Kenya’s fight against illicit alcohol bleeds billions

A new report has revealed that Kenya’s battle against illicit alcohol is far from over, with illegal beverages now accounting for 60% of all alcohol consumed in the country.

This marks a staggering 27% increase since 2022, leading to a loss of approximately Sh120 billion in uncollected revenue annually.

The study, commissioned by the Alcoholic Beverages Association of Kenya (ABAK) in collaboration with Euromonitor International, paints a concerning picture of the thriving underground alcohol economy driven by smuggling, tax evasion, and counterfeiting.

The report highlights that illegal alcohol, including homemade brews like Chang’aa, Busaa, and Muratina, makes up two-thirds of the illicit market.

These drinks are widely consumed in rural and peri-urban areas, where affordability is a key factor.

A 300ml serving of Muratina, for example, can cost as little as Sh20, while Chang’aa is roughly 70% cheaper than legal spirits.

However, the real issue lies in the sophisticated tax evasion and smuggling operations, which rob the government of billions of shillings each year.

Despite the government’s introduction of new anti-counterfeiting measures in March 2024, including mandatory reporting and upfront excise tax payment, the report suggests that these efforts have failed to curb the rising illicit trade.

Tax leakages have only worsened, particularly following the implementation of stricter excise regulations.

Small and medium producers, struggling to meet the new requirements, have resorted to operating under the radar, further widening the tax gap. The widespread availability and low cost of illicit alcohol, compounded by weak enforcement and corruption, have contributed to its increasing dominance.

A significant portion of the illicit alcohol is smuggled into Kenya from neighboring countries like Uganda and Tanzania, where ethanol is cheaper.

The report reveals that the smuggling of ethanol has increased by 144% since 2022, further exacerbating the situation.

Raymond Omollo, the Principal Secretary for Internal and National Administration, acknowledged the severity of the issue and emphasized the government’s commitment to tackling it.

However, he noted that enforcement efforts need to be strengthened to ensure compliance with alcohol regulations.

The report also mentions that corruption and consumer complicity continue to undermine the fight against illegal alcohol.

Juma Mukhwana, the Industry Principal Secretary, stressed the need for a strategic approach to combat the growing illicit alcohol market, which is now larger than the legal market.

He called for policies that balance the fight against illegal alcohol while respecting cultural traditions surrounding alcohol consumption.