Counterfeit and illicit alcoholic drinks back on the shelves

Illicit alcoholic drinks back in Kenya
The State’s spirited crackdown on ‘killer drinks’ mid-2015 resulting in the closure of distilleries and breweries was hailed a major success.

Two years on, however, the illicit brands are slowly finding their way back into the market.

While the fight against illicit and counterfeit alcoholic drinks saw millions of litres of such drinks confiscated and destroyed, dealers are now back into brisk business - making the crackdown appear as if it was only a public relations campaign.

Numerous brands that authorities exorcised from the market in the 2015 crackdown are back on the shelves, while some manufacturers have reintroduced their drinks under different brand names.

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Unscrupulous business operators are also recycling used bottles from legit players to package their substandard products.

They are using fake Kenya Bureau of Standards tax stamps to get their products on the shelves. In addition, alcoholic drinks packed in sachets are also back in the local market, despite being banned more than a decade ago.

These add to the problems experienced by the economy, Government revenue collection and loss of market by genuine industry players.

The illicit alcoholic industry has been blamed for crippling economic activities in certain regions across the country, with many young people turning to drinking binge - neglecting income generating activities.

While there is no official data on the illicit industry given its illegal nature, it is denying the Government tax revenues that could be running into billions of shillings annually, with some quarters estimating that the exchequer could be losing up to Sh30 billion in unpaid revenues.

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Legit players in the industry have also experienced a loss in market share leading to foregone revenues, with the industry estimated to be commanding a sizeable 30 per cent of the market.

“At the moment, unfortunately, the industry is fast drifting to the rut we were stuck in just before the national crackdown of 2015,” said Africa Spirits Ltd Head of Marketing Nyawira Kariuki.

“A range of illicit alcohol brands are up for sale in stores across Kenya, some of which are detrimental to the health of Kenyans.”

She added that sachet-packed alcoholic drinks have been finding their way back into the Kenyan market from other East African countries.

Implementing ban

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Kenyan banned packaging of alcohol in sachets in 2005 while Tanzania and Uganda did the same this year.

The two are at different levels of implementing the ban, but the products are largely available in the market and have been spilling into Kenya.

This is especially from Uganda. “Porous borders. This remains the single most prevalent reason on why we have sachets in the market today.

Some unscrupulous traders take advantage of laxity in security checks at border points to ship in the sachets which are still available in neighbouring countries,” said Kariuki.

Other than denying Government tax revenues and endangering lives, the illicit manufacturers of alcohol are also able to price their products cheaply and undercut legit players.

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This, Ms  Kariuki said, could in the long-term see legit players scale down operations as they further lose market share.

“Since they do not pay taxes, these players can sell their products cheaply, undercutting legit players,” said Kariuki.

“As alcohol manufacturers and traders, our industry alone has the potential of creating numerous job opportunities for the youth if proper regulations are put in place. Needless to say, the Government would be the biggest beneficiary through taxation.”

She observed that with illicit brews hitting hard the core of our industry – innovation and brand value – the realisation of Kenya’s projected growth remains simply untenable.

“Legit companies are have been left on their own devices in an increasingly toxic environment,” she said adding:

“In the long-term, this unwavering campaign of unfair competition could morph into the loss of millions of jobs, eroding investment and eventual death from health complications caused by illicit liquor.”

The Consumers Federation of Kenya (Cofek) also observed an influx in the amount of counterfeit and illicit alcoholic beverages.

“There is a sudden increase in fake and unlicensed alcoholic products in circulation in Kenya despite the government’s directive to crack down on illicit brews and drugs,” said Cofek Secretary General Stephen Mutoro.

The lobby estimates that four million Kenyans, almost all young people, countrywide are currently consuming illicit brews.

In addition to wasted years by heavy drinkers and consumption of harmful rinks, legit players and the Government are losing billions in tax revenue annually.

“Genuine alcoholic manufacturers do not just suffer the loss associated with the production of second-generation alcoholic products. They lose revenues as dubious dealers hold onto 30 per cent market share of the alcoholic multi-billion industry,” said Mutoro.

Millions daily

He observed that the loss and destruction of illegal alcohol business have seen genuine investors lose tens of millions daily. “The unlawful trade is robbing the country over Sh30 billion in annual revenue. This is because illicit dealers do not pay tax at all yet they shrink revenues of those who genuinely pay taxes. Simply put, the increasing numbers of illicit and illegal alcoholic beverages is a threat to human health, security and the economy.”

Mr Mutoro talked of a possible collusion between Government officials and the players in the illegal trade.

“The spike in production and consumption of illicit alcohol has been fuelled by individuals who seem to be colluding with corrupt law-enforcing officers,” he noted.

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TaxIllicit brewsTax evasion