Step up fight against illicit killer beverages

The increased circulation and consumption of illicit brews in the Kenyan market is a serious challenge.

Government agencies and manufacturers of genuine liquor have over the years confiscated such drinks worth hundreds of millions of shillings and prosecuted vendors, but the illicit trade continues.

Of all the attributes - negative or positive - none is as widely accepted as that of alcohol serving the important role as a social lubricant and an economic driver.

Alcohol brings people together, is a wonderful ice breaker and is a great part of any entertainment.

The alcoholic beverages industry employs hundreds of thousands directly and many more over the shoulders.

The alcoholic beverages industry provides jobs, profits and is a wealth creator. In most countries, the alcoholic industry is one of the key tax revenue providers to the government.

Share of negativity

But alcohol also has its share of negativity.

Negative connotations to do with alcohol often lie within the confines of quality and the amounts consumed.

If partaken in moderation, alcohol touches all the right spots. However, irresponsible drinking is a recipe for social disorder and is a health risk.

It is at this point that checks and balances are necessary. One of the key concerns on alcohol is on illicit brands.

Illicit alcohol is a recipe for chaos. Like all that is ingested, alcohol whose quality cannot be measured against a strict quality control process is a danger to the consumer and a reputation wrecker for manufacturers.

In the past there have been reports of deaths as a result of consumption of illicit alcohol.

Industry players

The alcohol industry is one of the most regulated and most heavily taxed.

Anything that affects the image of the industry severely affects the sales in the sector, leading to a dip in profitability.

It is with this in mind that the sector has been advocating the elimination of illicit drinks. It is easy to see why the issue of illicit alcohol is a headache.

The first clue lies in the number of alcohol outlets in Nairobi alone. Of the 12,500 alcohol outlets in Nairobi, only 3,900 are regulated.

While industry players have met their share of the bargain, the executors in the name of county governments have fallen short of executing their mandate.

County and national governments need to double their efforts in addressing, among other things, the concerns around illicit brews.

It is Important to achieve the balance of using alcohol taxes to offset the external costs associated with negative impact of alcohol, while also sparing revenue for economic development.

Alcohol tax should, therefore, be used to address the social justice – offset external costs associated with negative impact of alcohol – especially from the sale and distribution of illicit alcohol.

The tax proceeds should also be used to address the economic development, being a key contributor to the economy.

It beats the purpose to continue to heavily tax the alcoholic beverages sector; in the process increasing the cost of compliance and the cost of doing business, yet fail to address the issues for which the taxation was set up in the first place.

High taxation in a bid to address challenges bedeviling the alcohol sector raises the cost of entry into the formal alcohol sector, especially for those in informal settlements.

The end result of high cost of entry is the proliferation of illicit brews that the taxation was to address.

Illicit brews and brands have a number of risks. Illicit brews mean health concerns for the consumers; it means loss of excise duty on the part of the Government and also a ballooning health expenses.

For industry players, illicit brews mean loss of business, loss of revenue and loss of jobs. Illicit brews are mostly smuggled into the country.

There are those who counterfeit original brands and those who parallel import, infringing on the distributor rights.

Then there are those who take original alcohol and use fake stamps to get them into the market, the illicit chang’aa brew and the fake or surrogate alcohol.

Illicit alcohol is driven by pricing gaps between illicit and legal drinks. Illicit brews are cheaper and have a higher profit margin.

Price wars in the alcoholic industry, complex regulatory and compliance environment and enforcement pitfalls all contribute to the illicit brew trade.

To counter this, there is need to have a collaborative enforcement of rules and regulations.

Tax stamp

There is also need to simplify the rules and regulations governing how to deal with illicit brews.

As it stands, there exists a multiplicity conflict by the enforcers and the executors, who often conflict and cross each other’s paths.

Enforcing officers also need to be equipped with the right information.

There is need to seal tax stamp leaks by eliminating corruption and corrupt officers in the process.

But perhaps one of the best ways to fight illicit brews is by giving tax incentives to dealers to ensure that the alcohol products are affordable, hence no need to go the illicit route. We can tame trade in illicit brews.

 

Mr Mutugi is Chairman of Alcoholic Beverages Association of Kenya (ABAK). [email protected]