A taste of legal chang’aa

By Kenneth Kwama

Local beer and spirit manufacturers could lose a key market and with it, forfeit billions of shillings to manufacturers of illicit brews if a proposed law that seeks to legalise the brewing and sale of chang’aa goes through in Parliament.

The proposed Alcohol Drinks Control Bill 2009 seeks to repeal the Chang’aa Prohibition Act and if enacted, could significantly affect the fastest growing business segment in the alcohol industry — the lower-end market and in the process deny recognised brewers like East African Breweries Ltd (EABL) and the Kenya Wine Agencies Ltd (Kwal) one of the most important revenue-generating planks in their stables.

However, proponents of the new law, which was presented to Parliament by Naivasha MP John Mututho argue that legalising the production of chang’aa will make it a more straightforward business, thus helping avoid the pitfalls that has seen brewers use ingredients, which makes it dangerous to health.

In 2000, at least 137 people died in Nairobi after drinking an alcoholic brew laced with methanol. Several others were admitted in hospitals across the capital, some in serious condition while a number of others went blind.

Highly poisonous

Methanol is an industrial alcohol used in the manufacture of dyes and has been used as an additive to chang’aa or kumi kumi (ten-ten), to increase its intoxicating effects. It is a highly poisonous substance and as little as 30 millilitres is enough to kill a person, with 10 millilitres being enough to cause blindness. Those who died suffered respiratory paralysis or liver failure.

But even as the Bill that seeks to endorse chang’aa finds its way in the corridors of power, established firms are already jittery about the move insisting that there is need for a clear legal framework.

Currently, the cheapest beer in EABL’s family of beers meant for the low-end market,

Senator, is the fastest growing brand in the company’s stable and has recorded over 60 per cent growth in the last two years. At Kwal, most growth has been witnessed in the 205ml spirit package, which is also a favourite of the low-end market.

The industry is already believed to be losing up to Sh9 billion annually in lost sales to counterfeiters and illicit brewers. The amount is treated as lost income and denies the exchequer billions of shillings in lost revenue.

Despite several attempts, FJ could not get Kwal’s new MD Edwin Kinyua to comment, but a senior manager at the firm told FJ the proposed law could erode the company’s earnings and make its products for the low-end market uncompetitive.

"Already we are experiencing serious problems with unscrupulous businesspeople selling illicit brews. Getting them is a problem. What will happen if they are allowed to operate officially?" he poses. "It will be disaster."

There are also concerns that enforcement of the law could be difficult.

Responsibility is scattered across different government agencies including Kenya Revenue Authority (KRA), Kenya Bureau of Standards (Kebs), Ministry of Public Health and the police and it will be difficult to pin failure on a particular agency.

By the beginning of this year, prices of the 205ml package — a favourite of the low-end spirit consumers, had skyrocketed to about Sh165, up from an average of Sh70 late last year due to massive tax increases.

As a result, the sales in this category were estimated to have dropped by up to 80 per cent across the board.

As a result of the tax impasse, most local manufacturers found themselves with huge inventories of un-sellable stock of wines and spirits worth hundreds of millions of shillings, while a number of industry players suspended production.

The Chang’aa Act could bring similar repercussions if not properly implemented.

Eabl’s Corporate Affairs Director Ken Kariuki says the industry is not afraid of competition, but is wary of what will happen if the proposed law comes into effect because a repeal of the Chang’aa Act would embody blatant consent for the abuse of the production and sale of high-risk alcoholic substances.

Loss of eyesight

"The production of chang’aa is not defined and this is evidenced by the ingredients and processes used mostly with the aim of raising potency levels. The results have been disastrous with consumers experiencing problems like loss of eye sight, dignity and has sometimes resulted into death," says Kariuki.

Fuelled by the basic need to earn a living, Kariuki says people would start looking at chang’aa brewing as a simple avenue to make money. Currently, the ingenious

businesspeople involved in its production are brewing in backyards, houses and even at river banks.

Despite the expected hit on the low-end segment, high-end consumers whose gobbling habits start from 750ml bottles will be largely remain unaffected and are expected to continue with their conservative consumption style even if the proposed law is passed.

Kwal has been positioning some of its brands like Hunters Choice, Papaya, Simba Cane and Kibao Vodka to enable it grow its share of the domestic market and position the brands for competition in both local and international market.

The umbrella of National Alcohol Beverages Association of Kenya (NABAK) last year documented the effect of chang’aa on the industry through a letter to Mr John Njiraini, Commissioner of Domestic Taxes, Large Taxpayers Office at the Kenya Revenue Authority (KRA).

In the letter dated October 6, 2008, the associations told the commissioner that the cheap brews were already taking over the low-end market.

"Majority of these manufacturers are not registered with KRA and they should not be dealing with alcohol products. Since these products are cheap, they enjoy a greater market share to the disadvantage of the formal players not to mention loss of Government revenue in unpaid taxes," said Nabak.

Manufacturers are also worried that the proposed law could make it legal for people to consume toxic material, which could be detrimental to their health if not properly implemented and some are proposing tight checks and balances, just in case.

Kariuki says the enactment of the law would not be entirely unadvisable if some conditions are not adhered to. EABL has a number of proposals, including one that requires products for sale to have KRA certificate or stamp to show tax compliance. It envisages that the packaging used for these products will also pass inspection by Kebs and bear its certification stamp.

"All brewing premises should be inspected by public health officers and be approved before beginning operations. They should also be subject to inspection on a quarterly basis. Packaging should clearly indicate the ingredients used and the alcoholic content of the product," says Kariuki.

For many of the country’s most impoverished sections of the population, the deadly brew has become an escape from the daily misery they face. Consumption has however remained muted because it is illegal.