EXPORTS

Alcohol exports drop to five-year low on illicit trade

In Summary

•The manufacturers noted that the taxman loses at least Sh3 billion annually on illicit alcohol.

•Of the 3.4 litres per person per year consumption in Kenya, 1.9 litres is legally recognized while 1.5 litres is unrecorded not officially recognised.

Some of the alcohol impunded during a raid targeting illegal alcohol distlillers in Nairobi's Mowlem area on Wednesday, June 13, 2018. /COURTESY
Some of the alcohol impunded during a raid targeting illegal alcohol distlillers in Nairobi's Mowlem area on Wednesday, June 13, 2018. /COURTESY

Value of alcohol exports to regional and international markets dropped to its lowest in the last five years to Sh197 million, the 2019 economic survey shows.

This is an 86 per cent drop from Sh1.45 billion reported in 2014 and a 90 per cent drop from Sh2.058 billion in 2015 which was the highest value within the period.

In 2017, the sector exported 4.87 million litres of alcohol valued at Sh405.4 million

Distillers attributed the drop to Kenya's licensing and taxation models  which they said has opened room for illicit alcohol trade.

Speaking during a stakeholder’s forum on the illicit trade of alcohol, Kibos Sugar corporate affairs manager Joyce Opondo said the government has in the last two years alone lost over Sh1.2 billion in taxes from the illicit trade.

The manufacturers noted that the taxman loses at least Sh3 billion annually on illicit alcohol.

“Every litre that is going out of our plant is charged Sh210 tax to mean that one has to buy it for Sh300 to make as little as Sh90 to run our operations and pay salaries. KRA is killing the industry,” Opondo said.

Eric Kiniti, the Secretary of Alcoholic Beverage Association of Kenya said the illicit alcohol is majorly from neighbouring countries in East Africa.

“We are not only concerned by the health risk to consumers; illicit alcohol trade denies formal players a level-playing ground and the economy billions of revenue over time,” Kiniti said.

KRA commissioner for intelligence and strategic operations Githii Mburu agreed that the existence of a friendlier tax regime in neigbouring countries is a barrier to market entry for investors.

 
 

“Ethanol is cheaper there and thus the motivation by a lot of those who import it illegally to source it… there is a need for a more comprehensive approach is needed if illicit products is to be dealt with” Mburu said.

According to an analysis of the sector title The Unintended- Kenya needs to develop a more comprehensive policy if its fight against illicit alcohol is to succeed.

The survey was carried out by the Kenya Association of Manufacturers (KAM) and the Institute of Economic Affairs (IEA).

Addressing distillers in the illicit trade forum, IEA CEO Kwame Owino said that their analysis had shown that the approach taken to regulate alcohol is population-based rather than targeted at reducing excessive drinking.

“…Reducing the amount of time for drinking and limiting the advertising of alcohol doesn’t solve the problem as more people are pushed towards illicit alcohol. By suppressing one side, you go back to the other side. Our licensing model actually creates barriers to market entry,” Owino said.

The institute argued that Population-Based Policies are easier to administer but are unlikely to be most successful in Kenya given the low per capita consumption of alcohol, demographic changes, dual market structure and expected income growth among Kenya’s working population.

Data from the World Health Organisation shows the per person consumption of alcohol in Kenya stood at 3.4 litres of pure alcohol in 2018.

This is much less than the global average of 6.4 litres per person.

Of the 3.4 litres, says the WHO, 1.9 litres is legally recognized while 1.5 litres is unrecorded not officially recognized.