Crackdown on illicit alcohol elicits fear among beer industry stakeholders

For instance to underline its rich tax offerings the Kenya Revenue Authority (KRA) reported that Excise Duty collected domestically grew by 22.1 per cent, to Sh20.4 billion in the first quarter of the current fiscal year.

East Africa Breweries (EABL) said earlier it sells a bottle of Tusker beer at Sh190, out of which the Kenya Revenue Authority takes Sh107 as taxes.

In the measures unveiled by Interior Cabinet Secretary Kithure Kindiki, licences and certification permits for second-generation alcohol and alcoholic beverage distillers and manufacturers, issued by the Kenya Revenue Authority and Kenya Bureau of Standards were suspended with immediate effect.

The CS said all valid licences will be vetted afresh in the next 21 days.

Following the move, the Ministry of Interior has invited all licenced manufacturers and distillers to a meeting to be held on Tuesday next week.

The CS said the measures, which follow a campaign launched last year and which Deputy President Rigathi Gachagua was tasked to lead, will also require manufacturers to have Quality Control (QC) laboratories installed with Gas Chromatography with Flame Ionisation Detector (FID) when making applications for new licences.

Kindiki said the laboratories must be operated by competent laboratory analysts to test incoming raw materials and finished products before releasing to the market, adding that they should register with a provider of inter-laboratory comparison and submit their QC results to Kebs every month.

"All alcohol manufacturers shall henceforth establish and document all traders in their distribution chain and have procedures for ensuring full traceability from factory to the consumer of alcoholic products manufactured for sale. All alcoholic products shall include traceability information including manufacturer details, location, ingredients/content," the CS also announced.

Industrial ethanol

He said Kebs shall ensure that within 45 days, all industrial ethanol is denatured or marked with a denaturing agent (denatonium benzoate) to prevent diversion and/or the accidental use of industrial ethanol in alcohol manufacture.

The government also declared as null and void any licences currently issued to bars and other outlets and premises by county governments that are contrary to the provisions of the Alcoholic Drinks Control Act, especially as relates to licensing of premises within residential areas and around basic educational institutions.

"County security teams are to secure shut down and seizure of such premises with immediate effect," said Kindiki.

He added that no bars or alcoholic outlets shall be allowed to operate beyond the stipulated operation hours as provided in section 34 of the Alcoholic Drinks Control Act, failure to which the operator shall be fined or imprisoned as provided by law and all the drinks, and related accessories in the premises forfeited with accompanying licence withdrawal.

To ensure manufacturers and distillers of counterfeits are also eliminated, the government said those aware that their products are being counterfeited and fail to report to the Anti-Counterfeit Authority shall be deemed complicit.

"Licenced manufacturers will be required to furnish County Security Teams with the geo-location and physical details of their licenced premises, as well as stock records per licenced premises. Any other physical premises stocking, manufacturing and housing manufactured stocks will be deemed illegal stocks for destruction," said Kindiki.

A man smoking shisha. Punitive measures put in place for those in the illegal trade. [Denish Ochieng, Standard]

According to a report by the Alcoholic Beverages Association of Kenya (ABAK) published in June 2023, illicit artisanal alcohol accounts for more than half of the total volume of illicit alcohol.

"Mass-market, high-volume brands are the main target of counterfeiting and smuggling but smugglers are also interested in ethanol, driven by increasing demand from illicit commercial alcohol manufacturers.

A mix of mid-market and premium spirit brands are also targeted alongside high-quality cider and beer," reads the report titled Building a Strategy to Combat Illicit Trade in Kenya.

The report shows that the value sales of illicit alcohol in the country stood at Sh67 billion as per the 2022 figures. This represents a market share of 21 per cent with legal alcohol sales being Sh248.1 billion representing 79 per cent.

There are four categories of illicit alcohol according to the report: counterfeit and illicit brands which are fraudulent imitations of legitimate brands; contrabands or smuggled; tax leakages -legally produced but without payment of the required excise tax and illicit artisanal alcohol.

While these new rules will likely favour the licit trade of alcohol, players in the sector said they would formally issue a statement after studying the government directive.

"We have just gotten the document and we are going through it," said the National Bar Owners Association Secretary General Boniface Gachoka.

"We will issue a comprehensive statement," he noted.

Narcotics

Officials in the trade have also been put on notice. Section 17(a) of the Narcotics Drugs and Psychotropic Substances Control Act stipulates that a law enforcement officer or public officer who aides and abets any offence under the Act including concealing the commission of any offence and collusion shall be liable to punishment

"In this regard officers abetting, concealing or colluding with any person to commit an offence under alcoholic drinks shall be liable as per law," said the CS.

"Further, and in line with the Public Ethics Act, all public officers in the enforcement/compliance chain (KRA, KEBS, ACA, Public Health, Nacada, NGAO, NPS etc) shall not own and operate a bar directly or via proxy. All public officers currently operating such premises are required to shut them down or resign from the service with immediate effect. Cross-referencing of the Public Service Commission, National Police Service Commission and distinct agency staff records shall be undertaken to secure compliance thereof."

The Government said all landlords or premise owners shall be deemed aiders and abetters thereof and be held liable for renting out space for the establishment of bars/ wines and spirits outlets in prohibited areas pursuant to section 20(c) of the Penal Code.

Under the new radical rules, the Ministries of Interior and Health shall put in place measures for branding and colour specification of all alcoholic and tobacco distribution vehicles. To enforce compliance with the package according to the Alcoholics Drinks Control Act, the Kenya Bureau of Standards shall within 60 days, review the guidelines on the minimum quantity of alcoholic drinks to enhance the same from 250ml to 750ml or higher.

At the same time the importation, manufacture, sale, use, advertisement, promotion or distribution of shisha is outlawed in the country, any establishment found in breach of this provision will be shut down with immediate effect. County Security Teams are required to enforce this prescription without fail.

And in what could mean a new raft of taxes for beer makers the rules decreed Government will Incorporate a model of taxation based on alcohol content.

It will also review the taxation framework for beer and other non-spirituous alcoholic drinks to mitigate the risk of harmful effects.

At the same time, there will be mandatory adoption of digital Kebs/KRA stamps for all alcohol and alcohol-based products, and the withdrawal of physical stamps.