60pc of alcoholic drinks illicit, report shows

The government is losing billions of shillings in uncollected revenue as it continues to lose ground in the battle against illicit alcohol, a new report has revealed.

According to the findings, illegal alcohol now accounts for 60 per cent of all alcoholic beverages consumed in the country, a staggering increase of 27 percent since 2022.

The study was commissioned by the Alcoholic Beverages Association of Kenya (ABAK) in conjunction with Euromonitor International.

It paints a grim picture of a runaway underground economy powered by homemade brews, tax evasion, smuggling, and counterfeiting, resulting to an annual fiscal loss of Shs.120 billion.

“The smuggling of ethanol increased, with the tax loss related to smuggling increasing by 144 per cent since 2022. Higher alcohol taxes are pushing more people toward cheaper, illegal options. The illegal options are powered by the smuggling of ethanol, which has increased,” reads the report.

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The report, based on data collected from 2022 to 2024, shows that illicit alcohol now dominates the market in both volume and value.

In 2024, illicit alcohol sales in litres of absolute alcohol (LAE) reached 1,921,921 hectolitres; comprising 60 per cent of all alcohol sold.

Legal alcohol sales, on the other hand, grew by only 11 per cent in 2024, a sharp decline from the 19 per cent growth recorded between 2020 and 2023.

Homemade brews, which include Chang’aa, Busaa, and Muratina make up two-thirds, representing 67 per cent of the illicit alcohol consumed in the country.

These drinks are especially popular in rural and peri-urban areas due to their affordability and cultural acceptance.

The report noted that a 300ml serving of Muratina, for instance, can cost as little as Sh20, while Chang’aa is on average 70 per cent cheaper than legal spirits.

“Illicit artisanal homebrew represents 67 per cent of the illicit alcohol market, but most of the illicit alcohol value lies in smuggling, counterfeit and tax leakage,” the report noted.

Despite their prevalence, it is the sophisticated tax evasion and smuggling operations that are robbing the exchequer of the most money.

According to the report, tax leakage alone, primarily through the non-declaration or under-declaration of production by small and medium-scale distilleries accounts for Sh73 billion in losses annually.

Counterfeiting of popular mid-priced and premium spirits like Chrome and Gilbey’s contributes a further Sh64 billion.

Although the government introduced new anti-counterfeiting measures in March 2024 including suspension of manufacturing licenses, mandatory geo-location reporting by producers, and upfront excise tax payment based on alcohol strength (ABV), the study indicates the steps have done little to curtail the surge.

In fact, the report stated that tax leakages increased, particularly in 202,4 following the policy shifts.

 “Fiscal losses have grown by 68 per cent since 2022, driven by an increase in parallel imports and a rise in the consumption of illicit artisanal local brews,” it reads.

Worryingly, the reforms intended to tighten control may have unintentionally encouraged the increase.

According to the report, small and medium producers are facing challenges meeting the new excise regulations, especially with regards to ethanol prices and outstanding tax debts.

This, the report stated, has led many to continue operations under the radar, further widening the tax gap.

The report, stated that affordability is the main reason illicit alcohol is winning.

Illicit spirits, including counterfeits of Gilbey’s, Chrome, and other well-known brands, are often priced 10 per cent to 40 per cent lower than their legitimate counterparts.

Chang’aa, although considered expensive for a local brew, is still vastly cheaper than mainstream spirits, a fact that appeals to lower-income consumers reeling from inflation and high excise duties.

“The prevalence of illicit alcohol is driven by high excise taxes on legal alcohol, affordability and accessibility, weak enforcement and corruption, and the cultural acceptance of homemade brews,” the study noted.

The report further stated that illicit drinks are sold through informal street vendors, pubs, kiosks, residential homes, and even some formal bars and clubs.

The channels have become normalized. For example, the report noted that 64 per cent of consumers believe they can buy illicit alcohol from street vendors, while 50 per cent believe residential homes are a reliable source for drinks like Chang’aa and Muratina.

Furthermore, corruption and weak enforcement within regulatory bodies continue to undermine efforts.

“Reported corruption and bribery within various agencies, which regulate alcohol hamper the government’s ability to enforce its regulations,” the study stated.

According to the study, another critical factor fueling the illegal alcohol market is the smuggling of ethanol, particularly from Uganda and Tanzania.

Kenyan ethanol is the most expensive in the East African Community (EAC), creating a strong incentive for cross-border illicit trade.

“Smuggling increased from 4 per cent to 7 per cent in 2024, driven by high local prices compared to neighbouring countries,” the report revealed.

Also, it noted that parallel importation which is the unauthorized import of genuine products has increased, blurring the line between legal and illegal channels and complicating enforcement.

Efforts to crack down on the deadly drinks have been hampered by limited resources, widespread complicity among consumers and traders, and a lack of political will.

“Consumers are aware of what makes products illegal and their potential impact. However, consumers are complicit in the sale of illicit alcohol and there is a wide degree of social acceptability despite this knowledge,” the report stated.

Dr. Raymond Omollo, the Internal and National Administration Principal Secretary acknowledged the gravity of the problem but stated the government resolve to act.

“Alcoholic drinks in Kenya are tightly regulated, but enforcement is needed to ensure compliance. NACADA and other government agencies introduced various measures to curb illicit alcohol, including the suspension of manufacturer licenses and vetting of all producers,” stated Omollo.

His remarks were delivered on his behalf by Beverly Opwora, the secretary of National Administration.

Omollo noted that illicit alcohol is a major risk to internal security as it leads to organised crime.

“If you go to our correctional facilities, that is the prisons, many of the officers from National Police Service will adhere to this. That many of our brothers and sisters who are in jails were under influence, about 95 per cent were under influence when they committed that crime,” said Omollo.

Dr Juma Mukhwana, the Industry Principal Secretary, said that the study establishes a good base from which to generate the policies and actions necessary to curb the production and sale of illicit liquor.

“This latest study confirms what we have all along suspected; that the illicit market has grown bigger than the legal market. It is mainstream, it is organised and it is big.

As we seek to eliminate illicit alcohol, we must learn from studies to create strategies and tactics that protect the legal alcohol, fight the illicit alcohol and maintain the culture and traditions of our people in regards to alcohol,” said Dr Mukhwana in a speech read on his behalf by Karanja Njora, the Secretary for Administration.