How billions are lost yearly through illicit alcohol industry

Kenya loses about Sh120 billion in tax revenue annually due to the illicit alcohol trade, with both the volume and value of the market continuing to grow.

The National Assembly’s Public Petitions Committee heard that growth in the illicit alcohol market has outpaced the legal sector over the past two years, with illicit products now accounting for 60 per cent of the total market. This underscores the scale of the underground economy and its impact on public revenue.

This emerged during a meeting between the committee and the Alcoholic Beverages Association of Kenya (ABAK), as MPs continued engagements with stakeholders on a public petition by Deputy Speaker Gladys Boss regarding the production, distribution and consumption of illicit brews.

According to ABAK, tax leakage is the largest contributor to illicit alcohol value sales at Sh73 billion, followed by counterfeit and illicit brands at Sh64 billion.

ABAK chairperson Kui Kinyanjui said illicit alcohol gives illegal operators a great advantage over compliant manufacturers by undercutting prices while evading quality standards and excise regulations.

She also called for urgent, coordinated enforcement across government agencies, noting that illicit alcohol continues to dominate parts of the market due to a major economic imbalance.

Legal alcohol is heavily taxed and regulated, while illicit products are untaxed, unregulated and cheaper.

“We are calling for an immediate nationwide multi-agency crackdown involving the Kenya Revenue Authority, National Police Service, Kenya Bureau of Standards, Anti-Counterfeit Authority, as well as national and county governments to shut down unlicensed outlets and counterfeit operations,” she told the committee.

KRA excise stamps

She said the illicit alcohol trade remains widespread, as shown by continued deaths, counterfeit brands, unlicensed liquor outlets, underage drinking, adulterated products, illicit brews and second-generation alcohol.

“Illicit alcohol accounts for approximately 60 per cent of the Kenyan market, resulting in preventable deaths, serious health crises, and annual tax revenue losses exceeding Sh120 billion. These products undercut legitimate producers on price while evading all quality and excise controls,” ABAK told Parliament.

She further proposed mandatory KRA excise stamps and a digital track-and-trace system for all alcohol products, including second-generation brews, to help distinguish legitimate products from illicit ones at the point of sale.

Additionally, she recommended a national digital traceability system covering the entire supply chain, from production to retail.

ABAK also raised concerns over the inconsistent implementation of the law, citing challenges in enforcement capacity, regulatory gaps, prosecution delays, and limited public awareness.

While the Alcoholic Drinks Control Act (Cap 121) of 2010 provides a solid legal framework, enforcement remains fragmented.

The industry lobby noted that NACADA’s coordination role needs strengthening, while county governments and the National Police Service require greater capacity support.

Anti-Counterfeit Authority (ACA) Chief Executive Robi King’a pointed to porous borders as a major enabler of the illicit trade.

He identified key entry points, including Isibania, Shimoni, Busia, Mbale, Malaba, Lwakhakha, Namanga, Lunga Lunga and Moyale, which are frequently used to smuggle finished spirits and ethanol into the country.

Dr King’a also highlighted weak inter-agency coordination as a major challenge, citing the absence of a clear statutory framework with performance indicators, dedicated funding, and joint reporting structures. This, he said, hampers cooperation among key institutions including KRA, KEBS, ACA, NACADA, the Government Chemist, the Kenya Sugar Board, the Directorate of Criminal Investigations (DCI), the Office of the Director of Public Prosecutions (ODPP), and county governments.

“I urge this Committee to consider enacting a Multi-Agency Committee on Illicit Trade Act, or amending the Anti-Counterfeit Act, to establish a permanent inter-agency body anchored in law,” Dr King’a said.

Dagoretti North MP Beatrice Elachi, a committee member, urged urgency in implementing specific interventions on the ground, particularly in Uasin Gishu County, which is central to the petitioner’s concerns.

“You have presented your recommendations, but the petition raises specific concerns about illicit brews in Uasin Gishu. What concrete actions are you taking to resolve this?” she posed.

In response, King’a said the Authority has an operational office in Eldoret and has rolled out a rapid results initiative targeting the region.

“Within the next two months, we aim to decisively tackle the illegal alcohol problem in collaboration with non-governmental actors, national government officials, county commissioners and local administrators,” he said.

He added that the Authority is also scaling up public awareness campaigns on counterfeit goods.

“Over the past three months, we have conducted intensive outreach in Nakuru, Bungoma and Kakamega. Our next focus area will be Uasin Gishu,” he noted.

Political goodwill

King’a further explained that Kenya’s illicit alcohol economy takes four main overlapping forms. The first is counterfeit and illicit-brand alcohol, involving fake imitations of legitimate products, including refilling original bottles, falsifying labels, tampering with seals and digital tax stamps, and cloning established brands.

The second is contraband and smuggled alcohol, branded products illegally imported into the country without payment of duties, often intercepted through joint operations with the Kenya Revenue Authority (KRA) and KEBS at borders, ports and one-stop border posts.

The third category is tax-leaked alcohol, where legally produced drinks evade excise duty, including under-declared production from licensed manufacturers.

This falls mainly under KRA’s mandate, but also involves the Authority when such products are repackaged or refilled into counterfeit bottles.

He also cited illicit artisanal and adulterated brews, including unregulated commercial production of traditional alcohol such as chang’aa, kumi-kumi and kangara, as well as back-yard distillation. Some of these products are reportedly laced with industrial methanol, formalin or pesticides, posing serious health risks.

Committee Chairperson Muchangi Karemba emphasised the need for political goodwill, noting that sustained commitment from leaders is critical in addressing the illicit alcohol crisis.