Increased circulation and consumption of illicit brews in Kenya is a serious challenge. Of all the attributes—negative or positive, none is as widely accepted as that of alcohol being a social lubricant and an economic driver. Alcohol brings people together, it is a wonderful ice breaker and is a great part of any entertainment. Celebrations without alcohol often miss the mark.
Alcoholic beverages industry employs hundreds of thousands directly and many more over the shoulders. It also mints out profits and is a wealth creator. In most countries, the alcoholic industry is one of the key tax revenue providers to the government.
But alcohol also has its share of negativity. If partaken in moderation, alcohol touches all the right spots. However, irresponsible drinking is a recipe for social disorder and is a health risk.
Illicit alcohol is a recipe for chaos. Alcohol whose quality cannot be measured against a strict quality control process is a danger to the consumer. In the past, there have been deaths as a result of consumption of illicit brews.
The industry is one of the most regulated and most heavily taxed. Anything that affects the image of the industry severely affects the sales in the sector leading to a dim in profitability. It is with this in mind that the sector has been advocating for the elimination of illicit drinks.
It is easy to see why the issue of illicit alcohol is a headache. First clue lies in the number of alcohol outlets in Nairobi alone. Of the 12,500 alcohol outlets in Nairobi, only 3,900 are regulated.
While industry players have been meeting their share of the bargain, county governments have fallen short of executing their mandate.
It is important to achieve the balance of using alcohol taxes to offset the external costs associated with negative impact of alcohol while also sparing revenue for economic development.
It beats the purpose to heavily tax the alcoholic beverages sector, in the process increasing the cost of compliance and the cost of doing business, and not addressing the issues that bore the taxation regime in the first place.
High taxation raises the cost of entry into the formal alcohol sector resulting in proliferation of illicit brews that the taxation was meant to address.
Illicit alcohol is driven by pricing gaps between illicit and legal drinks. Illicit brews are cheaper and have a higher profit margin. Price wars in the alcoholic industry, complex regulatory and compliance environment and enforcement pitfalls all contribute to the illicit trade.
One of the best ways to fight illicit brews is by giving tax incentives to dealers to ensure that the alcohol products are affordable. Illicit brew hurts more than the liver. Let us all tame it. The writer is chairman of Alcoholic Beverages Association of Kenya