Kenya could extend mandatory excise stamps to all alcoholic beverages including second-generation brews as authorities move to plug an estimated KSh 120 billion in annual tax losses tied to the illicit alcohol trade.
- •The proposed expansion of the excise-stamp regime, coupled with a digital track-and-trace system spanning production to retail, is set to tighten oversight in a sector long split between heavily taxed formal manufacturers and a sprawling informal network that largely operates beyond regulatory reach.
- •The suggestions were made by representatives of the Alcoholic Beverages Association of Kenya (ABAK) who appeared before Parliament to contribute to a petition by Uasin Gishu Women Representative Gladys Boss Shollei.
- •The petition seeks to tighten oversight of the production, distribution and consumption of illicit alcohol across the country, focusing on curbing unsafe brews and strengthening enforcement.
By requiring every unit of alcohol to carry a verifiable tax marker, the alcoholic beverages lobby group explained it would be easier to distinguish compliant products from untaxed ones at the point of sale, while generating real-time data on volumes moving through the supply chain.
Fresh disclosures to lawmakers show illicit alcohol accounts for about 6% of the market but causes a disproportionately large share of lost tax revenue, highlighting how underreporting and fragmented distribution make it difficult for authorities to collect excise duties. In a research study commissioned by ABAK, illicit alcohol market has effectively overtaken the legal sector in volume terms, with consumers drinking an estimated 3.6 litres of pure illicit alcohol per adult in 2024 compared to 2.5 litres of legal alcohol.
Second-generation brews are locally produced, low-cost spirits that are processed, packaged, and distributed through informal but scalable channels, often resembling mainstream alcohol products. Their commercial reach, combined with limited oversight and reliance on untaxed or smuggled ethanol, makes them especially prone to illicit production and tax evasion.
Legal producers, burdened by excise duties and compliance costs, face competition from lower-priced illicit alternatives that bypass quality controls and fiscal obligations, creating a price distortion that continues to draw consumers into the black market.
According to Anti-Counterfeit Authority CEO Dr. Robi King'a, border points across the western, southern and northern corridors have been flagged as conduits for smuggled ethanol and finished spirits. The absence of a formalized structure with clear accountability, funding and performance metrics has further complicated efforts to contain the trade, even as multiple agencies operate within the same enforcement space.
Policy makers are now weighing whether to anchor a permanent multi-agency framework in law, a move intended to streamline coordination between tax authorities, standards regulators, anti-counterfeit officials and law enforcement.
The shift toward tighter surveillance reflects a broader recalibration of strategy, from episodic crackdowns to systemic control mechanisms embedded in production and distribution. However, the approach also highlights a deeper tension within the market: as excise taxes rise and enforcement struggles to keep pace, the economic incentive sustaining illicit supply continues to expand.
According to the referred ABAK study, 94% of consumers acknowledge that illegal alcohol is significantly cheaper than regulated products, with some variants priced at less than half the cost of legal spirits, making them highly attractive in low-income segments despite known risks. At the same time, 61% of consumers associate illicit alcohol with severe health consequences such as blindness, organ failure, or death. This shows that the consumption is not driven largely by ignorance but financial incentive.
