How Kenya is losing illicit brews trade war at the borders

Kenya has made great strides in alcohol policy development, restricting the consumption, manufacturing, and sale of illicit liquors and traditionally fermented brews. 

But the latest measures imposed in 2023 by increasing excise taxes on alcoholic products have led to an unintended consequence – they have opened the door to an influx of illicit alcohol through Kenya’s porous borders. 

A visit to Busia town in the wee hours of last Friday confirmed the activities of a well-planned smuggling ring of traditionally brewed alcohol from the neighbouring Uganda. 

“Our ‘merchandise’ will be here soon. You have to find your way here at once,” my source, *Imbumi (not his real name), told me frantically over the phone. He had asked for anonymity for security purposes. 

When I arrived at his homestead, the middle-aged man was busy offloading the consignment of Ugandan-brewed chang’aa before dispatching it to his local dealers. 

I was taken aback by the presence of two police officers standing by, unbothered by the sickening smell of the illegal cargo. I understand they are here to take their regular bribe to look the other way. 

The alcohol business, especially chang’aa is booming in the border town due to the laxity of authorities on the Ugandan side. 

On this particular day, Imbumi had brought in 30, 20-litre jerricans of chang’aa. 

“I buy 20 litres of alcohol at Sh2,500 and sell it to customers in Kisumu and Mombasa for Sh5,000 and above, depending on how far it has to be delivered,” says Imbumi. 

That translates to a profit of between Sh1,500 and Sh2,000 per jerrican, depending on his customer’s location after deducting transport costs and bribes for patrol police officers. 

To understand how the trade works, I arrange with Imbumi to accompany him to Uganda on his next trip.

On the material day, we drive across the border without much of a hitch, thanks to his car’s Ugandan number plates.

I sat in the front passenger’s seat, seeing that the back seats had been removed to create room for his unusual cargo. 

“Take my turnboy’s seat. As you can see, there are no back seats,” he had instructed before we hit the road.

Smuggling trade

Typically, a turnboy scouts ahead to clear the path, negotiating with security officers to allow the vehicle to pass.

Nearly all vehicles passing through the porous border posts are modified to suit the smuggling trade.

While driving through one of these posts, I’m surprised to see police and county officers lounging in groups under umbrella shades.

Upon inquiry, I learn they’re stationed here strategically to collect bribes from those smuggling goods into Kenya or Uganda. 

In a vast area known as “no man’s land,” officers from both Kenya and Uganda have set up tents, united by a shared goal: extorting bribes.

As we pass, they wave at Imbumi, signalling no issues with our passage.

Our first stop is Sofia, a Ugandan village just across the Busia border.

Brewing traditional alcohol, known as Ajono, is a common activity here, evident from large pots and sufurias prominently placed in compounds.

I’m told that while brewing Ajono is legal in Uganda, it’s done covertly in Kenya due to stricter regulations.

My attempt to interview Ugandan brewers proves futile, as they grow hostile, so I wander around Sofia, observing activities and taking photos. Kenyan retailers inform me that they source alcohol from large-scale producers in Jinja and Kampala.

After a long stroll, I notice a well-fenced building with a large gate, where lorries and cars enter and exit regularly. A local explains it’s a warehouse for repackaging smuggled goods destined for various countries.

“Large trucks transport 200-litre drums of ethanol or alcohol across the border,” says a Ugandan named Magyezi.

“The drums are stacked inside, concealed behind goods like milk cartons, cereal drums, or animal feed. Sometimes, we even hide items in sand, depending on the destination.”

Suspicious security guards at the warehouse prompt us to leave quickly, and we duck into a nearby bar. Sofia boasts numerous bars and nightclubs, drawing many Kenyan customers due to cheaper alcohol.

Tracing our way back to the crossing points, I observe from a distance how police collect bribes as low as Sh20 from smugglers. “When I reach this point with my alcohol, I pay Sh1,000 to the officers as a gate pass, regardless of the quantity, as long as I stick to our agreement,” Imbumi explains.

Around noon, I spend nearly an hour watching officers coordinate their levy collection, which never reaches the tax authorities.

Smugglers slow down and pay the bribe, and officers tuck the cash into a handband hanging under the umbrellas providing shade.

At one point, senior officers arrive in a Land Rover, discussing operations with their colleagues. I followed them to the station to seek their comments.

Busia County Commander Ahmed Abdilie declines to speak, promising a statement once he gathers “enough data.” He questions my findings, arguing that distinguishing illicit from legal trade is challenging since similar products pass through customs legally.

Fred Nabusolo, a former officer once stationed at the porous posts, says officers operate on their bosses’ schedules.

“They work in two shifts and aren’t fazed by cameras—they’re there to provide for their families,” he explains. Previously, officers from various stations would assign themselves to collect bribes, but after his transfer, police and county officers began collaborating to streamline the scheme.

“At 6 pm, they retreat to mabati makeshifts, count the money, cover daily expenses like meals, and reserve a percentage for their boss,” Nabusolo adds, noting the lucrative nature of the border trade and his hope to return.

Porous points

Busia County Chief Officer for Trade Timothy Odende denies county officers’ involvement in the illicit operations.

“The county government doesn’t collaborate with police to allow liquor through porous points. We don’t collect liquor revenue at the border, as no licences are issued there,” he says.

Odende clarifies that the national government oversees import licenses, while a multi-agency team patrols for illegal entries.

He acknowledges the challenge of cheaper Ugandan alcohol, which fuels the crowded bars in Busia municipality’s 54 licensed liquor premises.

The illicit alcohol and ethanol trade also thrives at the Tanzania-Kenya border in Isibania. Leah Agutu, a small-scale trader from Kisumu, has sold chang’aa sourced from Uganda and Tanzania for five years.

“I choose between Tanzanian or Ugandan chang’aa based on exchange rates. It’s stronger than Kenyan brews, so my customers prefer it,” she says.

Ugandan supplier

Agutu once tried brewing her alcohol but struggled to ration ethanol properly.

“I bought ethanol from a Ugandan supplier for Sh300, cheaper than the Sh1000 Kenyan price. It sped up fermentation, but I stopped after a customer developed complications,” she recounts.

Previously, Agutu partnered with businessmen to buy a drum of ethanol from Tanzania for Sh45,000, supplying it to cosmetic makers and traditional brewers. She earns up to Sh4000 profit per 20-litre jerrycan.

Traders exploit Kenya’s low export taxes and significant excise duty disparities between countries to sustain this illicit trade.

Tobias Olando, the Chief Executive Officer of the Kenya Association of Manufacturers (KAM), says the economic loss from untaxed alcohol is significantly rising, fueled by the illicit and underhanded nature of the trade.

He notes that the policy shifts and cross-border disparities have continued to incentivise smuggling and tax evasion.

“The recent change enacted through the Tax Laws Amendment Act 2024 has shifted the excise tax regime on alcohol from a volume-based to an alcohol content-based system. The transition has negatively impacted raw materials like ethanol, which is essential in manufacturing,” says Olando.

For instance, the excise tax on ethanol was sharply increased from Sh356 to Sh964 per litre.

“This has not only inflated production costs for compliant manufacturers but also triggered an influx of contraband alcohol and ethanol from neighbouring countries where excise rates remain comparatively lower. These developments have severely undermined the competitiveness of the legitimate alcoholic beverage industry in Kenya,” he adds.

KAM recommends a review of the ethanol tax, either by exempting it or taxing it at a preferential rate, to limit smuggling and level the playing field.

It further urges the government to strengthen enforcement against the illicit trade by adopting a multi-agency enforcement strategy to restore market integrity and safeguard public health.

John Ogwayo, manager of customs and border control enforcement at Kenya Revenue Authority, agrees that smuggling affects both revenue collection and other players in the industry, creating unfair competition.

He says the revenue collection body has deployed a multi-agency team, but they still face the challenge of regulating the inflow of illicit brews.

“The government has begun surveying to understand what is happening within our borders, but the level of porosity is extreme. Plus, we are supposed to use security roads around the borders, but they are in a very poor state. If you are told that some smuggler is around a kilometre away by the time you catch up, he shall have gone,” points Ogwayo.

He notes that KRA has been using the Tax Stamp System, among other methods, to regulate the illicit business; however, they also face challenges with border officials.

“Tracking those who smuggle alcohol is still tricky. The issue of integrity is affecting all the government officials at the border, the smugglers use feeder roads to avoid checkpoints, they have their surveillance team ahead who would always communicate to inform them that there is a road block at a specific place,” he says.

Noting the integrity among the authorities, Ogwayo says KRA has a disciplinary channel for punishing such officers.

He believes that the use of a standard domestic tax rate within the East African Community countries might reduce the taxation disparity.

Currently, the KRA is introducing the use of flow meters and CCTV surveillance systems to monitor and record high volumes of alcohol being produced in factories.

The custom control manager also discusses the East African tracking system, which he believes, once fully operational, will aid in monitoring the movement of vehicles across the borders of neighbouring countries.

He, however, recommends use of drones to enhance surveillance along the porous borders.

Similarly, a report by the Alcoholic Beverages Association of Kenya in 2023 indicates that the country loses an estimated Sh71 billion in taxes annually due to the proliferation of illicit alcohol.

Consequently, illicit finance flows are primary enablers of criminal activities, such as money laundering, forcing unscrupulous traders to legitimise their wealth.

Auditor General Nancy Gathungu says illegal financial flows (IFFS) hinder a country’s ability to mobilise its natural resources for sustainable economic development.

“If EAC have strong laws to combat anybody bringing in resources irregularly without disclosure on how they have earned those resources then they should be able to stop at that point and either return those resources or report to the government of Kenya that they have seen some activities either in terms of goods crossing the border or funds in their banks," she said during the release of the regional coordinated audit on illicit financial flows in April.

"It's about each country strengthening itself and ensuring nobody can bring in any illegally acquired wealth that has no explanation.”

She recommends that African governments subscribe to regional and global initiatives for cooperation in financial intelligence and the use of technology to ensure real-time management and monitoring of transactions by tax authorities.

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