What you need to know:
- A 2019 study by Ernst & Young showed that consumption of alcohol that’s sourced from illicit and informal markets was costing the government about Sh1.2 trillion in uncollected excise duty each year.
Dar es Salaam. Despite efforts to halt the making and selling of illicit liquor, the trade remains a serious threat to consumers while negatively affecting legitimate distillers, thus prompting a call to tackle the illicit market’s potential growth.
Figures unveiled by a National Bureau of Statistics (NBS) report have it that reported crimes against state security and public tranquillity which are related to illegal liquor, have risen to 6,022 last year compared to 4,602 reported in 2020, a 30.8 percent rise.
When asked what the increase meant to the country’s economy, and to the makers, Dr Rose Samson, an independent economist cum analyst, said the increase was huge and it needed careful approach to tackle its cause.
“All forms of unrecorded production of alcohol fall into illicit practice category. It’s unfortunate that there is a rise in reported cases but one needs to know what caused the increase. Was it due to improved crackdown strategies or more people finding it easier for quick money?” she observed.
She added: “I commend all efforts done but we also need to change our tactics, mind you, majority of the country’s population are youth, these are the primary consumers as their socio-economic condition can’t allow them to access liquor, they don’t earn.”
Therefore, the economist was of the view that youth consume more illicit distilled spirits than beer because spirits have higher alcoholic content and tend to be more expensive, providing an even greater incentive for those who sell illicit liquor as they make huge profits.
Dr Rose was of the view that since illicit liquor was not taxed, then the government automatically missed out on expected revenue that was to be collected from missed sales of genuine products. Illicit liquor lower sales and profits of spirits sold in the legitimate market.
A 2019 study by Ernst & Young showed that consumption of alcohol that’s sourced from illicit and informal markets was costing the government about Sh1.2 trillion in uncollected excise duty each year.
It stated that the market for alcohol sourced through illicit and informal means constituted approximately 55 percent of the overall country’s alcohol market.
Mr John Wanyancha, the director of Corporate Relations at Serengeti Breweries Limited (SBL), commended the government in dealing with the illicit perpetrators saying: “We will keep cooperating with government and law enforcers to tackle the matter.”
“The demand for illicit local alcohol consumption is derived by the fact that consumers have got no access to taxed alcohol, their purchasing power is limited and therefore prefer illicit products which are cheap,” he explained.
He added: “For the past five years, SBL has kept the price of its product the same, we haven’t raised our prices; as a way of promoting affordability but we also have some programmes which promote positive drinking behaviours.”
According to Mr Wanyancha, the illicit market also included the smuggling of legally produced, high-quality and branded drinks, and with respect to illicitly produced alcohol, the biggest health concern to consumers was exposure to health risks associated with toxic.
According to a report by the Organisation for Economic Co-operation and Development (OECD), an international organisation that works to build better policies for better lives, legal operators are not able to compete on a level-playing field with illicit trades who evade taxes.
“Illicit producers and traders are not subject to the costs associated with running of legitimate businesses (including wages, health securities, operational and marketing costs). It means that they can either offer customers a lower price or commercialize the products at a similar price, while having much higher margins,” the report reads in part.
OECD further highlighted the level of illicit trade in a given country is an important consideration for legitimate operators when taking a decision on whether to enter a market, and whether to invest in production and distribution in that market.
The report dubbed The Economic Impact of Counterfeiting further noted other general sales taxes that the government loses, including Value Added Tax (VAT), tariffs and taxes paid by legitimate producers may be diminished to the extent that sales and profits of legitimate products decline.
However, Mr Exaud Kigahe, who is the Deputy Minister for Investment, Industry and Trade, was one time quoted in the media saying the government will engage the Fair Competition Commission (FCC) in a crackdown on dealers of counterfeit alcoholic drinks.
“Our ultimate goal is to create a level playing field among all players in the business, however this cannot be achieved when we have counterfeit products returning to the shelves,” he claimed.