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Why the price of popular spirits could double

The danger with prices of legitimate alcohol going up is that more consumers might be drawn to the illicit variety, which poses serious health risks.

An infographic representing the excise rate (by Ksh) for alcoholic beverages between 2021 and the proposed Finance Bill 2024
  • Proposed amendments to excise duty requirements for alcoholic beverages in Kenya will hit the alcohol manufacturing sector hard
  • This change will significantly affect the cost of 40% alcohol by volume - spirits, the most consumed alcoholic beverages in the market
  • Kenya already faces a crisis with 59% of all alcohol consumed being illicit, with the majority being in the form of spirits

This year’s Finance Bill has proposed amendments to excise duty requirements for alcoholic beverages that will hit the alcohol manufacturing sector hard.

In what has been touted as a measure to combat sale and consumption of illicit brews, the Bill proposes a change that prevents local manufactures from claiming back excise on inputs used in manufacturing alcohol.

These inputs include ethanol, glass, concentrates and sugar, where Kenya does not have the capacity to produce glass locally or manufacture industrial sugar.

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Ethanol, for example, is moving to an alcohol by volume (ABV) calculation – currently paid at Sh356 per litre, which manufacturers are currently able to claim back.

Manufacturers will be required to pay tax for inputs as well as the finished product resulting in double taxation.

Under Finance Bill 2024, the excise duty on ethanol will increase to Sh1,600, and manufacturers will not be able to claim it. The cost will, therefore, have to pass on to customers.

The change will majorly affect beverages at 40% alcohol by volume - spirits, which are the most consumed in the market.

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Where local manufacturers have been subject to an excise rate of Sh356, it has increased to Sh640 for the finished product.

“If we take in the Excise Duty on the finished product, it moves to KSh400. If we include, now that we can’t claim back the input cost that we paid on the ethanol, it moves to KSh770 for a 250-ml bottle,” EABL Corporate Communications Director Eric Kiniti illustrated in the case of Chrome Vodka.

He adds: “We are actually going to affect local manufacturing because it will be easier for us to import and not produce locally because your costs of production are so high and prohibitive that you cannot get a selling price that is competitive in the market.”

The Bill’s provision will make the local manufacturing of spirits untenable and could force manufacturers to relocate to other countries, which means job cuts in Kenya.

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Kenya is already facing a crisis because of the prevalence of illicit liquor. A study conducted by Euromonitor International in 2023 found that 59% - more than half - of all alcohol consumed in Kenya is illicit. The majority of these illicit varieties of alcohol is in the form of spirits.

Of the 154 million litres of alcohol that are sold in Kenya in a year, 89.8 million litres are illicit, with sales of the questionable alcohol growing by 63% between 2021 and 2022, the period when the research was carried out.

The danger with prices of legitimate alcohol going up is that more consumers might be drawn to the illicit variety, which poses serious health risks.

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