The Kenya Revenue Authority (KRA) has announced that it has increased border surveillance in order to stem the high amount of smugglers bringing goods in from neighbouring countries such as Tanzania and Uganda.
The hope is that the move will help to reduce the potentially large revenue lost to local manufacturers and traders to illicit trade, which the Anti-Counterfeits Authority (ACA) estimates to be more than Sh153 annually.
The measures follow other recent steps to improve the strength of the Kenyan border, such as the discontinuation of the Kenya visa on arrival. It is now obligatory for all non-visa-waiver foreign citizens to pre-register for an online visa before they may enter the country.
In late 2021, the KRA received an estimated Sh40 million worth of surveillance equipment to enhance security at key border points, as part of customs capacity-building initiatives in Kenya.
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The aid was procured from the government of Japan by the United Nations Office for Project Services (UNOPS). The Japan International Cooperation Agency (JICA) and the World Customs Organization (WCO) also partnered on the project.
The equipment received included an X-ray baggage scanner, as well as a patrol boat and other patrol vehicles, in addition to Raman spectrometers and field test kits. The scanner will be a key aid in detecting contraband goods at border checkpoints.
In addition to the heightened surveillance system and increased scanning of goods at border checkpoints, the KRA has worked closely with local police to ensure enhanced patrols on the frontiers most affected by smuggling operations.
Bernard Kibitit, the KRA’s chief manager at Nairobi Customs Stations, recently spoke on the measures during a media forum to address the seizure of prohibited and restricted goods at the ports of entry.
“Government agencies, in a multi-agency approach, have heightened surveillance and I can tell you smuggling activities have reduced”, Kibiti claimed.
Goods smuggling is especially prevalent in towns such as Malaba and Busia on the Kenya-Uganda border, Isebania, a crossing with Tanzania, and Moyale on the border with Ethiopia.
Some of the most commonly smuggled goods include beverages such as water, juice, and soda, as well as sweets, sugar, and milk products. Smuggling of tobacco and alcohol products is also especially prevalent.
The rise of goods smuggling in the country has largely been blamed on the high rate of taxation in Kenya, resulting in local produce becoming far more expensive than in neighbouring countries.
“Our challenge is that for some of the products, the cost is significantly higher compared to our neighbours,” Kenya Association of Manufacturers (KAM) chief executive Phyllis Wakiaga has said. “There is a growth in illicit trade in the country as the cost of products continues to rise.”
As an example, taxes make up approximately 50-60 percent of the cost of alcohol in Kenya. While the typical price of a beer in Kenya is between Sh180 and Sh300, consumers in Kampala, Uganda can only expect to pay Sh139.
In Tanzania and Ethiopia, the cost of a beer is even lower, as little as Sh100 and Sh60, respectively. Additionally, the price of basic goods such as bread, flour, milk, and rice is far cheaper in these countries than in Kenya, and as much as Sh20 and Sh50 cheaper in Uganda.
Retail Trade Association of Kenya (Retrak) CEO Wambui Mbarire has also blamed new taxes and high excise duties for the rise in illicit trade The excise duty for products such as fruit and vegetables has recently gone up from Sh11.59 to Sh12.17 per litre.
Meanwhile, duties for most alcoholic products have increased from Sh116.08 to Sh121.85 per litre. Mbarire said that currently “about 44 percent of the alcohol consumed in Kenya is illicit”, as repeated tax increases have pushed consumers to seek out cheaper alternatives.
In turn, this is costing taxpayers and the Kenyan government an estimated Sh78 billion in lost revenue in alcohol sales. The illicit cigarette trade also adds an additional loss of roughly Sh4 billion in annual excise revenue.
“This presents an obvious incentive for smugglers to exploit our porous borders and sell goods bought more cheaply in Uganda to customers in Kenya”, said Mbarire. “While the government has put in place measures to curb illicit trade and tax evasion, the impact on the ground is very minimal”.
The decision to tighten controls against smuggling operations follows other recent attempts to correct the unpredictable business environment in the country and combat the high cost of living, including a 12 percent increase in the minimum wage.
Nevertheless, this falls short of the 24 percent suggested by the Organization of Trade Unions-Kenya (COTU). Additionally, the rate of inflation in Kenya continues to rise, with an increase of 4.97 percent recorded for the 2020/2021 financial year.
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