Illicit Cigarette Trade Denying KRA Massive Revenue – BAT

Source from:  The Star, Kenya 02/15/2019

Seven hundred million counterfeited cigarettes were traded in Kenya last year, according to a market research by leading manufacturer BAT.

British American Tobacco announced yesterday that the illicit trade has grown from 12.4 per cent to 14.1 percent.

It is higher in neighbouring Uganda at 22 per cent.

The firm’s financial director Sidney Wafula said the trade denies Kenya Revenue Authority Sh2.5 billion annually in tax revenue while the industry loses Sh900 million.

“Our independent third-party research shows that the counterfeit cigarettes are either smuggled into the country, having been destined for a lower tax market that was never reached,” BAT managing director Beverly Spencer said.

She said some of the cigarettes are produced locally with forged tax stamps.

Spencer said KRA and other relevant bodies need to find the point of sale of the fake products since its very difficult for the consumer to tell the difference.

In the firm’s full-year financial results ending December, the cigarette manufacturer said it exported nine billion sticks to nine markets across Africa.

The exports are equivalent to 65.2 per cent share of BAT factory output, leaving 34.8 per cent of the output or at least 4.8 billion sticks for local use.

Out of the Sh36.5 billion gross revenue announced by BAT as of December 31, 48 per cent was from exports while local revenue accounted for 52 per cent.

It announced a Sh4.1 billion net profit driven by excise-led pricing in the Kenyan and export markets coupled with an increase in cut rag (semi-processed tobacco) sales volumes.

Cut rag exports went up by 242 per cent to 2.8 tonnes valued at $15 million.

The annual volume of leaf grown was 8.9 million kilogrammes which saw farmers earn Sh1.49 billion.

Apart from illicit trade, consumer pressure was a top challenge affecting BAT as consumers remained cash stretched.

“We are competing in a highly competitive space with telecommunications firms from the increasing use of data and sports betting firms,” Spencer said.