By KT Reporter
More than 71 percent of the alcoholic (fermented) beverages consumed in Uganda are now the illicit and unregulated, traditionally produced drinks, according to the latest survey report released by the Alcohol Industry Association of Uganda.
The means that these “artisanal” products, the common names being Malwa, Kwen, Kasese, Arege, among others, continued to drink into Uganda formal alcoholic (fermented) beverages market share which now declines to just 29 percent.
With the consumption growing to 71 percent in 2024, from 69 percent it means that the government is also losing tax revenues as the makers and distributors are not regulated or licensed.
The Report, “Understanding illicit alcohol market in Uganda,” researched and compiled by international researcher Euromonitor International, was launched at Kampala Serena with various stakeholders from the industry in attendance.
The research conducted in the first quarter of this year shows that on average, Ugandans consume 4.6 litres of pure illicit alcohol per year, compared to 2.3 litres of pure legal alcohol. In simple terms, 4.6 Litres is equivalent to four 500ml cans of beer per week, or four glasses of wine per week or seven 30ml shots of vodka per week.
The association commissioned the report in order to build knowledge of and understand the drivers of the illicit alcoholic drinks trade, its shape, its size, and impact on government revenue in Uganda in comparison to 2020.
The overall objective is to work with the government to understand the problem and identify ways to combat the issue.
“For about 10 years up to date, illicit alcohol has been accounting for 65 percent of the market to date; and the 35 percent of legal and regulated alcohol are paying over 1 Trillion Shillings in taxes,” said Emmanuel Njuki, Vice Chairperson of the association, adding, “Government should be concerned about the revenue losses.”
According to him, if the challenge of illicit alcohol was to be tackled, it would mean a better business opportunity; “either you will see a lot of investments from the existing industry players, or you will see more people coming into this market to invest.
Through that, we get more taxes, then there is good health of our people and a better Return on Investment for our industry investors.”
The report shows that the total alcohol market amounted to 15 Trillion Shillings in 2024, with 40 percent of this accounted for by illicit alcoholic beverages. It says that Illicit sales in this period amounted to 6 Trillion Shillings.
“Factors such as unemployment and the rising cost of living have driven demand for affordable or cheap home-made artisanal alcohol like wines and spirits, which are up to 81 percent cheaper than the legal alcohol,” the report says.
However, it says that an unforeseen advantage to this was that counterfeiting and smuggling contraband alcohol shrunk from 27 percent to 25 percent, and 4 percent to 3 percent, respectively, from 2020-2024.
Other findings in the report indicate that in 2024, the total Ugandan alcohol market reached 1.7 million hectoliters (170 million litres), with 67.3 percent being illicit products compared to 64.5 percent in 2020.
While presenting the report, Benjamin Rideout, Consultant, explained that between 2020 and 2024, the illicit alcohol market has expanded by 157,453 in Hectolitres.
The volume share of illicit alcohol increased to 67.3 percent in 2024, from 64.5 percent in 2020. The fiscal loss relating to illicit alcohol sales grew at a Compound Annual Growth rate of 16.2 percent, due to increasing volumes and higher excise duties on various alcohol categories such as wine and spirits.
“Illicit alcohol is driven by affordability, accessibility, and low levels of enforcement. With over 20 percent of Uganda’s population living below the national poverty line, the affordability of alcoholic beverages is paramount to influencing consumer choices,” says the consultant.
He adds that Illicit alcoholic beverages are characteristically cheaper than legal brands, even though illicit producers and distributors closely monitor legal market prices to maximise profits, especially with counterfeits.
On views from the public, Rideout added that consumers believed illicit alcohol is most widely available in Buganda at 26 percent, West Nile and Lango follow with 19 percent each and Teso 13, while along the Eastern Border in Busoga, illicit alcohol is available at 15 percent.
There is tax leakage from the thriving illicit alcohol trade stemming from scale, unregulated distilleries not declaring, under-declaring, or misclassifying their production, followed by counterfeit fabrication.
The contribution of counterfeit and illicit brands to fiscal loss is said to have been valued at 3 Trillion Shillings in 2024. However, only 10 percent of consumers associate illicit beverages with tax evasion or the loss of revenue to the government.
“Illicit alcoholic drinks are priced more affordably, with price points up to 81 percent lower than the equivalent legal beverages. While spirits, such as vodka and gin, are cheaper by around 29 percent, whereas brown spirits, such as rum and whisky, deliver discounts of 15 percent on average,” reads the report.
The association recommended a need for widespread sensitisation of consumers on the impact of illicit substances not only on their health but on the bigger picture.
“If consumers are made aware of how this inadvertently impacts their access to social amenities, perhaps we could see a behavioural shift in its consumption.”
Isaac Arinaitwe, the Principal Economist at the Finance Ministry, applauded UAIA for instituting the study, saying that the findings, particularly on the fiscal loss as a result of illicit were alarming.
“Illicit alcohol even has a public health challenge to the consumers; it undermines fair competition to legitimate players. In terms of how to address the challenge of artisanal alcohol, it may be difficult to tackle, but we can address the issue of counterfeits; I know this would require a holistic approach using the Ministry of Local Government because they have a presence all over the country,” he said.
Abel Kagumire, the Commissioner Executive Operations at Uganda Revenue Authority (URA) explained that the tax body has set up a working group to pick field intelligence to address challenges of illicit trade, especially in alcohol and tobacco.
“In West Nile, we still have the challenge of illicit, Eastern Uganda has largely been handled apart from the issue of ethanol, which traders claim is from Kenya, yet it is from Swaziland. Identification of illicit products is still a challenge, unless the officers are trained in the field on how to identify them,” he stated.
Kagumire hailed the report for unearthing areas where leakages have been.
“We have been collecting 1 Trillion Shillings from the industry, and we clap hands, but using this, we can even collect 4 Trillion Shillings. As URA, we are surprised by the findings and we have taken them in good faith,” said Kagumire.
Counterfeit alcohol thrives across both formal and informal on-trade outlets, with smuggled contraband alcohol originating mainly from Kenya and the DRC through porous, poorly controlled land borders, as well as through Lake Victoria via Kenya’s port of Mombasa-URN. Give us feedback on this story through our email: kamwokyatimes@gmail.com
