Retailers demand action against “powerful” illicit trade networks

Retail Trade Association of Kenya (RETRAK) CEO Wambui Mbarire with Michael Kiragu, national chairman of the Pubs, Entertainment and Restaurants Association of Kenya (PERAK), during a media briefing on illicit trade, in Nairobi/ MARTIN MWITAKENYA’s economy risks collapsing due to rising illicit trade that is knocking out legitimate businesses from the market, with government also losing billions of shillings in tax revenue, retailers have warned.

This also means massive job losses as business cut investments, reduce operations, and some being forced to shut down since they cannot compete with cheaper illicit and counterfeit products which are evading taxes, while also exposing consumers to harm.

Retailers have since urged the government to dismantle the supply networks behind the trade, with some linked to powerful individuals with deep government connections.

According to retailers and players in the hospitality industry, the country needs a well-coordinated crackdown on illicit trade which has worsened in the alcoholic and tobacco industry, while also fast-spreading into sugar, cosmetics, clothing and motor vehicle spare parts.

The Retail Trade Association of Kenya (RETRAK) says enforcement agencies must shift from conducting raids and seizing counterfeit and smuggled products in shops to pursuing manufacturers, financiers, transporters and distributors who sustain the illegal trade.

The association wants the Kenya Revenue Authority , Anti-Counterfeit Authority, Kenya Bureau of Standards and National Police Service to establish a joint enforcement framework, designate a lead agency and publish timelines for reporting progress.

The warning comes amid growing evidence that illicit products are taking a larger share of the Kenyan market, undermining tax collection, distorting competition and threatening businesses that comply with regulatory requirements.

A Kantar study estimates that illicit cigarettes accounted for 45.1 per cent of Kenya’s cigarette market in 2025, up from 34.1 per cent in 2021. The trade resulted in estimated excise duty and Value Added Tax losses of Sh10.2 billion last year and Sh47 billion cumulatively between 2021 and 2025.

The alcohol market is facing an even bigger challenge. Figures presented to Parliament by the ACA indicate that illicit alcohol accounts for approximately 59 per cent of alcohol consumed in Kenya by volume, with an estimated economic cost of Sh71 billion in 2022.

The ACA’s latest firm-level survey also found that counterfeit goods accounted for an average of 18 per cent of products across the sectors surveyed, including 21 per cent of motor vehicle spare parts and 19 per cent of alcoholic drinks.

The scale of enforcement operations points to the size of the underground economy. The ACA seized counterfeit goods valued at more than Sh563 million during the first three quarters of the 2025-26 financial year, while KRA destroyed fake and illicit products worth Sh218 million in July.

KRA has also intercepted nearly 100 tonnes of smuggled sugar in Lodwar and Marsabit, highlighting the challenge posed by porous borders and established smuggling routes.

RETRAK chief executive Wambui Mbarire yesterday said authorities must investigate the entire supply chain rather than concentrate on retailers found selling illegal products.

“Seizing illicit products from a shop is only the beginning. Investigators must establish who supplied the goods, where they were stored, who transported them and who financed the consignment. Following that trail is how we disrupt the networks and prevent the next delivery,” she said.

The association argues that legitimate retailers are increasingly disadvantaged by competitors dealing in smuggled, counterfeit and untaxed goods, which can enter the market at lower prices because their operators evade taxes and regulatory costs.

Mbarire said retailers also need practical tools to verify excise stamps and product authentication marks, alongside clear guidance when suspicious deliveries are identified.

The association wants accessible and confidential reporting channels for shop employees and consumers, as well as regular public updates on investigations, prosecutions and recovery of unpaid taxes.

It says the absence of visible enforcement outcomes risks allowing illegal suppliers to continue operating while compliant businesses shoulder the cost of licensing, taxation and regulatory compliance.

The concerns have also been raised by the hospitality industry, which says the government’s approach to regulating alcohol must address the sources of illicit products instead of imposing additional burdens on legitimate operators.

Michael Kiragu, national chairman of the Pubs, Entertainment and Restaurants Association of Kenya (PERAK), said the problem is not necessarily the absence of laws but the failure by enforcement agencies to implement existing measures and pursue offenders.

He questioned whether some provisions in the Alcoholic Drinks Control Act 2026, including proposals to raise the legal drinking age from 18 to 21, would meaningfully address the growth of illicit alcohol.

Kiragu said stakeholders had previously raised concerns about policy proposals contained in a document associated with the alcohol control framework, arguing that some measures were now being reintroduced without sufficient consultation with industry players.

He called for structured engagement between regulators, manufacturers, distributors, retailers and hospitality businesses to identify the loopholes facilitating the illegal trade.

“Let us get to the bottom of the problem, starting with the porous borders from Uganda, where we have alcohol, cigarettes and even mattresses crossing illegally without payment of taxes,” he said.

He warned that the government’s continued focus on additional licences and regulatory requirements could weaken legitimate businesses without necessarily stopping illegal operators.