FAKE LIQUOR IS NOT JUST A HEALTH CRISIS. IT IS A THREAT TO KENYA’S PLACE IN THE EAC MARKET.

By John Saidi Nyanje — international investment law and dispute-settlement specialist.

There is now a necessary and growing public discussion in mainstream and social media about

counterfeit liquor in Kenya. Much of it rightly focuses on deaths, permanent injuries, criminal

networks, weak regulation and the failure to protect consumers.

But we must also see the wider economic danger. Every poisoned bottle creates a cost for the

public health system, for families, and ultimately for the State. Victims require emergency care,

prolonged treatment, and sometimes lifelong support. The public pays twice: first through weak

enforcement and lost tax revenue, and then through hospitals and medical intervention after the

harm is done.

There is, however, another cost that is receiving far less attention: the risk to Kenyan

manufacturing and Kenya’s credibility as a supplier within the East African Community.

Article 13(1) of the EAC Customs Union Protocol requires Partner States to:

“remove, with immediate effect, all the existing non-tariff barriers to the importation into them

respective territories of goods originating in the other Partner States and, thereafter, not to impose

any new non-tariff barriers.”

That is what allows a genuine Kenyan producer to build a market in Uganda, Tanzania, Rwanda,

Burundi, South Sudan, the DRC and Somalia. Yet Article 22(1) of the same Protocol permits a

Partner State, after notice to the Secretary General, to restrict or prohibit trade for:

“The protection of human life, the environment and natural resources, public safety, public health

or public morality.”

If counterfeit or adulterated alcohol is repeatedly associated with Kenya, other Partner States may

respond with batch testing, enhanced certification, traceability requirements, border delays or

targeted restrictions. They would say, quite plausibly, that they are protecting public health.

The immediate loss falls on legitimate alcohol manufacturers. But it does not end there. It affects

Kenyan glass and packaging producers, label suppliers, farmers, distributors, logistics businesses,

retailers and investors. It raises the cost of doing business and gives competitors in other EAC

states an opening to take Kenya’s market share.

There is also a wider quality and competitiveness concern. Article 15 of the Customs Union

Protocol protects goods from Partner States by requiring treatment no less favourable than that

accorded to “like products” produced domestically. This means, for example, that a Partner

State cannot use the liquor crisis as a pretext to discriminate against an unrelated Kenyan product

merely because it is Kenyan. A ban on Kenyan juice, cosmetics or processed food could not

lawfully rest on a counterfeit-alcohol scare alone; there must be an actual and relevant risk.

But the commercial spillover can still be severe. Importers, supermarkets, distributors and

consumers do not always make fine legal distinctions. Once confidence in Kenyan regulatory

oversight is damaged, scrutiny can spread to other Kenyan fast-moving consumer goods. More

testing, delayed orders, demands for additional guarantees and a loss of brand trust can make

Kenyan products less competitive, even where no formal ban is lawful.

The EACJ’s decision in British American Tobacco Uganda Ltd v Attorney General of Uganda,

Reference No. 7 of 2017, is important here. The Court held that Uganda could not treat cigarettes

manufactured in Kenya as ordinary imports and impose discriminatory excise treatment. The

Court made clear that domestic measures cannot be interpreted in a way that defeats the benefits

of EAC integration.

Kenya should take the lesson seriously. The counterfeit-liquor crisis is expensive in hospitals; it

is expensive in lost revenue; and it may become expensive in lost regional markets. Effective

traceability, standards enforcement, public recalls and prosecution of the counterfeit networks are

therefore not only health measures. They are a defense of Kenya’s manufacturing base and its

competitiveness in the EAC.