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Partnerships key in addressing illicit alcohol trade

Filed under: Business,Latest News |

The unregulated illicit alcohol trade is driving alcohol abuse, damaging health, denting tax revenue and causing social ills, according to a new report on the problem.

Jeffery Fry, an author and poet once said: “Before you act for the greater good, you should know what is great and what is good.” As captains of the beverage industry, Zambian Breweries believes that illicit alcohol is the hallmark of alcohol abuse because its composition is vague, it has a high percentage of alcohol content and is low cost and its promotors have no ethics about selling to minors.

Zambia’s great future is hinged on the productivity of its youth, which are under threat from alcohol abuse mainly caused by illicit alcohol. The greater good lies in formulating effective partnerships through stakeholder engagement to find solutions through pragmatic research.

The National Alcohol Policy states that the harmful use of alcohol has caused many social, economic and public health problems in the country.

Republican President H.E. Edgar Chagwa Lungu, speaking on the progress made in applying national values and principles delivered to the National Assembly bemoaned alcohol abuse because it contributes to gender-based violence, defilement and transmission of disease, including the spread of HIV and AIDS.

The President further directed government ministries to ensure effective management in the production and sale of alcohol to curb alcohol abuse.
As a captain in the brewing and beverage industry, Zambian Breweries has supplemented government’s efforts by engaging Euromonitor International, a leading independent provider of strategic market research from the United Kingdom to conduct market analysis on illicit alcohol in Sub-Saharan Africa for the second time since 2014.

Zambian Breweries views this report as a pragmatic means to gather quantitative and qualitative variables that will give stakeholders a vantage point to come up with solutions to addressing alcohol abuse.

The report covered counterfeit and illicit brands, substitution or refill of alcohol brands, industrial manufacturing of illegal brands, the smuggling of ethanol as raw material or a finished product, illicit artisanal (home brew) alcohol, surrogate alcohol not meant for human consumption such as pharmaceutical alcohol, and tax leakage.
This report had four findings:

  • Illicit alcohol activities are widespread in Zambia with smuggling causing the largest fiscal loss;
  • Low-cost packaged spirits in 200ml formats are a core feature of the illicit market;
  • COMESA Market and other illicit wholesaler hubs are thriving around Lusaka;
  • There has been an increase of lobbying undertaken by government ministries to regulate alcohol distribution and sales.

In terms of fiscal loss, the report has recorded large-scale trade in all the main illicit activities with tax leakage, mainly from unpackaged opaque beer, representing the largest litres of alcohol equivalent (LAE) volume.

The smuggling of packaged products is the largest contributor to fiscal loss with spirits, wine and clear beer all showing huge levels of smuggling in 2017.
Illicit alcohol continues to flood the Zambian market, losing the country an estimated US$145.5 million in unpaid taxes in 2017 alone.

Illegitimate unregistered suppliers made over two-thirds of the alcohol sold during the period under review.

Illicit alcohol trade, according to the report, poses a substantial health threat to consumers, while the negative economic consequences for alcoholic drinks companies and governments are equally considerable. Euromonitor identified that the loss to the Treasury had increased threefold since the last survey in Zambia in 2014, when it identified a fiscal loss of more than US$50 million to government through smuggling and unpaid taxes.

Some 70 percent of the alcohol sold is now illicit, compared with 40 percent in 2014.

“This report makes worrying reading,” said Zambian Breweries country director Jose Moran. “We appeal to government to enforce existing legislation that will prosecute people involved in the illicit alcohol business as government is losing substantial amounts of money through the illicit alcohol trade. This will help curb negative health and social effects brought about by tujilijili and junta.”

The report explained that cheap, unregulated packaged spirits have moved away from sachets, which are now banned, to smaller sized bottles of 200ml. The majority of the distilleries making these are unregistered producers and are not paying tax.
Only about 30 percent of local spirits production in Zambia in 2017 were traceable to legitimate, registered manufacturers. This represents a significant fiscal loss to the state.

According to the study, Market Analysis for Illicit Alcohol in sub-Saharan Africa, smuggling of packaged products into Zambia from Namibia at the Katima Mulilo border is the largest contributor to fiscal loss, with spirits and wine showing high levels of smuggling in 2017.

The report observes that the smuggling of alcohol from Namibia occurs through containerised vehicles. Contents are typically declared as fish and other perishables that are tax-free.

The report exposed Lusaka’s COMESA Market as a significant hub for illicit alcohol distribution but to a far less extent compared with 2014, due to the cholera clean-up from September 2017.

The report findings highlighted townships such as Matero, Mandevu and Chilenje in Lusaka as “competing” with COMESA Market in distributing smuggled alcohol and other illicit products.

The Euromonitor market analysis noted, however, there had been an increase in government lobbying to strengthen the regulation of illicit alcohol, mainly because of alcohol-related abuse.

The report justifies part of government’s drive as health-related, citing interventions made during the cholera outbreak in 2017 that compelled government to intervene in alcohol consumption in urban compounds, epicentres of disease in peri-urban areas, and shut down outdoor trade.

Mr. Moran said Zambian Breweries would continue to collaborate with government and other stakeholders to enhance the National Alcohol Policy’s vision of having a nation free from the negative social, health, and welfare consequences of alcohol abuse in the population, to enhance national development.

“We therefore appeal to the government to address this issue from the root as exposed by the report. In October this year, we signed an MOU with the Drug Enforcement Commission (DEC) on looking at how we can collaborate with government using evidence-based data to fight this illegal alcohol trade as it has negative fiscal, health and social impact,” Mr Moran explained.


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