Cigarette manufacturer Mastermind Tobacco says it is losing over 50 per cent of its revenue to illicit trade on the market in Kenya.
This translates to at least Sh1.4 billion in profits every year, hurting the firm's operations.
It has the second largest share of the Kenyan cigarette market after BAT, by volume of sales.
However, according to Euromonitor, since the early 2000s it has seen its percentage share decline, from over 20 per cent to just over 14 per cent.
In a statement, the firm said products bearing the name of its flagship brand Supermatch are smuggled into Kenya from neighbouring Uganda.
A decade ago, the Kenyan cigarette firm sued Leaf Tobacco Company (LTC) for infringing its copyrights on the Supermatch brand.
Mastermind supported assertions by its market partner British American Tobacco that stated that the country is losing up to Sh6.5 billion annually in taxes as a result of the influx of illicit cigarettes being sold in the local market.
The company is now asking the government to establish strong border controls measures that will curtail the entry of illicit products into the country.
“We are also asking the government to crack down on traders and dealers engaged in the import of illicit cigarettes into the country and take legal action against them,'' the firm said.
Mastermind Tobacco said if not curtailed, the Tobacco industry in the country will be forced to shut down which will lead to a massive loss of jobs.
“We are concerned at the growing level of illicit cigarettes making their way into the country, especially from Uganda,” the cigarette maker said.
The company said the product from Uganda bearing a similar name (Supermatch) does not have a health warning and the tax stamp is fake.
“We are the biggest losers in the market because when we have 80 percent of illicit products bearing the name of our product and are sold cheaply in the country, we will not be able to compete.”
Mastermind said it is ready to work with government, regional and international agencies to eliminate all forms of the illicit tobacco trade.
“If we do not work together, we may be forced to shut down because we will not be able to compete against products that are not paying tax,” Mastermind Tobacco stated.
The tobacco industry is the highest taxed in the country with up to 62 per cent, going to the revenue collector.
“It will take a concerted and united approach by the market players like Mastermind and all agencies involved to fight this menace that is threatening our economy,” said the company.
Kenya is losing at least Sh100 billion annually in revenue due to the infiltration of counterfeit and related illicit trade in the local market.
The latest Intellectual property crime study by the Anti-Counterfeit Authority (ACA) indicates that the vice is on the rise and could see firms close.
According to the report, 78 per cent of consumers in the country buy counterfeit goods (cigarettes included) because they are cheaper compared to original brands.
"An estimated one in every five products sold in Kenya is counterfeit and almost four million Kenyans are using counterfeit, posing a serious threat to health and security and depriving our economy of vital revenue,'' the authority said.
Last month, the Kenya Revenue Authority (KRA) in collaboration with the Inter-Agency Team destroyed an assortment of illicit goods seized from the market worth Sh500 million with an estimated tax value of Sh150 million.
However, the World Economic Forum estimates indicate that neighbouring countries of Uganda and Tanzania were worst affected by the revenue leakages after posting annual losses of $1.8 billion (Sh195.8 billion) and $1.6 billion (Sh174.1 billion) respectively.
Globally, the World Health Organisation (WHO), in its slogan “Stop illicit trade of tobacco products,” every year, governments lose $40.5 billion in revenue from the illicit trade of tobacco products.
In some countries, illicit trade can reach as high as 40–50 per cent of the overall tobacco market.
“Our countries are at risk, as the illicit tobacco trade is more prominent in low- and middle-income countries than in high-income countries,” says WHO
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