The illicit alcohol trade is valued at around Sh67 billion, with the country's revenue loss estimated at Sh66 billion.

| Nation Media Group

The making of illicit brews and the Uganda connection

What you need to know:

  • Today, sugar millers in Kenya are making a fortune from the trade of molasses as alcohol distillation business booms in Uganda.
  • The high demand for molasses in Uganda also explained the continued harvesting of immature cane as production of molasses.

George knows that he needs to be extremely discreet on his self-appointed assignment of tracing the routes that smugglers use to sneak molasses across the Busia border to Uganda.

These people — mostly middle men who disguise themselves as farmers to procure molasses from Kenyan sugar millers to sell in Uganda — can be dangerous.

In 2021, they were fingered for the death of George’s colleague, a molasses procurement manager at one of the three local alcohol distilleries. They just didn’t like the way he was poking his nose into their business.

It is a risky undertaking, but George has to do it nonetheless. The survival of his employer, and thus his job, depends on it. He works at a distillery that manufactures alcohol by turning molasses into ethanol. One of their biggest customers has turned down an offer price that is just enough to cover their operating costs.

Over the past one year, George has been gathering information that has revealed the existence of an ethanol smuggling racket through which most of the locally produced molasses has been mopped up and exported to Uganda without the appropriate documentation such as export permits.

The illegally exported molasses, George reckons, could also be responsible for the proliferation of counterfeit alcoholic drinks and illicit traditional brews such as chang’aa.

Criminal gangs tend to sprout where there is an opportunity to make a quick buck. 

The illicit alcohol trade is valued at around Sh67 billion, with the country's revenue loss estimated at Sh66 billion, a June 2023 study by Euromonitor, a market research company, revealed.

The oft-repeated claim by industry insiders that the illegal export of molasess has been enabled by the porous borders is an understatement.

As our investigation revealed, illegal traders of molasses choose to do their business at night, not necessarily to avoid being seen by the police, but to conceal from the public glare a smuggling racket that has been oiled by the bribe-taking law enforcement agencies including the police and customs officials manning these borders.

Sugar, once christened the ‘white gold”, was for long the only sugarcane product millers were obsessed with. 

So profitable was it that, in the 18th century, Africans were violently uprooted from their continent, shipped across the Atlantic and put to work, without pay, on vast sugarcane plantations in North America.

Later on, millers learnt of the value of molasess, a thick brown syrup that is left after sugar has crystallised. Another by-product of sugarcane is bagasse, cane husk, which is used for power generation.

For long, millers kept pouring molasess down the drain as waste. But this changed, so much that where in the last decade 81 per cent of sugarcane has been used to produce sugar, this is projected to drop to 76 per cent by 2032, a study by the United Nation's Food and Agriculture Organization (FAO) and the Organisation for Economic Co-operation and Development (OECD), a club of mostly rich countries, has projected.

The shift is due to the flexibility by millers, mostly in countries such as Brazil, the world's largest producer of sugarcane, to easily switch from sugar to ethanol production.

Today, sugar millers in Kenya are making a fortune from the trade of molasses as alcohol distillation business booms in neighbouring Uganda. The high demand for molasses in Uganda, people in the know told Nation, also explained the continued harvesting of immature cane as production of molasses, unlike sugar, does not require high sucrose content found in mature cane.

The Sugar Directorate says that, over the past few years, there has been an increase in demand for molasses, sparking an increase in the number of molasses exporters from two in the financial year 2021/22 to 16 in financial year that ended in June.

But there has also been an explosion of unlicensed exporters, who disguise themselves as farmers.

The millers are selling a tonne of molasses to these unlicensed exporters at Sh40,000, an increase of nearly 10 times from Sh4,500 less than year ago. Distillers in Uganda in turn give them upwards of Sh60,000 for a tonne of molasses.

The middle men's profit margin of Sh20,000 is enough to take care of every operating cost that they incur, including paying off the police and KRA officials and remain with a decent margin.

In raw form, molasses can be used for animal feed or making fertilisers. The Ministry of Agriculture has since determined that 20 per cent of the locally produced molasses is more than enough for the dairy farmers who use it to sweeten the animal feeds, says Kibos Sugar Company Chairman Raju Chathe.

But most of the molasses is transformed into ethanol, which is then used to distill spirits such as whiskey, gin or rum. Ethanol can also be denatured, made unfit for human consumption, and used to make industrial alcohol for the manufacture of cosmetics and pharmaceuticals.

The portable spirits produced by prominent alcohol manufacturers like the East African Breweries Limited (EABL), London Distillers or Kenya Wine Agencies Limited (KWAL) are valued at around Sh200 billion and give the taxman about Sh18 billion in excise duty, popularly known as the sin tax, official data shows.

But it is the unseen billions changing hands behind the shadows that has gained interest in the underworld. 

In Nairobi, reckons Raju, a litre of ethanol is going for Sh400 in the black market. This works out to Sh400,000 for 1,000 litres, or one tonne, of ethanol. This means that, for the Ugandan distillery that paid Sh60,000 for a tonne of molasses, burning a few shillings to get their products across the Kenyan border all the way to Nairobi is a risk worth taking.

Of course, some of this ethanol remains in major urban centres in Western Kenya, such as Kisumu city, where it has been used to make dozens of bootleg drinks.

Before we left Kisumu for Busia, George purchased more than six 250 ml spirit brands retailing at between Sh100 and Sh140. Such a price is not possible for a company doing clean business and paying all its taxes.

Excise duty on a 250 ml of alcohol alone is around Sh113. Add the cost of ethanol, the bottle, cup, labelling, excise stamp, and the retailer's margin and the cost works out to over Sh250, according to calculations done by Nation

Predictably, virtually all of these drinks didn't have genuine excise stamps from the Kenya Revenue Authority (KRA), which means the biggest cost component that is not included in the Sh140 retail price is excise tax and the 16 per cent value added tax (VAT), sales tax.

Where did they get their alcohol? Although Uganda, Kenya's biggest trading partner, is a major sugarcane producer in the region, the demand for molasses from the 14 distilleries has outstripped supply.

Ten of these distilleries, mostly standalone, were opened in the past three years. In contrast, Kenya only has three distilleries which, ironically, are currently struggling to access molasses from the 15 sugar factories in the country.

The biggest local distillery is the East African Agro-Chemical and Food Company, a standalone distillery based in Muhoroni, Kisumu County.

Kibos Sugar Company, also based in Kisumu County, is the other distillery. The third one is London Distillers, an alcohol manufacturer. Mumias Sugar also has a distillery which went mute soon as the millers' machines stopped roaring. A tonne of molasses is currently going for as high as Sh60,000 in Uganda.

Today, George and I will attempt to trace the so-called panya routes (illegal crossings) used by, not only those who illegally export molasses to Uganda, but also those who sneak back into Kenya ethanol to scores of unlicensed distilleries.

The sleepy border town of Busia — infamous for the magendo (smuggling) trade of the 1980s when the East African Community was in limbo — is a critical conveyor belt for the smuggling of molasses and ethanol.

And a lot of young boys on this side of the border strive to have a bite of the loot. They describe themselves as clearing and forwarding agents.

George, pretending to be trader with a trailer of molasses waiting in Kisumu, managed to convince two of these young men to show us the route that we will use to move this raw material to a distillery in Uganda. Our plan was to go all the way to Jinja town.

First, we needed to hire a car with Ugandan number plate to avoid raising eyebrows across the border. Ugandan police have recently been harassing motorists driving cars with Kenyan number plates, we are told.

One of them, clearly the leader, talks amiably to some boys on motor bikes as we head to the fueling station. 

"Those are the boys who will go ahead of us to ensure the route is okay," he says.

"You see all that cement on the motor bike?" He points us to some three motor bikes with cement on their carriers just as we get to the petrol station.

"All that cement is going to Uganda," he says. The cargo, he says, is offloaded at the petrol station and then picked one by one by the boda boda operators. The same will happen with our cargo.

The trailer should be here by around 11pm. It shall be packed here until around 4am when it shall leave for Uganda, avoiding the official route.

Meanwhile, an advance party of boda boda riders will do a reconnaissance of the route, he tells us.

"Here we have so many routes. This is not like Malaba where there is only one route," says the guide. Malaba is another border town in Busia County. 

One can't help but notice that the borderline here is by all intents and purposes imaginary, a major reason why the East African Community (EAC) has been one of the most successful regional economic blocs on the continent with people and goods moving with ease across the borders, according to a study by the African Union and the African Development Bank.

The towns on either side of the border are both known as Busia. And rightly so. The people in this area are the same: the area where we are is occupied by the Iteso community, a Nilotic group whose peoples can be found both in Uganda and Kenya.

The Abasamia, a Luhyia subtribe, can also be found on both sides of the border, with families separated by imaginary lines drawn by the European imperialists centuries ago as they shared the continent amongst themselves.

Our guide can speak Kiganda, a national language in Uganda, Samia and Teso. Even if the two countries were not in the same trading bloc, he wouldn't have needed a passport to move from one country to the other.

The greenness of the maize plantations on either side of the murram road stretches across the imaginary boundary that at some point is demarcated with concrete beacons hidden with overgrown bush and inscribed with 'Kenya' and 'Uganda.'

But this similarity of the region has also made it hard to enforce rules of fair play in the EAC, such as the rules of origin, aimed at ensuring that goods sold in the region duty-free do not come from outside of the seven-member regional bloc.

Word has it that a lot of ethanol that has occassionally been seized coming from Tanzania at Isebania border has actually come from South Africa, which is a member of the Southern African Development Community together with Tanzania.

Just before taking the diversion that will get us to Uganda, we encounter a roadblock manned by two Kenyan police officers.

Our guides inform them that we were surveying the route for some deal that was about to happen and they would be considered in the proceeds.

“Those ones we will give them something and then they will let us pass,” says the guide.

How much are we expected to pay them, George asks.

"Because yours is a trailer, you will give them only Sh10,000."