Kenya: Govt drops taxes, manufacturers raise prices

In Kenya, while the government has abandoned tax hikes on tobacco products, tobacco prices have nevertheless increased by 20 to 33%, due to the pricing policies of manufacturers. These sudden increases, tabled without notice by cigarette companies, are aimed at restoring their profit margins.

Price increase higher than government expected

According to the Kenyan newspaper The Star, the average price of cigarettes has increased by about 100 shillings per pack of twenty units, or about 70 euro cents, corresponding to an increase of between 20% and 33%. For example, a pack of Sportsman, one of the best-selling in the country, now sells for about 2.80 euros, compared to 2.10 before the increase. This increase, undertaken by British American Tobacco (BAT), was followed by other manufacturers, while Kenyan President William Ruto had refused to sign the bill to increase taxation on tobacco, following protests in the country. Ultimately, the pricing policies of manufacturers are leading to a greater increase in the price of tobacco than what was envisaged in the bill.[1].

Rising production costs in Kenya to justify tariff policy

The manufacturer British American Tobacco justified this sudden increase by citing the need to cope with the increase in production costs, due to the sluggish Kenyan economy, the geopolitical context, the rise in interest rates and currency fluctuations. During the year 2023, British American Tobacco's profit would have decreased by more than 19%, due to the increase in costs and the decrease in sales volumes. According to the cigarette manufacturer, such pricing practices are necessary to ensure the sustainability of the tobacco sector, representing more than 80,000 jobs in Kenya. It is also interesting to note that to oppose tax policies, the tobacco industry regularly puts forward the argument that such a measure would penalize the purchasing power of smokers. However, this does not seem to have been taken into account by the manufacturers when implementing their pricing policy in the country.

The issue of illicit trade avoided by manufacturers

In response to the increase, the Consumer Federation of Kenya (Cofek) and the Campaign Against Illicit Trade and Counterfeit Products (CAITFAP) have warned of the risk that such pricing practices could have on illicit trade. Manufacturers had opposed tax increases on tobacco products, arguing precisely that such an increase would have the effect of penalizing the tobacco sector and encouraging illicit trade. Such a turnaround seems to indicate that manufacturers give little credence to their own argument, which is only aimed at dissuading governments from implementing tobacco control policies.

The health challenge of smoking in Kenya

Tobacco use is a major human and health challenge in Kenya. According to a recent study published in Tobacco Induced Diseases, the prevalence of tobacco use is estimated at 13.5%, with significant gender disparities. For example, while only 4% of women report smoking, nearly one in four men in the country use tobacco (23%). Overall, tobacco use accounts for 16.5% of deaths among people aged 35 and over, while it is responsible for over 40% of deaths associated with respiratory diseases, 31.4% of cancer deaths, and 13% of tuberculosis deaths in the country.[2].

©Tobacco Free Generation

FT

[1] The Star, Cigarette prices up by 33% despite Finance Bill withdrawal, 07/24/2024, (accessed 07/25/2024)

[2] Odeny, Lazarus, Gladwell Gathecha, Valerian Mwenda, Anne Kendagor, Samuel Cheburet, Beatrice Mugi, Caroline Mithi, Florence Jaguga, Kennedy Okinda, Rachel K. Devotsu, Shukri F. Mohamed, and Jane R. Ong'ang'o. “Tobacco smoking-attributable mortality in Kenya, 2012–2021”. Tobacco Induced Diseases 22 no. July (2024): 134. doi:10.18332/tid/186170.