Bar Owners Get Relief From Threat of Mass Shutdowns

Business Daily (Nairobi)

30 May 2011

Alcohol dealers – who have been living under the fear of closure for breach of the law on proximity of bars to learning institutions – got a big measure of relief last week after the liquor market regulator indicated that it would be selective in its enforcement of the legislation.

The National Agency for the Campaign Against Drugs and Alcohol (Nacada), told the Business Daily that it had changed tack in its enforcement of the 300-metre rule provided for in the Alcohol Control Act 2010.

Planning zones

“We will consider a number of factors such as the planning zones in deciding the fate of any outlet that is in breach of this law,” said Mr Aggrey Busena, the acting chief executive at Nacada. “If a school is situated in an area that is exclusively a shopping centre, then special consideration has to be given to the bar owners.”

The legislation, which was passed mid last year, outlaws the establishment of bars or any alcoholic outlets within a radius of 300 metres from learning institutions for persons aged below 18 years.

Its coming into force in the next 42 days was expected to lead to the closure of thousands of bars, especially in Nairobi where the collapse in City Hall’s planning department has seen bars mushroom haphazardly.

Mass closure of bars and other retail alcohol outlets meant a possible loss of jobs for thousands of waiters and management staff, besides deepening the decline in sales of alcoholic beverages that began with the restriction of drinking hours when the new law came into force in September.

Kenya’s liquor market is estimated to be worth Sh42 billion, with the mainstream segment accounting for 60 per cent of the total.

Nacada’s apparent change of licensing criteria, while offering thousands of small businesses a lifeline, is expected to run into serious trouble should bar owners whose premises are ordered closed as their rivals are left in operation fight “selective enforcement” of the law.

It could also put Nacada in conflict with parents opposed to having bars close to schools and want the law applied fully.

Mr Samuel Henia, a Nairobi-based lawyer with John Mburu & Advocates, describes Nacada’s change of tack as wise, saying full application of the law risked attracting legal suits because bar owners can assert that their interests have been ignored.

“There is a possibility that businesspeople, whose premises are closed with full implementation of the law, will seek to stop it by asserting that their right to earn a living and own property have been violated,” he said.

Other legal experts said Nacada’s proposed method of licensing is only possible with the amendment of the Alcohol Control Act 2010 to include an exemption procedure clause.

Recent gazettement of the district licensing committees means the licensing process officially began on Monday – five months behind schedule – leaving bar owners with only 42 days to submit their licence application forms.

The applications will be filed in the next three weeks before the committees embark on another three weeks of vetting them in readiness for licensing. The vetting includes inspection of premises before a final decision to grant or reject an application is made.

The law also grants unsuccessful applicants a small window to appeal to the High Court before the list of licensed premises is published. New businesses whose applications are rejected and existing ones whose licences have been cancelled can apply afresh after six months.

Exclusion of liquor premises from learning institutions has elicited sharp reaction from bar owners who cit the huge costs of moving to new locations. The ban on alcoholic advertising and restriction of business hours have met similar reactions from industry players but Nacada insists that the law must apply fully until it is repealed.

Mr Sam Ikwaye, the chief executive of Pubs Entertainment and Restaurants Association of Kenya (PERAK), said that although protecting underage persons from the influence of alcohol is good, there is no justification for the 300 metres limit.

Mr Ikwaye wants the licensing boards to give due consideration to the order of establishments in arriving at its decisions. “Special consideration should be given to what was founded first: The bar or the school,” he said.

Mass closure of bars risks further eroding the profitability of beer makers who have been under pressure since the law came into force late last year.

Beer distributors said sales had dropped by up to 30 per cent since the beginning of the year – signalling an erosion of revenue for beer makers by a similar margin.

Kenya’s largest beer maker, East African Breweries Limited, reported a drop in net half-year profits for the period ended December 2010 to Sh4.1 billion from Sh4.2 billion the previous year even though the period was only partly affected by the new law.

Last month, EABL increased the prices of its premium brands by between Sh5 and Sh10 per bottle citing an increase in production costs though industry analysts said it may also help cushion the brewer against revenue erosion caused by the drop in sales volumes.

The coming into force of the distance rule puts a new hurdle before the beer makers that risks shutting down a large number of sales outlets and a cutback in sales volumes.

Discourage entrepreneurship

“Closing a large number of bars will most certainly hurt sales and discourage entrepreneurship in the alcoholic beverages industry,” said Ms Tabitha Karanja, the managing director of Keroche Industries.

Removal of pubs from around schools has won the support of educationists who argued that the move protects children from the negative influence of alcohol.

Kenya Private Schools Association chairman John Kabue said the law should help instill character into school-going children at an early age. “You cannot model children to have good character if the first sight they encounter upon stepping out of school is that of drunkards staggering around,” Mr Kabue said.

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