Corruption rules as illegal imports flood Kenyan market

• Trade driven mainly by agents who bribe state officials to look the other way

The taxman is losing an estimated Sh100 million every week in a tax evasion scheme involving unscrupulous importers working with corrupt customs and airport officials, according to the findings of a Sunday Nation investigation.

The epicentre of the operation in which importers bring in items ranging from top-of-the-line household goods to vehicle spare parts – all tax free – is Eastleigh, the bustling business centre just east of Nairobi’s central business district that has become notorious for illicit trade and huge cash transfers.

Goods ordered online from Dubai, China, Turkey, India and Singapore are flown into the underutilised Eldoret International Airport and ferried to Nairobi by road. Some of these duty free goods enter Kenya through Wajir airport which the government recently upgraded to international status, our investigations show.

Eldoret airport, for long considered a hotbed of corruption, was temporarily closed by the Narc government when it came to power in 2003. It was quietly reopened and, since then, it has been business as usual.

Perhaps unaware of the colossal tax losses the operation inflicts on the economy, shoppers flock to Eastleigh to order or buy various goods, attracted by the huge bargains – upwards of 100 per cent – the traders offer.

A genuine leather sofa set that retails for Sh350,000-500,000 in city furniture shops fetches as little as Sh150,000 on the Eastleigh black market. Vehicle tyres that sell for Sh5,000-8,000 in the retail market go for Sh3,000 on the black market. Chinese tyres for commercial vehicles will cost you Sh25,000 in Eastleigh instead of Sh40,000 charged by normal shops.

The Sunday Nation trailed the illegal business and learnt that the goods are not smuggled; they are cleared through normal channels and sent by road to Nairobi under the watch of customs officers blinded by generous bribes.

The shady business operates on trust. A buyer pays a deposit and is charged for freight depending on the weight of the cargo. He or she is then given a code with which to claim the goods once they arrive in Nairobi. But the traders assume responsibility until the items are collected in Eastleigh or otherwise delivered to the buyer’s destination of choice.

“The system has gained popularity over time because of the level of efficiency exhibited by the importing companies. You won’t lose even a penny in the transaction,” a businesswoman who uses the system regularly but who refused to be identified discussing her business associates, said.

A potential buyer usually contacts one of a number of offices scattered throughout Eastleigh or their branches in Dubai, India, China or Turkey. Some of the goods are ordered on the Internet, and the trader does not have to travel to the countries of origin.

Once the trader has bought the goods, they are weighed and a charge is levied according to the weight and not the value. The charges range from Sh280 to Sh350 a kilogramme.

The trader does not have to worry about any extra charges or how the goods will be shipped. Once the goods arrive in Eastleigh – usually in four or five days – all the buyer needs to do is give the code and pay the requisite amount. Payments can be made either upon ordering or on delivery, depending on the agreement reached.

The trade, our investigation established, has been supplying the retail clothing business in Kenya and may have contributed to the explosion of “exhibition” stalls that sell clothes in city and town centres and supply shops countrywide.

Illicit trade

Our findings were corroborated by Kenya Revenue Authority chief of investigations Joseph Nduati, who acknowledged that the agency is aware of the illicit operations at Eldoret airport and that the nearly duty free goods are on sale in Eastleigh.

“We are aware of the tax evasion going on at the two places and have put in place adequate measures to seal the loopholes,” he said without giving specifics. In spite of the measures he alluded to, the illegal operation continues.

KRA cannot quantify how much tax revenue the government is losing because it does not have a specific code for businesses in Eastleigh.

“Eastleigh is part of the East of Nairobi tax band which stretches from Tom Mboya Street to Jomo Kenyatta International Airport,” said a senior KRA official, who cannot be named as he is not authorised to speak to the media.