BAT Kenya CEO Sidney Wafula on illicit trade, new nicotine products and tax policy

This story has significance for readers across Kenya and beyond.

Two significant changes have taken place at BAT Kenya in recent months. Chief executive Crispin Achola left the tobacco manufacturer after three years at the helm, while the company’s chief financial officer also exited.

Mr Sidney Wafula, who had been BAT’s director of finance for East and Southern Africa, replaced Mr Achola.

Two weeks ago, Mr Wafula oversaw his first financial results since taking charge, with revenue rising five percent and profit after tax growing three percent despite pressure from illicit trade and higher operating costs.

We sat down with Mr Wafula after the results to discuss his priorities, illicit cigarettes, modern oral nicotine products, taxation and regulation.

What is your priority as CEO?

My immediate goal is to help with combating the high incidence of illicit trade.

If illicit trade continues to rise, then it becomes quite unsustainable for the business to operate going forward. We have seen the planned closure of the factory in South Africa, where illicit incidence is at 75 percent. Seven and a half out of 10 cigarettes are illicit.

It is unsustainable because you cannot compete. A factory's efficiency is down to how much throughput comes through it. You have a factory which can deliver, say, 10 billion sticks, but if you are just doing 3.5 billion, your cost base is too high. You are not competitive.

It is also critical because government revenues are under pressure. We estimate that Sh12 billion in taxes, mainly excise and VAT, are not being paid because of illicit trade.

The second priority is continuing to grow modern oral. We acknowledge the harm associated with smoking, and we also acknowledge that it is responsible of us to offer safer alternatives to people who choose to continue taking nicotine.

The third thing is talent. We have gone through changes recently, and it is important that we have strong talent that will deliver on these objectives. The business environment is increasingly complex and dynamic. You need strong people to deliver those results.

Why has government struggled to decisively deal with illicit tobacco?

The opportunity here is to have one, decisive; two, coordinated; and three, sustained enforcement efforts.

We have had some green shoots from government. You read in the press about illicit tobacco being nabbed here and there. The reality is that it is not sustained. That effort is not sustained, it is not decisive and it also isn't coordinated.

There are quite a lot of agencies that need to be coordinated — security, health and the revenue authority. There is an opportunity to have more decisive and coordinated efforts for a sustained period.

Does corruption form part of the problem?

You are right. Sustained efforts will require you to deal with the root causes, some of which could be corruption.

These sporadic incidents where some traders have been nabbed here trying to cross from Uganda and all that — it is really not decisive. It is not coordinated. It is not sustained. We just need a big, bold move on enforcement because that is the difference.

You have very robust guardrails in terms of regulation today. What is the difference? The difference is enforcing those regulations. What is our biggest illicit problem? It is people who don't pay taxes. The law is very clear. Enforce it.

How much is Velo contributing to the business at this stage?

It is still one percent of total revenue. We have just restarted the journey in June 2025. We were here before, but because of regulatory uncertainties, we pulled back a bit. The regulatory framework has become a bit clearer, and that is why we came back in 2025.

It is still quite a small, nascent category, but there are plans to grow it. In the medium term, 15 to 20 percent of our revenue should really come from this.

Why is this important? You look at our strategic objective to “build a better tomorrow”, and that is really centred on giving our consumers products that have less harm. In our case, it is the modern oral nicotine offer.

Does that mean BAT could revive its modern oral nicotine manufacturing plant in Kenya?

If the conditions are right, I wouldn't rule out a revival of the factory. A big part of that is just to ensure that there is regulatory certainty, because that was the main reason why we had to pull out of it.

I wouldn't rule it out. We have already demonstrated in the cigarette industry that we are an export hub, so there is no reason not to do that in modern oral.

But again, a big part of that becomes the regulatory certainty and the competitiveness of Kenya as a manufacturing country.

You said there is more regulatory certainty, but there is also a looming Tobacco Control Bill. How do you view that?

We are seeing more certainty, and that is why we are coming back. But still, with the looming Tobacco Control Bill, what we are trying to put across is that it is important that we have progressive, balanced and evidence-based regulation, certainly around tobacco control, just reflecting the different harm profile of the products.

That is a hurdle we still need to cross. We have to work through it with the regulators by engaging quite transparently and giving them the evidence on why it is important to have regulatory certainty. More importantly, regulation needs to be balanced and progressive. It needs to reflect the profile of the product. I think that will help boost product sales.

What other regulatory headwinds do you see, particularly on taxation?

Based on what I've seen over the last three or four years, I'm encouraged by the fact that tax policy on our industry is stable.

There is a clear recognition by government that there is a strong correlation between increasing excise too high and, therefore, government revenue losses.

Why don't we capitalise on that? For example, say have a three-year roadmap where all manufacturers know for the next three to five years this is what the excise is going to be. With that, we can plan.

If we grow revenue, government grows revenue. The Kenyan economy grows. As simple as that.

How will you engage policymakers?

My approach is simply centred around, firstly, transparency. We have to be very transparent with the regulators.

Secondly, my approach would always be to share my experience. I've been in this industry for 20 years, and I've worked through different parts of the world. It is my job to share as much as possible — use cases, market research, the paperwork and industry knowledge.

Lastly, it is sharing ideas on what a progressive policy would look like.

For me, it is just openly, transparently sharing my insights and my experience. They have a different view, I have a different view. Let's share mine, let's share yours, and let's come to a conclusion because science is science.

I'm not in politics. I have to accept that. All I can do is share my experience, share the evidence and share proposals, citations, and transparently. I think things never go too far if you are not seen to be transparent.

Reporting originally appeared via Business Daily. Read the full source for additional context.