Can’t be tamed! Deep Inside Kenya’s multibillion betting industry under fierce government onslaught

Brian Kithinji

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Courtesy: Bet Moran

In this week’s special, we critically examine why betting in Kenya is adored by millions of youths, hated by the government that collects billions from the sector and how it may well survive the recent crackdown efforts. Is it too big to tame?

When the betting ship sailed into the country in 2014, it was well received by a majority youthful populace eager to make money out of their love for sports. The government had no qualms ushering a new tax income source. Today, it is leading a fight to tame and deregulate the billion dollar industry.

Betting is a term common amongst many Kenyans. In fact they came to know about it, even before the industry opened shop in the country five years ago. Many Kenyans watch soccer, and had been familiarized through media advertisements on the whole idea of betting for teams to win, players to score. Some of the teams they supported were sponsored by betting companies.

Despite that, there was no betting industry in Kenya. That changed in 2014, just before the FIFA World Cup tournament in Brazil. Betting firms rushed to cash in on the psyche over the tournament, and poured millions into mainstream and social media advertisements.

In 2014, the industry was valued at 1.9 billion Kenyan Shillings (190 million US Dollars) according to the audit firm Price WaterHouse Coopers (PWC). Policy makers barely took notice. As revenues tripled, and the number of firms operating soared to 27, the government began taking an interest in the industry.

How people bet

Kenya’s betting industry is totally reliant on mobile money transactions by prospective gamblers. To place a bet, a person loads money into a virtual wallet run by the mobile money companies.

Winners collect their winnings through the same wallets, unless in the event of a jackpot which would require a bank cheque due to the large amounts involved. At least 13 million people have wallets for betting companies.

A person tries to place a bet on his mobile phone, Courtesy: Daily Nation

Government crackdown begins

In 2018, the Ministry of Interior set up a multi-agency team to look into the betting industry. The agency submitted a report to the National Security Council, Kenya’s highest security policy making body, that gave an inside look into an industry that rarely reveals much.

The report established that betting companies made about 201 billion shillings (2 billion US Dollars) in 2018, but remitted taxes worth 4 billion shillings (400 million US Dollars). The turnover rose amazingly by 1000 percent in the space of just five years.

Then on April 1, , Interior Cabinet Secretary Fred Matiang’i issued an order to Kenyan betting firms to seek fresh renewal licenses by July 1, upon proving tax compliance. They were also tasked to show they are sufficiently liquid and had a good financial performance over the last four years.

In May, the government banned media advertisements all betting advertisements on social media, mainstream media ads on gambling between 6am and 10pm, and endorsement of betting activities by celebrities.

In July, the State ordered mobile service providers, first Safaricom then Airtel, to shut down the pay bill numbers and short text codes of all betting firms. The order was released by Kenya’s Betting Control and Licensing Board, in a letter dated July 10, and signed by Acting Director Liti Wambua.

The list of firms included bigwigs SportPesa, Betin and Betway. Others were Premierbet, Mozzartbet, Dafabet, Betpawa, Lucky 2 U, 1XBet, World Sport Bet, Atari Gaming, Bet Boss and Palmsbet. Also affected were Elitebet, Betyetu, Bungabet, Cysabet, Nestbet, Easybet, Kick Off, Millionaire Sports Bet, Kenya Sports Bet and Eastleighbet.

The government also deported 17 directors of betting firms from Russia, Bulgaria and Poland for allegedly being in the country illegally. CS Matiang’i directed the Principal Secretary in the State Department of Immigration Gordon Kihalangwa to review working permits of foreigners who had applied to conduct other businesses but ended up investing in the betting industry.

What is behind the government crackdown?

One worry for the government is that up to 500,000 of the youths blacklisted by the Credit Reference Bureau (CRB) took mobile money loans to bet. The CRB ranks the credit score of Kenyans, positive or negative, and determines whether they are eligible for a loan. Estimates of the number of blacklisted citizens range from 3 million to 5 million, with 35 believed to be under the age of 35.

It also emerged that most of the betting firms failed to remit the 20 percent withholding tax on payouts, and a good portion of the revenues made were wired to accounts abroad. This was made possible through the ownership structure of the industry which is 90 percent foreign owned.

“The government has a problem with this industry (betting) being foreign dominated. There are few Kenyan owners, most of the staff at senior level are foreigners, yet they make their money from common Kenyan citizens.” Says Joyce Ndegwa a market analyst.

One example of foreign ownership in the industry is the Asian Betting Limited which operates as Dafabet, and has three directors; Louis Watts, Cary Underwood and Lina Kantaria. However, Watts and Underwood, foreigners, own the cumulative 100,000 shares while Kantaria, a Kenyan citizen, owns zero.

Another such firm is Gamcode Limited which operates as Betin, and has four shareholders. They include Italian citizens Leandro Giovando and Domenico Geovando, Mauritius-based Samson Capital Investments and the only Kenyan director Jophece Yogo, who owns zero shares.

BetPawa, a major betting firm, is operated under Nanovas International and wholly owned by foreigners. Nanovas Limited, a foreign firm, owns 99.98 percent of the Kenyan firm, while tech start-up funder Nikolai Barnwell has a 0.02 per cent stake.

Premier betting Limited, which operates as Premier Bet, is owned by London-based Editec Sarl Limited which has 99.8 percent of the shares. Francis Galleri and Allan Galleri, named as directors, have 0.1 percent stake. MFI Office Solutions finance executive Nisma Abdulgafur Kana is the only local director and Englishman Frank Albert Attal and Andrew Peter Batley are her co-directors.

Ownership structures in the four companies is a perfect replica of the entire industry, and an issue the government has frequently lamented.

Composition of gamblers

One other issue raised by Kenya’s government is the demographic composition of the gamblers (people who bet). A Geopol survey in December noted that 40 percent of the low income gambling consumers are unemployed while 29 percent are students.

Kenyan laws strictly indicate that betting must be conducted by citizens with a National Identification card and of ages above 18 years.

This has raised a serious problem that many youths are gambling not for fun as before, but to get a source of income to sustain their livelihoods. John Kinyaka has been betting for 5 years now. He told Ventures Africa that he cannot quit betting because it feeds him.

“I am 24 years now, I finished school, but I don’t have a job. Where will I get money to eat? To buy clothes? To keep applying for jobs? But with betting I can get my cash. Easy, not much stress.”

Dr. Ndambuki, a psychologist and director of mentorship at Kenyatta University added, “Once you try and win or if you know of someone who has won, you get a psychological impetus that if you try even after losing so much money, there is a chance that you will still win.”

What the betting firms say

Betting companies have not let the allegations made by the government pass them by without a fight. SportPesa Chief Executive Officer Ronald Karauri, who also heads the Association of Gaming operators has disputed the revenue figures cited by the government.

He says that betting firms make less that the 200 billion figure in the report, blaming a confusion over the issue. “That is a matter that is already in court and the government know this, but there is a push to show that the industry is not paying its share of taxes, which is not entirely true.”

SportPesa’s financial statements sent to the Kenya Revenue Authority indicate that the firm made 15 billion shillings (150 million US Dollars) last year, and paid 6.2 billion (62 million US Dollars) in taxes.

Betin also moved to court last week, seeking orders to suspend the decision by the Interior Ministry not to renew its operating license. High Court Judge Weldon Korir, suspended the July 1 decision.

 “A conservatory order be and is hereby issued staying or suspending the effect of the betting board’s decision of rejecting the applicant’s application for the renewal of its 2019/2020 Bookmaker’s license, until July 16,” ruled the judge.

Controversy over government’s claims of non-compliance

Kimani Kung’u, the Chairman of the Betting Control and Licensing Board, has poked doubts over whether noncompliance with taxes was behind the non-issuance of licenses by the Interior Ministry.

In an interview with a local radio station, Radio Jambo, in July, he argued that the true revenue of betting companies at the end of 2018 was between 20 billion and 25 billion (200 – 250 million US Dollars) and that there is no way it could have soared to 200 billion by mid-2019.

According to the Kenya Revenue Authority, all bets placed with betting companies should be considered revenues and therefore taxable. However, betting companies say that their revenue is the difference between the amount placed as bets and the amount paid as winnings.

The 200 billion figure appears to be the total amount staked each year, not what is actually retained by the companies. A lot of this is recycled money where punters bet, win, and bet again. The same money is being recounted over and over. It is not actually revenue for the betting companies.

Their argument is inline with international best practices. International tax experts have told Ventures Africa that Gross Gaming Revenue equals Amount Wagered minus Winning Payouts.

Audit firm Price WaterHouse Coopers also argues in its analysis Global Gaming Outlook that “There are two main approaches to taxing online gaming activities: a tax on stakes, levied directly on consumers when placing bets, which tends to discourage consumers from participating; and a gross profit tax (GPT) levied on operators’ winnings. Most countries are opting for the GPT option, as being more likely to boost growth in the regulated market and thereby help the tax take.” 

Surprisingly, Kenya Revenue Authority seems to agree on its website. A statement on its website reads, “Betting tax is chargeable on the gross gaming revenue (GGR) of a bookmaker at the rate of 15% as provided by Section 29A of the Betting, Lotteries & Gaming Act, 1966 Cap 131. Gross gaming revenue means gross turnover less the amount paid out to the customers as winnings.”

None of the betting companies dispute the 15 percent tax on GGR and they are all complying. For example, SportPesa, the only betting company to have made its financial figures public, paid KRA 3.6 billion shillings as ‘betting tax’ or Gross Gaming Revenue in 2018. That was half the total 6.3 billion shillings paid as tax by SportPesa in 2018.



A tax on GGR of 15 to 20 percent for sports betting is common in many countries across the world including Australia, Sweden and Denmark. However, Germany charges just 5 percent on GGR for sports betting (horse racing).



In 2018, KRA gave SportPesa an award as one the best taxpayers in Kenya.” We want to thank and appreciate you for the role you play in the economy. It is our hope that you continue to grow,” Emma Mwambia, a KRA official, said at the award ceremony.

It is very unclear how SportPesa is not tax compliant, since it has yet to be given a chance to renew its license over the same accusation.

Power of betting firms

To understand why the government is pulling this fight, one must also take into account the power and strength of betting firms in the country. One firm that is immensely powerful is SportPesa.

Data estimates on Sportpesa indicates that each user spends an average of 700 shillings each month on the site. The site is visited by at least 80,000 users per month, each spending an average of 35 minutes every day on the site, in comparison to an average of 15 minutes per visit on Facebook and 2 minutes on Google searches.

Alexa Rankings, the internet’s leading authority on website rankings according to traffic also indicates that SportPesa is the most popular local website in Kenya.

Sportpesa, Courtesy: The Citizen

The firm has expanded to nearby Tanzania, and invested in the development of the local sports leagues and tournaments in Kenya and Tanzania.

In soccer, it fully sponsors the Kenya’s domestic top tier club competition, the Kenyan Premier League as well as the Harambee Stars and Harambee Starlets, Kenya’s national men’s and women’s football teams respectively.

SportPesa is also the shirt sponsor of the Kenya Sevens Rugby team, Gor Mahia and AFC Leopards, two of Kenya’s most decorated soccer clubs, as well as Nakuru All Stars, a second division team. It also has sponsorship deals with Simba SC and Young Africans SC (Yanga), two leading clubs in the Tanzania Premier League.

  

SportPesa has also moved out of the East African space to become the new title sponsor for the Racing Point Formula 1 Team for the 2019 season. The team was officially entered as the SportPesa Racing Point F1 Team.

The Betting firm also has a 1.3 billion shillings sponsorship deal with Everton FC, the biggest deal in the club’s sponsorship history and partnerships with Hull City, Arsenal and Southampton. It moved its global capital headquarters to Liverpool, in the United Kingdom.

How the government’s crackdown is perceived

Many people, especially the elderly, have expressed satisfaction with the governments’ move to regulate the industry. Elma Matayo says that finally parents like her will not have to be worried with their children’s expenditures, and they spend their leisure time.

There have been many cases in recent years of University students consuming money meant for their school fees on betting. A few have won, but most ended up losing the cash, and engaging in crime to get a substitute for the lost cash.

In addition, betting has been viewed as leading cause of depression and high suicide rates among young people. There have been cases in the past of youths who decided to take out their lives after losing a bet.

To use this as an argument to ban betting is delusional, according to most youths. Phanice Langat, a young lawyer told Ventures Africa that “shutting down a few betting firms does not inevitably address the main problem that is facing the youth. The government is very quick to shut down these firms but does not offer an alternative source of income.”

Moreover, there are many young people employed in the betting industry. They have become collateral damage in this war between the government and their bosses. More than 50,000 betting shops have opened across the country employing over 300,000 Kenyans, and if the crackdown continues, they may have to look for another legal source of income, that isn’t easy to find.

Football fans take part in live betting in a betting shop in March 2017. Courtesy: Nairobi News

Price Water House Coopers in its 2017-2021 gambling outlook report indicates that the yearly turnover of the sports betting industry will hit 500 billion shillings (5 billion US Dollars) by 2020. Currently, Kenya has the largest betting industry in Africa behind South Africa and Nigeria.

It leads in the highest number of betting youth at 76 percent followed by Uganda at 57 percent and Ghana at 42 percent, according to a survey by GeoPoll.

This is why the government may not kill the industry altogether. The price is too great on its young people, whom they have no proper plan or capacity to engage with economically. The revenues are too big to miss, for an economy that is struggling with foreign debt and mismanagement of resources.

Furthermore people can still bet. In the case of Betway, one can still play and withdraw in case of winning. However, for withdrawals, you will need to use the SMS platform whereby to withdraw, you SMS W#Amount of money to withdraw#Betway password to 29029.

SportPesa, also indicated on its social media channels that it is still in business.”SportPesa wishes to refute claims that our business is closing down. We are in discussions with the government and relevant stakeholders and are positive that we will be back to full operation soon. Note that any update regarding our business is communicated through our channels,” they posted on Facebook.

10 betting firms (out of the 27 firms) were on Monday cleared by the Kenya Revenue Authority (KRA), including OdiBets, others are Mozzartbet, Betway, Eastleigh bet, Lucky to you, Kenbook makers, Bet boss, Kick off, Easi bet and Palms bet. All of the firms are majority owned by Kenyan citizens.

The crackdown on the industry may end up being a case of substituting foreign betting firms with local betting firms. Not taming the industry and introducing tough regulations to guard youths, as everyone currently believes.

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