Why Sportpesa and Betin Halted Kenya operations

 

The betting space in Kenya is set to shrink significantly after the country’s largest betting firms, Sportpesa and Betin, announced plans to exit the market citing frustrations from the government that make their business no longer tenable.The bookmakers who currently hold the lion’s share of the multi-billion shilling gambling industry, estimated at over 60%, will cease operations in Kenya in the near future following a standoff over taxation with the Kenya Revenue Authority.

 

Sportpesa termed the decision by government to alter the taxation regime on the betting industry as a disappointment, making its operating environment hostile that has caused a deterioration of its profits. In a message to its customers, the firm said the imposition of a 20% excise tax on all betting stakes by KRA completely removes the incentive of punters to place bets as this deprives them of their total winnings. It has also deactivated its website.

Owned and operated by Pevans East Africa, Sportpesa was founded in 2014 by Kenyans backed by Bulgarian investors. Betin on its part is firing all of its employees after declaring them redundant as a result of being out of operation since July 2019.

The bookmaker served a notice of termination to all staff despite holding extensive meetings with government agencies regarding the company’s licence renewal without much success.

It further said that it has been facing financial constraints, forcing it to rethink its operational model that has led to deterioration of probability.

But even with its impending exit of the market, Betin is not out of the woods yet. Its operators, the directors of Gamcode Limted, face criminal charges for their alleged unwillingness to settle a Sh3 billion tax obligation.

KRA says it will take stern action against them for failure to remit Sh3.05 billion tax arrears. The company, which is owned by Coast-based Italian millionaires Domenico Giovando and Leandro Giovando, however cites a stay order issued by the Tax Appeals Tribunal against further enforcement by KRA.

Sportpesa’s exit comes barely a month after it received clearance from the taxman to apply for a new operating licence.

The betting giant warned that the unfair taxation will lead to a decline in government tax revenue to near zero and will halt all sports investment in Kenya. It will however continue operating in Tanzania where it set up in 2017.

It hinted that they may be back when a time reaches when adequate taxation and non-hostile regulatory environment is restored.

Sportpesa had sued the government demanding compensation for substantial business lost during the three month impasse. CEO Ronald Karauri argued it was illegal to suspend their paybill and SMS shorcodes since they had obtained a court order to continue with business.

Ironically, the firm had for several years won awards hosted by the revenue authority for diligent tax compliance besides being recognized as a Superbrand company in 2017, placing 13th in the ranking of the best companies in Kenya.

The 2018 Finance Bill heralded the withholding tax imposed on all gross winnings payable by all sectors governed by the Betting, Lotteries and Gaming Act i.e. gaming and prize competitions. Thus winning clients are now liable for 80% of their winnings. The tax required by the government is deducted by the betting firm immediately a winning bet is complete.

Parliament had proposed a 10% duty but the National Assembly’s Finance and Planning Committee increased this to 20%. The House defended the increase saying the excise tax was supposed to be as punitive as possible to dissuade people, mainly the youth, from betting which they termed as a vice.

The legislators argued that gambling has created an addiction that has led to a vicious cycle of betting, debt and poverty.

The 2500 employees of the two firms, most of them being Kenyans, have already been rendered jobless by the impending closures.

The exit of these betting giants will have a crippling effect on the country’s sports industry which heavily relied on them.

For starters, the Kenyan Premier League is sponsored by Sportpesa. The league, now known as the Sportpesa Premier League, is backed to the tune of Sh250 million for a period of three years. This means that match officials including referees and linesmen as well as logistics and thus quality for matches is to be compromised.

Sportpesa was sponsor of the two largest clubs in the league with the greatest following, Gor Mahia and AFC Leopards. The two have not paid their players and staff for the second month running, further frustrating an already dire situation.

Gor chairman Ambrose Rachier says they could wind up the club should the injection of funds to the Kenyan Premier League Champions through a sponsor fail to mateialise. The side confirmed that they will with immediate effect cease wearing Sportpesa branded jerseys for their future CAF Champions League and KPL fixtures.

The situation is further dire for their fierce rivals Ingwe who wholly relied on Sportpesa.

It is also the backer of the Football Kenya Federation Super Cup, an eight team football knockout tournament featuring 4 teams each from Kenya and Tanzania. This now hangs in the balance which could fail to stage this season without the support of the main financiers. It is also the sponsor of female boxing star Fatuma Zarika.

It cancelled all sponsorships in the county in August notifying all clubs and partners of termination of conmtracts.

It is the sponsor of Everton FC of the English Premier League as well as a partner with Arsenal, Southampton, Hull City and the Spanish La Liga.

Betin was the official sponsor of Harambee Stars financing their training in France ahead of their month long stint in Egypt at the Africa Cup of Nations to the tune of Sh20 million

The Sports Fund, which is drawn from revenue generated by betting companies, will also be affected.

The two firms were among 27 betting firms that had their licences revoked by the government in July in a heavily publicized crackdown of the industry led by Interior CS Fred Matiang’i.

 

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