Sports betting is not a new activity in the country. It began local operations way back in the 1960s when the state introduced the first Gaming Act. At that time, however, sports betting, among other forms of gambling, were limited to casinos and similar premises.
Fast forward to five decades later, betting has become a household name, and has, for some people, been a source of livelihood, although that assertion is purely subjective because betting is based on chance, and serendipity is subject to probability.
The boom of the practice can be strongly linked to the growth of mobile money. Kenya, is perhaps, the only country in the world that has a robust and dependable mobile money product that was pioneered by Safaricom (M-PESA) and has since been complemented, albeit weakly, by the likes of Airtel Money, among other financial products.
These services have been instrumental to the success of betting firms: you see, most Kenyans are middle to low earners, with some of them living under the poverty threshold if the U.N. definition is anything to go by. To this end, most people who, through no fault of their own, believe they can make a quick buck via sports betting, do not have a lot of money.
This is where the said mobile money services come it: you can deposit any amount in your wallet, starting from KES 50 and upwards. This, coupled with the fact that some betting firms allow users to place a stake of KES 20 or more, has served the needs of the companies thanks to a healthy stream of customers.
So, what happens if a market favours a particular trade? It gets more players, and additional businesses translate to a series of developments that are backed by remitted taxes, among other social goods such as customer relationship management. While the details of what the firms have done for the ordinary people cannot be as transparent as some would want them, the organizations have done an excellent job by sponsoring events, among other activities that have benefitted a lot of Kenyans.
Has this been the case? The answer is complicated because the government and betting companies are offering conflicting information. And how did we get here? – considering the sports betting industry has been around for so long to attract this kind of sudden backlash?
Well, some housekeeping…
Move to increase taxes
A little over two years ago, there was a move to increase the amount of money betting firms were making for the nation in terms of taxes. At around mid-June 2017, President Uhuru Kenyatta shot down a bill that had sought to maintain those taxes at 15 percent (of their revenues). The National Assembly was directed to approve a 20 percent raise to 35 percent, which was still down from the proposed 50 percent rate that was part of the Financial Bill 2017 but was still fought over because it was on the high side.
Similar to what would follow the bill in months later, the tax revisions were defended as a move to discourage from engaging in activities that could erode their morals (betting).
Move to stop renewing licenses
Well, we saw this first in Uganda, which is also served by some of the sports betting companies that have their shops locally. In Uganda, the directive was given by the nation’s leader Yoweri Museveni. Uganda’s Minister of Finance reiterated that no new companies were to be registered.
Of course, it has come to emerge that such announcements can be dropped because they are mostly peddled to force betting firms to agree to proposals could make them close shop, or are just exploitative.
Nevertheless, the same approach was used locally, although it has since come to pass or grow following the proposals packed in the Gaming Act 2018 and lately, 2019.
The Gaming Act 2019
As mentioned, the influx of betting firms has highlighted the profitability of the space. It has also been assumed that the sector operates under weak laws, prompting the revision of the Gaming Act 2018 in the recently proposed Gaming Act 2019.
Last year’s motion called for the establishment of a Betting Control and Licensing Board, which should be tasked with issuing licenses and permits in line with the law.
The 2019 version of the bill introduces more clauses that aim to police the sector further. For instance, it seeks to increase the minimum stake from KES 20 to KES 50 in order to discourage some users. Secondly, the 2019 bill intends to limit access to fearing betting sites in order to retain proceeds in the country. Also, it proposes a 30 percent stake for Kenyans for all external betting companies operating in the state.
Government suspends pay bill numbers
It was evident that betting firms were not going to adhere to some of the directives fronted by the government and the incoming Gaming Act 2019. The government argues that the firms are not paying their fair share of tax. On the other hand, the firms have tabled their financial numbers, which reveal the amount of tax paid, and the activities they have taken part in.
Late last week, the government suspended pay bill numbers (by ordering telcos to withdraw them) used to deposit funds into betting wallets amid hue and cry from lobbyists and customers. At the moment, the matter has not been settled.
Sportpesa, arguably one of the biggest betting companies around, has faulted the government and has since taken the dailies to refute the accusations placed on it by legislators.
People who have knowledge in financial matters have also pointed out that Sportpesa is not upfront about its dealings.
One Twitter user painted some numbers on his timeline.
#Bettingkenya Just one firm makes KShs 100 Billion a year . Sponsorship engagements are as follows:
1. Rugby (Sh607 million),
2.KPL (Sh450 million),
3.Gor(Sh325 million) and
4.AFC Leopards (Sh225 million)
Total (1.6B) out of 100 Billion. 🤔
Let's NOT hide behind doing good.
— Mohammed Hersi (@mohammedhersi) July 13, 2019
While the numbers and the tweet are responsible, they do not appear to make mathematical sense as highlighted by economist David Ndii.
These betting revenues do not add up. According to Finaccess 2019 survey, only 1.9% of Kenyans bet (about 500k). A revenue of Sh. 100b works out to Sh. 200k per customer. Either the youth are rich, the revenue is wrong, or is from other sources. https://t.co/pIdq8hmpHk pic.twitter.com/XE9T6Rgnpz
— David Ndii (@DavidNdii) July 13, 2019
My contention is borne out. Sportpesa turnover is 20b, not 100b. Assuming 50% mkt share makes industry turnover 40b, in which case Finaccess finding of 1.9% (500k punters) works out to average Sh. 6600 a month, 1650 a week— “drinking money” basically. https://t.co/HsyLsETYvU pic.twitter.com/t8DH3NrZPf
— David Ndii (@DavidNdii) July 15, 2019
Simply put, two inferences can be arrived at: either the government knows something, or sports betting firms are not being truthful about their financials. There are reasons the government is compelling the companies to pay more taxes, which may be exploitative if the firms do not command astronomical profits. However, considering the last linked tweet, the companies have way too much money than what their customers can stake, which, in itself, opens another can of financial discrepancies.