Betting on Kenya: Gambling industry regulatory risk fails to deter suitors
The betting industry in Kenya has been characterised by rapid growth alongside legal tussles, exorbitant tax claims, potential political patronage and an unclear regulatory landscape. Despite the enduring non-financial risks, the sector continues to attract new suitors and operators remain optimistic.
Significance – Regulatory Yo-Yoing and a Legal Impasse
There is little question about the value of gambling to the Kenyan economy – the 30 registered sports betting companies had combined revenues of approximately USD2 billion in 2020, according to Slotegrator estimates. And in that context, there has been a rapid drive by authorities to regulate and realise the revenue raising potential of the sector. The results have rather raised regulatory risks for the industry.
Under the 2019 Gaming Act (replacing 1966 legislation), licensing fees were increased from KSH3 million to KSH50 million (circa USD385,000 at contemporary exchange rates) and restrictions were applied to advertising and betting payment methods. The Kenya Revenue Authority (KRA) also delivered a tax bill of USD138 million for SportPesa, the largest indigenous betting company in the country, and revised it to USD877 million following a review.
After a separate attempt in the 2020/21 budget to levy a 20% duty on all betting stakes, Betin and SportPesa ceased operations in Kenya. SportPesa has sought to reverse its position since the planned tax was removed from the budget. However, attempts to have its license reissued by the Betting Control and Licensing Board (BCLB) have come to no avail thus far.
The most recent ruling at the end of March this year stated that the SportPesa brand cannot be licensed out to any other company (they were attempting to do this with their parent company, Milestone Games Limited) until they comply with all BCLB and KRA demands for the above-mentioned tax arrears[1].
Despite the clear challenges, the growth potential of the sector has led firms such as Betsafe, 22Bet and Betway to launch in Kenya, as well encouraging Sportpesa’s continued efforts to re-enter the market. They have been spurred on by an October 2020 decision to allow mobile money payments for bets.
Outlook – New entrants see opportunity
The October decision and Kenya’s long-term structural trends are supportive of growth. However, regulatory and other non-financial risks are not diminishing.
For instance, the Building Bridges Initiative that seeks constitutional reform via a referendum has a recommendation[2] to forcibly close all private betting companies and replace them with a state-owned national lottery entity. The report claims that betting “is leading to hopelessness and greater poverty.” For more about the BBI, see What’s at Stake in Kenya’s Hotly Contested BBI Referendum?
Despite this and the current lack of regulatory clarity, operators that are able to pivot on product offerings and operations see opportunity. SportPesa for one hopes to enter this league of sector leaders and when an agreement is formed with the KRA and BCLB.
—
[1] There is a disagreement between SportPesa and KRA over whether taxes apply to the original stake, only to profits or to both.
[2] One of the arguments surrounding BBI is whether to have a simple yes/no vote or whether to vote on individual provisions.
Photo credit: Blow up, Unsplash
—
We are an African-owned and managed firm delivering local knowledge in support of transformative and sustainable economic outcomes in the region. If you would like to learn more about our work, please don’t hesitate to get in touch. We would love to hear from you! questions@songhaidvisory.com