Kenya Suspends Licences of 27 Betting Operators

Investigative article about the business dealings of Kenyan betting giant, SportPesa.

    • B2B
    • 24-07-19

Kenyan gambling behemoth SportPesa has been rather busy in the Twittersphere over the past fortnight. In addition to the usual posts peddling sporting events as well as its perpetual calendar of promotional initiatives, the company has been forced to deny claims that it’s shutting down.

On July 1, Kenya’s Betting Control and Licensing Board (BCLB) suspended the licences of 27 betting operators over ‘contested’ taxes. SportPesa was among the unlucky group of outcasts because of its refusal to pay around $3 billion in tax arrears to the Kenya Revenue Authority (KRA).

Things quickly went to hell in a handcart for the company thereafter. On July 12 the BCLB ordered Kenyan telecom companies to stop processing the mobile payments of said betting operators. As a result, SportPesa’s unique pay-bill numbers and SMS codes were rendered useless, much to the chagrin of its punters.

Malicious Actions Breed Amicable Solutions

SportPesa’s first instinct was to throw a Twitter tantrum by releasing an official statement in which it decried the BCLB’s ‘malicious actions’ and ‘abrupt measures’.

The company insists that a High Court ruling allows it to continue operations pending a final decision over its ever-increasing tax bill.

Subsequent social media utterances were more diplomatic, however. On July 18, CEO Captain Ronald Karauri penned a statement that was published on Twitter, in which he pledged to work with the authorities as well as the pesky KRA to reach an ‘amicable solution’.

Since then, SportPesa’s Twitter brigade has been playing whack-a-mole as it frantically tries to placate its fuming customers.

Who are SportPesa?

SportPesa dominates Kenya’s online betting sector and rose to prominence following the country’s mass-adoption of mobile technologies around five years ago.

Founded by a collection of international investors in 2014, it is the main sponsor of the Kenyan Premier League as well as Everton Football Club. By some estimates, the betting giant is said to have earned around $1 billion in 2018.

Mincing Words

As part of the SportPesa’s Twitter statement, Karauri was also at pains to highlight the contributions that have been made towards good causes in Kenya.

‘Our business has uniquely and consistently boosted sports development in the country and we have not minced our support in community investment.’

By all accounts SportPesa also didn’t ‘mince’ its pressure on the Kenyan Government in 2018 to reduce gambling taxes.

In January of that year, President Uhuru Kenyatta controversially announced the introduction of a 35% tax hike on all betting operators. This didn’t go down very well with SportPesa which then scrapped all (yes all) of its local sport sponsorship deals in retaliation –

Although the forlorn betting operator has indeed ‘boosted sports development’ within Kenya, it appears that the company is quite happy to play fast and loose with such initiatives when its revenues are directly threatened.

After sustained lobbying by SportPesa and a cabal of sportsbook companies, President Kenyatta then decided to reduce the planned tax increase to a more acceptable rate of 15%, while slapping a 20% tax on the winnings of individual gamblers.

The decision was made shortly after his re-election to office. By sheer coincidence, Paul Wanderi Ndung’u, one of SportPesa’s major shareholders, is also a financier and fundraiser for Kenyatta’s Jubilee Party.

SportPesa’s ‘New Deal’ for Africa

In 2017, SportPesa signed a multi-million pound sponsorship deal with Premier League club, Everton FC. Writing in the club’s annual report of 2018, Everton’s Chief-Executive Denise Barrett-Baxendale waxed lyrical about the club’s ‘developing relationship’ with SportPesa, gleefully enthusing that the Kenyan betting giant had demonstrated ‘a strong alignment with (the club’s) values’.

The so-called ‘developing relationship’ relates to a highly-lucrative arrangement which has seen the club’s 127 year-old home Goodison Park, converted into a giant advertising-hoarding for the SportPesa brand. The team is currently on a pre-season pilgrimage to Kenya as well.

Barrett-Baxendale’s ‘strong alignment’ bilge apparently refers to SportPesa’s support of Everton’s admirable work in locally-deprived local areas.

Not to be outdone by the club’s philanthropic efforts, SportPesa unleashed its very own charitable scheme: the installation of a donation bin in the Everton Club shop with all proceeds going to the company’s ‘Kits for Africa’ project. Mighty oaks from little acorns grow….

However, we’d venture that once Everton fans have spent their hard-earned wages on the new 2019/20 kit (a steal at just £60 and exclusively endorsed by SportPesa), they probably won’t have much spare change left for this noble undertaking.

But it’s not just Everton FC that has struck a deal with SportPesa. The betting giant also enjoys ‘partnerships’ with Hull City, Arsenal and Southampton, as well as Formula 1 team, Racing Point.

Offshore Shenanigans

Despite SportPesa’s aggressive expansion into UK markets, the company operates as a ‘white label’ associate to registered offshore company, TGP Europe. As such, it does not require a licence from the UK Gambling Commission and can avoid paying corporation tax on any revenue accrued in the UK.

Although standard practice within the gambling sector, such schemes often tend to irk industry commentators, especially when you’ve got a multi-billion dollar tax bill hanging over your head.

Responding to questions from the Guardian newspaper about this cosy arrangement, a company spokesperson stated that in an effort to allay concerns, SportPesa would be increasing its yearly GambleAware contribution to £10,000 – a contemptible sum considering the operator’s estimated annual revenue. Unfortunately, the spokesperson wasn’t terribly keen to offer any further insights into the issue of corporation tax.

SportPesa’s recent dispute with Kenyan authorities may or may not cause disquiet among its slew of business partners. But it’s caused a great deal of consternation among customers based in the sub-Saharan state, where gambling and sports-betting are national obsessions.

Gambling In Kenya

Indeed, gambling in Kenya has become a multi-billion dollar industry over the past five years with around $2 billion wagered in 2018 alone. Online betting has also soared with an estimated 76% of young people placing bets on mobile platforms.

This growth has been helped considerably by the lack of a coherent regulatory framework for gambling operations and promotions.

In May, the Kenyan government finally responded by introducing measures restricting outdoor and social media advertising as well as celebrity endorsements. In addition, all gambling promotions are now subject to BCLP approval.

The random vetting of gambling operators and quarterly compliance reviews are currently being considered, with the government recently stating that it ‘would not hesitate to debar non-compliant operators in any category’ – big words indeed.

Art of the Empty Gesture

Following the recent licence suspensions, SportPesa CEO, Karauri said this:

‘We are committed to dialogue with all relevant stakeholders, with the aim of developing a mutually beneficial solution that will compliment the government’s development agenda, as well as provide a stable business environment’.

So it appears that SportPesa is willing to throw money at any obstacles, regulatory or otherwise, that may arise – the derisory £10,000 offered to GambleAware is a prime example. It is precisely this cavalier attitude that landed the company in hot water with authorities in the first place.

But in light of the restrictions being placed on Kenyan betting operators, it may be that the country’s administration isn’t merely calling in its debts. Perhaps its efforts are sincere. Perhaps ‘mutually beneficial’ solutions in Kenya are a thing of the past. Don’t hold your breath.

Original article: