Gaming firms no longer bet on Kenya in new tax regime

Tuesday July 18 2017

Tanzanian Sports Minister Harrison Mwakyembe

Tanzanian Sports Minister Harrison Mwakyembe (left) with SportPesa chairman Paul Ndung’u and SportPesa Tanzania CEO Pavel Slavkov at the launch of SportPesa in Dar es Salaam. PHOTO FILE | NATION 

By VICTOR KIPROP
More by this Author

If there is one sure bet in the gaming sector in Kenya, it is its unstoppable growth. In the past three years, sports betting has swept the country like a storm, boosted by the now ubiquitous smartphone.

The country has more than 20 local and international firms, making it home to the third-largest gambling market on the continent, after South Africa and Nigeria.

The Kenya Revenue Authority has collected at least Ksh4.7 billion ($47 million) from eight betting companies over the past three years.

The exponential growth of the gaming sector has indeed been a boon to the taxman, with the government introducing new taxes that are expected to bring in millions of dollars in additional revenues.

President Uhuru Kenyatta recently signed the Finance Bill, 2017, which raised the tax rate on betting, lotteries and gaming activities to 35 per cent.

But the law has seen widespread opposition from industry players, who say it will suffocate their investments and hurt complementary businesses like telcos and media companies.

“A 35 per cent tax is an unbearable burden to any business. It will kill the industry,” said Ronald Karauri, chairman of the Association of Gaming Operators of Kenya.

Leading sports betting firm SportPesa has announced that it will withdraw all sponsorship for clubs and federations starting January 1, 2018.

The firm, which that recently entered the Tanzanian market has also threatened to close down its Kenyan operations as it considers shifting base to Tanzania or the United Kingdom.

SportsPesa global chief executive officer Gerasim Nikolov said the company can no longer operate profitably under the current taxation regime.

“There is nowhere in the world where such a huge tax is levied on turnover and, even here in Kenya, no firm can survive if a 35 per cent tax was put on its turnover,” he said at a media briefing in Nairobi.

SportPesa has pumped an estimated Ksh1 billion ($10 million) into Kenya’s sports industry through sponsorship of sports teams, federations and competitions.

The company is also sponsoring a number of topflight English football clubs such as Everton, Hull City and Southampton.

While announcing the initial 50 per cent tax proposal during the reading of the 2017/2018 budget, Treasury Cabinet Secretary Henry Rotich said the new taxes will help boosts sports and arts development in the country.

“The proceeds will be put in a newly created National Sports, Culture and Arts Fund,” he said.

But, as the government readies itself to start minting millions of dollars from the gaming companies, concerns have been raised on whether high taxes are the best way of taking advantage of the runaway success of the gaming sector.

During the debate on the Bill in parliament, some MPs argued that raising taxes would impact the sporting fraternity which has been the most visible beneficiary.