Kenya: two top sports betting firms shut down due to tax hike

SportPesa said it was “disappointed” by the move and that it would stop its operations until a “non-hostile regulatory environment” returned.

2019-10-02

Kenya

Reading time 1:45 min

It was in response to a recent parliament vote that will raise the excise duty on the amount wagered at the time a bet is placed on all betting platforms to 20% from an initial 10%. Early estimates suggest the shutdown of SportPesa and Betin could result in 2,500 direct jobs losses.

Kenyan online betting firm SportPesa said on Saturday it was halting operations due to a drastic hike in taxes on betting stakes. Local newspapers Daily Nation and Standard reported that a second firm, Betin Kenya, had also ended its operations, citing the heavy taxation as the main reason. The two firms controlled more than 60 percent of the betting market share in Kenya.

Online sports betting companies such as SportPesa have grown rapidly in the East African nation in recent years, riding a wave of enthusiasm for sports, with the government saying the gaming industry achieved a combined revenue of 204 billion shillings ($2 billion) last year. That sparked government concern about the social impact of betting, and in May Kenya introduced new gambling regulations, including a ban on advertising outdoors and on social media.

Last week, parliament voted an amended proposal raising the excise duty proposed in the 2019/20 (July-June) budget on the amount wagered at the time a bet is placed on all betting platforms to 20% from an initial 10%.

SportPesa said it was “disappointed” by the move and that it would stop its operations until a “non-hostile regulatory environment” returned. The firm has deactivated its website. It said the new tax comes on top of an existing 20% tax on individual gamblers' winnings. “The tax is based on a fundamental misunderstanding by the Rotich led treasury of how revenue generation works in the bookmaker industry,” it stated.

"This will have severe consequences for licensed betting companies, which dutifully pay their taxes and ultimately will lead to a decline in government tax revenue to near zero and will halt all investments in sports in Kenya," the firm said. However, SportPesa said it will continue to operate in Tanzania after exiting Kenya.

On its side, Betin said it was facing financial constraints resulting to deterioration of the profitability. Early estimates suggest the shutdown of SportPesa and Betin could result in 2,500 direct jobs losses, ranging from employees to commission-earning agents who power the companies’ strong retail network across the country.

Football Kenya Federation (FKF) President Nick Mwendwa termed the move a major loss since local football had lost sponsorship worth around Sh600m.