Kenya’s casinos defy wave of insecurity to rake in Sh1.6bn

Kenyan casinos rode last year’s wave of higher economic growth to book a 7.6 per cent increase in revenues, setting a new record that recently attracted the attention of the taxman, resulting in the imposition of new taxes.

The latest industry records show that Kenya’s 13 casinos’ revenue rose to Sh1.6 billion last year compared to Sh1.5 billion in 2012 when the economy grew by 4.6 per cent.

Last year’s record revenues reflect the impact of the 5.7 per cent expansion of the GDP — a figure that came out of September’s fresh computation of economic data commonly known as rebasing.

It is worth noting that the gambling revenue grew despite the wave of insecurity that characterised 2013, including the deadly terrorist attack at Nairobi’s Westgate Mall.

“It has been a tough a year because of insecurity. This has been a big challenge because our industry relies heavily on tourism,” said David Moshi, the chairman of Association of Gambling Operators of Kenya (Agok).

“We have been hit badly especially in areas like Malindi.”

The performance of the casinos is captured in a new report by advisory firm Pricewaterhousecoopers (PwC), which forecasts that the industry’s revenues will grow at a slower pace in the next few years because of higher taxation.

“Reflecting the impact of the withholding tax and slower economic growth, we expect casino gambling revenue growth to drop to 4.9 per cent in 2014 and to 4.1 per cent in 2015,” PwC says in the report, ‘Raising the Stakes in Africa’.

The government last year introduced a 20 per cent withholding tax on gambling winnings, a move that was fought in court by Agok on grounds that it would discourage wagering.

The High Court, however, recently dismissed the petition, allowing the taxman to take a larger share of the winnings in the secretive industry.

Mr Moshi said the Kenya Revenue Authority (KRA) is yet to start collecting the withholding tax since the industry and the taxman are still working on modalities of execution.

Taxes and levies collected from the casinos rose 7.4 per cent last year to Sh261 million, taking 15.7 per cent of the total revenues. The taxman’s collection from wagering activities is projected to rise to Sh279 million this year.

PwC estimates revenues in the local gambling sector by extrapolating casino taxes. The betting industry is, however, larger when online and mobile gambling is factored in.

READ: Gaming tax forces firms to shift from asset to cash prizes

SportPesa, an online and mobile platform that offers betting on games, was launched in February, becoming one of the latest entrants in the sector.

EliteBet Kenya, an online gambling platform, launched operations in January.

There are 13 licensed casinos in the country, most of which are associated with hotel resorts. Others are standalone betting houses located near airports.

Six casinos are located in Nairobi, five in Mombasa and one each in Ukunda and Malindi.

PwC noted that virtually all forms of gambling are permitted in Kenya. The first online gambling site, BetKenya.com, was launched in early 2013.

Growth in the industry has seen county governments move to control the betting houses that operate in their jurisdiction, pitting them against the Betting Control and Licensing Board (BCLB).

The government in August last year granted counties the authority to issue gambling licences but the BCLB has opposed the move, arguing that gambling is a security issue over which it should have full authority.

This has led to a regulatory uncertainty, with each party threatening not to recognise licences issued by the other.

PwC says its forecast of slower revenue growth in the industry this year and in 2015 is based on its expectations that GDP growth will also decline to 3.5 per cent and three per cent in 2014 and 2015 respectively.

“We then expect the market to pick up with gains averaging 8.4 per cent compounded annually between 2015 and 2018,” reads part of the report.

The report covered the gambling industries of Kenya, Nigeria and South Africa, which has the largest wagering market in the continent.

Gross land-based casino gambling revenues in South Africa reached Sh144 billion last year, followed by Nigeria’s Sh3.6 billion.