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Will new fees kill Nairobi’s lucrative gambling sector?

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A casino at Two Rivers in Nairobi in November 2019. PHOTO | SALATON NJAU | NMG

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Summary

  • City Hall seeks to bring order in the multibillion-shilling industry that has largely remained unregulated at the county level.
  • A previous attempt to regulate the sector in 2014 flopped after a petition was lodged in court challenging the Nairobi City County Betting, Lotteries and Gaming Act, 2014 – which the court set aside.

The Nairobi gaming and betting industry is set to undergo a raft of changes with new regulations aimed at streamlining the sector in the pipeline.

This as City Hall seeks to bring order in the multibillion-shilling industry that has largely remained unregulated at the county level.

The county, through the Nairobi City County Betting, Lotteries and Gaming Bill, 2020, wants a bite of the cherry of the lucrative industry with City Hall targeting to pinch 30 percent of revenue made by the sector.

The Bill, which has undergone the second reading at the assembly, seeks to establish a betting Act which will entrench regulations for the control and licensing of betting, gaming and totalisator premises, and other forms of gaming within the county.

According to the new Bill, a board – Nairobi City County Betting, Lotteries and Gaming Control Board – will be established to act as an authority to provide coordinative and advisory mandate on programmes and projects for control of betting and gaming in Nairobi County.

The board will be charged with promotion of the implementation of national policies, norms and standards in relation to betting, lotteries and gaming activities as well as recommend issuance of related licences.

A non-executive chairperson knowledgeable in matters of business, trade, betting and gaming will be appointed by the governor to head the board assisted by a director in charge of betting, lotteries and gaming who shall be the secretary to the board and an ex-officio member.

The board will also consist of a chief officer responsible for security and compliance as well trade chief officer together with six other persons conversant in trade or finance, all appointed by the governor.

The board will be assisted by a directorate which will be tasked with regulating, controlling and licensing gaming activities; implementing policies and standards for betting, lotteries, casinos and other forms of gambling as well as issuing licences.

The directorate, which will be headed by a director, will also be charged with establishing and maintaining a register of all gaming machines and devices in the county; a central electronic real time gaming monitoring system; carrying inspections and enforcement; investigating, monitoring and evaluating compliance of policies and regulations.

“The director will have powers to approve or reject application for licences, issue licences, suspend or cancel the same,” reads the Bill.

The Bill further proposes appointment of a gaming inspector who will be tasked with inspection of betting, gaming and totalisator premises to ensure compliance; preside over public lotteries and prize competitions draws; monitor and report to the director trends and innovations within the industry.

The gaming inspector will also have power to conduct investigations to prevent illegal betting and gaming as well as appoint gaming inspectors as may be necessary for the enforcement of the provisions of the Act.

The Bill proposes a raft of charges including an entertainment tax on all betting, lotteries and gaming licensed under the Act chargeable at a rate of 20 percent on the gross winnings of all betting, lotteries and gaming activities.

Entertainment tax

Betting, lotteries and gaming draws permit will be charged at Sh5,000 per draw; entertainment tax of 10 percent will be charged on winning revenue for the same.

For bingo games, Sh30,000 will be charged per bingo for three- month permit while the county will levy 15 percent of proceeds from lottery to go to the County Lottery Distribution Trust Fund within 14 days after such draw for distribution to “good causes”.

According to the Bill, a grant fee of Sh600,000 will be charged for a betting premise as well as application fee of Sh10,000. Investors will pay the same at renewal.

The owners will then have to pay Sh30,000 annual fee per premise as well as Sh10,000 as transfer (location fee) per premise.

For gaming (casino) premises, a grant fee of Sh100,000 will be charged with another Sh10,000 payable as application or renewal fee. An annual fee of Sh300,000 will be applied as well as Sh200,000 as transfer fee.

For totalisator premises licence, a grant fee of Sh200,000 will be charged as well as Sh100,000 as annual fee and transfer fee with Sh10,000 payable as an application or renewal fee.

For public lottery licence, the grant fee will be charged at Sh4 million per lottery with another Sh1 million as application or renewal fee. Another Sh500,000 will be required as an annual permit fee and Sh25,000 as transfer application fee.

An investigation fee of Sh500,000 will apply for local applicant while a foreign applicant will have to fork out Sh1 million.

However, in case of a three-month permit, Sh2,000 will be the application fee while three percent of projected ticket sales or Sh75,000, whichever is less, will apply.

For prize competition permit, six percent of total budget where total budget is sum of advertising, production and design cost and the cost of all prizes will be charged in addition to Sh2,000 application fee.

Pool table tax

Pool table licence will attract an annual fee of Sh5,000 and an application of Sh250 per table. The same charges will apply for each amusement machine licence.

Lastly, funfair or tombola permit for three months will attract a permit fee of Sh20,000 as well as Sh1,000 as application fee.

However, the director may refuse to grant or renew licence if information contained in the application is not true or the application does not meet requirement.

One can, however, appeal within 21 days with the board.

A licence can be suspended for not more than six months if charged with offence involving fraud, dishonesty or related to gaming while a revocation can come as a result of breach of provisions of the Act, false statement in application; gaming business is wound up or dissolved.

“Licence can be transferred after only five years upon payment of prescribed fees. One will be required to pay Sh50,000 to get duplicate licence in case one is lost, destroyed or mutilated,” reads the Bill.

Culture and Community Services chairperson and Woodley/Kenyatta Golf Course MCA Mwangi Njihia explained that the Bill was developed as a response to various persistent challenges facing the county such as loss of revenue pointing out that the county government currently cannot collect revenue from these activities due to inadequate laws governing the Nairobi City County betting, lotteries and gaming activities.

The Bill, he added, will be critical in collection of revenue and control of betting, lotteries and gaming activities within the capital city.

Quality services

“With the projected increase in the city population, there was a need for the Nairobi County Assembly in conjunction with the county government to come up with the Betting, Lotteries and Gaming Bill, 2020 to guide the effective collection of revenue for the purpose of providing quality services to city residents,” said Mr Njihia.

“The Bill is a valiant step towards addressing the betting, lotteries and gaming challenges that have confronted the city. In light of this Bill, City Hall will be able to collect revenue which will generate income to the residents of Nairobi for better service delivery,” he added.

A previous attempt to regulate the sector in 2014 flopped after a petition was lodged in court challenging the Nairobi City County Betting, Lotteries and Gaming Act, 2014 – which the court set aside.

Nonetheless, Mr Njihia said present and future ventures in betting, lotteries and gaming sector will be done within the framework of the Bill with the county executive given 60 days of adoption of the report, which was on November 12, 2020, to submit a regulation on the same.

“The current Bill varies with the Nairobi City County Betting, Lotteries and Gaming Act, 2014 and seeks to replace the same which was not gazetted as per the final court orders in petition No. 295 of 2014,” he said.

Mr Njihia said the national government has been enjoying all the tax revenue earnings from the sector that currently has 23 registered casinos in Nairobi, according to data by City Hall.

However, the casinos are licensed and regulated under the provisions of the Betting, Lotteries and Gaming Act of 2017 and their activities overseen by the Betting Control and Licensing Board.

This has denied the county government revenue which City Hall now seeks to get a 30 percent share from the casinos operating in the capital.

Mr Njihia said the yearly turnover of sports betting industry in Kenya is worth more than Sh5 Billion that even with its runaway growth resulting in imposition of higher taxes by the government, the proliferation of gaming outlets across the country has continued with over 20 betting and lottery companies currently in the country with the number growing.

According to the Bill, the national government will issue licences for public gaming whereas the county government will give licences for the premises where betting will be conducted.

Further, the national government will issue licences for national lotteries whereas the county will supervise those lotteries that are within its confines with the national government responsible for online gaming whereas City Hall will handle pool tables operating in the city.

Gaming control fund

The Bill further proposes the establishment of Nairobi City County Betting, Lotteries and Gaming Control Fund which shall provide for research and dissemination of findings on betting and gaming as well as awareness creation on the effects of excessive gaming and betting. The Fund will be headed by an administrator appointed by the CEC Finance.

In terms of enforcement, any person who will be found operating any betting, lottery or gaming business without a licence will be committing an offence liable to a fine or conviction.

Consequently, promoting or advertising any prize competition in connection with any trade or business or the sale of any article to the public without a permit will attract, upon conviction, a fine not exceeding Sh1 million or imprisonment for a term not exceeding five years, or both.

Individuals who will participate in the same will be liable for conviction to a fine not exceeding Sh50,000 or to imprisonment for a term not exceeding six months, or both.

Use of unlicensed gaming premise will attract a fine not exceeding Sh1 million or to imprisonment for a term not exceeding five years or both, same as for operating unlicensed betting premise.