Economy

Betting firms in Kenya rise to 100 amid clampdown

mbugi

Betting Control and Licensing Board Chief Executive Officer (CEO) Peter Mbugi. PHOTO | JEFF ANGOTE | NMG

Betting firms licensed to operate in Kenya have hit 100, defying a government’s policy to clamp down on gambling through imposition of higher taxes both on the companies and punters.

The list of betting firms licensed for the year ending June published by the Betting and Licensing Control Board (BCLB) shows the number had increased to 100 from 76 in a similar period a year earlier—reflecting a 31.5 percent growth.

Kenya last year reintroduced excise duty on betting stakes to 7.5 percent, which means the government first takes Sh7.50 for every Sh100 a gambler places as a bet irrespective of winnings.

It also takes a 20 percent on winnings and levies additional taxes on the betting firms in efforts meant to make gambling unattractive.

But investors in the betting space have been undeterred by the government's attempts to curb the business through higher taxation and tighter regulation.

BCLB chief executive Peter Mbugi said that the majority of the 24 new firms are owned by locals.

“Since the start of the year we are witnessing more companies owned by Kenyans interested in the betting industry, Mr Mbugi told the Business Daily on Monday.

They include Mofabet registered as Johannes Swift, Zukabet registered as Muvana Limited, Unibet, Hollywood Bets and Safebet.

Online sports betting companies such as SportPesa grew rapidly before the drastic hike in taxes, riding a wave of enthusiasm for sports. The government says the gaming industry achieved a combined revenue of Sh204 billion in 2018.

That sparked concern about the social impact of betting, prompting new gambling regulations, including restrictions on advertising.

Betting is popular among young people – employed as well as the jobless — who see it as offering a game-like thrill besides an opportunity to make quick money.

The government earlier said 54 percent of Kenyans involved in betting were low-income earners.

While a few punters get lucky and win large sums of money, the activity represents missed opportunities and losses for participants as a whole.

Kenyans spent Sh83.2 billion to place bets in the six months to September through Safaricom’s #ticker:SCOM M-Pesa platform alone, underlining the gambling craze that has become a national pastime.

The telco’s disclosures show that the value of the bets jumped 69 percent from Sh49.2 billion a year earlier.

Safaricom, the Kenya Revenue Authority (KRA) and betting firms are the biggest beneficiaries of the growth and intensity of betting activities, pocketing billions of shillings.

The telco’s revenue from betting doubled to Sh2.95 billion from Sh1.48 billion. The taxman is estimated to have collected at least Sh6.2 billion from punters using M-Pesa.

The KRA takes 7.5 percent of the value of bets placed besides 20 percent of winnings and corporate taxes on betting firms.

The volume of bets funded from M-Pesa accounts surged 84.7 percent to 347.8 million, signalling a growing gambling addiction.

The Sh83.2 billion wagered in the six-month period, for instance, is enough to buy 2.05 billion shares of Safaricom, equivalent to a 5.1 percent stake in the country’s most profitable firm.

Such a stake would earn dividends of about Sh2.8 billion annually, based on the telco’s latest distribution of Sh1.37 per share for the year ended March.

Betting is now the second-largest business line by revenue under M-Pesa’s payments and betting unit after consumer-to-business (C2B), which generated sales of Sh5.1 billion in the six months to September.

The disclosures show that betting firms and punters are being charged some of the highest fees by Safaricom compared to other M-Pesa users.

The betting firms are not required to make their accounts public because they are private entities.

A court case pitting the KRA against Pevans East Africa, which pioneered betting in the country using the SportPesa brand, highlighted the lucrative business the company was doing before its operations were scuttled by the taxman.

Court papers showed that Pevans alone took in bets worth Sh149.7 billion in 2018, making it the second-largest company in Kenya by revenue after Safaricom at the time.

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