Over 2,500 people who depend directly on Kenya’s betting industry will be jobless in the coming days after two of the most prominent sports betting firms in the country have announced their exit.
The firms – SportPesa and Betin – have halted their operations in the eastern African nation after a longstanding tax dispute with the government. Both companies are said to control more than 60 percent of the market share in Kenya.
The betting companies blamed their exit on the government’s decision to impose heavy taxes on the industry which, according to them, made the business no longer viable. Recent reports show that the Kenyan legislature recently imposed a 20 percent excise tax on all betting stakes, much to the displeasure of SportPesa.
“The tax is based on a fundamental misunderstanding by the Rotich-led treasury of how revenue generation works in the bookmaker industry,” the company said in a statement, adding that the tax will have a “damaging impact on both customers and treasury.”
There is also current 20 percent withholding tax on winnings which SportPesa says further compounds the issue. As a result, the “economic incentive to place bets will be completely removed as the taxes will deprive consumers of their total winnings,” the firm added.
Kenya’s present hostile regulatory environment will have severe consequences for licensed betting companies which dutifully pay their taxes, the betting firm argues further. Eventually, this will lead to a decline in government tax revenue to near zero and will halt all investments in sports in Kenya.
SportPesa, which had earlier indicated that it was coming back to business after initially having license issues with the government, is staying away for now. “Until such time that adequate taxation and non-hostile regulatory environment is returned, the SportPesa brand will halt operations in Kenya,” the statement reads.
Betin for its part is ceasing operations totally on October 31, a memo issued to the company’s staff says. The firm sent the notice of termination to its workforce on the basis that it has not been operational since July this year.
In the memo, the company explains that the management has had “several extensive meetings with relevant government entities” on the license renewal issue without much success.
“In view of the above, we have had financial constraints as you might all expect. As a result of the deterioration of the profitability, the management has had to rethink its operational model and to proceed with the exercise of termination on account of redundancy,” the firm said.
Betin also said it had tried to find an alternative between July and September 2019, but it has now become financially impossible to maintain the entire workforce. Thus, positions will be rendered redundant by the end of the month.
The massive job losses resulting from the exits of two major sports betting firms can be said to be the first casualty of the government’s crackdown on the multi-billion shilling betting industry in Kenya.
Along with stringent requirements for license renewal and the imposition of multiple high-rate taxes, part of the clampdown saw the Kenya authorities order telecom operators to shut down the pay bill numbers and shortcodes of 27 betting companies back in July.
The list contained the big names in sports betting, including SportPesa, Betin, and Betway. Others are Betpawa, Premierbet, Dafabet, World Sport Bet, Palmsbet, Easybet, Bet Boss, etc. The order by Kenya’s Betting Control and Licensing Board (BCLB), sought to close down the burgeoning betting industry.
At some point, the betting board also involved commercial banks and the communications sector regulator in its crackdown, in what shows its determination to stop betting companies. Particularly, banks were reportedly asked to make it hard for betting firms to get their billions of shillings out of the country.
The government’s decision to embark on a drastic clampdown on the betting industry, initially triggered by taxation matters, is supposedly targeted at addressing threats gaming and gambling might pose to the nation, such as money laundering and gambling addiction of the youths.