Two years ago, political pressure combined with new tax regulations, aggressive push from the taxman and negative media coverage brought the sports betting industry in the country almost to its death throes. The pressure even sunk the largest sports betting company in the country which at its peak, had more than $1 billion in annual revenues. Much of this pressure has since abated although the regulatory environment has tightened ever since. Still, things have been looking up for the sports betting industry in the country. There have been a lot of developments over the past two years that have put the industry on a positive growth trajectory.
Right before the government clampdown, Kenyan punters wagered bets to the tune of $2 billion annually. The tough regulatory environment and the introduction of excise duty (which was later scrapped in the finance bill of 2020) threatened to throw in new challenges in the lucrative industry.
Positive Developments
Last year saw some positive developments in the industry which could spell good tidings for the industry this year. One of the biggest news was the re-entry of Kenya’s largest sportsbook SportPesa after almost a year’s absence. Although its return was temporarily blocked by the Betting Control and Licensing Board (BCLB), a court order allowed it to operate. At its peak, SportPesa commanded two-thirds of all bets placed by punters, grossing close to $200 million in monthly revenues. Most Kenyans sports bettors have an account with the sportsbook and its rocky re-entry could reignite and rejuvenate the fortunes of the sports betting industry. Last year also saw the Betting Control Licensing Board and the Kenya Revenue Authority (KRA) clear ten new betting companies, including Betway, to operate in Kenya. The move has infused new energy and dynamism into the local betting scene and will have positive ramifications for the online betting market in Kenya in 2021.There have also been new investments in Kenya’s online gambling scene. The latest of which has been the acquisition of a Kenyan betting firm by the Nevada-based TransAtlantic Capital for an undisclosed amount. The positive economic outlook and the return to regular sporting events and calendar means that 2021 may be the year that the local sports betting scene replicates the successes of the yesteryears.
Challenges
The main challenges so far have been regulatory. With the taxman tightening the noose and the government still keen on introducing new taxes on betting companies, most betting firms in Kenya now find themselves operating under the watchful eye of the regulators and the taxman. The main point of contention is excise tax on stakes that was first introduced in the Finance Act of 2019. This tax was to be levied on the stakes that punters place with bookmarkers. The new directive also obligated gaming companies to show this excise tax on betting slips. Additionally, the Kenya Revenue Authority had imposed a 20% withholding tax on all the punter’s winnings. These taxes were imposed on top of a 30% corporation tax and a 15% betting tax. Although the 20% withholding tax was later scrapped in the Finance Bill signed by the President, the government has threatened to reintroduce it, a move that will negatively affect punters’ betting outcomes. There is also the Gaming Bill currently before the Parliament that could give the taxman and security authorities a “window” or platform through which they could tracking betting in real-time and help curb money laundering and other illicit financial activities.
As the debate and push-pull between the betting companies and the regulators continues into 2021, betting companies licensed to operate in the country now have to comply with the new legal terrain, including the taxes. A local presence gives betting companies a massive edge thanks to the lucrative MPESA-powered text betting Kenya offers, but a tough tax and regulatory regimen might also see some punters opt for international sportsbooks without a local presence in the country. It’s a dynamic market and the sports betting public is getting increasingly sophisticated.
