SportPesa threatens to pull the plug over new tax law

By alex wafula
Jun 24, 2017
  • Ronald Karauri, the SportPesa CEO said by complying with the government law they cannot sustain their sponsorship activities. (SNA. File Photo)

  • Kenya Rugby Union could be the hardest hit by the withdrawal of sponsorship by SportPesa. (SNA. File Photo)

Betting firm SportPesa, one of the biggest investors in Kenyan sports has threatened to pull the plug on their sponsorship to sports teams and federations.

This is after President Uhuru Kenyatta, on Wednesday signed into law the Betting, Lotteries and Gaming Amendment Act which was passed by the Parliament.

The President, on Wednesday signed into law the Amendment Bill raising the taxes collectively, up from the 5 percent cut on lotteries, 7.5 percent on betting and 12 percent on casino gambling.

SportPesa Chief Executive Officer Ronald Karauri has now said the hefty cut by the tax man will stifle their businesses adding complying with the government law would mean they cannot sustain its sponsorship activities going forward.

“It will be impossible to continue funding the sector with the taxes that have been imposed. We shall therefore be giving all the beneficiaries of our sponsorships to inform them that we shall not be able to sustain those activities going forward,” Karauri said.

He is also the Chairman of the Association of Gaming Operators –Kenya.

The betting firm has entered into partnerships with the Football Kenya Federation (FKF), Kenyan Premier League (KPL), Kenya Boxing Association (BAK) and the Kenya Rugby Union (KRU).

They also sponsor Gor Mahia and AFC Leopards, two of the biggest clubs in Kenya as well as Nakuru All Stars, Kenya Harlequins RFC.

Other beneficiaries are the grass-root Super Eight league run by Extreme Sports KRU and FKF.

KRU receives close to Sh120 million per year from the company with the sponsorship covering all national teams (men and women) as well as grassroot development.

Also part of the purse from SportPesa includes match bonuses and logistics.

FKF receive Sh. 70 million most of which is pumped into grass-root and women football.

Annual increment

AFC leopards received about Sh. 48 million from the sponsors, Gor Mahia receives roughly Sh. 63 million with both teams’ sponsorship rising by five percent every year.

“It is sad because we are community clubs and most of our activities depend on sponsorship. We had suffered for a long time especially when our sponsors Mumias left and we had to go two years without a good flow of finances. This is a very alarming state of affairs,” Dan Mule, the AFC Leopards chairman said.

His sentiments were shared by Kenyan Premier League Chief Executive Officer Jack Oguda whose company saw a substantial amount of their income cut off when Pay TV channel SuperSport pulled out of its broadcast partnership.

The exit of the betting firm as the league’s title sponsor will send them into disarray.

For KRU, the announcement wouldn’t come at a worse time. The Union is looking at the World Cup qualifier for the 15s team and participation by the Sevens team in next year's World Cup in San Francisco as well as the Commonwealth Games in Australia.

Besides the RWC Sevens and Commonwealth games, Kenya is also a core team in the World Rugby Sevens World Series. The 15's team plays in the top tier of Rugby Africa competition, the Gold Cup.

However, SportPesa said their overseas partnerships including that with English premier League sides Hull City and Everton FC remaining intact.

The company has also entered the Tanzanian market and are sponsoring three teams; Yanga, Simba and Singida United.

Online gaming sites started gaining traction in the country about two years ago with Kenya Revenue Authority revealing that the fast-growing industry had helped expand the exchequer’s tax base.

Remittance to the taxman

By February this year, 25 licensed betting companies had paid a total of Sh4.7 billion in the financial years 2014/2015 and 2015/2016.

Gross revenues from the industry are estimated to be in the region of Sh3 billion with forecasts indicating that the industry may experience steady growth over the next five years.

“Betting and Gaming have become widespread in our society in an environment that is inadequately regulated. Its expansion is beginning to have negative social effects in particular on the youth and the vulnerable members of the society,” Treasury Cabinet Secretary Henry Rotich said during the Budget Speech at Parliament in March.

Supporters of the amended bill say the law would enhance job creation and raise revenue for the Exchequer.

While SportPesa have been first to sound an alarm for an imminent final whistle on their dealings, it remains to be seen whether other betting companies will follow suit.

Ulinzi Stars (Elitebet), Mathare United (Betway) and Sofapaka (Betika) are some of the other teams sponsored by betting companies.