Kenya’s sporting clubs impacted due to tax hike

KENYA’S top betting firm has followed through with its plans to cut sports sponsorships following a ruling in favour of the gambling tax hike.

Sportspesa, which allows Kenyans to bet on their favourite sports online and via betting shops in the country, has pulled its 600 million shillings in annual sponsorships of the Kenyan Premier League (KPL) and other local sporting clubs.

Last year, the government debated a uniform gambling tax as a solution to curb societal gambling harms.

While the government initially proposed a 50 percent tax rate and then scrapped it, President Uhuru Kenyatta introduced a uniform tax rate of 35 percent on gross profits for all gambling companies in the end.

Betting companies now have to pay 27.5 percent more tax, with the government stating the revenue will support culture, arts and sports in Kenya.

The High Court recently ruled to uphold the tax rate after Sportpesa challenged the President’s move, claiming he had overstepped his powers, prompting the sponsorship cull.

Justice John Mativo found “no evidence of abuse of tax policy” had been demonstrated, according to Kenyan news outlets.

The sponsorship cancellations don’t come as a surprise, as Sportpesa CEO, Ronald Karauri, announced the company had no other choice to remain financially viable last year.

“All we will have to do is manage our expenditure in terms of our marketing expenses,” Karauri told Reuters.

“We had really committed ourselves to sports in the country so it is a very huge burden for us as a cost.”

MPs have accused Sportpesa of blackmailing the government and have explained that the money will help support the economy.

The lack of sponsorship of Kenyan sports has been felt instantly though, with the chairman of Gor Mahia, Ambrose Rachier, stating his team could be forced to pull out of the 2018 CAF Champions League Cup.

Sportpesa gave Gor Mahia 60 million shillings a year, and without the funding, the team could lose its chance to play in the tournament.

“It is devastating…we are in mourning,” Rachier said.

SportPesa was the main sponsor of the KPL, with a deal worth more than 447 million shillings which was expected to run until 2019.

“The Kenyan Premier League is composed of 18 teams and that is also sponsored by SportPesa,” said Rachier.

“It means that those clubs will also be negatively affected and therefore football may just take a nosedive in this country.”

The Kenyan Rugby Union will also lose its 120 million shillings it received from Sportpesa each year, which provided funding for the teams to prepare for the World Rugby Sevens Series.

“Unless the government steps in and says we will underwrite that [the tax rate], what we possibly will do is tell our suppliers and partners that we can’t meet our obligations,” Chairman of the rugby union, Richard Omwela, said.

Other affected teams include Kenya Boxing Association, Super 8 grass root football league, AFC Leopards, Nakuru All Stars and Kenya Harlequins RFC.

The betting firm’s international sponsorships, including the English Premier League (EPL) football clubs, Everton and Hull City will remain in place.