SportPesa cancels sponsorships in Kenya as tax row intensifies

SportPesa has announced it is withdrawing from all sports sponsorship deals in Kenya. In a statement that made headlines this week, the betting firm decried the intense uncertainty surrounding the company following “punitive measures by regulators” that have hampered the renewal of gambling licences and reactivation of paybill numbers.

The debacle began back in July this year when the Kenyan government, under the leadership of President Uhuru Kenyatta, directed telecommunication companies to shut down the paybill numbers and short codes of bookmakers that failed to renew their licences. The Central Bank of Kenya (CBK) compounded matters when it terminated banking services to the betting firms.

The Betting Control and Licensing Board (BCLB) in Kenya withheld the licences of 27 gambling operators for the current financial year on the grounds on noncompliance. According to the Kenya Revenue Authority (KRA), the 13 casinos, eight wagering firms and six lotteries in question failed to settle withholding tax arrears on winnings of up to KES 61 billion (USD $610m).

SEE ALSO: KENYA CLAIMS BOOKIES OWE $586 MILLION IN TAXES

One of the worst-affected companies is SportPesa, arguably the biggest betting firm in the country. CEO Ronald Karauri claims the KRA is being double-minded in asking the BCLB to withhold the company’s operating licence and accused the taxman of using a loophole in the amended Finance Act 2018 to demand winnings.

On top of moving to court to fight off the supposed tax arrears and demand compensation for the weeks it has not been in business, SportPesa has now pulled the plug on all its sports sponsorship deals in Kenya.

The withdrawal has caused much uncertainty pertaining to the fate of the Kenyan Premier League, which is set to begin on August 30.

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According to the KPL Head of Marketing Elly Kalekwa, an emergency meeting with all 18 chairpersons of the top football clubs in Kenya has been convened in a desperate attempt to secure a new title sponsor before the start of the League.

Despite doubling their efforts to bring another sponsor onboard, Kalekwa has admitted that finding a willing partner that could match SportPesa’s yearly facilitation of up to KES 87 million (USD $870,000) will be a monumental task.

Gor Mahia and AFC Leopards, two of the most accomplished and decorated sides in the Kenyan Premier League, will be most affected, as SportPesa’s sponsorship withdrawal may force them to forfeit domestic matches. It will also make it difficult for the clubs to fulfil their contractual obligations, especially to foreign players.

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This is not the first time SportPesa has revoked its sponsorship of local clubs. Towards the end of 2017, the company withdrew financial support of sports clubs and unions after the Kenyan government introduced a 35 per cent tax on betting.

Gambling is a lucrative business in Kenya, with the local betting industry raking in up to KES 200 billion (USD $2b) in annual sales.

A survey conducted by think-tank CGAP (Consultative Group to Assist the Poor) revealed that the number of Kenyan youths blacklisted by credit bureaus skyrocketed from 150,000 to 500,000 between 2016 and 2018, with Interior Cabinet Secretary Dr. Fred Matiang’i revealing that majority of the loans were used to aid gambling habits.