Betting firms in survival battle as profit, market share shrinks

Top betting firms are jittery of the legislative pressure from the government and a shrinking market share as newer and more robust players join the market in huge numbers.

Few top firms namely Sportpesa, Betway and Betin were the first to pitch camp in Kenya about four years ago, and raked in billions in the process.  For others, things are becoming muckier. They are findings it hard to navigate through the terrain with profit dipping as and gamblers get more avenues to bet.

As of 2017, there are close to 50 licensed betting firms in Kenya. Of this, 30 are operational and use mobile money as a payment channel. According to Betway Kenya Country Manager Wanja Gikonyo, betting companies paid over Sh4.7 billion in corporate taxes last year.

And since the Kenya Revenue Authority (KRA) was charging a corporate tax of 30 per cent on total profits before the 50 per cent tax proposal this year came to light, the firms could have raked in a cumulative profit of Sh15.6 billion last year. But all this could be disappearing if the current tense operational mood in the sector persist. “I am hoping the 50 per cent tax proposal will not be implemented. If implemented it is going to cripple our businesses,” Ms Gikonyo says. The parliament has since lowered the tax to 35 per cent.

Gikonyo explains that the proposed 50 per cent tax was to be deducted from each betting firm’s gross profits. On top of that, the firms were also required to pay a further 30 per cent corporate tax.

“With this kind of taxation, we will be really squeezed in terms of the business we will be conducting ... will be working for a meagre 20 per cent,” She avers.

Wrong information

Gikonyo who feels that Treasury was grossly misadvised on the formulation of this Bill, says the industry’s hopes now lie with the regulator, the Betting Control and Licensing Board.

With the weight of taxation bearing down on the firms, the challenges of working with the country’s leading telcos on their money transfer platforms also abide. Technical hitches among the leading telecommunications companies when it comes to money transfer are becoming a big turnoff to a majority of Kenyans who place bets on a daily basis. “

Everyday, we have to work hard and employ more personnel to work with platforms such as Safaricom in mobile money transfer, since we don’t handle cash. Technical hitches irritate players. We also have to keep Safaricom informed on when the Premier League is starting and the betting volumes are expected to go up.

With this kind of work, we need more personnel which drives our staffing costs up,” Gikonyo says.

The Kenyan betting fan is also evolving. While in the past players could place bigger bets, the huge influx of betting firms in the market has seen most players bet as little as Sh50, and spread their risks across many betting platforms, an activity which does not translate to much profits for the firms.

Gikonyo asserts that in comparison with other countries across the East African region, Kenya’s tax demands for the industry are a bit too high. “In Tanzania they charge a 25 per cent corporate tax. In Uganda they charge 30 per cent. Investors in Kenya will surely move,” she observed.

Ms Gikonyo reckons that given the over-crowding currently in the market, a typical betting firm such as Betway will need to differentiate itself and move into other sports and not just soccer. Betting firms could move into sports such as Basketball and Rugby which are also quite popular in the country.

Ms Gikonyo affirms that despite the challenges the betting industry is facing, Betway will remain in operations even if the 50 per cent tax proposal is implemented. “Despite the crowding and the tax burden, Betway is here to stay. We will be looking ahead to make our brand more recognisable by sponsoring teams not only in the football league, but other sports as well,”

She said the UK-based company will also be expanding into other African markets, since currently they have branches only in Kenya, Tanzania and Ghana.”From next year, we will be opening offices in Uganda, Zambia, Zimbabwe and South Africa,” Gikonyo avered.