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Echoes of past as Midiwo betting Bill goes after foreign investors

By Business Beat Reporter | February 7th 2017 at 00:00:00 GMT +0300

Gem MP Jakoyo Midiwo

A proposal to ban foreigners from holding a stake in betting firms has raised eyebrows among sector players.

The Bill, by Gem MP Jakoyo Midiwo, is set to go through the Second Reading in Parliament this week, and has been characterised as attempting a controversial return to the past.

The Betting, Lotteries and Gambling Amendment Bill of 2016 has several other radical proposals, including limiting winnings to Sh30 million.

The Bill went through its First Reading in the National Assembly on December 1 last year, and was published in the Kenya Gazette the following day. It is now set for the committee stage.

But stakeholders have taken issue with it, saying the proposals do not address the issues facing the sector, such as the proliferation of illegal gaming machines and lack of structures to enforce responsible gaming. They added that some measures proposed would be impossible to implement as they are unconstitutional, or the mechanisms to do so do not exist.

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Investment destination

Adding its voice to opposition against the proposed law, the Kenya National Chamber of Commerce and Industry (KNCCI) said it was largely “anti-business”, and could negatively affect foreigners’ perception of Kenya as an investment destination.

In 2015, MPs introduced a clause into the Companies Act requiring foreign firms opening offices in Kenya to cede at least a third of their shareholding to locals.

The law was later revoked by the Treasury, with Industrialisation Cabinet Secretary Adan Mohamed saying it was an error.

“Kenya prides itself on being a very liberal economy, and this Bill is not in line with what is required of a liberal economy,” said KNCCI Chairman Kiprono Kittony.

He added that the economy was going through turbulent times, and cautioned MPs against passing punitive laws that could damage one of the few thriving industries.

Regional insurer Africa Trade Insurance (ATI), which offers covers that reduce the business risks and costs of doing business in the continent, warned that any laws designed specifically to target and penalise foreign investors can be damaging to an economy.

Although ATI does not insure gaming companies, it noted that most African countries are keen to attract foreign direct investment to shore up their economies through the protection of investors’ rights.

“Gambling is a controversial industry, but we would suggest that exploring regulation and control may make greater sense than measures that specifically legislate against foreign investors,” said ATI Chief Underwriting Officer John Lentaigne

The Association of Gaming Operators in Kenya (AGOK) added that the clause in the Midiwo Bill that seeks to allow only Kenyans to own online gambling firms is contrary to the property rights protected under the Universal Bill of Rights and the Constitution.

“It is of grave concern to us that the Bill proposes, in light of the reality of the ownership of the gaming industry in Kenya, to limit the shareholding of online gaming licensees to Kenyan citizens. The inevitable result of such a limitation will be the violation of constitutional protection for foreign investors,” AGOK CEO Harrison Ikunda wrote to the National Assembly.

Sports betting firm SportPesa has a number of foreign owners, as does its industry peers Betway and Betin. Philippines-based betting firm Emphasis Service, operating under the brand name Dafabet, is said to be eyeing the lucrative local market.

“The betting, lotteries and gaming industry is an industry that is statutorily regulated, yet it appears, from a flurry of unco-ordinated and incoherent legislative actions, that it is an illegitimate and undesirable industry,” Mr Ikunda wrote.

SportPesa CEO Ronald Karauri added that betting firms are not against regulation.

In fact, he said, the industry had proposed guidelines to tighten oversight in 2015. These guidelines have yet to be implemented.

“The Jakoyo Midiwo Bill says it wants to prevent underage gambling, but we at SportPesa only allow betting on M-Pesa, where users are verified by the phone companies since they require identification to register,” Mr Karauri said.

“In fact, we are planning to tap into the Integrated Population Registration System (IPRS), a Government database system, that will help us verify users.”

He added that he had been involved in coming up with the 2015 guidelines that made viable proposals to improve enforcement.

“We had even proposed to have BCLB [industry regulator Betting Control and Licensing Board] operate a helpline to directly ensure responsible betting, rather than leave it up to individual firms who may not encourage responsible betting. We did not have a problem funding it,” he said.

Under the guidelines seen by Business Beat, betting firms would have had to set up in Kenya with a physical office and infrastructure, as well as employ Kenyans to staff IT and maintenance departments. Only a handful of betting firms operating in the country have a physical presence in Kenya.

Firms were also to “establish and maintain an in-house customer care centre within Kenya to monitor and respond to queries by players”.

The guidelines also proposed a business plan that would show minimum investment and sources of funds.

Wider consultations

BCLB has added its voice to the debate on the proposal, with its chairman, Kimani Kung’u, saying those behind the Bill did not consult the industry regulator.

He told Business Beat that the draft law could kill the industry, as the proposals, rather than seeking to improve the sector, appear “anti the betting industry”.

Mr Kung’u added that locking out foreigners from investing in gaming companies is contrary to the Constitution that forbids the State from discriminating against people on ethnic or social origin grounds.

The age limit also attempts to tell adults, “ who are defined constitutionally as those above 18 and are allowed to go into war, how to spend their money”.

AGOK now wants the Midiwo draft law to be deferred for wider consultations with industry players, saying that as it is, the Bill punishes an entire industry for the flaws of a few operators who may be operating illegally.

The lobby added that some proposals in the draft law are not rooted in reality. For instance, bet amounts and winnings “are determined by statistical risk-reward matrices that set the odds”.

The lobby said implementing time limits for lottery and prize competitions to between 7am and 7pm, and gaming from 5pm to 7am, would be difficult as users can bet at any time online through platforms hosted outside the country.

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