How A Report On Gambling In Kenya Was Censored

Jonathan Rozen is CPJ’s senior Africa researcher. Previously, he worked in South Africa, Mozambique, and Canada with the Institute for Security Studies, assessing Mozambican peace-building processes. Rozen was a U.N. correspondent for IPS News and has written for Al-Jazeera English and the International Peace Institute. He speaks English and French.

The Story.

Below is the story that irked the gambling cartels into hiring dark web geeks into censoring the report in spirited effort to not only muzzle media free speech but wipe out the devastating effects of gambling in Kenya and the destruction in the society.

By Lionel Faull & Paul Wafula

(This story was first published by the Daily Nation in Kenya).

The enormous scale of Kenya’s betting addiction can be revealed after leaked figures from the regulator show that punters wagered more than Shs30 billion (£235m) in a single month last year.

The staggering size of the local betting industry has emerged from a leaked spreadsheet of revenue declarations made by gambling firms to the Betting Control and Licensing Board (BCLB) for May 2019, shortly before the government introduced tougher regulations and higher taxes.

Extrapolating from this monthly figure, punters were on track to spend more than Sh360 billion (£2.8 billion) on betting annually had the government not stopped the party.

This amount is Sh257 billion (£2 billion) more than what the national government allocated to health in 2019/20.

The leaked data reveals that Kenyan punters staked nearly 180 million individual bets in a single month.

Kenya has an adult population of around 35 million, according to 2019 population census figures released by the Kenya National Bureau of Statics (KNBS). The average amount bet per stake was Sh170 (£1.30).

Mental health

Gaming Awareness Society of Kenya co-founder Nelson Bwire reacted with shock at the figures: “Data we have submitted to the presidential task force on mental health indicates that gambling is a major contributor to mental health-related problems.

“The effects are devastating — family breakups, addiction, depression, unmanageable debt, increased crime and suicides. But to learn that people are spending such huge amounts on betting in such a short time? It’s absurd!”

The revenue declaration snapshot was obtained by Finance Uncovered, a UK-based investigative journalism and training project, and shared with the Daily Nation. It originated from an insider at the BCLB, which receives and compiles monthly revenue declarations from the industry.

DOWNLOAD THE DATA:

• Kenyan betting companies’ May 2019 declarations to the BCLB

This is thought to be the first time that betting figures for the entire industry, albeit a one-month snapshot, have been made public.

An industry source suggested that the numbers could be higher because the BCLB relies on companies’ self-reporting.

The Kenyan gambling market is heavily dominated by online betting, which industry experts say typically returns 90 per cent of bets to punters as winnings. Retail outlets, or betting shops, return 85 per cent.

The amount firms retain after making winnings pay-outs is called the Gross Gaming Revenue, or GGR. Betting firms could, therefore, be retaining between 10 to 15 per cent of bets staked.

This means they could have raked in GGR of between Sh3 billion and Sh4.5 billion (£23-£35 million) in May 2019. This works out at between Sh36 billion and Sh54 billion (£280-£420 million) in annual GGR.

Betting firms would have been expected to pay a 15 per cent tax on GGR, plus a 20 per cent withholding tax on punters’ winnings, following a series of tax laws passed in 2018.

The big two

Topping the BCLB’s leaked spreadsheet of nearly 40 betting and lottery firms was SportPesa, who declared monthly bets totalling nearly Sh20 billion (£157 million).

SportPesa, which became a roaring success after it launched in Kenya in 2014, accounted for almost two-thirds (64 per cent) of market share.

The firm stepped to the international stage after it announced a Sh1.3 billion (£9.6 million) a year sponsorship deal with Everton FC in 2017. It was the biggest deal in the club’s sponsorship history.

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It would also set up a global headquarters in Liverpool. Before it shot to global fame, it had entered smaller deals with Arsenal, Southampton and Hull City football clubs, as well as the Spanish La Liga and a top Italian club teams.

Rival firm Betin came in second, with declared bets of almost Sh6 billion (£47m) — nearly 20 per cent of all market share.

Government clampdown

Sportpesa and Betin were among the 27 firms whose betting licences were withdrawn by the government in July last year over alleged tax non-compliance.

SportPesa and Betin fought the tax demands, which the Kenya Revenue Authority (KRA) claimed they owed in arrears under the 2018 revenue laws, in court.

They were given tax compliance certificates for the previous year only for the government to demand more.

Two directors of Betin Kenya, Leandro Giovando and Domenico Giovando, were also deported and later denied entry back into Kenya, despite holding valid investor work permits last year.

While some of the other suspended firms later had their licences reinstated, both SportPesa and Betin to date have not.

This saw them shut their Kenyan operations in September last year, rendering hundreds of Kenyans jobless.

The biggest blow was felt in the local football league after SportPesa withdrew from sponsorship deals citing “the hostile taxation and operating environment”.

Before its withdrawal, SportPesa had waged a public relations campaign in the media, reportedly claiming in a series of full-page newspaper adverts that they had collected Sh20 billion (£157 million) in revenues in 2018, made Sh9 billion (£70 million) in gross profits and paid Sh6.4 billion (£50 million) in taxes.

They also claimed to have invested a total of Sh1.37 billion (£11 million) in local clubs, and a further Sh171 million (£1.3 million) in other socio-economic causes, including Sh41 million (£320,000) in community health.

The firm maintains that it has been playing by the rules and paid its fair share of taxes. It has a tax clearance certificate and several awards from KRA to prove it.

In February this year, SportPesa also withdrew from its international sponsorship commitments, including a reported £9.6 million a year shirt sponsorship with English top-tier football side Everton FC and a reported US$10 million a year deal with Formula One team Racing Point, whose CEO reportedly explained was because SportPesa “had some difficulties in their home market.”

Before Covid-19 struck, the betting regulator said the interior ministry was still conducting security checks on owners of the big companies before it could grant them back their licences.

Best of the rest

Betika, the third biggest betting firm by declared bets in May last year (Sh1.45 billion, £11 million), has retained its licence throughout those turbulent months and is now thought to be Kenya’s biggest betting company.

However, they now operate in a more curtailed market that has been further depressed by the wide-ranging impact of the Covid-19 pandemic, including the temporary closure of betting shops and cancellation of local and international sporting fixtures.

According to the data, Betpawa (since closed) and Sportybet (still operational) completed the top five.

Betpawa director Nikolai Barnwell was also included in the deportation list of 17 foreign directors of betting firms operating in Kenya — but claimed he had a valid investor permit and was on the list erroneously.

Betika appears to be the only company in the former top five that was not majority-owned by foreign investors.

It is owned by Beverly Technologies Limited, whose directors are John Michemi Muthuro and Sophia Nyarora Gichuhi. The company is not linked on the online company registry search.

A surprise entry in the top five, SportyBet has flown beneath the radar until now. Its directors are Jai Ashok Mahtani and Sudeep Ramesh Ramnani.

Their nationality is unknown. They co-own a company called Marawin, which operates the SportyBet brand in Nigeria.

Under-declaration?

The leak of the figures from the BCLB is significant. The regulator releases very little information publicly. But the monthly figures should be treated with some caution, experts say.

A source who has worked in a senior management position in one of the smaller companies said that firms who operate from physical shops, where bets are wagered in cash, can “potentially get away with” under-declaring revenue by up to 80 per cent.

The source, who spoke on condition of anonymity, said it was much harder for mobile and online betting companies to under-declare their revenues because of the digital trail left by betting activities on their servers.

However, the sheer number of bets and the regulator’s inability to access the data in real-time mean that “significant” under-declaring is also possible for digital firms.

Other experts who have viewed the data point out that one would need to know companies’ operating costs and taxes paid in order to calculate their profits.

Further obscuring their true profitability, some betting companies have set up related companies in countries where there is little or no publicly available information about how much money they derive from their operations in Kenya, and how this is accounted for.

SportPesa, for example, set up a holding company in the Isle of Man, while Betin’s biggest shareholder was a company incorporated in Mauritius.

Public health

Betting, particularly on sport, exploded in Kenya from the mid-2010s onwards, finding fertile ground among a youthful populace who combine sports mania with digital savvy.

By 2019, betting was impossible to ignore, as firms such as SportPesa and Betin ploughed millions back into blanket advertising campaigns and high profile sports sponsorships.

But concerns about the prevalence of betting addiction, particularly among unemployed youth, also grew.

Mr Bwire, a campaigner for stricter reforms in the industry, said that the government should now turn its attention away from the industry as a source of tax revenue and gear its efforts towards public health and welfare, “especially in this Covid-19 era when isolation and boredom will increase gambling participation and fuel gambling addiction”.

“Gambling companies have realised this and are using our new-found isolation to their own advantage, going by the recent guerrilla marketing of online casino games,” he warned.

Story republished with permission and partnership with FU.