Kenya: Why state failed to renew SportPesa licence
The requirement that betting firms get security clearance is the reason giant gaming firm SportPesa folded its operations in Kenya. The firm closed shop last October and declared over 360 workers redundant in what was first said to be a tax standoff with the Kenya Revenue Authority.
Whereas KRA held that the firm’s annual sales amounted to Sh100 billion, SportPesa put its annual revenue at Sh20 billion gross gaming revenue. Fresh details have now emerged on why the giant gaming company was denied a licence and eventually forced out of business.
Months leading up to SportPesa’s license expiry, Kenya’s top security organ, the National Security Council, discussed a report by security agencies about betting and its effects.
The council was told that gambling, and especially sports betting, had become pervasive in Kenya. The compulsive nature of gambling, the council was told, had seen many youth, children and adults sell their belongings to feed the gambling appetite thereby becoming a security risk to the country.
The council was also told that there was evidence that online betting was impoverishing people. In some cases, the council was also told, some people were committing suicide after losing bets.
It was at this point that the council made a decision to introduce new security conditions that each betting company had to meet. All applications had to go through the National Intelligence Service for final approval and this is where the SportPesa application was held.
Article 140 of the constitution establishes the National Security Council, which is chaired by the President.
Yesterday, the Betting Control and Licensing Board confirmed to the Star that the firm’s application is still pending. CEO Peter Mbugi said the agency was only awaiting the report of the security agencies to grant the entity a fresh license.
He explained that the security clearance was factored in the licencing process in the wake of fears some firms were involved in illegalities. In the review, Mbugi said the number of sports betting firms reduced from 117 last year to the current 65.
Public gaming dropped from 67 to 40 while the number of lotteries was cut from the initial 27 to 14. The BCLB boss exonerated the board from any blame in the SportPesa situation saying “security vetting is done by security agencies.”
“The clearance by security agencies is the last stage. This is the case of the Sportpesa application. It is not that we closed their operations but they are waiting for security clearance.”
Mbugi said it was not automatic that an already licensed firm would get its authorization renewed by mere presentation of their respective applications. Firms seeking new licenses are required to attach to their application details of registration including a CR12 with information of its owners and shareholders.
New applicants are required to have a business proposal stating what they are planning to do, the systems and applications they intend to use and the premises.
They should also provide details of the banks they will work with, whether employees meet the requirement for local content and their source of money.
“They should also get clearance from Kenya Revenue Authority and get a certificate of good conduct. For the ones who are requesting for renewal, the same process has to follow as it is not automatic that licences are renewed,” – Mbugi said.
But SportPesa CEO Ronald Karauri said the requirement for security clearance is news to them as it was not in their previous applications.
He told the Star that they are waiting for the BCLB to tell them what happened to their application for license renewal.
“It is up to them to tell us. I will try to make contact with them to get what they are waiting for,” Karauri said. Security clearance was not part of our previous applications. We are only hoping that it applied to every player in the industry and not just us,” – the CEO said.
The BCLB, however, holds that the application of the laws on gambling is uniform and no player is handled differently. Mbugi said the strict rules enforced by the agency followed concerns that “Kenya was being turned slowly into a gambling country.”
He holds that there was an era of uncontrolled advertising – largely on TV – where firms carried adverts with people enticing others to bet.
“The country was running in a different way. People were betting all over. From teachers in schools, university students, to policemen handling sensitive security posts. The craze was serious and had cut across all sectors so we felt that something had to be done. This was with the belief that there is benefit in hard work,” – Mbugi explained.
Mbugi said that during the fresh vetting, dozens of firms were found to have evaded taxes for some time, hence were compelled to clear with KRA.
“Among the things we checked were whether their employment status had local content and whether they were operating accounts within the country,” – the regulator said.
The regulator also set conditions for advertisement adding that some firms closed shop as they were not able to get security clearance. “Those who could not apply decided to close shop.”
Mbugi said – “regulations are for limiting accessibility, affordability, and availability which once controlled creates an environment of responsible gaming. Most of the gaming operators are now following the regulations we gave them. We have administrative measures we can employ to ensure compliance.”