- SportPesa shuts down Kenyan operations
- 453 employees are laid off
- Kenyan authorities still haven’t responded
Kenyan sports betting operator SportPesa is pulling out of the market due to a conflict with Kenyan Parliament and a demand on the part of MPs for the company to pay 20% in back taxes.
SportPesa Refuses to Agree to 20% Excise Tax
As SportPesa and the Kenyan government have reached an impasse, the betting operator has started laying off employees in the country, with redundancies forcing 453 staff members out of the job. SportPesa appealed to the government to give up on a 20% excise back tax or otherwise the company would need to withdraw from the market.
Even though some headway was made in the issue in August, which SportPesa described as ‘positive discussions,’ no solution has been reached. Now, the operator is considering suspending operations completely rather than operate under the new back tax system.
On September 19, the Kenyan Parliament’s Finance Committee proposed a 20% back tax to apply for the 2019/2020 budget, which was already 10% than a previously suggested tax in June. MPs rallied around the new tax and the measure was passed on September 25, setting in motion one of the most vocal disputes in the history of the country insofar as sports betting is concerned.
On October 4, the company official stated that it would be shutting down its business – provisionally for the time being. Yet, 453 employees are let-go, which is almost the entire staff. The company also warned that by forcing SportPesa’s hand to quit the country, that would negatively impact the government’s budget.
Economic Downfall and Leverage to Negotiate
Here’s what a SportPesa spokesperson had to say about the recent developments, speaking to iGamingBusiness.com, a daily journal focusing on the business side of the industry:
“We regretfully closed our operations in Kenya as a result of a long-running hostile regulatory and taxation environment in the country. This included a recent decision by the Kenyan legislature to impose a 20% excise tax on all betting stakes, which is based on a fundamental misunderstanding by the Kenyan treasury of how revenue generation works in the bookmaker industry. Such taxes render the betting sector in Kenya commercially unviable.”
Not only that, but the Kenyan government’s high-handed approach, SportPesa argued, would lead to job losses and closure of other betting companies, taking a bite into the economy. The economic and social impact will be felt soon, the company warned.
Yet, SportPesa urged the government to try and come up with a mutually-beneficial solution instead. This means that while the company is pushing ahead with a withdrawal from the country, it seems like SportPesa is using the latest development as leverage.
The company stated that it’s prepared to return at a time when a non-hostile regulatory environment is re-established. Meanwhile, SportPesa’s prospects in other markets look very solid, with the company operating as a sponsor for the English Premier League’s team Everton and F1’s Racing Point.