Bookmakers bet on Kenya

Driven by the ability of firms to capitalise on technological uptake and high betting rates among the country’s youth, Kenya’s gambling market is expanding rapidly.

Within the last few years, the busy streets of downtown Nairobi have increasingly played host to a new genre of adverts. Once characterised by consumer goods or telecom companies, the marketing space is now giving way to highly profitable and rapidly expanding betting firms. From April to June this year, four bookmakers were among the top 10 companies by advertising spend, alongside household names like Safaricom and East African Breweries. Tatua 3, a lottery company, spent just over $17.5m on promoting its games.

And it’s not just in Kenya. SportPesa, the most visible Kenyan firm, has gone global by sponsoring English Premier League football clubs alongside an existing partnership with the domestic Kenyan Premier League. Such exposure illustrates the company’s rise from obscurity just four years ago and reaffirms the Kenyan betting market as one of the most dynamic in Africa.

The perfect storm

The market’s growth is best explained by the ability of firms to capitalise on favourable technological uptake and youthful demographics. While companies spend large amounts on visibility, Kenya’s markets were already well prepared for a gambling boom. Indeed, the Kenyan-led mobile money revolution has brought with it more than just innovative fintechs and expedient startups. Betting firms have been quick to seize upon the country’s 87% mobile penetration rate, using hand-held devices as a virtual shop front to promote gambling and facilitate payments. “Based on our studies around 96% of Kenyans will bet on their mobile phones,” says Joy Masimane, analyst at market research firm GeoPoll. “Mobile-related banking services like M-Pesa have made it convenient to bet using a phone.”

Thrown into this mix is a country-wide love of sport, particularly football, and a slowly-rising middle class. According to GeoPoll’s research the greatest proportion of betting Kenyans are the millennial middle to upper classes. The country has the highest percentage of betting youths in the six sub-Saharan countries surveyed by GeoPoll, with 76% of Kenyans aged between 25 and 34 having placed a bet at least once. A modest estimate puts prospective gamblers in the country at 2m, with the figure rising daily.

Corporate expansion

On the back of these fundamentals, corporate expansion has been swift. At the beginning of the decade Kenya was home to only a handful of betting outfits, most of which ran traditional lotteries. Today, East Africa’s second-largest economy counts 32 bookmaking firms and 36 casinos. The largest names include Betway, Betin, SportPesa and Justbet.

Some of these companies make use of familiar branding and the Swahili language to project a localised image. Like mobile money outfit M-Pesa, SportPesa derives the latter part of its name from the Swahili word for money, while ChezaCash uses the Swahili word for “played” – cheza. The reality, however, is that while the management of SportPesa is Kenyan, the majority of the ownership is not. Ronald Karauri, the CEO of SportPesa, owns a 6% stake in holding company Pevans East Africa Limited, which founded SportPesa in 2014, but just over 50% of its shares are in foreign hands.

Dafabet, a relative newcomer, is owned by Philippines-based betting firm Emphasis Services Limited. The company chose Kenya as a base to begin an Africa-wide expansion strategy in early 2017. “We are looking to expand throughout the African continent and it was important that our first initiative was to establish a major presence in Kenya – a market that is mature and respected, is sports-betting savvy and continues to be a growing sports betting market, thus giving us a stable base from which to grow,” said Louis Watts, director of retail and regional operations, in a statement at the time.   

Dafabet is by no means an isolated case. The growing number of Kenyans who are beginning to bet continues to whet the appetite of gambling firms looking to either enter the market or to expand current operations.

Need for regulation

This allure has been strengthened following the September passing of favourable legislation that reduced the levy on firms’ gambling revenues from 35% to 15%. This follows months of lobbying by industry leaders who protested against what they insisted were high revenue taxes on top of the 30% corporation tax. The tax burden is shared with punters – government taxes 20% of their winnings – meaning that Kenya is one of the few countries that taxes both the company and the customer.

Evidently, the Kenyan government has taken kindly to the booming sector and wants to incentivise its growth. Yet apart from working to cultivate and share in the wealth of gambling houses, opponents argue very little is being done to safeguard consumers from the negative consequences of gambling. Research by GeoPoll indicates that on average consumers spend around $50 a month on gambling in a country where the mean wage is $500.

“Most of the laws seem to be very much on getting revenue from the industry, but we are yet to see laws that are earmarked on protecting the consumer,” says Masimane. According to the Kenyan National Bureau of Statistics almost 7m Kenyans are unemployed. Many look to gambling as a quick fix and stories about incredible personal losses have circulated on social media, prompting a growing backlash.

Kenya’s regulator, the Betting Control and Licensing Board, has been slow off the mark in this respect. To date very little legislation has been introduced to protect consumers or temper the reach of gambling advertising. In fact, much of the regulatory framework is outdated and relevant to a time well before the technological realities of today’s gambling industry.

The gambling industry, if correctly regulated, has the potential to become a key engine of growth and revenue within the Kenyan economy. The government must quickly get up to speed with rapidly expanding firms in order to ensure corporate booms are translated into socio-economic gains and consumers are adequately protected.

Tom Collins in Nairobi