Derek Otieno and Gitahi Ngunyi @PeopleDailyKe
Betting company SportPesa yesterday threw the Kenyan sports fraternity into a spin after it cancelled Sh600 million sponsorship deals following the government’s decision to implement a new taxation structure.
In what might be the biggest single setback to local sporting organisations, football, rugby and boxing would be the worst hit as the new excise tax will cart away 35 per cent of betting firms’ revenues effective this month. Previously, the levy was pegged at 15 per cent.
SportPesa chief executive Ronald Karauri announced the decision that plunged the Kenyan sporting industry into uncharted waters after the firm lost a case last week challenging the implementation of the new taxation regime.
“Unfortunately, we lost the case and we regret this decision, we have no choice but to cancel all sponsorships,” Karauri said, confirming fears that have been circulating since Thursday when the High Court ruled against the firm.
Treasury Cabinet secretary Henry Rotich had proposed last year to increase the tax to 50 per cent with the intention of raising funds to develop the country’s sports and arts. Karauri, however, said the betting firm would not close shop but restructure operations as a response to the new taxation demands.
On the onset, the firm announced that it had suspended all sponsorship agreements worth Sh600 million entered with sports organisations in the country. Karauri said the restructuring would also affect media, as the firm would be cutting down on advertising spending. However, he did not disclose how deep the cut on advertising would go and did not disclose the firm’s annual spending on media buying.
“I will have to check on how much we spend on media buying,” he said. He said the restructuring was necessary in order to retain all employees. Karauri’s announcement drew immediate reactions, with football giants Gor Mahia and AFC Leopards threatening to petition continental football body —Confederation of African Football (CAF) — to withdraw from the 2018 Champions League and Confederations Cup.
Gor Mahia chairman, Ambrose Rachier, said they would hold a crisis meeting yesterday to decide on whether to write to CAF stating their withdrawal from the 2018 Champions League. “One-way air tickets cost Sh3.5 million, accommodation Sh3 million and we will need Sh10 million for one match.
“Our gate collections are not enough to cater for that expense and also pay players and technical bench, we are in dilemma. No Kenyan club is going to successfully stay in the 2018 Kenya Premier League,” Rachier said.
His Leopards counterpart, Dan Mule, also said his team, which won the 2017 GOtv Shield, will follow suit and withdraw from the 2018 CAF Confederations Cup. In case the two teams make their threats real, what awaits them is a hefty fine and lengthy ban from continental football.
“We have no sponsors right now. We are going to withdraw from CAF assignments. I don’t know how we will pay the 10 international players we have signed ahead of the season,” Mule told People Daily.
Besides Gor and Leopards, other organisations staring at a bleak future include Football Kenya Federation (FKF), Kenya Rugby Union (KRU) and the Boxing Association of Kenya (BAK). SportPesa has also been catering for the bulk of the pay for newly hired national football team head coach, Belgian Paul Put and Technical Director, Andreas Spiers from Germany.
The SportPesa Premier League (SPL), BAK National Boxing League as well as the annual Super 8 grassroots football tournament are the domestic competitions that will be affected by the move.
“Our 2018 calendar includes the Rugby Africa Championships for our U20s in April, Lionesses participation at the HSBC Women’s Sevens World Series qualifiers in Hong Kong and as well as the Commonwealth Games, and the Women’s Africa Cup Sevens in September,” KRU said in statement.
The cuts will also affect World Boxing Council women’s Super-bantamweight champion, Fatuma Zarika, local rally driver Leonardo Varese and a number of grassroots tournaments. Apart from paying 35 per cent tax on betting revenue, betting firms are required to pay 30 per cent corporate tax. Sportpesa has mounted a spirited campaign since the new tax was proposed, drawing the intervention of President Uhuru Kenyatta.
Uhuru’s intervention led to the review of the proposal from 50 per cent to the current rate. Still not satisfied, the firm mobilised its sister company Bradley Ltd, which runs Pambazuka lottery, moved to the High Court challenging the constitutionality of the law.
An online check shows that Kenya’s taxation on gambling and betting at 35 per cent is lower compared to other countries such as Germany, Luxembourg, Denmark, UK and Macao. In Germany, the taxman collects 90 per cent from revenues of gaming and betting firms. Luxembourg, Denmark, UK and Macau governments take 80, 75, 50 and 39 per cent, respectively.