SportPesa Drops Team Sponsorships in Response to Kenya’s Gambling Tax Increase
Posted on: January 3, 2018, 06:00h.
Last updated on: January 3, 2018, 04:57h.
Kenya’s leading betting site pulled sponsorship from the country’s sports teams after the government in Nairobi hiked gambling tax rates from 7.5 to 35 percent.
SportsPesa, which has operations in Kenya and the UK, had spent $5.8 million to sponsor soccer and rugby teams as well as pro boxing.
The company had vigorously fought the tax increase in court after it officials proposed it in June, but last week a high court appeals ruling predicated the decision to cut off financial support of athletics.
“Unfortunately, we lost the case and we regret this decision,” SportPesa CEO Ronald Karauri said. “We have no choice but to cancel all sponsorships.”
In addition to sponsoring Kenyan leagues and teams, SportPesa became the first African company to invest in the English Premier League, spending nearly $12.5 million as shirt sponsor for Everton FC.
Critical Support for Sports
Without money from shirt deals, some soccer clubs announced they would be cancelling their participation in this year’s Continental League matches, saying in statements they could not afford the travel expenditures without the sponsorship deal.
“Without the backing of SportPesa, the club will not be able to pay salaries,” AFC Leopards chairman Dan Mule said, pleading with the government to hold off implementation of the new tax plan until various stakeholders could convene an emergency meeting to address immediate impacts of such a pullout.
Ambrose Rachier, chairman of defending Continental League champion Gor Mahia, said losing SportPesa’s sponsorship would adversely affect his club, and has started private fundraising efforts to make up for the loss of nearly $970,000.
MPs Blast SportPesa
Initially, some members of Parliament called for a tax hike to 50 percent, but said they were willing to compromise at 35 percent. While betting company interests balked that some would just end up pushing the increase up each year, some MPs lashed out at the company, reminding them that Kenya’s gambling tax rate is one of the lowest in the world.
“The new tax on gambling is not punitive as some people would want to think,” MP Aden Duale said, pointing out rates as high as 75 to 90 percent in counties such as Denmark, Austria, and Germany.
MP Irungu Kang’ata said the amount was totally reasonable. “It is within the range of other ‘sin taxes’ like cigarettes and alcohol,” he told the Daily Nation. “In fact, gambling is not an economic activity that adds value to society.”
MP Hillary Kosgey attempted to remind SportPesa that these taxes would fund critical programs in the country they’re profiting from.
“They get money from Kenyans and it is only fair that the profits they make go into serving Kenyans in economic development,” he said. “We will not allow [SportPesa] to blackmail the government.”
Karauri said there are no plans for SportPesa to leave the country, but they are planning an appeal to Kenyan President Uhuru Kenyatta to rescind the rate or at the very least lower it.