One Week, One Trouble: How SportPesa Became Kenya’s Enfant Terrible
One of Kenya’s topmost sports betting platforms, SportPesa, like many times in the past, is in the news again and not for the best of reasons.
The big-shot sports betting firm has previously broken into the news due to reported issues that have spanned across betting license suspension and to even probes about money laundering.
And now, the betting firm has been connected with some “secret” disclosure about its revenue. Some reports revealed SportPesa to have averaged daily bets amounting to USD 3.7 Mn (KES 408 Mn) which totaled USD 1.36 Bn (KES 149.7 Bn) at the end of the year 2018, as written in the court papers disclosure.
Out of this stated amount, USD 1.18 Bn (KES 129.6 Bn) was paid out to winners from the betting activity and hence leaves it with a net of USD 182.6 Mn (KES 20.1 Bn). This means that SportPesa paid out about 87 percent of the bets in that stated year.
Some analysts then proceeded to break down SportPesa’s revenue with deductions that the revenue SportPesa made at the end of 2018 can bring the firm into a profit of USD 90.8 Mn (KES 10 Bn) and even possibly greater, considering the operating expense the firm incurs.
Also, the stated revenue disclosed makes SportPesa the second-largest company by revenue in Kenya, only after Safaricom which recorded a turnover of USD 2.28 Bn (KES 251.2 Bn) in the year 2020 which ended in March.
As earlier stated, this is only one of the many controversial and headline-making issues it has faced in the past.
SportPesa’s Troubles from way back
Since the early period of 2018, SportPesa has not had a smooth ride, particularly with issues it had previously encountered with the Kenyan government.
Activities were however ongoing, though bumpy, until July 2019 when Kenya’s Betting Control and Licensing Board (BCLB) suspended its operational license together with other betting firms.
The license suspension started as a case of the Kenyan government’s displeasure over the betting addiction which was identified to be increasing debt amongst young people.
However, that went on and on until the proverbial final straw broke the camel’s back.
This was the government’s imposition of a 20 percent tax on winnings for the betting industry. The 20 percent tax was voted for in September 2019 by the parliament in Kenya and this led to the halt of SportPesa’s operation in Kenya.
Precisely, SportPesa said then in a statement that it would not operate in the country until the rate is changed and a non-hostile regulatory environment is returned.
Fast forward to the 30th of October 2020, SportPesa re-opened operations in the Kenyan market, a year after the tax tussle it had with the Kenyan government. But the catch was that is the betting firm returned to the market under a new license holder.
One would have thought that would be an end to SportPesa’s long-coming issues, but that wasn’t to be.
The firm encountered a new hurdle less than 24 hours after it reopened. Just again, SportPesa got blocked by the BCLB due to issues pegged as conflicting licenses. The chairman of BCLB, Cyrus Mains, claimed that SportPesa went through back doors to get its go-ahead.
The main issue was about SportPesa getting back to the market under a new company called MileStone Gaming Limited. The agreement between both firms is to make MileStone which formerly goes by the trading name “Milestone Bet” operate under the name “SportPesa”.
In any case, the clash about SportPesa’s reopening didn’t end badly for the betting firm eventually, following the High Court’s intervention which cleared SportPesa’s operation. It could be said that the BCLB lost the case here.
Surprisingly, that didn’t put an to the drama surrounding SportPesa. Recent crises came up in SportPesa in early November and were reported as a clash amongst its shareholders.
It started when some shareholders denied knowledge of SportPesa’s new operational license under MileStone, challenging the arrangement.
Two businessmen, Paul Wanderi Ndung’u and Asenath Wacera Maina, who have a combined stake of 38 percent in SportPesa, disclosed their lack of information of the MileStone deal, asserting that they have been kept in the dark.
This particular clash threatens to break the six-year union of the wealthy and influential local Kenyan shareholders and the foreign Bulgarian investors that helped found SportPesa.
And as if all of this is not enough, new damning allegations are hanging around the company. In mid-November, it was reported that SportPesa is being probed for money laundering amounting to USD 278 Mn (KES 30 Bn). Claims arose that the sports betting firm transferred USD 278 Mn (KES 30 Bn) from its local accounts to unidentified offshore banks.
This matter is still currently under investigation by the Financial Reporting Centre (FRC) and a State agency that tracks illicit money moves, and that was before uncovering the betting firm’s secret revenue.
Like SportPesa’s new licensing deal, the wealthy investors behind SportPesa have also fallen out over the recent allegations that triggered the probe.
For now, though, fingers would have to stay crossed as interested parties wait to see if SportPesa can rescue itself from imploding in the midst of what seems like a never-ending crisis.
Featured Image Courtesy: Economist