By - Kiraithe Daniel Mutemi
Betting and gambling have become instant wealth sources for companies operating in Kenya, the third-largest betting economy in Africa after South Africa and Nigeria. Sports betting industry is estimated to be over ksh 300 billion or USD 3 billion in this east African country with one of the highest unemployment rates in Africa. This value is projected to reach 500 USD 5 billion in 2020, underscoring the addition effects and increasing new entrants. There exist a conflict between firms’ investors and the government in what can term as an attempt to regulate an industry ran by cartels.
An increase in the number of betting firms which have mushroomed in the last five years is worrying the Kenyan authorities as more young jobless people turn to bet for survival. There are over 40 betting companies in Kenya, a number which is higher than that of banks. Increasing tax payable by these companies and the gamblers to deter the behaviour does not seem to bear fruits. The government refused to renew licenses of some of the betting companies on compliance grounds. This move has ended up in courts with agreements being reported recently. For example, Sportspesa, one of the top betting firms, reached an agreement with Kenyan authorities to settle tax claims out of court in a struggle that saw the firm’s license delayed by two months. The local firm sponsors top leagues in Europe.
The government’s claims through the cabinet secretary (Minister) for Interior Dr. Fred Matiang’i also included repatriating home all the cash earned from the business while failing to pay tax by the foreign-owned betting firms.
” We are not going to entertain these businesses, which are wrecking the lives of our children anymore. I promise that they have to go soon ” said Matiang’i.
Mental illnesses and suicide cases among the young people involved in betting is highly linked to the effects of losing the stake in betting. Therefore, the betting question becomes both social and economic. More than 500,000 people listed by various Credit reference bureau companies for defaulting on mobile loans are said to gamblers. The report referenced by Matiang’i indicated 76 per cent of the population is involved in betting. The youth comprised the majority gamblers. Economists and analysts in Kenya point an accusing finger to the high number of joblessness among young people as the influence behind thriving betting businesses.
Betting can ruin the economic status of individuals and society in the long run since it is the majority who do not win when they place a bet. However, the betting firms argue they sponsor social activities such as sporting activities. The net effect of the actions by betting firms should be assessed quantitatively to understand the thin line between proper businesses and exploitation.
Majority of people participating in betting use mobile applications and online sites to do so. Regulating local betting activities by imposing punitive measures is challenging to the government as gamblers can use other sites they find friendly. The fact that mobile phones are accessible to over 98 per cent of citizens makes it easy for people to use them in betting. Some companies have made it even simple to allow their clients to use regular SMS or USSD service to bet. This method can be used by non-smartphone owners and those who do not access the internet every time.
Betting companies can be a good source of revenue for the government. This industry is capable of contributing over ksh 100 billion shillings to the taxman with the current taxation rates. However, it is worth noting the cost of solving the adverse social effects of gambling as well as that of collecting the revenue is greater than the benefit of the tax collected.
The number of foreign-owned betting companies in Kenya and Africa, in general, is higher than that of the local firms. Africa has, for the longest time, been used as a consumption continent where every product may successfully be piloted and marketed. Creating lifetime consumers of a particular product is easy through targeting children and addicts. The vast profits from these businesses end up being repatriated back to the other countries where the companies originate from. It would, therefore, be economically sensible for such companies to operate from their countries of origin since they have an online presence to reach clients all over the world, but that is not the case. Could the investors be protecting their society from social effects while bringing back earned profits home?
Another argument of the betting firms is that they provide Job creation. With online betting sites, few jobs are created compared to the ones that may be ruined through addiction, personal debts and mental illnesses associated with losing stakes in the games. Unlike casinos that may require more workers during high demands for the services, digital betting does not.
The government should seek sustainable ways of addressing unemployment to help betting addicts in Kenya. Just like drug and substance abuse patients, betting fanatics may require a substantial economic fortune to rehabilitate. Besides, big winners from bets have in the past gone broke in a short time due to wastage in an attempt to win more. The economic benefits of betting are outweighed by the socioeconomic challenges that come as a result of the same. It is also critical to treat all the betting companies equally, whether locally-owned or foreign-owned.
Follow us on Twitter @aprecon
Follow on Instagram @_aprecon
Like our Page on FB @aprecon
Copyright © The African Progressive Economist 2019. All Rights Reserved.