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Kenya’s SportPesa Which Once Earned $1bn Reportedly Sells Its Brand For $134K

December 4, 2020

Floundering for help under Kenya’s repressive taxation on betting firms, SportPesa has done its worst — sell off its brand for a meagre $134k — in a secret deal reported by Business Daily, a Nairobi-based print media. For the Kenyan betting firm which was reported to have earned up to Ksh100 billion ($1 billion) in revenues in 2018, this is perhaps the final stroke that broke the camel’s back.

“In consideration of the sum of £100,000, the assignor hereby assigns to the assignee absolutely with full title guarantee all its rights, title and interest in and to the trade marks,” an agreement sighted by Business Daily revealed.

“Any payments to be made to the assignor under this clause shall be set off against any amounts owed by the assignor to the assignee or any other member of the assignee’s group to the extent possible.”

Here Is What You Need To Know

According to Business Daily’s report, the SportPesa gaming brand was sold for £100,000 (Sh14.7 million) in June this year, triggering a fight among the founders of the sports betting platform.
The agreement revealed that Pevans East Africa, the owner of the SportPesa trade mark, had on June 2, 2020 signed an agreement to transfer the brand to UK-based Sportpesa Global Holdings Limited.
It was reported that although Pevans’ chief executive Ronald Karauri signed the deed of assignment on behalf of the firm, the decision to transfer the brand was not unanimous.
Karauri was reported to later emerge with a controlling 54.4 per cent stake in Milestone Games Limited, the company that was subsequently assigned the right to use the SportPesa trade mark in Kenya by Sportpesa Global in the roundabout deals. Kalina Karadzhova, a Bulgarian national and a resident of the Isle of Man, signed the deed on behalf of Sportpesa Global where she serves as a director.
Kenyan entrepreneurs Paul Wanderi Ndung’u and Asenath Maina, who own a combined 38 per cent stake in Pevans, have accused Mr Karauri and the foreign investors of locking them out of the firm’s management and strategic decisions since 2017.
Mr Ndung’u, who holds a 17 per cent stake in Pevans, says the deal undervalued the SportPesa brand by billions of shillings.

The Background To SportPesa’s Chequered History In Kenya

In 2019, both SportBesa and Betin stopped doing business in Kenya due to what they saw as a hostile tax environment.
The government in Nairobi hiked gambling tax rates from 10 to 20 percent.
In its ruling, the court determined that the tax could only be applied to a player’s winnings at the end of every month, and that the Kenyan Revenue Authority must collect revenue from customers, rather than directly from operators.
Ronald Karauri welcomed the ruling, suggesting that it may prompt it to reconsider its withdrawal from the Kenyan market.

“We have long advocated for a fair and level playing field and a regulatory and taxation environment that both supports business and inward investment, and is in the interests of Kenyan consumers,’’ he said.

“SportPesa will now reconsider the future of its operations in Kenya,” he added. “We encourage the authorities to take the Tax Appeals Tribunal ’s ruling fully on board and to now apply a reasonable approach to gambling regulation and taxation, in line with international best practice.”

The dispute over the winnings tax dates back to its introduction, with SportPesa arguing the tax removed incentive for customers to place bets.
Although the Kenyan High Court initially blocked collection of the tax, the Kenyan Revenue Authority and Betting Control and Licensing Board agreed on 1 July to withdraw the licences of 27 companies who failed to pay the levy, including SportPesa and Betin.
After the state ordered telecoms company Safaricom to block banking services to the 27 companies, leaving customers unable to deposit funds — a move SportPesa said violated a court order — SportPesa ended its sport sponsorships in Kenya and placed its 453 employees in the company on leave.
A SportPesa spokesperson told iGamingBusiness.com in early September that the company believed it was heading towards the resumption of normal operations after constructive talks. However, on 19 September, the Kenyan Parliament’s Finance Committee proposed a new 20% excise tax rate on betting stakes in the 2019/20 budget, an increase from the 10% stake proposed by the treasury in June.
In response, SportPesa that it would not operate in the country until the rate was changed, and laid off its Kenya-based employees.

A Short-lived Comeback

On October 30th 2020, SportPesa (Pevans East Africa) declared that it was back on the Kenyan betting scene after a one-year absence. Part of the reasons for its absence is because the betting firm’s previous license was among the 27 licenses revoked by the Kenyan Revenue Authority and Betting Control and Licensing Board for failure to comply with increase in gambling tax rates from 10 to 20 percent. The revocation was enforced despite a Kenyan High Court ruling blocking collection of the tax. Since then, SportPesa has been in court.

As a way to get around the revocation, Pevans East Africa (owner of SportPesa) then assigned its full rights under its tradename [SportPesa], for five years, to another gaming firm, known as Milestone Games Limited (under the trademark, Milestone Bet), which had been newly licensed by BCLB.

However, BCLB through Maina said this return would not be allowed as SportPesa, being the property of Pevans East Africa, is still subject to a pending court case over its own license. This, according to Maina, prevented another licensee from using the brand name of SportPesa.

Consequently, Maina and his Board had proceeded to suspend Milestone’s new operating license and had equally asked payment providers such as Safaricom, which owns the popular M-Pesa mobile payment service, to stop processing transactions for the site.

He further proceeded to state that “the known owners of the trading name Sportpesa are not licensed to operate in the gaming business in Kenya,” a statement which leaves Sportpesa’s future in the east African country still foggy even when the appeal concludes.

Maina said that Milestone may continue to trade using the Milestone Bet brand.

The Brand SportPesa

Birthed in 2014, SportPesa, quickly became a popular brand in Kenya and globally as a result of intense marketing, sophisticated gaming technology and record-breaking jackpots.

Pevans spent billions of shillings in partnerships and sponsorships of local and international sports teams, including Kenya’s Gor Mahia Football Club, UK’s Everton, Hull City, Arsenal and Formula One’s Racing Point.

The gaming platform is estimated to have a loyal customer base of 12 million in Kenya from which it generated revenues of Sh150 billion in 2018 alone.

The firm paid out Sh129.6 billion as winnings, leaving it with Sh20.1 billion that analysts reckon is enough to generate a profit in excess of Sh10 billion for a firm with thin operating expenses, mainly staff.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

One Year After Shutting Down, Kenya’s Leading Betting Firm SportPesa Is Back

October 31, 2020

One year ago, Kenya’s leading sport betting firm, SportPesa, shut down its Kenyan operations and sacked more than 450 of its workforce. Last year, the Kenyan Parliament’s Finance Committee had imposed a new 20% excise tax rate on betting stakes, representing an increase from the 10% stake which the treasury had proposed in June 2019. SportBesa and its major competitor Betin couldn’t bear it. Although a Kenyan High Court initially blocked collection of the tax, the Kenyan Revenue Authority and Betting Control and Licensing Board agreed on 1 July, 2019 to withdraw the licences of 27 companies who failed to pay the levy, including SportPesa’s and Betin’s.

*Captain Ronald Karauri*, SportPesa’s CEO

Now, one year after, SportPesa is back, but under a different license, even though another High Court in Kenya had declared Thursday the new laws, including the Finance Act 2018, the Tax Laws (Amendments) and the Statute Law (Miscellaneous Amendment), which contained the new betting tax rate as illegal.

“SportPesa is back! I’m happy to announce that the SportPesa brand is back under a new BCLB licence holder, ” tweeted betting firm’s ceo Captain Ronald Karauri.

The Background To All These

In 2019, both SportBesa and Betin stopped doing business in Kenya due to what they saw as a hostile tax environment.
The government in Nairobi hiked gambling tax rates from 10 to 20 percent.
In its ruling, the court determined that the tax could only be applied to a player’s winnings at the end of every month, and that the Kenyan Revenue Authority must collect revenue from customers, rather than directly from operators.
Ronald Karauri welcomed the ruling, suggesting that it may prompt it to reconsider its withdrawal from the Kenyan market.

“We have long advocated for a fair and level playing field and a regulatory and taxation environment that both supports business and inward investment, and is in the interests of Kenyan consumers,’’ he said.

“SportPesa will now reconsider the future of its operations in Kenya,” he added. “We encourage the authorities to take the Tax Appeals Tribunal ’s ruling fully on board and to now apply a reasonable approach to gambling regulation and taxation, in line with international best practice.”

The dispute over the winnings tax dates back to its introduction, with SportPesa arguing the tax removed incentive for customers to place bets.
Although the Kenyan High Court initially blocked collection of the tax, the Kenyan Revenue Authority and Betting Control and Licensing Board agreed on 1 July to withdraw the licences of 27 companies who failed to pay the levy, including SportPesa and Betin.
After the state ordered telecoms company Safaricom to block banking services to the 27 companies, leaving customers unable to deposit funds — a move SportPesa said violated a court order — SportPesa ended its sport sponsorships in Kenya and placed its 453 employees in the company on leave.
A SportPesa spokesperson told iGamingBusiness.com in early September that the company believed it was heading towards the resumption of normal operations after constructive talks. However, on 19 September, the Kenyan Parliament’s Finance Committee proposed a new 20% excise tax rate on betting stakes in the 2019/20 budget, an increase from the 10% stake proposed by the treasury in June.
In response, SportPesa that it would not operate in the country until the rate was changed, and laid off its Kenya-based employees.

A New Chapter

According to CEO Kanauri, SportBesa’s new journey will begin with a different license, Betting Control and Licensing Board (BCLB)licence.

Mr Karauri said SportPesa will uphold the highest standards of service and responsible gaming, adding that they are ready to work closely with BCLB and all other stakeholders in the gaming industry.

“As market leaders, SportPesa will focus on upholding the highest standards of service and responsible gaming. We look forward to working closely with BCLB and all other stakeholders,” Karauri said.

“We are excited to explore a wide range of partnerships in Kenya over the coming weeks and months, which will prioritise the development of sports in communities across our great country,” he added.

SportPesa will now join at least 10 other companies which are currently operating in the country. They include Betway, Mozzart Bet, Odi Bets, Eastleigh Bet, Lucky to you, Ken bookmakers, Bet boss, Kick off, Easi bet and Palms bet.

SportPesa has footprints in Tanzania, South Africa, Italy, Ireland, the Isle of Man and the United Kingdom.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Kenya’s Betting Company SportPesa To Return To Business As Kenyan Tax Appeals Tribunal Rules In Its In Favour

November 12, 2019

The end of the road may not be on the horizon for Kenya’s sport betting firm and Everton football club sponsor SportPesa, after all. The Kenyan Tax Appeals Tribunal has ruled in favour of betting operators that challenged whether a controversial gambling tax should be levied on player winnings, rather than their original stakes. The decision may pave the way for local operators such as SportPesa and Betin to return to the market.

“Today’s ruling is a significant development for both SportPesa and the wider betting sector in Kenya, reversing previous government policy that had rendered the sector commercially and economically unviable, with a major, negative impact on jobs, local economies and sports in Kenya,” SportPesa chief executive Ronald Karauri said.

Here Is All You Need To Know

Both operators stopped doing business in the country due to what they saw as a hostile tax environment.
The government in Nairobi hiked gambling tax rates from 7.5 to 35 percent.
In its ruling, the court determined that the tax could only be applied to a player’s winnings at the end of every month, and that the Kenyan Revenue Authority must collect revenue from customers, rather than directly from operators.
Ronald Karauri welcomed the ruling, suggesting that it may prompt it to reconsider its withdrawal from the Kenyan market.

“We have long advocated for a fair and level playing field and a regulatory and taxation environment that both supports business and inward investment, and is in the interests of Kenyan consumers,’’ he said.

“SportPesa will now reconsider the future of its operations in Kenya,” he added. “We encourage the authorities to take the Tax Appeals Tribunal ’s ruling fully on board and to now apply a reasonable approach to gambling regulation and taxation, in line with international best practice.”

Not Sure Of Returning To Business

Betin, meanwhile, declined to comment on whether the tribunal’s ruling will mean a return to the market, according the
The dispute over the winnings tax dates back to its introduction, with SportPesa arguing the tax removed incentive for customers to place bets.
Although the Kenyan High Court initially blocked collection of the tax, the Kenyan Revenue Authority and Betting Control and Licensing Board agreed on 1 July to withdraw the licences of 27 companies who failed to pay the levy, including SportPesa and Betin.
After the state ordered telecoms company Safaricom to block banking services to the 27 companies, leaving customers unable to deposit funds — a move SportPesa said violated a court order — SportPesa ended its sport sponsorships in Kenya and placed its 453 employees in the company on leave.
A SportPesa spokesperson told iGamingBusiness.com in early September that the company believed it was heading towards the resumption of normal operations after constructive talks. However, on 19 September, the Kenyan Parliament’s Finance Committee proposed a new 20% excise tax rate on betting stakes in the 2019/20 budget, an increase from the 10% stake proposed by the treasury in June.
In response, SportPesa that it would not operate in the country until the rate was changed, and laid off its Kenya-based employees.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world

SportPesa lays off 453 after closing Kenyan operations

October 5, 2019

SportPesa has announced that it has made its 453 Kenyan employees redundant after closing its operations in the country, as it urged the country’s authorities to repeal the 20% excise tax rate on all stakes that caused it to withdraw from the market.

The operator had been in the midst of a long dispute with Kenyan operators, centred on a different tax, since July, but this appeared to be approaching an end after what a SportPesa spokesperson described as “positive discussions with the Kenyan Revenue Authority” in late August.

However, On 19 September, the Kenyan Parliament’s Finance Committee proposed a new 20% excise tax rate on betting stakes in the 2019/20 budget, an increase from the 10% stake which the treasury proposed in June.

On 25 September, MPs voted the budget through, including the 20% tax. SportPesa said in a statement that it would not operate in the country until the rate is changed.

The company confirmed to iGaming Business today (4 October) that the closure of its business meant that all of its employees in Kenya would be laid off.

“We regretfully closed our operations in Kenya as a result of a long-running hostile regulatory and taxation environment in the country,” a SportPesa spokesperson said. “This included a recent decision by the Kenyan legislature to impose a 20% excise tax on all betting stakes, which is based on a fundamental misunderstanding by the Kenyan treasury of how revenue generation works in the bookmaker industry. Such taxes render the betting sector in Kenya commercially unviable.

“As a result, we have been forced to make 453 employees in our Kenyan operations redundant, which was an extremely difficult decision for the company to take.

The spokesperson said that, through layoffs, the new tax will end up resulting in a significant loss of tax revenues for the Kenyan government.

“This means that in addition to the billions of Ksh in lost government revenues that will result from the closure of betting companies’ operations, the livelihoods of taxpayers across the country are also now directly impacted, as are the many individuals that they themselves may privately employ, such as domestic staff,” the spokesperson said.

“The economic and social impact of the government action therefore continues to be felt by Kenyan business and Kenyans themselves, with many individuals now without employment and the important social investment in grassroots sports delivered by betting companies now under threat.

“We urge the Kenyan government to reconsider its current agenda.”

In August, Kenyan president Uhuru Kenyatta called upon the country’s lawmakers to pass a total ban on gambling in the country,

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world

SportPesa Becomes The First Casualty Of Kenya’s Anti-Gambling Taxation

October 2, 2019

SportPesa, Kenya’s leading online sports betting has folded up. This is the second and possibly the last sign that it has been incapacitated by the new tax regime introduced by the Kenyan government against gambling firms. The first was when it pulled sponsorship from the country’s sports teams after the government in Nairobi hiked gambling tax rates from 7.5 to 35 percent.

This tax decision will have a damaging impact on both customers and treasury,” the company stated in its reply. “Further compounded by the currently in-effect 20% Withholding Tax on Winnings, the economic incentive to place bets will be completely removed as the taxes will deprive consumers of their total winnings. This will have severe consequences for licensed betting companies, which dutifully pay their taxes and ultimately will lead to a decline in government tax revenue to near zero and will halt all investments in sports in Kenya.

Here Is All You Need To Know

SportPesa and other sports betting entities have faced significant government opposition in Kenya.
Last month, Uhuru Kenyatta, the country’s president, called on lawmakers to ban gambling. His call came after the country’s Betting Control and Licensing Board ordered telecommunications companies to suspend the shortcodes and paybill numbers the sportsbooks used to exchange funds with their customers.
Part of the backlash from legislators stemmed from social concerns. One lawmaker noted a rise in suicides from young men who took up betting on sports through their mobile devices.
Kenyan officials also expelled nearly 20 foreign business leaders who were working for sportsbooks in the East African nation.
SportPesa and Betin then joined forces to file a lawsuit against the government, but that the country’s Supreme Court dismissed the legal challenge. In doing so, Justice John Mativo noted SportPesa’s license had expired, which meant the company could no longer operate legally until it reapplied for one.

Major Sponsor in Soccer

Even with its troubles in its native country, SportPesa still enjoys a relatively high profile in Kenya’s sports betting industry. This is thanks in part to the sponsorships it holds with soccer teams and leagues across the world. That includes Everton, in England’s Premier League, and Hull City, which plays in England’s second-tier Championship league.

Read also: Kenya Welcomes New Currency As Deadline For Phase Out of Kenya’s Old KSh1,000 Elapses

However, even British lawmakers have begun to question whether its professional soccer teams should enter into partnerships with sports betting operations.

SportPesa also serves as the official African betting partner for LaLiga, which runs the top soccer leagues in Spain. It also sponsors Italian club Torino FC.

“If local communities enjoy it, we know that our involvement can be an extremely positive influence for all concerned,” SportPesa says on its partnerships page. “While we offer valuable financial support, we also go much further: helping clubs build capacity and join corporate social responsibility initiatives to create value for players, teams, communities, and businesses.”

Mass layoff

The move comes after another firm, Betin, sent home all its employees saying they have run out of finances.

According to the firm’s management, efforts to hammer a deal with the government which could have seen it resume operation have failed, forcing the firm to send home employees.

“Management has had several extensive meetings with the government entities regarding the company’s licence without much success,” read an internal memo signed by the managing director.

“Given all these, we have had financial constraint as you might all expect. As a result of the deterioration of the profitability, the management has had to rethink its operating model and to proceed with the exercise of termination on account of redundancy.”

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world