Kenyans place $ 83.2 billion worth of M-Pesa bets in six months

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Economy

Kenyans place $ 83.2 billion worth of M-Pesa bets in six months


betting

A user with the latest mySafaricom app. PHOTOS | DIANA NGILA | NMG

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Summary

  • Safaricom, the Kenya Revenue Authority (KRA) and betting companies are the biggest beneficiaries of the growth and intensity of betting activities, pocketing billions.
  • KRA takes 7.5 percent of the value of bets placed in addition to 20 percent of winnings and corporate tax on betting companies.
  • The growth in betting comes despite the government trying to curb activity through higher taxation and increased regulations.

Kenyans spent 83.2 billion shillings on placing bets in the six months to September through Safaricom’s M-Pesa platform alone, underscoring the gambling craze that has become a national pastime.

Revelations from the phone company show that the value of the bets was up 69 percent from the 49.2 billion shillings of the previous year.

Safaricom, the Kenya Revenue Authority (KRA) and betting companies are the biggest beneficiaries of the growth and intensity of betting activities, pocketing billions.

Telco’s revenue from betting doubled to Sh2.95 billion from Sh1.48 billion. The taxman is estimated to have raised at least Sh6.2 billion from bettors using M-Pesa.

The KRA takes 7.5 percent of the value of the bets placed in addition to 20 percent of the winnings and corporate tax on the betting companies.

The volume of bets funded by M-Pesa accounts increased 84.7% to 347.8 million, signaling a growing addiction to gambling.

The growth in betting comes despite the government trying to curb activity through higher taxation and increased regulations.

Betting is popular with young people – employed as well as unemployed – who see it as a game-like thrill as well as an opportunity to make fast money.

While some bettors are lucky and win large sums of money, the business represents missed opportunities and losses for the participants as a whole.

The 83.2 billion shillings wagered in the semester, for example, are enough to buy 2.05 billion shares of Safaricom, equivalent to a 5.1% stake in the country’s most profitable company.

Such a stake would earn dividends of approximately Sh 2.8 billion annually, based on the phone company’s latest distribution of Sh 1.37 per share for the year ending March.

Betting is now M-Pesa’s second-largest line of business by revenue in the payments and betting unit after consumer-to-business (C2B), which generated sales of 5.1 billion shillings in six months. until September.

The revelations show that betting companies and bettors are charged some of the highest fees from Safaricom compared to other M-Pesa users.

The revenue of Sh2.95 billion from betting, for example, represents 3.5% of the value of bets funded by the mobile money platform.

In contrast, Safaricom grossed only sh. 0.25 percent or 5.51 billion in revenue from consumer payments to businesses worth Sh.2.1 trillion through M-Pesa.

The full scale of gambling in the country is unclear, but betting funded by the M-Pesa account is expected to account for the bulk of the business, given the platform’s dominance in personal payments.

Betting companies are the biggest beneficiaries of the betting craze, but they are all private companies that are not required to make their accounts public.

A court case pitting the KRA against Pevans East Africa, which pioneered betting in the country using the SportPesa brand, highlighted the big business the company was doing before its operations were sunk by the taxman.

Court documents showed that Pevans alone received bets worth Sh.149.7 billion in 2018, making it the second largest company in Kenya by revenue after Safaricom at the time.

Pevans told the KRA that he had paid shillings 129.6 billion or 86.5% of the bets placed in 2018.

The company said it withheld Sh 20.1 billion as gross gaming revenue on which the betting tax of Sh 4.8 billion was due.

He added that he had paid taxes worth Sh3.6 billion, leaving a balance of Sh1.2 billion.

The taxman, however, is demanding a revised sum of 95 billion shillings in what it claims are taxes not paid by Pevans and which contributed to the cancellation of the company’s gaming license in July 2019.

The high betting margins had attracted more than 100 companies, but their number dropped significantly after the 2019 government crackdown and the imposition of multiple taxes.

It recently emerged that some of the gambling businesses were run by unlicensed operators.

The Betting Control and Licensing Board (BCLB) announced in September that it had suspended 70 issues of M-Pesa bills for unlicensed or unauthorized gaming activities performed through broadcast channels.

The BCLB presented the list during a meeting with the ICT committee of the National Assembly, which had instructed BCLB to demonstrate that unlicensed gaming activities that are performed on radio and TV stations using poster numbers issued by telecommunications companies were deactivated.

The BLCB told the committee chaired by William Kisang that it had ordered Safaricom to turn off the bill numbers.

“The board of directors has ordered Safaricom PLC to suspend the … payment bill numbers on various dates between December 2020 and August 2021,” said BCLB Chief Executive Peter Mbugi.

He said the 70 paycheck numbers were suspended on December 22, 2020.

He added that although BCLB has not conducted any studies, it is possible that media play activities could have a detrimental impact on the public, particularly children.

“The council has repeatedly raised the matter with media houses and has also worked with the Communications Authority of Kenya (CA) to curb unauthorized promotions and advertisements,” he said.

Mr. Mbugi told the ICT team that the board of directors in conjunction with the CA was reviewing the game advertising guidelines and content to address emerging threats.

The BCLB and the acting director general of AC Mercy Wanjau appeared before the committee to explain the reasons behind the rampant betting and gambling in the broadcast media and its effects on the public.

The committee said unscrupulous operators had infiltrated the gaming industry.

Ms. Wanjau told lawmakers that broadcasters are responsible for the advertising material broadcast by their stations and must therefore ensure that all advertisements are legal, honest, dignified, truthful and compliant with fair competition rules.

Mr. Kisang asked the two regulators to provide the committee with additional information regarding the media list, paycheck numbers, and the period in which operators ran paycheck numbers.

The committee also asked regulators to provide details on any taxes evaded or evaded by operators and the state of the crackdown on unscrupulous operators in the gaming industry through the media.

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