Africa

Kenya’s new tax on betting highest in region, says PwC

Published

6 years ago

January 10, 2018

Experts say hike will kill gaming firms and call for review to protect investment

Consultancy firm PricewaterhouseCoopers (PwC) has revealed Kenya’s betting tax is the highest in the region and ahead of gaming hubs like the famed Las Vegas.

PwC says the new 35 per cent tax on all gambling revenues is higher compared to other African countries like South Africa which charges 9.6 per cent, Rwanda (13) and Uganda (20).

Neighbours Tanzania replaced corporate tax in the gaming industry with a six per cent tax on revenue as an incentive to attract more players to invest in the business.

Developed nations of Germany (five per cent), Las Vegas (6.5) and Canada (20) have significantly lower rates than the Kenyan one which became effective from January 1.

The United Kingdom levies 15 per cent as a conclusive tax for remote online gaming with no further levies. Companies established offshore are allowed to operate in the country.

The actual figures contrast sharply with what has been reported recently in local media claiming, for example, that the rate in the UK and other European nations such as Czech Republic, Belgium, Slovakia, Spain and Denmark is 50 per cent while in Germany the tax is at an astronomical 90 per cent.

Steve Okello, a Tax Partner at PwC, reckons that Kenya’s taxation is harsh on the nascent industry and could hurt the growth of related sectors and government revenues with the affected firms scaling back operations or relocating their businesses.

“I feel the tax change that is probably the highest in Africa looks discriminatory, you know one industry is being picked out and heavily charged,” said Mr Okello.

“We are likely to see lots of cutting back on expenditure if not closures in the industry that will affect overall tax growth,” he added.

Besides the blanket 35 per cent tax on revenues, lotteries pay 30 per cent corporate tax and dedicate 25 per cent of their sales to charities as a legal requirement before taking care of winnings and other operating expenses.

Betting firms say the tax hike will kill the fledgling industry and hurt supporting businesses including telecoms and media companies, which benefit from daily advertisements from the firms.

Safaricom #ticker:SCOM says mobile phone-based betting was driving revenue in its SMS business.

Kenya Revenue Authority (KRA) warned the tax hike will hurt tax collection from gaming firms.

Pambazuka National Lottery suspended operations on Sunday following the hike.

“The effect of the 35 per cent tax on all ticket sales is that the total cost of operations rises to 115 per cent and this before deduction of operations costs,” said the firm in a statement.

Analysts fear local gambling firms could relocate to offshore tax havens which offer low rates to attract capital investment.

“Betting is online and technology based and firms can move to low tax jurisdictions like Malta and Gibraltar and still operate from Kenya. The country will lose revenue in this event,” Mr Okello added.

High taxes have seen renowned betting firms such as Bet365, Betway and Betfair — whose services are accessible to the Kenyan market through their websites — operate from Malta and Gibraltar which cap their rate at one per cent of gross gaming revenue.

The Treasury said it hiked taxes more than four times to curb the growth of gambling, arguing that it was hurting the young and vulnerable.

Mr Okello said that since winners are not taxed, with the affected firms absorbing the huge hit, the higher tax rate will do little to curtail gambling.

He proposes a tax of 10 per cent on betting firms as ideal to stem the likelihood of affected entities closing shop in Kenya and relocating elsewhere.

Profitable blue chip firms at the Nairobi bourse will slide to losses if subjected to the 35 per cent tax.

KenGen will dip to Sh1.6 billion loss compared to a profit of Sh6.7 billion, while the Nation Media Group will book a loss of Sh1.1 billion from a profit of Sh2.4 billion.

“In my view, the 35 per cent tax on all collections would have been proposed as a final tax like rental income,” says tax expert Mwaniki Githinji.

“If when computing the net profit they are allowed to offset the 35 per cent as an allowable deduction, then it would be okay. However, according to the Income Tax Act, for purposes of arriving at the net taxable income, this is not an allowable expense,” he added.

That mirrors Tanzania and the United Kingdom that replaced corporate tax with a conclusive tax to boost investment. SportPesa has issued a notice to appeal a High Court decision that maintained the 35 per cent tax rate.

The betting firm says the higher tax is in breach of Article 201 of the Constitution that demands the public finance system promotes an equitable society where the tax burden is shared fairly.

George Miller

George Miller (Gyorgy Molnar) started his career in content marketing and has started working as an Editor/Content Manager for our company in 2016. George has acquired many experiences when it comes to interviews and newsworthy content becoming Head of Content in 2017. He is responsible for the news being shared on multiple websites that are part of the European Gaming Media Network.

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Africa

Gia Janashvili Talks About Emerging iGaming Market in Africa

Published

2 years ago

July 6, 2022

Gaspar Incze

The iGaming business is fast expanding its boundaries and entering new markets, owing to a growing demand for remote gaming. As far as online gambling and sports betting go, Africa is one of the major untapped markets.

Developers, investors, and iGaming solutions companies are slowly realizing the growth potential and are taking steps to explore the sizable market potential.

Gia Janashvili has years of experience helping local iGaming brands understand their potential clients and reach targeted audiences.

We conducted a short interview with Gia Janashvili, who shared his thoughts on the budding African iGaming marketplace and what that means for users and gaming providers.

Pan-African iGaming Market Growth Potential

Africa, as a whole, has seen an economic upturn in recent years. Mobile devices and Internet access are quickly becoming affordable commodities to millions. In fact, one statistic shows African internet users in 2019 accounted for 11.5% of all internet users.

Africa, particularly the Sub-Saharan region, has a relatively liberal stance toward the practice of online betting and casino gambling. This has created an opportunity for investors and developers to provide turnkey gaming services to millions. South Africa has the largest iGaming sector, followed by countries like Uganda, Nigeria, and Kenya.

One nation investors have fixed their eyes on lately is the Republic of Congo (Brazzaville). Gia Janashvili is a majority shareholder in Paridirect, an online casino, and sports betting portal catering to the Congo-Brazzaville market. In an interview, he explained what led him and VeliServices – the iGaming solutions company he co-founded – to throw their support behind this brand.

“Africa has untapped potential for growth in the iGaming sector,” said Janashvili. “But investors usually look for steady markets like South Africa and Nigeria, disregarding peripheral countries like the Republic of Congo, not to be confused with the Democratic Republic of the Congo.”

Despite a population of just 5.5 million, Janashvili believes countries like the Congo provide a real opportunity for those with the right business-to-client approach.

Challenges Facing iGaming Providers

Success in a market as small as Congo has its challenges. For comparison, South Africa has a population of 60 million and Nigeria is around 215 million. Both make the Republic of Congo seem very small in contrast.

“The market size is considerably smaller than competing markets in South Africa and Nigeria,” said Janashvili. Cybersecurity also poses an issue due to the increase in internet users. However, according to Janashvili’s VeliServices, “data is the new gold,” and there’s still gold to be struck even in these markets.

“Our B2B2C business model enables our clients to reach targeted audiences using a personalized approach,” said Janashvili. He voices that success in the iGaming industry in any market entails learning what users need and how they behave so the gaming provider can offer more customizable solutions.

VeliServices Enters African iGaming Industry

Providers need resources to conduct market analyses, which usually entail sizable investments in unfamiliar waters. The goal of VeliServices is to create a bridge between gaming brands and their targeted users in a specific region. Janashvili argues every market is different and requires providers the right approach to connect with users.

VeliServices is an all-in-one package that provides turnkey solutions to gaming businesses to conduct data analyses and better understand the market. His platform offers data security, analytics, and anti-fraud machine learning tools that allow operators to gain a foothold in a given market and expand.

Paridirect.com is a relatively new project catering to the market in the Republic of Congo. Janashvili, who is a shareholder in Paridirect, indicates he and his company aim to lay the foundations of what could potentially be a lucrative and engaging market akin to the ones in Kenya or Uganda.

Legal Status of Online Gambling and Sports Betting in Africa

Another reason for the fast expansion of the African iGaming scene is the relaxed legislation on gambling and sports betting. South Africa is possibly the only African nation with a booming iGaming sector with predefined online casino gambling and sports betting laws. Other countries have limited regulation or lack legislation that defines the rules of interactive gaming. Oddly, a lack of clear regulation can also cause issues itself. Janashvili believes local governments could be impelled to take action to create a legal framework if they see a rise in investments in the industry.

“Right now, you have many African markets that are unregulated,” he says, adding that this could expose users and operators alike to fraud and cyber-criminal. “If investors shift focus to smaller markets, local legislatures could prompt a more robust position on gambling regulation.”

Final Thoughts

Clearly iGaming’s potential for growth is impressive. With so many untapped markets around the globe, there should be no question as to the future of the industry. Expansion into these untapped markets is the next phase for the sector and Africa is at the top of many investor’s priorities. Gia Janashvili and VeliServices stand poised to tap the potential of the Republic of Congo, but it only leads to the question: What other untapped markets in sub-saharan Africa can be opened for iGaming?

Africa

Authorities destroy illegal gambling machines in South Africa

Published

5 years ago

December 14, 2018

George Miller

Authorities destroy illegal gambling machines in South Africa Reading Time: 1 minute

The Limpopo Gambling Board in South Africa has seized and destroyed 100 illegal gambling machines from local shops.

Chairman of the board Elijah Tjiane said: “The serious crimes we’re witnessing in the country start with illegal machines operating in local shops. They then go to drugs and later graduate to other heavy crimes.”

Tjiane said the R500 fine illegal gambling operaters got was too little.

“We wish lawmakers could come up with a fine that will fit the crime the person has committed.”

Limpopo Economic Development MEC Seaparo Sekoati said illegal gambling was crippling businesses which operated by the book.

He said destroying the illegal machines would assist in reducing crime in the province.

“The work done by the board’s law enforcement unit, working closely with police in tackling illegal and harmful economic activities, is outstanding. Our law enforcement officers confiscated 101 gambling machines which were collected from various spaza shops in and around our communities.

“Illegal gambling outlets have a negative impact on our economy.

“Such unregistered and underground operations do not adhere to the tax legislation of the country,” said Sekoati.

Source: Latest News on European Gaming Media Network

Africa

Chandler to tap Kenyan market

Published

5 years ago

December 10, 2018

George Miller

Chandler to tap Kenyan market Reading Time: 1 minute

Victor Chandler (67), the veteran gambling entrepreneur who founded BetVictor, is setting his eyes on the Kenyan market. His African betting business wing BetLion is targeting Kenya and Tanzania for potential expansion.

The company is already working on online betting project with FSBTech in Uganda.

Kenya and Tanzania are the next targets. BetLion will face strong competition in the Kenya market. There are 36 licensed operators are currently active in the country.

Source: Latest News on European Gaming Media Network