Africa market focus: Kenya

Kenya has had a very chequered relationship with the gambling sector over the last two years, characterised by extremes of regulatory response primarily arising from a dispute between the industry and the Kenyan government over alleged unpaid taxes.

Last year the Kenyan government released a report claiming that the entire Kenyan sports betting sector had only paid KEN4bn (£31m) in taxes during 2018. In April 2019, Kenyan Interior Minister Fred Matiang’i gave the sector until 1 July to pay its outstanding tax, later stripping 27 of the country’s sports betting firms of their licences.

Licences were later reinstated for some operators, but not all, with previous Kenyan stalwart SportPesa entering into a long and costly dispute with the authorities, a dispute which would later see the firm exit the market.

Sports betting operators were then hit with a second major blow with the government’s decision to impose a 20% withholding tax on all player winnings. In the past, the 20% tax rate had previously only applied to the winnings generated from the bet and not the original stake, however under the greenlit change, the tax would apply to both.

Kenya’s turbulent relationship with the gambling industry looked to be smoothing out in June, when the government said it would revoke the tax on constitutional grounds, but the good omens proved to be a false dawn when the government later backtracked on its promise.

With so much travails, it is difficult to see where the incentives are for operators entering the market, but with heavyweights like Betsson Group newly entering Kenya’s sports betting arena, the race seems to be back on for the industry.

[box title=”Kenya in numbers” box_color=”#EC6408″ title_color=”#333333″]

Population: 50.72 million

GDP per capita: $1,816

Internet penetration: 43%

President: Uhuru Kenyatta

Principal regulatory body: Kenyan Betting Control and Licensing Board

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Main regulated verticals in Kenya are the following:

1) casino;

2) sports betting;

3) totalisator/pool betting (fixed odds betting);

4) gaming machines (slots);

5) lotteries.

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There are 10 types of licences:

1) “on-the-course” sports betting licence – this licence is intended to cover sports betting on authorised races;

2) “off-the-course” sports betting licence – this licence is intended to cover sports betting outside of races i.e. in betting shops and online (the situation with online gambling in Kenya is complicated – please refer to the subsection “what about online” below);

3) “on-and-off-the-course” sports betting licence – this licence is intended to cover sports betting on and off the races;

4) “on-the-course” totalisator licence – this licence is intended to cover operating a totalisator on authorised races;

5) “off-the-course” totalisator licence – this licence is intended to cover operating a totalisator outside of races i.e. in betting shops;

6) “on-and-off-the-course” totalisator licence – this licence is intended to cover operating a totalisator on and off the races;

7) pool betting promoter licence;

8) pool betting principal agent licence;

9) pool betting agent licence;

10) “gaming” licence – this licence is intended to cover casinos, slots and other games of chance establishments

There are also six types of permits:

1) permit for bookmakers to work on races;

2) public lottery permit;

3) permit for promotion of the lotteries relating to the races;

4) permit for use of gaming machines (on premises approved by the regulator);

5) permit for use of amusement machines (on premises approved by the regulator);

6) permit for (skill-based) prize competition

[/box] [box title=”What about online licensing?” box_color=”#EC6408″ title_color=”#333333″]

Status of online gambling in Kenya is rather complicated (as well as in other African countries) despite the fact that Kenya’s gambling legislation goes back to 1966 and gambling is a familiar industry for the country.

For now, there are no references to online gambling in the applicable Kenyan laws whatsoever. However, online offerings are recognised by the authorities – for instance, there are operators working on the internet/mobile only. The legal status of online is resembling the Ugandan one – it is based off the possible wide interpretation of the term “premises” that is used in the definitions of various verticals.

Such wide interpretation of the applicable laws also allows to conclude that in order to operate online one should at least set up the servers in Kenya in order to comply with the requirements to the gaming premises.

During the last couple of years, there were (and still are) constant talks within the Kenyan government with regard to the large-scale modification of the existing laws in order for them to cover and tame online for the benefit of society and government revenues – more details can be found in the subsequent sections.

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Gambling tax

All types of gambling: 15% of month GGR (payable each month).

It should be separately noted that all winnings are taxed with the withholding tax at the rate of 20%.

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Kenyan Betting Control and Licensing Board

Alias: BCLB

Website: http://bclb.go.ke/

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Term

All types of licences and permits expire on 30 June next following the date of issue.

Licence fees:

“on-the-course” sports betting licence;

• Application fee (one-off payment): €100
• Grant fee (one-off payment): €2,000
• Investigation fee (one-off payment):
  • local director: €400 and
  • foreign director: €4,000
• Annual licence fee (annually): €400
• Premises grant fee (one-off payment): €1,000
• Premises annual fee: €400
• Renewal fee for the licence itself and for the premises licence (annually): €40

“off-the-course” sports betting licence;

• Application fee (one-off payment): €100
• Grant fee (one-off payment): €2,000
• Investigation fee (one-off payment):
  • local director: €400 and
  • foreign director: €4,000
• Annual licence fee (annually): €400
• Premises grant fee (one-off payment): €1,000
• Premises annual fee: €400
• Renewal fee for licence itself (annually): €400
• Renewal fee for the premises licence (annually): €40

“on-and-off-the-course” sports betting licence;

• Application fee (one-off payment): €100
• Grant fee (one-off payment): €4,000
• Investigation fee (one-off payment):
  • local director: €400 and
  • foreign director: €8,000
• Annual licence fee (annually): €800
• Premises grant fee (one-off payment): €1,000
• Premises annual fee: €400
• Renewal fee for the licence itself and for the premises licence (annually): €40

“on-the-course” totalisator licence;

• Application fee (one-off payment): €100
• Grant fee (one-off payment): €2,000
• Investigation fee (one-off payment):
  • local director: €400 and
  • foreign director: €4,000;
• Annual licence fee (annually): €400;
• Premises application fee (one-off payment): €100;
• Premises grant fee (one-off payment): €1,000
• Premises annual fee: €400
• Renewal fee for the licence itself and for the premises licence (annually): €40

“off-the-course” totalisator licence;

• Application fee (one-off payment): €100
• Grant fee (one-off payment): €4,000
• Investigation fee (one-off payment):
  • local director: €400 and
  • foreign director: €8,000
• Annual licence fee (annually): €800
• Premises application fee (one-off payment): €100
• Premises grant fee (one-off payment): €1,000
• Premises annual fee: €400
• Premises renewal fee (annually): €40
• Renewal fee for the licence (annually): €80

“on-and-off-the-course” totalisator licence;

• Application fee (one-off payment): €100
• Grant fee (one-off payment): €6,000
• Investigation fee (one-off payment):
  • local director: €400 and
  • foreign director: €12,000
• Annual licence fee (annually): €1,200
• Premises application fee (one-off payment): €100
• Premises grant fee (one-off payment): €1,000
• Premises annual fee: €400
• Premises renewal fee (annually): €40
• Renewal fee for the licence (annually): €120

pool betting promoter licence;

• Application fee (one-off payment): €100
• Grant fee (one-off payment): €4,000
• Investigation fee (one-off payment):
  • local director: €400 and
  • foreign director: €4,000
• Annual licence fee (annually): €400
• Premises application fee (one-off payment): €100
• Premises grant fee (one-off payment): €1,000
• Premises annual fee: €400
• Renewal fee for the licence itself and for the premises licence (annually): €40

pool betting principal agent licence;

• Application fee (one-off payment): €100
• Grant fee (one-off payment): €1,000
• Investigation fee (one-off payment):
  • local director: €400 and
  • foreign director: €4,000
• Annual licence fee (annually): €100
• Premises application fee (one-off payment): €100
• Premises grant fee (one-off payment): €400
• Premises annual fee: €100
• Renewal fee for the licence itself and for the premises licence (annually): €40

pool betting agent licence;

• Application fee (one-off payment): €100
• Grant fee (one-off payment): €1,000
• Investigation fee (one-off payment):
  • local director: €400; and
  • foreign director: €4,000
• Annual licence fee (annually): €100
• Premises application fee (one-off payment): €100
• Premises grant fee (one-off payment): €400
• Premises annual fee: €100
• Renewal fee for the licence itself and for the premises licence (annually): €40

“gaming” licence

• Application fee (one-off payment): €8,000
• Grant fee (one-off payment): €24,000
• Investigation fee (one-off payment):
  • local director: €2,000; and
  • foreign director: €8,000
• Annual licence fee (annually): €4,000
• Renewal fee for the licence (annually): €200

Permit fees:

permit for bookmakers to work on races

• Application fee (one-off payment): €15
• Grant fee (one-off payment): €40 for each race.

public lottery permit

• for a specific charitable purpose
  • Application fee (one-off payment): €15
  • Grant fee (one-off payment): 3% of total tickets sale or €600 (which is less);
• for various charitable purposes
  • Application fee (one-off payment): €8,000
  • Grant fee (one-off payment): €31,000
  • Investigation fee (one-off payment):
    • local director: €4,000
    • foreign director: €8,000
  • Annual licence fee (annually): €4,000
  • Renewal fee for the licence (annually): €200

permit for promotion of the lotteries relating to the races

• Grant fee (one-off payment): €50 for each race.

permit for use of gaming machines (on premises approved by the regulator)

• Application fee (one-off payment): €400 per gaming machine;

Grant fee (one-off payment): €2,000 per location;

• Investigation fee (one-off payment):
  • local director: €1,000 per gaming machine; and
  • foreign director: €8,000 per gaming machine;
• Annual licence fee (annually): €400 per gaming machine;
• Renewal fee for the licence (annually): €100 per one gaming machine.

permit for use of amusement machines (on premises approved by the regulator)

• Application fee (one-off payment): €2 per amusement machine;
• Annual licence fee (annually): €15 per amusement machine.

permit for (skill-based) prize competition

• Application fee (one-off payment): €4 per application;
• Grant fee (one-off payment): 6% of total budget.

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Security deposit

Security deposit for all types of licences and permits: no more than €300.

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After the 2019 overhaul of advertising regulations (in short – BCLB issued a rather restricting list of requirements for gambling advertisements that was quashed by the High Court of Kenya less than a month after on the grounds of BCLB exceeding its mandate with issuing such requirements), there are not so many advertising requirements at all.

Basically, the only requirement that is in place is that it is an offence to conduct advertisement of a licensed gaming operator without the approval of the BCLB. This offence is punishable with a fine in the amount not exceeding €25 and/or imprisonment for a term not exceeding three months.

There is no criteria set for such approval as well as no procedure established.

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Kenya’s gambling market seems very weighed down with social and political agendas surrounding it.

Even a brief look at the latest news shows that everything is in constant motion and even chaos – just take a look at the latest story with excise duty on sports betting: it was announced and put in the bill, which, in the end, was assented and entered into force without this excise duty. Right after that, government officials announced that they will reintroduce excise duty as soon as such opportunity presents itself.

Another story that is able to set the mood for this market is 2019 halting of all licences based on the allegations that licensed operators in Kenya are not paying their taxes in full. This rather aggressive measure was simply announced by the Kenyan interior minister. In the end, BCLB agreed to renew licences only subject to full tax compliance of the operators confirmed by the Kenya Revenue Authority.

In other words, Kenya’s gambling landscape is really complicated.

Zooming out, we would say that the main market specific factor that should be taken into account is the long-playing plans of the Kenyan government to reload and revise the existing Betting, Lotteries and Gaming Act that is dated all the way back to 1966.

Kenyan parliament introduced a “Gaming Bill” in 2019, which is intended to completely overhaul current legislative and regulatory framework taking into account new developments such as online gambling, introducing increased fees, advertising restrictions, enhanced penalties, responsible gambling measures and many more.

Debates around this bill are really intense – supporters of the bill are using valid arguments about necessity to regulate and control online offerings and bring in additional tax revenues while opponents are stating that Kenyan youth are in danger, citing as an example cases when young Kenyans gambled their education money; the outcome of these debates is that as of summer 2020, this much needed bill is stalled in parliament at the Committee stage.

Of course, the main beneficiaries of this situation are existing operators that are benefiting from the existing legal vacuum of under-developed legislation.

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Honestly speaking, despite all complications of the Kenya market, it is tempting to conclude that it is definitely worth consideration from international operators.

Although, it wouldn’t be fair not to mention that the Kenyan gambling market is not stable to say the least and sometimes is being surprisingly modified by the regulator itself, and various government officials that have a say in areas surrounding gambling. On the bright side, the court system in Kenya is a really important and significant body sometimes playing a crucial role in gambling as well – like in the case with advertising restrictions described above.

To summarise, this market is fluid and not easy to comprehend and adjust to it, but it is indeed alive and promising; especially given the announced government’s desire to regulate online gambling and not restrict it completely.

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Ilya Machavariani is a gambling and gaming lawyer for Europe, Russia and the CIS, heading the Russian and CIS gambling practice group at Dentons. He has extensive experience advising on gambling issues and advises clients on operating in the Russian Federation and the CIS on the full range of regulations relating to the activities of gambling operators, as well as drafting the necessary contracts and internal documents. He also handles licensing processes for gambling operators that are entering new markets throughout the world.

Ivan Kurochkin being an associate at CIS gambling practice group at Dentons has broad experience on gambling issues, especially in regulatory matters. His work involves advising clients doing business in the Russian Federation on various activities of gambling operators (including bookmakers), focusing on issues related to compliance with gaming licence requirements, applicable AML requirements, and issues relating to advertising of gambling operators.

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Picture credit: iStock/dk_photos