Africa market focus: Uganda

As a continent, Africa is a mass of contradictions, with high levels of poverty in some regions, while others are flourishing into the next big emerging markets and the future economic leaders of tomorrow.

This contradiction extends into the gambling sector, with some jurisdictions regulating and operating gambling successfully, while others have completely eschewed the practice, be it for cultural or religious reasons.

As a result, Africa remains one of those markets which could, with little changes here and there, become a new playground for gambling operators disenfranchised by the steadily over-regulating European markets and too uncertain markets in Asia.

In the first of this four-part series, EGR Compliance,in partnership with international law firm Dentons Solicitors, looks at some of the continents emerging as regulatory hubs. This week, it’s the turn of Uganda.

Population: 42.7 million

GDP per capita: $860

Internet penetration: 42%

President: Yoweri Museveni

Principal regulatory body: Ugandan National Lotteries and Gaming Regulatory Board

The main regulated verticals in Uganda

1) casino;

2) sports betting;

3) pool betting;

4) bingo;

5) gaming and betting machines or devices (e.g. slots);

These machines/devices are defined as follows: any equipment or mechanical, electromechanical or electronic contrivance, component or machine; or software used remotely or directly in connection with gaming and betting or any game which affects the result of a wager by determining a win or loss.

6) lotteries.

There are eight types of licences available in the Ugandan market

1) casino;

2) sports betting;

3) pool betting;

4) bingo;

5) gaming and betting machines or devices – please note that activities under this licence may be different as the applicable laws are not entirely clear on the perimeter of this licence, namely:

– operating licence;

– technical operating licence (i.e. maintenance licence); and

– software operating licence (B2B)

These three sub-activities are listed in the main Ugandan Act governing lotteries and gaming and create an impression that these are separate activities and, in turn, separate licences; meanwhile, secondary legislation (e.g. licensing regulations, fees regulations etc.) does not separate these activities into different licences and provides for one overarching licence for gaming or betting machines or devices – this conclusion is also supported by the fact that there is only one template form for the application for all three activities.

6) betting intermediary;

7) national lottery;

8) public lottery.

Uganda laws provide neither for any online licences directly, nor for restrictions on online gambling; in the meantime, there are operators offering their products online (they are recognised by the regulator as well – it mentions such operators in their annual reports; NGBU has also mentioned online offerings in its licensing guidelines) and the general consensus is that it is possible to offer online products in Uganda.

In other words, Ugandan online gambling exists in some kind of limbo based on the legal vacuum on the one hand and possibility to expansively interpret legal definitions of “casino” and “gaming and betting machine or device” as covering online gambling on the other.

An immediate consequence of this situation is that in order to offer online products, one should establish land-based structure and corresponding local presence in order to obtain a licence for a relevant vertical.

To give you the full picture, it is also important to note that NGBU has listed certain additional requirements for online betting operators (e.g. datacentre of such operator should be physically located within Uganda) in its request for applications for licences issued shortly after adoption of the current legislation. There are no signs of these requirements in other acts, laws or regulations now and NGBU’s mandate to establish such requirements in such form is questionable, to say the least.

Gambling tax

All types of gambling: 20% of month GGR (payable each month).

It should be separately noted that Ugandan licensees are also obliged to administer and withhold from players at the moment of cash-out the amount of withholding tax at the rate of 15%.

Term

All types of licenses are issued until 31st day of December of the year in which it is issued and available for annual renewal.

Licence fees

Before we dig into figures, it is important to mention that Uganda laws differentiate the amount of application fees between “foreigners” and “nationals”: the applicant’s legal entity is considered as foreign if the majority of shares (50%+) in such entity is owned by non-Ugandans.

The Ugandan Communications Commission established certain overarching standards for advertising of any gambling vertical, which are of restrictive nature. Such standards provide that gambling advertisement must not, inter alia:

portray, condone or encourage gambling behaviour that is socially irresponsible or could lead to financial, social or emotional harm;
suggest that gambling can provide an escape from personal, professional or educational problems such as loneliness or depression;
suggest that gambling can be a solution to financial concerns, an alternative to employment or a way to achieve financial security;
portray gambling as indispensable or as taking priority in life; for example, over family, friends or professional or educational commitments;
exploit cultural beliefs or traditions about gambling or luck

To add to that, Ugandan gambling regulations provide for special advertising restrictions applicable to sports betting and gaming or betting machine verticals only.

It should be separately noted that advertising regulations recognise gambling websites and, therefore, apply to online offerings as well.

Such restrictions include, inter alia:

prohibition to advertise unlicensed operators;
obligation to include a special disclaimer about betting-related harm;
requirements to the content used for advertising; advertisement should not:

contain any lewd or indecent language, images or actions;
present any game or bet directly or indirectly as a potential means of relieving financial or personal difficulties;
encourage gaming or betting as a means of recovering past betting or other financial losses;
contain claims or representations that persons who bet are guaranteed personal, financial or social success;

requirements to the meaning of advertisement; it should not represent or imply that:

betting is an alternative to employment or a means of acquiring financial security;
winning is the probable outcome of gaming or betting;
gaming or betting primarily involves skill;
gaming or betting is a form of investment;
the more or longer one gambles or bets, the greater the chances of winning;
that gambling or betting is likely to make players’ dreams a reality

requirements to the appearance of actors involved in the advertisement – they should not appear to be underage;
requirements to the place of advertisement placement; it should not be placed:

in any media primarily directed at minors;
at venues where the majority of the audience may reasonably be expected to be minors; or

on outdoor displays directed at schools, youth centres, technical, other tertiary or university students.

One of the most unobvious things that one should be aware of before expanding into Ugandan market is that there is a really strong focus of government authorities on promoting local employees and businesses in general. For instance, the NGBU document covering the licences renewal process for 2020 directly states that NGBU will give preference and any support to local licensees.

To add to that, if a foreign operator decides to enter into Uganda, such operator would be obliged to obtain a so-called “investment certificate” from Uganda Investment Authority; it is a criminal offence for foreigners to invest without this certificate. In order to obtain it, one would need to incorporate a legal entity in Uganda, provide authorities with a very detailed business plan (this document should include information about financing of the investment/sources of such financing, market surveys etc.) and prove that the amount of future investments will exceed $100,000.

Finally, it should also not be forgotten that President Museweni attacked the gambling industry in early 2019 stating that the NGBU should cease the licensing process for new licensees and stop the renewal process for existing licences (the reasoning behind this attack was rather standard – President Museweni was concerned about the harm that gambling causes to Ugandan youth); after a short period of consideration, Ugandan authorities backed down and settled on additional restrictions to be imposed on foreign operators: it was announced that aforementioned restrictions would apply only to non-locals.

However, despite this story, there are no signs of these restrictions whatsoever (yet). NGBU was ready to renew any existing licence for 2020 without any prejudice for foreign operators.

Another thing that might be unexpected is that NGBU has a really wide mandate in terms of its possibility to review, assess and allow (or, of course, not allow) everything that concerns gambling products: premises, slots and other machines, particular games, software, anything. In other words, it might take some time to adapt particular offerings to the Ugandan market and NGBU requirements.

Uganda seems like a challenging market. Strict financial requirements to charter capital and bank guarantees/bonds, love-hate relationship between authorities and industry bringing a considerable amount of revenues into country’s treasury (this relationship still could unfold itself in a way that will not allow international operators to work in Uganda), unclear status of online gambling and, finally, strong focus on local businesses (which is obviously good for the country, but hard for international operators).

On the bright side, there is only one government body that is responsible for gambling regulation (contrary to Nigeria and South Africa where licensees need to deal with government bodies on a federal and provincial level), which is responsive and trying to keep up with the latest industry developments; low licence fees are also a considerable plus as well as a transparent taxation framework.

In the end, the Uganda market is worth considering but this consideration certainly should be really careful.

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.

Picture credit: Istock/dk_photos