3 January 2018

Kenya: Just How Did We Get Here, and Which Way Are We Going in Kenyan Sports Funding?

It is difficult to have a discussion about sponsorship, or indeed about taxation and tax laws of any developing nation, without grounding the conversation on money.

Tuesday was no doubt a sad day for local sports, and after SportPesa chief executive officer Ronald Karauri stepped forward to deliver the news that his company had decided to cancel all local sponsorships, the despair across local sporting circles was palpable.

Karauri repeated sorrowfully, for the millionth time, that the 35 per cent law was too heavy on his company, and that there was no way they could continue normal activities with the new tax regime that took effect January 1.

What he didn't mention, however, is that the Bulgarian-owned company has issued a notice to appeal against High Court's judgment last week that upheld the new tax laws that require betting, lotteries and gaming to pay 35 per cent tax.


The ramifications of the announcement will no doubt be far reaching, starting with Gor Mahia and AFC Leopards who are planning to pull out of continental competitions due to the looming cash crunch.

Asked about their sway on government's enforcement of the punitive 35 per cent tax law on gaming companies or their take on the Sports Fund established under the Sports Act 2013, the consensus among Kenyans is split down the middle.

Split because government isn't perfect. And neither is SportPesa.

And because the Sports Fund, which has been fronted as a solution to all local sports' financial problems, is still a wildly alien notion not just in Kenya, but on the African continent.

Opinion even within local sports stakeholders is divided because due to the fear of the unknown, the concern that another devastatingly tough period for local sports is upon them is real.


Regardless of which side of the divide one is, it is impossible not to see the cold, harsh reality that without SportPesa, local sports development is limited. For SportPesa, the cause to revolutionize the local sporting scene was an option, not an obligation. Yet they went about their activities with ease and panache, taking over sponsorships of major sporting entities such as Football Kenya Federation, Kenya Premier League, Kenya Rugby Union, Gor Mahia, AFC Leopards, Nakuru All Stars and may others.

All this was about security. And it was done so superbly that it made government forget their responsibilities in supporting national sports teams.

Unemployment rates

Apart from the huge mileage it brought them in terms of brad visibility, locking all other similar companies from major clubs and federations kept SportPesa ahead of their competitors and made them look good in the eyes of Kenyans.

In a country where unemployment rates are ridiculously high and salaries are barely enough to cover basic needs, trading was easy. Betting provided the youth with a form of economic pass time, however fickle, and SportPesa benefitted immensely from the growing betting craze that has now hit fever pitch.


It was all nice and quiet for a while, but when a start-up company goes splashing lavishly on both local and foreign clubs, marking historic feats like bringing Everton star Wayne Rooney to East Africa, sending two Kenyan select side to play friendlies abroad, bringing top East African clubs in a rendition of the now failed Cecafa Club Championship, gifting winners up to Sh20 million in cash etc., eyebrows are bound to start curving upwards.

In all their dealings with local federations and clubs, SportPesa inherited previous sponsors' habits and declined to make public the figures involved.

This has now fuelled speculation and has now given birth to a number of questions: How much money does SportPesa make? What fraction is this compared to how much they have so far invested in the sporting industry? Why have other betting companies left SportPesa to fight this battle alone? Why is government so stiff and reluctant to come to the negotiating table?

It is only Tuesday that Karauri revealed, mournfully, that his company would save Sh600 million every year from the cancelled sponsorships.


He was, however, at deep pains to disclose how much his company is making, and speculation is now rife that the company is making obscene profits locally, enough to cater for their extravagance.

But SportPesa is a privately owned company compelled by no laws to share their financial streams. But the common belief currently is that the company could be making well over Sh1 billion every month.

That, when looked under a naked eye in comparison to the Sh600 million that they will save from sponsorships every year, makes it hard for local football enthusiasts to expend any form of sympathy for the company.

There is also the concern that the company is actually using money made from the Kenyan market to support top UK clubs like Hull City and Everton.

The other question is, what will be government's response? By withdrawing sponsorship, SportPesa is definitely using the familiar negotiating card.

But will they succeed in making the government turn around and reverse the law?


And based on the failures of current Sports Cabinet Secretary Hassan Wario, how will this new development affect Uhuru Kenyatta's decision on who should be the next sports Cabinet Secretary?

But speaking of government, how will they ensure accountability if and when the Sports Fund becomes operational?

After all, this is the same government that promised five new stadia and delivered none.

Many Kenyans would rather have SportPesa use their money than giving it to government especially in light of the numerous corruption scandals that the country has grappled with in recent years.

Secondly, President Uhuru Kenyatta promised to create a favourable climate for business. Is this the way to go about it?


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