Kenyans spent Sh169.1 billion to place bets through Safaricom’s M-Pesa in the year to March, underlining the gambling craze that has become a national pastime.
The telecoms operator’s disclosures show that the value of bets jumped 23.8 percent from Sh136 billion a year earlier, defying a government clampdown on gambling through the imposition of higher taxes both on the companies and punters.
Safaricom, the Kenya Revenue Authority (KRA) and betting firms are the biggest beneficiaries of the growth and intensity of betting activities, pocketing billions.
The telco’s revenue from betting rose 40 percent to Sh5.98 billion last year, beating sales of more than a third of firms listed at the Nairobi bourse.
This disclosure came on a day when Safaricom posted a 1.7 percent drop in net profit to Sh67.49 billion, hit by investments in the yet-to-start Ethiopian operations and additional tax payments.
Safaricom booked a loss of Sh4.8 billion from the Ethiopia firm, where it has a 55.7 percent stake, and saw its tax payments jump 39.1 percent to Sh34.7 billion after the lifting of tax relief attached to the Covid-19 economic stimulus package.
The company is betting on business lines such as data and M-Pesa to offset the stagnant revenues from mobile calls amid a saturated market.
The volume of bets funded from M-Pesa accounts surged 39 percent to 732.2 million, signalling a growing gambling addiction.
The growth of betting comes despite the government trying to curb the activity through higher taxation and increased regulations.
Betting is popular among young people – employed as well as the jobless — who see it as offering a game-like thrill besides an opportunity to make quick money.
While a few punters get lucky and win large sums of money, the activity represents missed opportunities and losses for participants as a whole.
The Sh169.1 billion wagered in the review period, for instance, is enough to buy 5.3 billion shares of Safaricom, equivalent to a 13.2 percent stake in the country’s most profitable firm.
Such a stake would earn dividends of about Sh7.3 billion annually, based on the telco’s latest distribution of Sh1.39 per share for the year ended March.
It is also enough to fully acquire Equity Bank based on its valuation at the Nairobi bourse.
Betting is now the second-largest business line by revenue under M-Pesa’s business payments after business-to-consumer (B2C), which generated sales of Sh11.4 billion in the year to March.
The disclosures show that betting firms and punters are being charged some of the highest fees by Safaricom compared to other M-Pesa users.
The Sh5.98 billion revenue from betting, for instance, represents 3.5 percent of the value of bets funded from the mobile money platform.
In contrast, Safaricom took only 0.25 percent or Sh11.49 billion as revenue from the Sh4.7 trillion worth of business payments to consumers through M-Pesa.
The full scale of gambling in the country is unclear but the bets funded from M-Pesa accounts are expected to represent the majority of the activity given the platform’s dominance in personal payments.
Betting firms are the biggest beneficiaries of the betting craze but all of them are private firms which are not required to make their accounts public.
The list of betting firms licensed for the year ending June published by the Betting and Licensing Control Board (BCLB) shows the number had increased to 100 from 76 in a similar period a year earlier—reflecting a 31.5 percent growth.
Kenya last year reintroduced excise duty on betting stakes to 7.5 percent, which means the government first takes Sh7.50 for every Sh100 a gambler places as a bet irrespective of winnings.
It also takes 20 percent on winnings and levies additional taxes on the betting firms in efforts meant to make gambling unattractive.
But investors in the betting space have been undeterred by the government’s attempts to curb the business through higher taxation and tighter regulation.
BCLB chief executive Peter Mbugi said that the majority of the 24 new firms are owned by locals.
They include Mofabet registered as Johannes Swift, Zukabet registered as Muvana Limited, Unibet, Hollywood Bets and Safebet.
Online sports betting companies such as SportPesa grew rapidly before the drastic hike in taxes, riding a wave of enthusiasm for sports. The government says the gaming industry achieved a combined revenue of Sh204 billion in 2018.
That sparked concern about the social impact of betting, prompting new gambling regulations, including restrictions on advertising.
The government has in the past said 54 percent of Kenyans involved in betting were low-income earners.
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