Of Computer Glitches, Moving Human Fingers and Illicit Financial Flows

By The Elephant

Published by the good folks at The Elephant.

The Elephant is a platform for engaging citizens to reflect, re-member and re-envision their society by interrogating the past, the present, to fashion a future.

By The Elephant

A cousin of President Uhuru Kenyatta has quietly accumulated a financial stake in SportPesa’s controversial gambling empire, Finance Uncovered can reveal.

The finding — discovered in details buried in corporate filings in Kenya, the UK and the Isle of Man — came as the president signed a law to axe a 20% excise duty on bets staked, a levy that contributed to SportPesa’s withdrawal from its lucrative Kenyan market last year.

The proposal to drop the duty was included as an amendment to the Finance Bill, which had been passed by the National Assembly last week. The final hurdle to it becoming law was the president’s assent on Tuesday night.

A cousin of President Uhuru Kenyatta has quietly accumulated a financial stake in SportPesa’s controversial gambling empire, Finance Uncovered can reveal.

The president’s crucial decision is being analysed closely now it has been established that Peter Kihanya Muiruri, his second cousin, has over the past 14 months acquired stakes in three companies which are part of SportPesa’s international gambling empire.

SportPesa is the shirt sponsor of English Premier League side, Everton FC. After the government introduced taxes on bets placed by punters, and aggressively pursued gambling firms for its payment, it prompted a number of leading gambling firms to close their businesses in Kenya.

The taxes were brought in to both stem rampant gambling addiction in Kenya and also raise revenue from what has rapidly become a highly lucrative business.

Now it has been axed, it could see SportPesa, whose biggest shareholder and founder is Bulgarian national Guerassim Nikolov, re-enter the Kenya sport betting market and revive the wider gambling industry.

A SportPesa revival in Kenya would also benefit a member of Kenyatta’s own family.

A presidential spokesperson did not return calls or respond to a detailed text message asking whether Kenyatta knew about his cousin’s shareholding before he signed the bill into law.

A SportPesa revival in Kenya would also benefit a member of Kenyatta’s own family

The Kenyatta family business, managed by one the president’s brothers, has sprawling interests across the Kenyan economy, and individual family members also invest widely.

Shareholdings

Finance Uncovered, working with the Daily Nation in Kenya, accessed documents filed by SportPesa companies in Kenya, the UK and the Isle of Man.

The documents show Peter Kihanya Muiruri is a shareholder in three companies linked to SportPesa:

The first is a 1% stake in Pevans East Africa, the company which owns SportPesa in Kenya. Muiruri appeared on the shareholder register for the first time in May 2019, shortly before a government clampdown on the betting industry began. Muiruri is now also a director of Pevans. Pevans has previously disclosed that it amassed Sh20 billion in revenues and generated gross profits of Sh9 billion (£70m) in Kenya in 2018. The second stake is a 0.5% shareholding in SportPesa Global Holdings Limited (UK) – a company that owns SportPesa’s non-Kenyan betting companies in Tanzania, South Africa, Italy and Russia. It also owns a highly profitable UK business SPS Sportsoft Ltd, which provides IT services to SportPesa sister companies, including Pevans in Kenya. Muiruri acquired the stake last November. SportPesa Global Holdings made a profit after tax of almost £12m in 2018, according to its financial statements. The third is a 3% stake in SportPesa Holdings Limited (Isle of Man). This is an offshore company which receives SportPesa’s revenues from bets staked in the UK. Companies based in the Isle of Man, a small British Crown dependency and tax haven in the Irish Sea, do not have to publicly disclose their accounts so no financial information is available. Muiruri acquired the stake last December.

The value of Muiruri’s shares in the three companies is unclear, because up-to-date financial information for these companies is not available. It is also unknown at this stage how much, if anything, Muiruri paid for the shares.

SportPesa did not respond to the Daily Nation’s emailed questions. The company was asked whether it had lobbied the President either directly or indirectly for the reinstatement of its betting licence or any tax reductions.

The firm was also asked to disclose how much the president’s cousin paid for his shares in each of the three companies, and when he became a director in Pevans.

There is no suggestion of wrongdoing either by Muiruri or SportPesa.

Family connection

Muiruri himself is a low-key businessman. Little is publicly known about him. Muiruri’s mother is Uhuru Kenyatta’s first cousin, while his grandfather was the younger half brother of Jomo Kenyatta, Kenya’s first president.

In November 2016, President Kenyatta attended the funeral service of Muiruri’s father, the late Mzee Josphat Muiruri Kihanya, at the Holy Family Basilica in Nairobi and gave a short address. The presidency also issued a formal press statement paying tribute to the former civil servant, although it made no mention of the family connection.

SportPesa lost its betting license last July. The company announced it was withdrawing from Kenya last September in response to what it called “the hostile taxation and operating environment in the country”. Their withdrawal led to 400 job losses and the sudden cancellation of its local sports sponsorships.

In February this year SportPesa also withdrew from its international sponsorship commitments, including a reported £9.6 million a year shirt sponsorship with Everton.

The 20% duty was only introduced last November, according to the Kenya Revenue Authority.

Tax about-turn

Reversing any betting tax was not on the cards two months ago, when the Departmental Committee on Finance and National Planning chaired by Joseph Limo published the Finance Bill for public comment on 8 May. At that stage, the bill contained no plans to tinker with any betting taxes.

Committee meeting minutes show that an obscure stakeholder group — identified only by a non- existent URL as shade.co.ke — wrote to the committee on 15 May proposing the scrapping of the 20% excise duty on bets placed. “It has made many betting firms cash strapped hence cutting down on their sponsorships to local sports clubs,” they said.

The committee agreed, noting that “the high level of taxation had led to punters placing bets on foreign platforms that are not subject to tax and thereby denying the Government revenue”.

In its justification for approving the amendment, the committee explained to the National Assembly that it would “reverse the negative effects of this tax on the industry which has led to closure of betting companies in Kenya, yet international players continue to operate”.

The committee turned down other proposals by the unidentified stakeholder group to amend other tax laws affecting betting, which included a reduction in withholding tax on players’ winnings from 20% to 10% and exempting the betting industry from digital services tax. A gambling nation

As the committee was still considering the excise tax proposals in May, Finance Uncovered working with the Daily Nation published leaked betting revenue declaration figures from the industry for May 2019.

The data showed that punters had wagered more than Shs30bn (£234m) in just one month. SportPesa alone accounted for two-thirds of these betting revenues, according to the data which all betting firms submitted to the Betting Control and Licencing Board (BCLB).

Such huge revenues for a single month showed what is at stake for the gambling companies in Kenya.

The controversial 20% excise duty would have been levied directly on these revenues, and could — on the basis of the leaked revenue data — have been worth up to Shs72bn (£562m) in annual taxes for the Kenya Revenue Authority (KRA).

SportPesa alone accounted for two-thirds of these betting revenues, according to the data which all betting firms submitted to the Betting Control and Licencing Board

However, this was when the industry was at its peak, and before the government began its tax and regulatory clampdown last July, including suspending the betting licences of gambling firms including SportPesa and its next biggest rival Betin.

Two other associates of the president already hold a significant chunk of equity in SportPesa both locally and internationally.

They are Paul Wanderi Ndung’u, a key fundraiser for Kenyatta’s Jubilee political party during the 2017 election (17%); and Asenath Wachera Maina (21%), whose late husband Dick Wathika is a former Nairobi mayor whom Kenyatta has described as a long-time friend.

In addition to these links, SportPesa’s Nairobi headquarters share the same office complex that also houses the Kenyatta family-owned investment holding company.

This article was first published by Finance uncovered. An investigative journalism training and reporting project.

Published by the good folks at The Elephant.

The Elephant is a platform for engaging citizens to reflect, re-member and re-envision their society by interrogating the past, the present, to fashion a future.

By The Elephant

In the period from June to August this year Kenyan gamblers were hit by a wave of shocking news. Only a couple of weeks after Henry Rotich, Kenya’s National Cabinet Secretary, proposed a 10% excise duty on any amount staked in betting in order ‘to curtail the negative effects arising from betting activities’, the Kenyan government decided to shut down several betting companies’ virtual mobile money wallet systems because of alleged tax evasion. As a consequence, gamblers could no longer deposit or withdraw any money. This double attack on the blossoming betting industry has a background both in Kenya as well as elsewhere. Centered around the capitalist conundrum to realign the moral value of hard work and the systemic necessity to make profit, states tend to combine moral attacks on gambling (see the case of Uganda) with attempts to raise revenues. The vice of gambling turns into a virtue as soon that it raises revenue for the state.

It is also gambling’s allegedly nasty character which made the term a prime metaphor for the excesses of finance capitalism as well as for the pitiful status of the economies of neoliberal Africa characterized by rampant inequalities. Social scientists, politicians as well as journalists portray financial capitalism as a place where, in the words of George Paul Meiu, ‘gambling-like speculation and entrepreneurialism replace labour’ and the ‘magical allure of making money from nothing’, as Jean and John Comaroff have written, has seized the imagination of a vast majority of the population. Faced with a dazzling amount of wealth showcased by religious, economic and political leaders alike, young and unemployed men increasingly put their hopes on gambling. Trying to imitate what they perceive as a magical shortcut to unimaginable wealth, so the story goes, they become foolish puppets of a global capitalist system that they often know little about and have to face the dire consequences of their foolish behaviour.

After spending several months with gamblers both in rural as well as urban Kenya, I can only conclude that this story fails to portray reality in its complexity (see Schmidt 2019). While it is undeniable that some gamblers attempt to imitate the acquisition of a form of wealth that they perceive as resulting from a quick-to-riches scheme, a considerable number of Kenyan gamblers do not. In contrast, they portray and enact gambling as a legitimate and transparent attempt to make ends meet in an economy that does not offer them any other stable employment or income.

Narratives about betting leading to poverty, suicide and alcoholism neglect the fact that the majority of young Kenyan gamblers had already been poor, stressed and under extreme economic pressure before they started gambling, or, as a friend of mine phrased it succinctly: ‘If I don’t bet, I go to bed without food every second night, if betting does not go well, I might sleep without food two days in a row. Where’s the difference?’ Gambler’s betting activities therefore cannot be analyzed as a result of a miserable economic situation alone. Such a perspective clearly mutes the actors’ own view of their practices. They see betting as a form of work they can engage in without being connected to the national political or economic middle class or elite, i.e. without trying to enter into opaque relationships characterized by inequality. In other words, I interpret gambling as directed against what gamblers perceive as a nepotistic and kleptocratic state capitalism, i.e. an economy in which wealth is not based upon merit but upon social relations and where profit and losses are distributed in a non-transparent way through corruption, inheritance and theft.

Before I substantiate this assumption, let me briefly offer some background information on the boom of sports betting in Kenya which can only be understood if one takes into account the rise of mobile money. The mobile money transfer service Mpesa was introduced in 2007 and has since changed the lives of millions of Kenyans. Accessible with any mobile phone, customers can use it to store and withdraw money from Mpesa agents all over the country, send money to friends and family members as well as pay for goods and services. A whole industry of lending and saving apps and sports betting companies has evolved around this new financial infrastructure. It allows Kenyans to bet on sports events wherever they are located as long as they possess a mobile phone to transfer money to a betting company’s virtual wallet.

Gamblers can either bet on single games or combine bets on different games to increase the potential winning (a so-called ‘multi-bet’). Many, and especially young, male Kenyans, bet regularly. According to a survey I conducted last November around a rural Western Kenyan market centre 55% of the men and 20% of the women have bet in the past or are currently betting with peaks in the age group between 18 and 35. This resonates with a survey done by Geopoll estimating that over 70% of the Kenyan youth place or have placed bets on sport events.

Both journalistic and academic work that understand these activities as irresponsible and addictive had previously primed my perception. Hence, I was surprised by how gamblers frame their betting activities as based upon knowledge and by how they enacted gambling as a domestic, reproductive activity that demands careful planning. They consider betting as a meticulously executed form of work whose attraction partly results from its detachment from and even opposition to Kenyan politics (for example, almost all gamblers avoid betting on Kenyan football games as they believe they are rigged and implicated in local politics). Put differently, the gamblers I interacted with understand their betting activities as directed against a kleptocratic capitalist state whose true nature has been, according to my interlocutors, once more revealed by the proposal to tax gambling in Kenya. Two of my ethnographic observations can illustrate and substantiate this claim, the first being a result of paying close attention to the ways gamblers speak and the second one a result of observing how they act.

Spending my days with gamblers, I realised that they use words that are borrowed from the sphere of cooking and general well-being when they talk about betting in their mother tongue Dholuo. Chiemo (‘to eat’), keto mach (‘to light the fire’), mach mangima (‘the fire has breath’, i.e. ‘is alive’) and mach omuoch (‘the fire has fought back’) are translations of ‘winning’ (chiemo), ‘placing a multi- bet’ (keto mach), ‘the multi-bet is still valid’ (mach mangima) or ‘the multi-bet has been lost’ (mach omuoch). This interpenetration of two spheres that are kept apart or considered to be mutually exclusive in many descriptions of gambling practices sparked my interest and I began to wonder what these linguistic overlaps mean for a wider understanding of the relation between gambling and the ways in which young, mostly male Kenyans try to make ends meet in their daily lives.

While accompanying a friend of mine on his daily trips to the betting shops of Nairobi’s Central Business District, I realized that the equation between gambling and reproductive work, however, does not remain merely metaphorical.

Daniel Okech, a 25-year-old Master of Business Administration worked on a tight schedule. When he did not have to attend a university class during the mornings which he considered not very promising anyway, he worked through websites that offered detailed statistical data on the current and past performances of football teams and players. These ranged from the English Premier League to the football league of Finland (e.g. the website FootyStats). He engaged in such meticulous scrutiny because he considered the smallest changes in a squad’s line-up or in the odds as potentially offering money-making opportunities to exploit. Following up on future and current games, performances and odds was part of Daniel’s daily work routine which was organized around the schedules of European football leagues and competitions. The rhythm of the European football schedule organized Daniel’s daily, weekly and monthly rhythms as he needed to make sure to have money on the weekends and during the season in order to place further bets.

Even though betting is based upon knowledge, habitual adaptations and skills, it rarely leads to a stable income. With regard to the effects it has, betting appears to be almost as bad as any other job and Daniel does not miscalculate the statistical probabilities of football bets. He knows that multi- bets of fifteen or more rarely go through and that winning such a bet remains extraordinarily improbable. What allows gamblers like Daniel to link betting with ‘work’ and the ‘reproductive sphere’ is not the results it brings forward. Rather, I argue that the equation between the ‘reproductive sphere’ and betting is anchored in the specific structure between cause and effect the latter entails.

What differentiates gambling from other jobs is the gap between the quality of one’s expertise and performance and the expected result. For young men in Nairobi, one could argue, betting on football games is what planting maize is for older women in arid areas of Western Kenya in the era of global climate change: an activity perfected by years of practice and backed up by knowledge, but still highly dependent on external and uncontrollable factors. Just like women know that it will eventually rain, Daniel told me that ‘Ramos [Sergio Ramos, defender from Real Madrid] will get a red card when Real Madrid plays against a good team.’

For young men who see their future devoid of any regular and stable employment betting is not a ‘shortcut’ to a better life, as often criticized by middle-class Kenyans or politicians. It is rather one of the few ways in which they can control the conditions of their type of work and daily work routine while at the same time accepting and to a certain extent even taming the uncontrollability and volatility of the world surrounding them. Gamblers do not frame their betting activities in analogy with the quick-to-riches schemes they understand to lie behind the suspicious wealth of economic, political and religious leaders. While religious, economic and political ‘big men’ owe their wealth to opaque and unknown causes, gambling practices are based upon a rigid analysis of transparent data and information. By establishing links between their own life and knowledge on the one hand and football games played outside the influence of Kenyan politicians and businessmen on the other, gamblers gain agency in explicit opposition to the Kenyan state and to nepotistic relations they believe to exist between other Kenyans.

Therefore, it is unsurprising that, in the context of the betting companies’ alleged tax evasion, many gamblers have not yet repeated the usual complaints and grievances against companies or individuals that are accused of tax evasion or corruption. While some agree that the betting companies should pay taxes, others claim that due to the corrupt nature of the Kenyan state it would be preferable if the betting companies increase their sponsoring of Kenyan football teams. No matter what an individual gambler’s stance on the accusation of tax evasion, however, in the summer of 2019 all gamblers were eagerly waiting for their virtual wallets to be unlocked so they could continue to bet against the state.

This article has been co-published between The Elephant and Review of African Political Economy (ROAPE)

Published by the good folks at The Elephant.

The Elephant is a platform for engaging citizens to reflect, re-member and re-envision their society by interrogating the past, the present, to fashion a future.

Of Computer Glitches, Moving Human Fingers and Illicit Financial Flows

By The Elephant Today, The Guardian publishes an investigation we have carried out with them into Kenya’s biggest betting company, SportPesa. With its name emblazoned on the shirts of Premier League club Everton FC and a Formula One racing team, SportPesa is Kenya’s most powerful gambling firm – operating in a sector that sucks $2bn from Kenyans every year.

Its shareholders include Bulgarian businessmen, one of whom, Guerassim Nikolov, has a background in casinos and about whom historic concerns were raised in the Bulgarian media, which he vehemently denies. Its corporate structure is opaque. Our reporter, Lionel Faull, worked with Bivol, the Bulgarian investigative website, and The Guardian, to examine the inner workings of SportPesa. That piece is here.

Lionel also dug into the effect the gambling epidemic is having on Kenya’s youth. Here he reports on how one student activist became a victim of gambling addiction but who is now spearheading a campaign to bring about meaningful regulation. The activist also wants to see there is proper treatment for the hundreds of thousands of young addicted Kenyans who need help after having been lured into betting away money they can ill afford to lose. As part of their lucrative five-year deal with SportPesa, Everton played a pre-season match in Kenya this month

In 2017, a poll of African millennials revealed that Kenya’s youth are the biggest gamblers on the African continent.

A year later I prepared to travel to Nairobi to research a story about SportPesa. We at Finance Uncovered were interested in its stunning success. Founded and run by politically connected Bulgarian businessmen in Nairobi in 2014, it is now the biggest of Kenya’s mushrooming sports betting companies. And as we report with the Guardian today, so successful has it been exploiting the gambling craze in Kenya it has opened a European headquarters in the UK.

While investigating, I was struck by the almost total lack of any comprehensive data about the wider industry in Kenya and its millions of punters.

Sure, multiple news articles celebrated the rags-to-riches tales of jackpot winners, some of whom just as suddenly revert to rags. Others narrated horrifying individual anecdotes of gambling addiction, depression and suicide.

The gambling regulatory authority’s online presence amounted to a single sub-page of the interior ministry’s website and there was seemingly no organisation offering tailored counselling to problem gamblers.

It was as if a vast, silent vacuum had settled in the gaps between the sports betting billboards which peered down on Nairobi’s scurrying pedestrians. Finally, someone referred me to a gambling awareness website which was run on a volunteer basis by Nelson Bwire, a 24-year old economics student at Kenyatta University.

“A way of life”

I took the highway north out of the city to Bwire’s campus, past the football stadium that had recently welcomed English side Hull City FC for a SportPesa-sponsored exhibition match against Kenya’s top club team, Gor Mahia.

As we strolled along the university’s shrub-lined walkways, Bwire told me how he became addicted to sports betting.

It was 2013 and he was fresh out of high school, hanging out with mates and killing time on PlayStation.

One of them boasted how he had won money on a football match and showed Bwire how he could send cash via the ubiquitous mobile money platform M-Pesa to a website called JustBet, the only online sports betting platform in Kenya at the time.

“On my very first bet I put in KShs200 (£1.50) and won KShs4,800 (£35),” Bwire recalls. “I bet on four teams to win. I’ll never forget them. It was Swansea, Stoke, Arsenal and West Brom.”

The win was both a blessing and a curse: “It got me thinking this could be a way of life. It was a good experience, it seemed like fun. You could watch your team playing, and actually earn money doing it.”

“You want to become rich, doing nothing. You want shortcuts in life, and that’s your shortcut.

“As I continued betting, everything increased. The amount of bets, the amount of money, the amount of time. With friends, on my phone, with the room-mates I was living with. Most of us used to bet.

“After about a year and a half, I began to realise that none of us had money because the money we had, it goes to betting.”

Bwire estimated that over the 18-month period he was an avid gambler, he spent around KShs100,000 (£750) on football bets. To put this spending in context, his annual course tuition fee in 2015 was between KShs100,000-120,000 (£750-£900).

“The money I was betting with came from previous wins, pocket money from my parents, and other side jobs I was doing,” he explained.

“Loan sharks”

By late 2015, Bwire recalled that many sports betting companies had burst onto the scene, including SportPesa, and were advertising “vigorously” across Kenya. They were also active in and around the university, handing out flyers on campus and in the neighbouring estates where students live.

“I started to read stories in the media about people committing suicide, people gambling their fees, their rent money. And you also see the kind of life that gambling is sucking out of you. You are waking up and all you are planning is to bet. Whatever winnings you have in your betting account, you don’t even consider taking it out. You use it to bet again. It reached the point that I just called it quits.”

He also noticed how gambling was taking over other students’ lives. “You would go into the computer labs to do some research, or finish an assignment, and you would see screen after screen where students were just browsing sports betting sites,” he said.

“Students were borrowing money from loan sharks at predatory interest rates to fund their habit, and handing over their laptops or their national identity cards as collateral.” Problem gambling

In 2016 Bwire initiated a campus-wide survey to gauge the extent of gambling among his fellow students.

It found that half of male students and one-third of females surveyed bet more than once a week; and that nearly half of all respondents admitted to one or more signs of problem gambling behaviour. [see sidebar].

He later wrote a proposal to the university about how to tackle problem gambling on campus and launched a gambling awareness campaign working closely with student counsellors.

Nelson Bwire (second right) with fellow gambling addiction awareness activists and student counsellors, Kenyatta University, Nairobi, Kenya (July 2018). “Gambling is not something that I would want to see banned. No, I don’t take that hard line. But I think people should be aware of the risks and take responsible decisions,” Bwire said.

Soon to be an economics graduate, Bwire mused: “Right now Africa is growing, yes. But gambling problems will suppress African growth. The capital flight of gambling winnings that are going from Kenya to other places, that money should be in people’s hands. It should be in entrepreneurs’ hands. It should be in students’ hands.”

Shifting ground

Exactly a year after speaking to Bwire, I took the same road out of Nairobi, past the same stadium preparing to host another SportPesa-sponsored exhibition match, this time featuring Everton FC.

A hundred and fifty kilometres beyond the capital, deep in the countryside, SportPesa’s blue-and- white branding is plastered all over humble general shops in small roadside villages.

While SportPesa is the biggest player in Kenya, there are several others such as Betin, Premier Bet, 1X Bet and the UK-based Betway, which sponsors West Ham United in the English Premier League.

Huge billboards for betting companies greet you as you drive into bigger towns.

The inside sports pages of the newspaper I bought are filled with betting adverts, giving the day’s odds on matches from minor leagues in faraway countries.

But, after half a decade making billions in a largely unregulated environment, the ground is shifting underneath the betting industry’s feet.

A Gaming Bill has been introduced to Parliament that would overhaul a regulatory framework that was originally drafted in 1966.

Fred Matiang’i, the interior minister with a bulldog reputation, has given betting companies a month to settle their tax bills.

Citing a statistic that half a million Kenyan youth have been blacklisted for borrowing money they cannot repay, debt which Matiang’i attributed mostly to the betting craze, he declared: “This is a sector we must regulate.”

Last week, Matiang’i made good his threat when the betting regulator suspended 27 betting firms’ operating licences – including SportPesa – for alleged non-payment of taxes.

Safaricom, the mobile phone company which processes most of the mobile money transactions used to bet, was ordered to withhold their services to the blacklisted companies, and punters were given 48 hours to withdraw their money from their betting e-wallets.

The directives are thought to affect the majority of Kenya’s 12-million betting account holders, interrupting the flow of an estimated $2bn annually from their pockets to the industry.

SportPesa and others have protested vehemently, publishing their most recent tax compliance certificates in the press. SportPesa also pointed to a court order it obtained allowing it to continue operating pending finalisation of a dispute over payment of a percentage of punters’ winnings in tax.

Responding to suggestions about the rise of problem gambling in Kenya, the company told The Guardian it was a socially responsible business that placed a priority on local sports and community work.

In the midst of this febrile atmosphere, I give Bwire a call to find out how he’s doing and what he thinks of the clampdown.

Bwire has now left Kenyatta University, his graduation ceremony is later this month.

He continues to run his gambling awareness campaign on a part-time voluntary basis, but since we last spoke, his ambitions have grown: he is now preparing for it to go national.

He has registered a company, the Gaming Awareness Society of Kenya, and held a series of meetings with the betting regulator, urging them to introduce a countrywide gambling awareness campaign programme.

Nelson Bwire [R], founder of the newly-registered Gaming Awareness Society of Kenya, with Oluoch Ngicho [C], chief gaming inspector with the Kenyan Betting Control and Licensing Board (BCLB), and a colleague (February 2019)

He is also partnering with a UK software company, Betban, to offer betting website blocking technology to universities; and approached one of Kenya’s largest nationwide network of counselling centres to introduce gambling addiction counselling. But he is sceptical of the regulator’s motives for the crackdown: “If they were doing this in good faith, you might see some gambling addiction centres, some clinics, even just a little awareness created … they are just doing that for the tax.”

Bwire is echoing other commentators who see the directives as a thinly-disguised tax shakedown targeting the industry on behalf of the Kenyan revenue authorities and treasury who are under pressure to close a widening fiscal gap.

At a traditional wedding last weekend, President Uhuru Kenyatta referred to the crackdown explicitly. He said: “The firms should stop threats that they will move to court. The government must get its share [of tax] to fund activities that are beneficial to this country.”

This may not impress SportPesa’s owners, one of whom – as we report with the Guardian today – has been a major financier and fundraiser for Kenyatta’s Jubilee party.

“Those in the betting companies are our friends,” Kenyatta reportedly said, “But we have to agree that the government must get its rightful share to build cultural centres and other developments.”

But Bwire believes taxation is not going to dampen the public appetite for gambling, because “addicted gamblers will still gamble”.

He challenges the government to take a holistic approach, including addiction awareness and counselling.

“In this game of betting, they can’t only be a referee. People get injured in this game, and so there needs to be awareness about that, and doctors available too.”

Last year a new government body was set up, the Sports, Arts and Social Development Fund, to oversee the allocation of taxes specifically raised from betting.

Gambling taxes have reportedly already swelled the fund to around Shs15bn (more than £100m). By law, this money must be allocated to national sports teams, cultural facilities and the government’s universal healthcare pledges, as well as to unspecified “government strategic interventions”.

The fund took months to become operational due to political wrangling over who would control it.

In a country that many have argued is a kleptocracy, it remains to be seen whether any additional tax the government squeezes from the betting companies will fund gambling addiction awareness or rehabilitation – or instead disappears down the Nairobi drain.

Student gambling

In 2016, a few years after Kenya’s largely unregulated mobile phone-enabled sports betting craze took off, Bwire and his fellow students produced the first dedicated survey of betting among the youth.

They polled 373 students at Kenyatta University, roughly 0.5% of the university student population (78,000).

Although the sample size was relatively small, in the absence of comprehensive data about Kenya’s betting craze, it represents an important contribution to the public’s understanding of its prevalence. Some key findings were:

* Nearly half of all respondents admitted to one or more signs of being at risk of problem gambling behaviour: – 50% said they needed to gamble with increasing amounts of money; – 30% said they were preoccupied with betting; – 20% said they gambled the day after a loss in order to recoup it; – 20% reported making repeated unsuccessful efforts to stop, or cut back, on gambling; and – 3% said they had committed an illegal act to finance gambling.

* Most respondents said they started gambling aged 18-19.

* 68% of male respondents and 47% females said they gambled weekly, or more than once a week

* 7% of male respondents & 2% of females reported gambling daily

* Two-thirds of respondents spend up to KShs1,000 (£7.50) per month, one-quarter said they spend up to KShs5,000 (£40); and 5% of respondents said they spent more than KShs5,000 on gambling per month.

* 72% of all respondents saw gambling/betting as a way to make money; 40% said they saw it as a source of fun.

* 70% of respondents had gambled in the preceding year.

Read the report here.

These statistics broadly mirrored the headline findings of an often-quoted 2017 survey by GeoPoll on the leisure and spending habits of sub-Saharan African youth, which found that 76% of Kenyan respondents – the highest in the continent — had tried gambling.

Kenyans also spent the most money, about $50 (£40) monthly, mostly on football bets. The majority placed a bet once a week.

This is article was first published by Finance Uncovered.

* Edited by Ted Jeory and Nick Mathiason

Published by the good folks at The Elephant.

The Elephant is a platform for engaging citizens to reflect, re-member and re-envision their society by interrogating the past, the present, to fashion a future.

By The Elephant

At a cybercafé somewhere in Nairobi’s South B estate, stone-faced male clients are glued to their computers. They are youthful, the type that ought to be attending college, or if they are working, should be at their respective work places. It is mid-morning on a weekday, the cybercafé’s computers are all occupied and the young men are not on the Internet doing research for a term paper, collecting data, compiling a literature review, or cleaning up their CVs; they are busy placing bets on football games that are being played thousands of kilometres away, mostly in European cities.

This cybercafé is a replica of the many cybercafés spread all over the city and in suburban areas that have been turned into betting sites. “Cybercafés are no longer the Internet places you knew where people came to download serious stuff, upload a government document or even watch porn,” said Moha, the cybercafé’s owner and himself a former betting addict. “With the introduction of online betting in Kenya, the cybercafé business was transformed and acquired a new model.”

In Rongai town in Kajiado County, 25 kilometres from Nairobi’s city centre, college students and young professionals have turned to cybercafés to gamble in the football betting craze that has left many residents befuddled. “All of them are male and between the ages of 19 and 35 years,” said a cybercafé owner. “A young man who was working for an IT company left his job to bet full time.” In Kikuyu town, Kiambu County, many young men have been sucked into the betting craze. They spend all day holed up in cybercafés, betting on nondescript teams in faraway countries, such as Bulgaria and Ukraine. They pay KSh1,000 upfront to cybercafés daily to satiate their betting addiction.

“Betting has become a full-time occupation for some people,” said Njoroge, one of the young men I found betting at Moha’s cybercafé.

A recovering gambler, Moha was so compulsively addicted to betting that he would bet his cybercafé’s daily proceeds relentlessly and non-stop. Convinced that the following day would be better than the previous one, he would place his bet again and again. Again and again, he would lose: day after day, week after week, month after month. “Just when the business was now about to collapse, I woke up to my senses. I was lucky, I salvaged myself. It could have been worse,” said Moha. At the end of his betting mania, Moha had lost hundreds of thousands of shillings. “That money was never meant to be mine,” he consoled himself.

A full-time occupation

Moha’s cybercafé is decked with a smart 43-inch TV that beams the latest European leagues’ football matches live. I watched as young men worked their bets with the seriousness of college students sitting for an exam. “Betting has become a full-time occupation for some people,” said Njoroge, one of the young men I found betting at Moha’s cybercafé.

Njoroge is your archetypal Kenyan gambler: intelligent, male, young, urbane and computer savvy. He is a recent graduate of Technical University of Kenya. He finished his BSc in IT studies just last year and told me that he was in the process of looking for a job. But as he looks for a job, he said, he is hooked to betting. “I will not lie to you – I cannot stop betting because I have become an addict.” Njoroge has been betting since 2013, when he first entered university as a freshman. “But I will also congratulate myself, I have been able to tame my betting mania to now just once a week,” said Njoroge. “I bet every Friday and I have cupped my betting to no more than KSh3,000. That is the maximum that I can bet.”

I asked Njoroge what was the highest amount he had ever won during his four years of betting. “Twenty-one thousand,” he replied. “I don’t play huge bets. For me to have won the KSh21,000, I had placed a bet of KSh1,000.” Since then, he has been winning small amounts ranging from KSh3,000 to 6,000. Was it out of choice that he was betting small money? I asked him. “Not really. It is because I have never had a huge lump sum. If I did, trust me, I would play in the big league. The bigger the odds, the greater the risk, the higher the reward,” Njoroge reminded me.

“Although I am not able for now to stay away from betting, I consider myself a safe bet,” said Njoroge. “I have been betting at Moha’s cyber for a while now and I know all my fellow gamblers. I do not consider myself a serial gambler.” Njoroge told me of a banker who worked at Kenya Commercial Bank who bet every single day. “His online account always has a floating minimum of KSh10,000 for placing his bets. Many times he has lost huge amounts, but he seems to have a constant supply of money. He does not seem to worry about his losses.” Every morning at 7am, his banker betting friend passes by at the cybercafé and places his bet before leaving for work. In the evenings, before going home, he passes by again and places more bets. “I think betting is like a sickness,” mused Njoroge. “I look at the banking fellow and I cannot believe that he often bets to win only KSh1,000 on top of his minimum KSh10,000.”

“Gamblers never have enough money. They are always begging and borrowing and are trapped in a vicious cycle of living in a make-believe world of delusion where they will wake up the next day and be declared a jackpot winner.”

Anthropologist Natasha Schull says, “For gamblers, it is not always the sense of chance that is attractive, but the predictability of the game that underpins the escapism. Even winning disrupts this state of dissociation.”

Before releasing Njoroge to go back to his computer machine, I asked him whether he was genuinely worried that his addiction would (finally) get the better of him. “That is why I am seriously looking for a job. I am hoping once I get a job, I will quit betting.” It sounded more of a wish than an expectation.

“But once you get a job, won’t you start earning some good pay and that may induce you into placing bigger bets? I mean you will now have the bigger cash you been craving for?” I asked him. “Remember what you told me about the greater the odds, the higher the reward?” He paused, then said, “Let me go back.”

A sickness

“Betting is a sickness, a sickness that can only be cured by oneself,” said Simon Kinuthia, a recovered gambler, who once lived in East London and came back home in 2008. It is in East London that he first learned how to bet and eventually got hooked. “Betting and gambling joints are all over the city of London. They are like your local neighbourhood kiosks here in Nairobi.” As a restaurant supervisor in East London, Kinuthia would use his break to dash to the nearest betting kiosk to place a bet.” He been back in Kenya for nearly ten years now, and says he would bet even his house rent and would be perpetually broke and always in debt “because you must always borrow to feed your addiction. Gamblers never have enough money. They are always begging and borrowing and are trapped in a vicious cycle of living in a make-believe world of delusion where they will wake up the next day and be declared a jackpot winner.”

With his colleagues, Kinuthia would bet in the morning, at tea break, during the lunch hour, in the evenings and even at night. “When we got our weekly pay, we would all head to gambling joints and bet the whole night. We would lose all our money, possibly only one of us would win his bets,” said Kinuthia. Yet, that did not deter them. “The more you lose, the more you want to place even more bets, erroneously believing it was not your lucky night. It is a paradox.”

Kinuthia, who is an accountant by profession, told me that betting is a business based on the understanding of probabilities. “What is the probability of a gambler winning the jackpot?” posed Kinuthia. “It is one out of 10 million, assuming every day 10 million Kenyans are placing their bets. In other words, your chances of not winning the big money is 99.9 per cent.” Many of these people, Kinuthia said, have little or no understanding of the probability of losses.

Kinuthia has faithfully kept away from betting in Kenya. “I saw people (in the UK) lose jobs, others got into manic depression. Others who could not live with the shame of losing everything they ever owned – after being auctioned – and of having mounting debts, committed suicide. “Betting is like being a drug addict: People begin using drugs as a leisure activity in the false belief that they can quit anytime, if the leisure becomes boring, or if they find something better to do,” said Kinuthia. “But no sooner do you start dabbling in drugs, then you realise you want more and more of the same. It is no longer a leisure activity, but an addiction that has to be fed to keep it going. That is precisely how betting works, even on the most innocent people, who cheat themselves they are doing it for fun, and if not for fun, at least then to win some money. They soon realise they are hooked onto an alluring activity that is intoxicating, that like a drug gives them a kick, or if you, like ‘a shot in the arm.’”

Photocopied newspaper page with “hot games” for betting.

Social anthropologists have long observed that gamblers use their bets to chase losses and often they seek to be in a world where they can forget their problems. I found this to be true of my newspaper vendor friend, who has spawned a business idea from the betting mania: selling photocopied newspaper pages with “hot games” for betting. At KSh20 per page, the vendor mainly sells the information to security guards, casual labourers, matatu drivers and conductors, street vegetable vendors and hawkers, job seekers, as well as jobless Kenyans. All of these people’s dream is to win the jackpot and merrily transform their “miserable” lives by becoming instant millionaires. It is a dream fed daily by the fantastic news that a peasant women from Kakamega County can actually win KSh25 million from placing her bet correctly.

This paradox – of losing hard-earned cash in a betting game and instead of quitting, you immerse yourself even further in the quagmire is something I found prevalent among university students. To understand how the betting mania has caught on among Kenyan youth, I went to the University of Nairobi’s Chiromo campus, where science and medical students are housed. It is a campus for “serious students” who are not even supposed to have time to socialise. But with the onset of online betting in Kenya, Chiromo campus students have not been spared the craze.

Victor Rago, who is studying chemistry, admitted to me that the betting mania has afflicted his campus and is driving many students crazy. “Today students spend more time betting than they do in their academics. If only they spent half the time they did in analysing football matches so as to place the correct bets, we would have very many first class honours.” Rago told me about his roommate, who in their second year in 2017, placed his bet one Saturday afternoon with Ksh200. As luck would have it, by the evening his roomie was worth KSh250,000 sent to his smart phone. “I knew he had ‘struck gold’, because when he came to the room, he said he wanted us to go into town and eat some real food at some real restaurant. He excitedly told me he had won 250K and it was proper for him to take some time and enjoy life. For a whole semester he did not show up in the lecture theatre.”

Rago said students were now spending all their energies dreaming every single day about betting and winning bigtime money. It has become a full-time occupation for them. Studies have become secondary. “Here at Chiromo, there are betting groups, just like there are tutorial groups, but the betting groups are superseding the tutorial groups by the day,” said Rago. I asked him why many of these betting groups are mostly composed of male students. “Male students are ardent football followers, which they have done for a long period, so they have a knack for better and greater analysis and I also suspect they are not averse to risks.”

But that does mean female students do not bet, said Rago. “They do, but they are not in the forefront. And, because they are not as adept analysts like their male counterparts, they rely on ‘seasoned analysts’ to predict for them.” Many of the so-called seasoned analysts run online advisory chats on Telegram applications. “They are also WhatsApp advisory chats, but many gamblers prefer the Telegram app,” said Rago. He said the Telegram app is preferred because your contact details are not exposed to everyone. Unlike WhatsApp, where, if you have to belong to a chat group, you must share your mobile phone number, the Telegram app is created such that it is controlled by a sole administrator and he or she does not need to know your telephone number to chat with his or her clients.

Professional predictors

“One of the biggest of these Telegram app online ‘professional predictors’ is called Binti Foota,” said Rago. Ostensibly targeted at females who do not have the time to analyse or follow football matches religiously, it has an accumulated a following of nearly 19,000 gamblers. “What the betting craze has done is to spawn another industry, which is feeding into the gambler’s addiction,” said Rago. “So, for KSh530 a fortnight, Binti Foota can help you predict the outcome of football games. If you pay her KSh1,030, the site can predict for you for 34 days.” Rago said many of the female students who bet make the bulk of Binti Foota chat followers. “Binti Foota’s identity is not known, neither does she have to know the identity of her clients. So, if you are dissatisfied with her analyses, what you can do is migrate to another prediction site, or bad mouth her on a different site,” said Rago.

Social anthropologists say that the social costs of gambling are huge, and include bankruptcy, homelessness, suicide and domestic violence.

The student told me these online “professional predictors” had been infiltrated by online scammers, who have been conning people of their money in the guise of helping them place winning bets. “Many of the so-called online analysts and professional predictors are just scammers preying on the gambler’s addiction.” Scammers from as far as Nigeria have opened Telegram chat groups that pronounce how they have helped people win hundreds of millions of shillings. And because people are predisposed to greed, they fall prey to such scams,” said Rago.

He added that because of the obsessive compulsive disorder (OCD) behaviour displayed by the student gamblers, most of these students tend to neglect their studies and suffer from pendulum-like mood swings that are unpredictable. Rago told me of the Kenyatta University second-year student who committed suicide last year. “The student bet all his tuition fees – KSh80,000. What he did was to place two bets: KSh40,000 each. The odds were high, but he took the risk, convinced he would at least win one gamble. When he lost both bets, his world came crumbling down.”

Social anthropologists say that the social costs of gambling are huge, and include bankruptcy, homelessness, suicide and domestic violence.

The bigger the odds, the greater the risk, the higher the rewards is a principle many gamblers abide by, hoping to cash in on the odds they have placed. Many times, the risk is not worth it, “but then”, said Rago, “gambling is a compulsive behaviour disorder that overtime grips gamblers, who like alcoholics, to cure their alcoholism, must first accept they are suffering from an alcohol problem. Gamblers must also come to terms with their odd behaviour that drives them to bet compulsively.”

A consultant periodontist described to me how self-destructive compulsive behaviour disorder can be. A part-time lecturer, he narrated to me how one of his best students pulled out of class in his third year. “Aaah daktari, this course is taking too long: my peers are making money out there and here I am slogging through an unending degree course,” the student replied when he asked him why he had decided to pull out of medical school. “To my consternation, I did not know he had been betting on the side,” the consultant said. “I was told that his friends were boasting to him that by the time he is finished with his medical degree, they would be owners of real estate and funky vehicles.” His friends apparently were full-time gamblers and some had shown him their bank slips.

The consultant said he should not have been overly surprised: some of the young doctors known as registrars have become master gamblers. “In between their clinical rounds in the hospitals, the physicians are glued to their smart phones busy betting, so much so that one would be inclined to think that betting is one of their examinable units.” But the most shocking revelation came when he learned that some parents were encouraging their children to bet, oblivious of the dangers they are getting their children into.

Sports betting

I met a senior-level manager at one of the better known sports gaming companies for a chat in their posh offices in Nairobi. If a company’s employees is an indication of who its clientele might be, this sports gaming company told it all: The employees I saw were young – hardly more than 33 years-old with a look that declared: “We are here, we have arrived”. “It is not true sports gaming companies are impacting negatively on the Kenyan society, much less its youth,” he ventured to tell me. “This is a wrong notion that is being perpetrated by the mainstream media. It has become all hype and no substance. What I want are facts and figures, not emotional lurid stories.” He reeled off from his head the statistics from a recent poll conducted last November to find out how Kenyan youth are spending their money. “The survey, GeoPoll, showed that 26 per cent of the youth spend their money on saving and expenditure and only five per cent spent their money on betting. Which youth is this that is being destroyed by betting? The Kenyan media is obsessed with sensational reporting,” said the manager.

Implications of Sports Betting in Kenya – a study conducted by Amani Mwadime and submitted to the Chandaria School of Business at the United States International University in Nairobi in 2017, estimates that 2 million people in Nairobi alone participate in online betting.

The manager, who is not authorised to talk to the media, described betting as an entertainment and said people are entitled to some fun, some leisure, albeit in a controlled environment. “We operate under the rules and obligations of the Betting Control Licensing Board. We are therefore legitimate. What is destroying the youth is not sport gaming companies – on the contrary – it is the so-called amusement machines that are now found all the over the place, including villages in some far-off counties. Those machines are the problem: they are illegal, unregulated and accessed by all and sundry. Of course, most of them are used by pupils and students alike, who are yet to be of the adult age, that is above 18 years. That is what the government and the media should be concerned with and not licensed, legal betting companies,” pointed out the manager. The government should clamp down on these machines, not ask sports gaming companies to part with astronomical taxes – “it just does not make sense. We are a business, not a philanthropic company. The government is being unreasonable when it says sports gaming companies are making so much money, so they have to pay taxes that are pegged to their turnover. It never happens anywhere in the world.”

The manager said his company has a cap on the amount one can bet in a day: KSh20,000. “I should let you know, we are not reckless. We also do not want people to overstretch their enjoyment.” Sports gaming companies and casinos consider gambling a “victimless” recreation, and therefore, a matter of moral indifference.

The sports gaming companies are up in arms because the government has asked them to pay 35 per cent on their monthly turnover in taxes. “And do not forget we still have to pay the annual 30 per cent corporate tax. Some people are misadvising the government,” said the manager. This “misadvising” began last April, 2017, when Henry Rotich, the Treasury Cabinet Secretary, proposed a 50 per cent tax on sports gaming companies when he presented the national budget. He also came up with the Finance Bill, which President Uhuru Kenyatta refused to sign, insisting sports gaming companies ought to pay the 50 per cent tax.

Social scientists agree that gambling blurs the distinction between well-earned and ill- gotten wealth.

When the matter was taken up by Parliament, it was shot down; parliamentarians rejected the 50 per cent tax idea and said that the tax should remain at 7.5 per cent. “Now we don’t know where this 35 per cent is coming from. There is a misconception about sport gaming companies in this country: That we make abnormal and humongous profits. The most profitable company in Kenya is Safaricom. I have not heard the government say, since Safaricom makes billions of shillings, they should pay higher taxes than what they are paying currently, because they happen to be making tonnes of money.”

I told the manager that my preliminary inquiries on the betting mania, especially among the youth, is that it is distracting them from productive activities, be it studies or work. I also told him that betting is unwittingly creating among the most productive cadre of Kenyans a false notion that gambling can be considered an economic activity.

“Kenya is not a theocracy and gambling has existed in independent Kenya for the last 50 years,” shot back the manager. “Where is all this hullabaloo about sports gaming companies coming from suddenly? I sense business envy here from some (powerful) quarters. Could be it that some people are sore because they cannot believe they missed an opportunity to make money?” The manager told me that a tycoon close to the powers that be fought one of the sports gaming companies when it started its operations, arguing that these companies were corrupting the morals of the youth. There are currently 25 sports gaming companies in Kenya, according to latest Kenya Revenue Authority (KRA) statistics, which were compiled last year in June.

“The argument about morals is both laughable and superfluous,” said the manager. “What then should we say of alcohol? Shouldn’t the government then shut down all the bars and drinking dens to curb alcoholism? What about beer and liquor manufacturing companies? Shouldn’t the government tax them an arm and a leg because they encourage our youth to drink? Alcohol is not only harmful to their health, but also leads to anti-social behaviour.” The morality argument falls flat on its face, said the manager. “That is the province of the purveyors of heavenly realm. I have not heard them say betting will take the youth to hell or that they are engaged in a sinful activity. ”

The manager dispelled the notion that betting and gambling are reckless behaviour. “Life is about gambling. Did you know prayer is a gamble? Everyday people are offering prayers to God, which are not fulfilled. Yet, they continue praying and they will not stop. At least we fulfil part of our bargain by paying people for their gambles. I can tell you this without a shadow of a doubt, we are going to create millionaires like no industry has done in modern Kenya.”

Anecdotal evidence shows that online betting is impoverishing poor people and reducing their levels of productivity. Dr. Mukhisa Kituyi, the Director General of the United Nations Conference on Trade and Development (UNCTAD), recently observed: “:….you are seeing sports gambling in Kenya today, but nobody is telling the gambling firms not to accept money from poor gamblers. It is the poor who must be told that they will live with the consequences of dreaming that gambling is an investment.” It is a fact that gamblers are drawn disproportionately from the poor and the low-income classes, who can ill afford to gamble: they are susceptible to the lure of quick imagined riches. This class of people are in financial doldrums and other societal tribulations that make them vulnerable to fantastic dreams of sudden wealth.

A tax expert who did not want his name revealed said, “One of the sports gaming company’s act of sponsorship withdrawal can be interpreted as an act of industry intimidation. The company is taking advantage of the fact that there is no direct evidence attributing societal problems to its activities.” Sportpesa, one of the better known gaming companies, withdrew its sponsorship of 10 sporting entities in Kenya that it was supporting after the government asked all sports gaming companies to pay an upgraded tax of 35 percent.

The tax consultant pointed out that Chapter 12 of the Kenyan Constitution on public finance management requires the creation of a tax system that promotes an equitable society. “Translation: Sports gaming companies such as Sportpesa are obliged to engage in good management practices by not holding the country to ransom, and using scaremongering tactics and threats such as job losses, withdrawing to another country or jurisdiction.”

Social scientists agree that gambling blurs the distinction between well-earned and ill-gotten wealth. I thought of the young man Njoroge – smart and forward-looking – yet, gambling, a debased form of speculation, had reduced him to lusting for sudden wealth that is not linked to the process that produces goods or services. Through gambling he hopes to grow wealth without actually working for it.

Published by the good folks at The Elephant. The Elephant is a platform for engaging citizens to reflect, re-member and re-envision their society by interrogating the past, the present, to fashion a future.