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SportPesa mega profits revealed in court fight


Companies

SportPesa mega profits revealed in court fight


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SportPesa CEO Ronald Karauri. FILE PHOTO | NMG

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Summary

  • The firm’s net income dropped to Sh2 billion in 2017 and rose to Sh2.8 billion in 2018 – its last full year of operation before it lost its licence due to a hefty tax demand from KRA.
  • Disclosures of Pevans’ performance in the period between 2014 and 2018 have been made in a court case filed by Asenath Wachera Maina.
  • The SportPesa betting brand was brought back in October 2020 by Milestone Games, a company owned by a section of the founders of Pevans.

SportPesa made a net profit of Sh12.9 billion for its owners in Kenya in its first five years of operation when the brand was owned by Pevans East Africa, revealing the lucrative earnings in sports betting.

Pevans launched SportPesa in 2014 when it made a net profit of Sh44.2 million. The earnings rallied to Sh1.6 billion the next year, later peaking at Sh6.2 billion in 2016.

The firm’s net income dropped to Sh2 billion in 2017 and rose to Sh2.8 billion in 2018 – its last full year of operation before it lost its licence due to a hefty tax demand from the Kenya Revenue Authority (KRA).

Disclosures of Pevans’ performance in the period between 2014 and 2018 have been made in a court case filed by Asenath Wachera Maina, who wants the court to affirm the company as the owner of the popular SportPesa brand.

The SportPesa betting brand was brought back in October 2020 by Milestone Games, a company owned by a section of the founders of Pevans whom Mrs Maina accused of fraudulently transferring the trademark to the new company.

The performance of Milestone is unknown to the public but the historical earnings of Pevans signal the large profits that belie the battle for the SportPesa brand.

The High Court has temporarily stopped Milestone – in which Ronald Karauri has a majority stake — from using the SportPesa brand.

The parties are set for a hearing of the dispute on May 31, according to the orders issued by Lady Justice Dorah Chepkwony.

In the five years, Pevans raked in cumulative revenues of Sh228.4 billion from the bets placed. The company also spent a total of Sh4.4 billion on marketing over the period.

Its average net margins stood at about 5.6 percent. The KRA has, however, argued in court that the company exaggerated its costs to pay less tax.

Pevans ceased operations following the cancellation of its operating licence in July 2019 over unpaid taxes and penalties, which the taxman last computed at Sh95 billion.

SportPesa is the most popular brand in the lucrative sports betting industry.

The gaming platform is estimated to have a loyal customer base of 12 million in Kenya who placed bets worth Sh150 billion in 2018 alone.

Betting firms, the KRA and mobile money operators – whose platforms are used to fund the bets — are the biggest beneficiaries of the gambling craze that has become a national pastime.

The sports betting companies pay out part of the value of the bets placed as winning to lucky punters. The taxman also takes a cut of the bets besides income taxes on the betting firms.

Betting is popular among many young people who, besides seeing it as a game-like thrill, see an opportunity to make quick money.

Results released by Safaricom show that Kenyans spent Sh169.1 billion to place bets through M-Pesa in the year to March.

The 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.

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 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.

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.

The government reintroduced excise duty on betting stakes to 7.5 percent, which means it 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.

The government has sought to tax punters more as a means of raising revenue and discouraging gambling. Punters could soon pay a fifth or 20 percent of the cash they have set aside in their wallets for betting in a proposed change to the excise duty taxes.

This will raise it from the current rate of 7.5 percent taxed on cash wagered on betting, gaming, prize competition and buying lottery tickets.

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