Kenya's betting craze: Sh2,806 bets per second... and rising

Breaking down the staggering bets into smaller chunks would mean that Kenyans bet Sh242 million daily, which is Sh10.1 million every hour, Sh168,333 every minute or Sh2,806 every second.

By contrast, were Kenya’s gambling industry a marketplace, it would rival the Nairobi Securities Exchange (NSE) whose turnover last year only edged wagered total slightly at Sh94.2 billion.

Punters alone would be able to fully fund budgets for manufacturing and industrialisation, social protection, governance and justice, and sports, culture, recreation and tourism, and still keep the proverbial change.

Kenya's betting craze is alive and well, despite an annual crackdown on existing gaming companies and heavy taxation.

In 2019, for example, the Ministry of Interior under then Cabinet Secretary Fred Matiangi took on gaming firms with a series of criminal charges, including money laundering and tax evasion, in a battle that nearly killed the sector.

While the government's actions seemed to drain the swamp, like cockroaches that are said to have the potential to survive a nuclear attack, the industry has bounced back with thousands, if not millions, of devotees, all itching to make a killing, or as they say on the streets, 'kuomoka'.

Players have braved the risks of gambling and the certainty of heavy taxation to keep the lights on for a multi-billion shilling enterprise.

But what makes a gambler tick?  What keeps them going, setting aside sums of their hard-earned money in losses as they routinely fail and barely win?

“Excessive gambling is a defined mental disorder. This mental disorder is known as ludomania or problematic gambling. This disorder incapacitates its survivors in such a great manner that one is not able to stop the gambling behaviour despite its many risks,” Silas Kiriinya, a consultant psychologist and the CEO of Amazon Counselling Centre, tells Nation.Africa.

“The behaviour begins as just a way of entertainment and a means to pass time and get rich. Eventually, a habit is created and before one takes notice, they are severely addicted to gambling already. This explains why one is not able to stop the behaviour of gambling despite losing many times.”

Comorbidity, a pre-existing mental disorder, can also lead to pathological gambling.

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According to Dr Kiriinya, Kenya has rapidly become a betting nation, with the number of people seeking professional help increasing by the day.

Betting has also been informally promoted, especially among the youth, as a get-rich-quick scheme and a magic wand for overnight wealth.

However, the phenomenon of gambling is steeped in history, with its beginnings predating modern history: evidence of gambling practices has been found around the world, including in Egypt, Greece, China and Japan, and dates as far back as 2000 BC.

By the Middle Ages, countries such as Italy and Germany had legalised gambling, while others such as France and England maintained a conservative stance on the industry.

Kenya did not allow gambling until 1952, when, curiously, the then-Christian Council of Kenya called for the practice to be decriminalised, arguing that it would lead to tighter regulation of what it described as a vice, an abomination and an activity that went against the Protestant work ethic.

Nevertheless, gambling remained relatively small-scale, with activity largely confined to racecourses and licensed betting shops.

However, the introduction of the internet and mobile phones in the 1990s created new opportunities for gambling, including the entry of foreign online betting companies.

Today, the gambling industry is in full swing, with both legal and illegal gambling taking root.

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In post-independence Kenya, the first major piece of gambling legislation was the Betting, Lotteries and Gaming Act of 1996.

The Act has undergone minor amendments over the years, including changes in 2010 that gave county and national governments concurrent jurisdiction over gambling.

The Kenya FinAccess Household Survey of 2021 paints a picture of the betting population that exposes the groups of people who are putting firewood on the bonfire that is the betting industry.

The percentage of adults who gamble is reported to have increased from 1.9 per cent in 2019 to 13.9 per cent in 2021, with urban males aged 18-36 more likely to bet.

The majority of gamblers have a level of education beyond secondary school, while youth aged between 18 and 25 years are more likely to bet than those in other age groups.

One in 10 Kenyans, or 11.2 per cent of adults engaged in the activity, see betting as a reliable source of income, although this is down from 22.7 per cent in 2019.

Mobile money has added fuel to the fire, with 2.6 per cent of mobile money account holders admitting to placing bets using their accounts.

With millions of people betting, this has ensured a steady stream of revenue for the bookmakers, who more often than not make a killing from punters' losses.

In a game of chance, the house is more likely to win as the odds are stacked against the dreamers and success is purely down to luck.

According to the Betting Control and Licensing Board (BCLB), bookmakers took in Sh16.3 billion in the year to June 2022, while casinos took in Sh6.4 billion, with the conservative figures representing gross gaming revenue after taking winnings into account.

While the house has always won, Caesar, represented by the taxman, has always taken his cut from the industry that has proven to be a cash cow for the exchequer in times of plenty and lean times.

Over the years, the government has slowly tightened the noose on the industry, squeezing more juice out of Kenyans' desire to make a killing.

Subsequent financial years have been accompanied by policy changes designed to take more out of the industry, even if the result so far makes no difference to the rich desires of punters.

For example, the passage of the 2023 Finance Act brought with it a higher rate of excise duty on betting, with the tax levied on amounts wagered rising from 7.5 per cent to 12.5 per cent from July.

Kenya already has some of the highest tax rates on betting, with rates seemingly increasing every year.

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For example, gaming companies are required to withhold 20 per cent of winnings paid to punters.

Similarly, the taxman collects a 15 per cent tax on the gross gaming revenue of gaming companies.

The taxes are in addition to the annual licence and compliance fees, which vary according to the type and size of the gaming operation.

Gaming companies are still required to pay income tax at the standard rate of 16 per cent.

The KRA has recently linked its system to that of gaming companies and now requires companies to remit excise duty overnight.

While tax increases on the classic sin industries such as tobacco and alcohol have proven to be demand destructive over time, taxes on betting have yet to prove a deterrent to either punters or bookmakers.

The unofficial proof of inelasticity has encouraged the government to impose more taxes on betting each year.

"Betting is inelastic and yet as addictive as alcohol, cigarettes or luxury goods. The industry has been a quick-fix solution to the government's revenue problem, where new taxes are always directed at the sector, especially when the economy is struggling. However, one would think that if a tax goes beyond a certain limit, it might be untenable for some participants in the industry," says Michael Mburugu, regional tax partner at consultancy firm PKF Eastern Africa.

Mr Mburugu argues that Kenya's betting craze is largely peculiar to standards set in advanced economies where punters are largely wealthy.

"I would call it irresponsible betting, where someone earning Sh200 a day will bet Sh100 in the hope of making a lot more. I very much question whether betting is a real economic activity. In advanced economies, betting is reserved for people with excess liquidity," he adds.

After years of taking a slice of the pie, the government now seems to want the whole cake, having proposed the creation of a National Lottery.

The government is keen to ride roughshod over betting companies as it seeks to raise new funds to fund areas such as sports, culture and the arts.

By creating a State-owned gambling machine, Kenya will join the likes of the United States, where states run popular lotteries such as Mega Millions and Powerball as designated national lotteries.

The United Kingdom runs its national lottery through the Gambling Commission, which has been in operation since 1994.

However, a lottery can be distinguished from both gambling and betting, where it remains a game of chance but the winners are determined by a draw.

According to a draft document from the Taskforce on the Creation of a National Lottery, the entity will pool resources to be directed to selected good causes or eligible government agencies, with a National Lottery Board (NLB) in charge.

“The NLB shall establish a new National Lottery that will be built as a distinctive, inclusive, strategic national asset that seeks to be the best in the world, capturing the imagination of all of the Kenyan people, be seen as a legitimate way of winning/spending money that is inclusive, accessible across the country, with adequate safeguards, run by a competent entity in a transparent and accountable manner while generating resources to be distributed to clearly selected good causes across the country,” the draft reads in part.

The National Lottery would be the only national lottery backed by the government, licensed by a new regulator to be known as the Gambling Regulatory Authority, and operated by a competitively recruited private operator.

Half of the proceeds of the lottery are expected to go to prizes and winnings, 38 per cent to good causes and 10 per cent to the national lottery operator, with the remainder split between contributions to a National Lottery Fund, the National Lottery Board and the Gambling Regulatory Authority.

In the low scenario, the National Lottery is expected to have a turnover of Sh31.74 billion and is tipped to reach revenues of at least Sh110.43 billion by 2033.

On the brighter side, lottery sales are expected to reach a high of Sh398.23 billion.

The National Lottery is expected to generate Sh34.52 billion in taxes, including corporate taxes in the first three years, with the bulk of the new gambling taxes expected to go to the Sports Fund.

Whether the National Lottery will reverse the trend of excessive gambling and betting or only fuel it remains to be seen.

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