Sportspesa starts cutting sports sponsorships in Kenya

It did not take long for SportsPesa CEO Ronald Karauri to carry through on his threat to discontinue sports sponsorships following his company’s challenge last week to the Kenya government’s imposition of punitive tax increases.

The increases raised gambling taxes from 7.5 percent to 35 percent. Added to the African country’s 30 percent corporate tax rate the increase is expected to have a major negative impact following its implementation on January 1 2018 (see previous reports).

Local media reports are that on the last day of 2017 the Football Federation of Kenya received a letter from Karauri explaining the company’s position and advising that he had no option but to terminate all sponsorship contracts with immediate effect.

The shock announcement came whilst SportsPesa is not yet half way through its agreed Kenya Premier League sponsorship contract, said to be worth the equivalent of almost US$5 million.

Federation president Nick Mwendwa said the loss of this key sponsorship revenue constituted a major blow to the federation.

Media reports are that several clubs will also be impacted by the SportsPesa decision to scrap sponsorship contracts, including Gor Hamia FC, AFC Leopards, Nakuru All Stars, Kenya Harlequins and the SportsPesa Super 8 League.

The SportsPesa move comes despite recent statements by government officials that it planned to engage with operators to better understand their problems.

Karauri has also moved on the Kenya High Court ruling that the government has the right to impose taxation through a budget process rather than a full standalone parliamentary debate on the subject, advising that SportsPesa is to launch an appeal against the judgement on grounds that it is not in compliance with the national Constitution, and does not fairly apportion the tax burden.

It appears that for now at least SportsPesa intends to stay in the Kenyan market, judging by company statements.