IMPASSE

Striking a win-win for sports betting and development

We can adopt alibi model used by Finland, Canada.

In Summary

• In the alibi model, gambling revenues are allocated to social interests including welfare and sports, which make up about two percent of the Finland government budget.

• Canada also uses the model; money raised from gambling is channelled to education, sports and culture.

The media has been awash with stories of the dispute between the government on the one hand and sports betting firms on the other, together with the ensuing ramifications. One such story was that of sports gaming giant SportPesa cancelling all its sports sponsorship deals in Kenya, citing an extremely challenging business environment.

Putting aside the emotive issue of gambling, this is a blow to Kenya’s sports industry in general and football in particular as perennial rivals Gor Mahia and AFC Leopards as well as Kenya Football Federation will attest. With many sportsmen and women turning professional, sports has become an important source of livelihood, providing an alternative to traditional agricultural, manufacturing and service industry jobs.

Taxing gaming revenue from an optimally regulated industry is an important source of sports financing for many countries. A study by Research and Markets estimated that the global gambling market sector was worth $449 billion (Sh46.5 trillion) in 2018 and is expected to grow at a compound annual growth rate (CAGR) of 5.9 percent by 2022. In 2018, Asia-Pacific was the largest market for gambling, accounting for 32.7 percent of the global market followed by North America, Western Europe and then the other regions.

 

Going forward, Africa will be the fastest-growing gambling market, with a CAGR of 7.7 percent. Further, the sports betting segment is expected to be the fastest-growing segment in the gambling market. Working together with the sector players, it is possible for government to devise a mechanism to make sports betting a vehicle for good, especially in the delivery of social services such as healthcare, sports and infrastructure.

A 2012 research comparing the system of sport financing within the European Union, found that the share of tax revenues from gambling allocated to the development of sports ranged between 30 to 35 percent. In Germany, where sports betting is estimated to be the same size as the pharmaceutical industry, the total lottery proceeds in 2009 were distributed to the Olympic Committee, German Sport Aid Foundation and the regional sports confederation.

England, which was among the first countries to implement a system of sports financing through gambling

The above is ample evidence that a well-regulated sports betting sector can and does benefit society and Kenya’s sports betting sector should not be an exception.

Besides England, which was among the first countries to implement a system of sports financing through gambling, Finland is considered a success story in integrating sports betting sector with sports financing and offers a good prototype that Kenya may consider adopting.

To start with, and perhaps as an honest acknowledgement of society’s aversion to gambling, Finland frames gambling as a potentially harmful activity. Moving from this base, Finland has adopted an alibi model of gambling regulation where gambling is legalised to avoid illegal markets and the lawlessness that comes with an underground gambling sector.

In the alibi model, gambling revenues are allocated to social interests including welfare and sports, which make up about two percent of the government budget. The Finnish gambling policy inherently focuses on channelling gambling demand towards securing national social objectives. Canada also uses the alibi model, where money raised from gambling is channelled to education, sports and culture.

Proceeds can be channelled towards interventions for early detection and treatment of cancer

In 2016, the Betting, Lotteries and Gaming Act was amended to introduce a flat 35 per cent tax on gambling to fund sports, arts and universal healthcare. This amendment was, however, later reversed.

 

The 2016 amendment borrowed from the alibi model. Given its success in the two countries, it is a proposal that is worth re-looking at especially at this time when the government is looking for funding to implement the Big Four agenda, which include provision of universal healthcare. To make it even more granular, the proceeds can be channelled towards interventions for the early detection and treatment of cancer, which has quickly become a national scourge.

It is clear that there are opportunities for the sports betting sector to collaborate with government for a win-win outcome. With the Finance Bill, 2019 under discussion, now is an opportune time for the sports betting sector, government and the regulator to call a ceasefire, have a roundtable sit down and objectively resolve the stalemate once and for all.

Associate director with KPMG Advisory Services Limited ([email protected]). The views and opinions are those of the author and do not necessarily represent the views and opinions of KPMG.