Gambling revenues fall on withholding tax

By Steve Umidha
Revenues reported by casinos dropped by a total of Sh1.54billion last year following a 20 percent withholding tax imposed on winnings, a new report on gambling in Africa by PricewaterhouseCoopers (PwC) reveals.
Casino gambling revenues in Kenya recorded a 6.9 percent dip in profits in 2014 down from 11.2 percent increase registered the year earlier and 24.2 percent compound growth between 2009 and 2011.
The study released this week further reveals that other than the government’s decision to introduce the withholding taxes on winnings from betting and gambling, increasing competition from legal online gambling and lotteries may have also contributed to the sluggish growth in the industry.
Sports betting companies like Sportpesa has in the recent months become synonymous with sports lovers in the country since its launch last year – mainly football enthusiasts who keenly follow Kenya, English, Spain, Italy and German premier leagues.
“An issue of great concern to the casino segment is that of illegal online gambling, and in addition certain casinos are also facing competition from other gambling facilities opening up in their catchment areas. Kenya compared to other markets will face stiff competition from legal online and mobile gambling,” commented Pietro Calicchio, Gambling Industry leader for PwC for South Africa.
The withholding tax regime came to effect January 1, 2014 following the Finance Act of 2013 which is believed may also have contributed to the slowdown for the 13 licensed casinos in Kenya.
South Africa has by far the largest component of gambling market in Africa ahead of Nigeria. Casino gross gambling revenues accounted for 72 percent in SA of total gross gambling revenues last year, down from 76 percent in 2013 compared to gross gambling revenues in Nigeria which rose by 17.1 percent in 2014.
Despite the sector’s slow growth, the report casts hopes in the segment and forecasts the industry’s revenues to grow by 7.5 percent compound annual rate from USD20.1billion to USD28.9million in 2019 and the growth is moreover expected to remain relatively stable in the next five years. Growth is further poised take place in the three markets.
“In the three market regions as a whole, gross casino gambling revenues will total an estimated USD1.8billion in 2019, a 2 percent compound annual increase on USD1.7billion last year.
John Ogana, an independent industry analyst however say the sector should expect bumpy ride in the near term from slower economic growth in these key markets as well as the continuing competition for market place from national lotteries such as Kenya Charity Sweepstakes and Limited payout machines (LPMs) which are commonly located in sports bars, night clubs and restaurants – which accounted for 9 percent of gross gambling revenues in 2014 among other gambling activities.