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SportPesa: Why we axed our 400 staff

Thursday October 3 2019

SportPesa Chief Executive Officer Ronald Karauri

SportPesa CEO Ronald Karauri during an interview at his office in Nairobi on August 19, 2016. PHOTO | JEFF ANGOTE | NATION MEDIA GROUP 

 AGGREY OMBOKI
By AGGREY OMBOKI
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Betting giant SportPesa has fired 400 employees after the management indicated that it could no longer afford their salaries.

In a meeting on Wednesday, Chief Executive Officer Ronald Karauri told employees that their services were no longer tenable.

Speaking to a local radio station, Mr Karauri said the company had been maintaining staff without generating revenue, making the expense of maintaining them impossible to afford.

“We have been keeping our employees on the payroll without generating revenue. It is really sad, but this is something we have to do,” said Mr Karauri.

ADDITIONAL TAX

He said the government’s decision to impose an additional tax of 20 per cent on all revenues had changed the firm’s operating environment, leading to a collapse in the company’s business model.

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“With the new tax regime, our business model has collapsed. The tax regime we have in our industry is meant to control how the local players operate, and can result in our business becoming completely uncompetitive because foreign firms operating online are not subject to the same rules. Additionally, it will lead to the diversion and loss of revenue to offshore accounts due to people using foreign firms to generate more cash from their bets on those platforms,” he said.

Earlier, SportPesa’s Partnerships Executive, Tom Bwana, said on his Twitter account that the staff had been told of their dismissal in a staff meeting on Wednesday.

“So today SportPesa management had to tell its staff what has been the inevitable for the last 3 months - the centre can't holder any longer. Massive grief seeing this entire team rendered jobless by ridiculous policies of our beloved government,” wrote Mr Bwana on the conversation thread of the Twitter hashtag #SaveMy Job and #IlostMyJob.

MEETING

In a brief video recorded by a phone camera and widely circulated online, the firm’s employees are seen being addressed during a meeting by an unidentified staff member.

“In the past few days, the most common question I have been asked is where to find a cheaper house,” the man say in the clip that has since gone viral since it was shared on the #SaveMyJob and #ILostMyJob hashtags.

The mass sacking has elicited mixed feelings on social media with some condemning the government for adopting a hostile attitude towards local businesses with others justifying the workers’ fate as a consequence of the choice by SportPesa management to close the firm’s operations in protest against a valid tax regulation.

“There is serious need for government to audit its activities and see the fall-over effects on the masses. Hundreds continue to lose their sources of income because of government restrictions on business, tweeted Noble Harry on the hashtag conversation thread dubbed #SaveMyJob.

PREFERENTIAL TREATMENT

Others however termed the move justified, saying the betting culture had transferred billions from poor Kenyans into the pockets of greedy businesses.

“SportPesa wants Kenyans to give it preferential treatment. The loss of 400 jobs cannot be compared to the economic sabotage they have perpetrated against jobless youths. How do you sponsor Everton for Sh5 billion and then give AFC Leopards Sh50m? No deal. Just exit!” wrote Nkirote.

The latest development comes days after the betting giant announced the closure of its operations in the country due to what it termed a hostile operating environment.

“It is not possible to operate under the new tax rules. This has become a hostile business environment,” the company said in a statement.

Mr Karauri said the company is still in court pursuing the return of its licence, expressing hope that it would succeed in its quest, and see the return to a more favourable business climate.

LICENCE

“We are still in court over the matter of our licence. I hope those in authority will realise there is no need to come up with a system of taxation that has never been used anywhere else in the world,” he said.

For the last three months, SportPesa has been the battling the taxman through its lawyers in a move to contest the government’s decision to government to withdraw licences of 15 betting firms it accused of tax avoidance.

Mozzart and Betway, which were also affected by the government’s move, have since been allowed to conduct business after their licenses were reinstated.

Sportpesa and Betin, regarded as market leaders, were however not so lucky.

The company’s exit has spelt doom for the multimillion sponsorship deals it had signed with a number of organisations and local soccer clubs including Football Kenya, the Kenyan Premier League, AFC Leopards and defending champions Gor Mahia.

REVENUES

Across the borders, the firm has also signed partnerships with English Premier League teams Hull City and Everton, where it is the club’s main sponsor, and Hull City.

Thursday’s events could herald a dark chapter for the firm that had rapidly grown to become one of the country’s top top earners, at one point winning a tax compliance award from the Kenya Revenue Authority.

According to the government, betting firms earned revenues around Sh204 b in 2018 alone.

These earnings and the subsequent imposition of a 20 per cent tax on all revenues come amid concern about gambling addiction in the country. ET