SportPesa’s Sponsorship Withdrawal – Biggest Gamble

2018 Cometh……

2017 has been one momentous year for the country. Even in the world of sport, it has been a well mix in the basket. Talking of baskets, tongues are wagging about the biggest sponsors of sport in Kenya – SportPesa – who are thinking of pulling back their bountiful offering, effectively reducing its involvement in sports in Kenya. What does this portend for sports in 2018?

We got the world...(image courtesy of SportPesa)
We got the world…(image courtesy of SportPesa)

A few posts ago, we predicted the impact of sports betting companies on our sports scene. A casual look at Kenyan sport in the last 3 years has seen a major impact both directly and indirectly on how we consume and interact with sport.
A PwC report on Kenya Entertainment and Media 2013-17 , revenues from sports betting were projected to rise from US$ 11.7 million (2012) to $17.3 million (2017).
As of writing this post, there are about 25 sports betting (and gambling )companies registered in Kenya. The biggest and easily recognisable is SportPesa – operating BCLB (Betting Control & Licensing Board) license no. 673 through Pevans EA Ltd.

Conservative estimates of sports betting and its impact to the economy are at between KES 635-700 million p.a. This is mainly in sports sponsorship, direct spending in improving sports facilities and teams, as well as employment. Add another KES. 2.4 billion in media spend (various media research reports in 2017) – from digital, print, radio and TV – as well as daily spends and we’re talking of billions of shillings!

The synergy enjoyed by both betting and telecoms companies have seen the mobile money in Kenya grow to daily transactions worth KES 18.4 billion! A good fraction of the monies are from your common man on the street, to the discerning campus student and many in blue-collar jobs who review their odds every other morning to make the winnings.

SportPesa Success

Back to SportPesa, the upsurge of sports betting in Kenya can be attributed to its adeptness and adaptability to their audience. As aptly summarised by BetMoran on the post titled ‘ Why SportPesa is very successful‘ the main points include;

  • Consumer spend – 50,000 users spending an average of KES. 500 = KES 25 million per month;
  • High and engaged web audience – an average of 16-18 million users every month (if using Google AdSense-this is another revenue stream);
  • Consumer education – when launching in 2014 just in time for the World Cup, SportPesa has continually educated its target audience on its various betting platforms and options;
  • Mobile technology – as noted above, riding the wave of over 25 million unique mobile phone connections, SportPesa was able to ride the wave of mobile money and making it integral in its platforms;
  • Media spend and engagement- as of Aug 2017, SportPesa was the biggest ad spending firm in media in Kenya rivalling telecoms and FMCGs such as Safaricom, Coca-Cola and P&G that have traditionally been high spenders in these.
  • Timing – launching in time for the 2014 World Cup, the brand was able to take advantage of the biggest sports extravaganza in the world. Pray they’re already looking forward to the 2018 one…

Enter GoK’s hand

In May/June 2017, the Treasury CS tabled proposals to tax sports betting firms in Kenya as high as +50% of the daily collections. While it is not our forte in matters taxation, with the numbers mentioned above, it would be foolhardy to assume this would not attract the Treasury technocrats. Given its agenda to invest in infrastructure including the now-on-then-off stadia development, the GoK has had a tough year in looking to bridge the budget deficit.

Sports betting firms did what is becoming our typical litigious selves in Kenya and took to court to stop the tax measures. The case to nullify the tax measures was dismissed last week, effectively attracting a 35% tax cap on the gross earnings of the sports betting firms effective January 2019.

As of close of 2017, the tax percentages were as follows;

  • 5% of lottery sales;
  • 7.5% for betting firms and bookmakers;
  • 12% for casino gambling and
  • 15% for raffles.
  • Additional taxes include 30% corporate tax and 25% of their total sales dedicated to social causes, including sports activities.

SportPesa is currently involved in major sporting disciplines including;

a) Football – FKF, Premier League, Super 8 , Gor Mahia FC, AFC Leopards FC and Nakuru All Stars FC

b) Rugby – through KRU, National 7s team and Kenya Harlequins;

c) Boxing – Boxing Association of Kenya and boxer Fatima Zarika;

d) Rallying – by sponsoring Leonardo Varese.

Other sponsorship includes shirt sponsoring Everton FC; sports partnership with Arsenal FC, Southampton FC and Hull City as well as La Liga in Spain.

All these associations are likely to be affected in one way or the other once the firm confirms its future role in sponsoring sports in Kenya and overseas too.

Having started expanding its geographical reach in the region to both Uganda and Tanzania, the main market still remains the local scene. The firm’s perceived close links within the GoK will also be exploring ways of either reducing the burden of taxation or enjoying tax holidays for a little longer than the prescribed date.

Way Out?

  1. National Sports Lottery – the establishment of this lottery is long overdue. The GoK through the Ministry of Culture and Sports ought to have fast-tracked this in the last 3 years. Among the many options would be to push for all betting and gambling companies to remit part of their monthly revenues to this common Fund. The monies raised would be apportioned to the sports associations proportionate to the scope of the sport and planned activities for the year. This has worked successfully in countries such as the UK.
  2. Commensurate Social Responsibility – in South Africa, betting and gambling companies have to engage a fair amount of their revenues to corporate social responsibility. While it may not be a sustainable business model for sports business, it is a means to the end of sports development in parts of the world as this.
  3. Lobbying – while we are not privy to what may have happened along the corridors of Parliament and the delays in confirmation of respective committees, it would serve them well to lobby the legislators to reduce the impact of the taxation on their revenues. Alternatively they can give their options of tax regime or tax holiday for those setting up to their 2nd or 3rd year upon which the applicable tax kicks in.

As of 1st January 2018, SportPesa had sought to appeal the ruling in the courts seeking to overturn the ruling. In the meantime, all local sponsorship stands suspended.

To managing the taxman and his demands, a lot still needs to be done to reach a consensus. For the sports organisations likely to be affected, a common ground on appealing to those in Government can be pursued.

It remains to be seen how the biggest gamble will finally play out in 2018.

 

Are Community Clubs in Kenya basket cases?

Once again the arguments about football clubs in Kenya in particular the community clubs v/s ‘corporate-sponsored’ clubs are back again (see earlier post here). It’s a bit of concern now especially with the taxman breathing down the neck of all and sundry. It is quite tragic that most of the community clubs enjoy a huge fan-base ( but have not been able to monetise and marshal these numbers to reflect well commercially..)

While some officials of the clubs read mischief and malice, in the end what the taxman wants, s/he gets! It is also very clear that most of the club officials have not put in place proper mechanisms for running a club.
Issues like;

  • annual financial statements;
  • player contracts and players’ welfare; 
  • commercial and business plans ( add the marketing bit in there);
  • communication and PR strategy 

among other important documents. They should not also blame other sources for their ineptitude and incompetency.

While the KPL has been making slow progress on some fronts, it is of fundamental importance that clubs set these issues right to avoid what we’re seeing currently.
It is also important that the KPL officials avoid being held at ransom by club officials who stifle developments such as has been the banned-but-soon-lifted proclamations regarding hooliganism.
Some have blamed the security personnel for not getting it right, but we already have over-stretched these people with current security scares in the country.
Clubs must revamp their mode of operations from societies ( as one official was quoted saying in the Press) to proper commercial and business outfits.

Sports is not charity anymore and KPL ought to spell this out for participating clubs. A benchmark of financial resources should be in place for at least 1 year. This will show that the club is capable of paying its players, management and other technical staff, merchandise and training facilities among others. Penalties should be in place for those who fail to meet the thresh-hold.

Early this season, KPL decided to do an audit of football venues across the country. It is also prudent for them to do the same for financial records of the clubs.Related to this, there is an interesting report done by AfriCog detailing football mismanagement in Kenya. Check the link here.

Back to the community clubs, various countries have tried these models of operation and succeeded so it is not excuse enough for the poor management practices currently witnessed. Clubs such as Kaizer Chiefs (South Africa), Atletico Bilbao , Barcelona (both from Spain), Boca Juniors (Argentina) as well as Borussia Dortmund to name a few.  A few quick tips;

  1. Establish a limited company before selling shares – this can be either to the general public or restricted to a certain number ( say 1 share worth KSh.50,000 etc);
  2. Get a wealthy benefactor and get him/her to manage the club as one of his entities – this is yet to catch on in Kenya but is prominent in Europe moreso England. Any Katumbis, Khozas or Abramovichs in Kenya?
  3. Secure major sponsorship deals with leading companies – this is a tricky one since most companies have what they call a need for ROI thus cannot justify putting money where they might not get value for it;
  4. Secure a large fan-base ( preferably regional or national) and this will be lucrative to both individual or corporate investors ( tragedy is if they are an unruly and emotional lot, they often end up being a curse instead) and finally
  5. Perform, perform and perform! Without good results, any club is as good as dead.
SIDE-NOTE:
In researching for this piece, some interesting links came up such as this one on the top clubs in Africa as done by CAF in December 2012. It’s interesting to note that even though the Democratic Republic of Congo has a troubled economy, their football clubs have performed well in the continent. Here’s a snippet of the rankings- number in brackets represents FIFA Club World rankings;
1. (67) Al-Ahly – Egypt  – estimated revenue of $36.09 million (in 2008)
2. (146) Esperance Sportive – $5.71 million 
3. (147) Zamalek – Egypt – $26.8 million
4. (176) Tout Puissant Mazembe aka TP Mazembe – DRC – $15 ( in 2013)
5. (190) Asante Kotoko – Ghana 
Kenya’s Clubs;
45. Gor Mahia (Pos.604)
79. AFC Leopards (Pos.893)
88. Tusker FC (Pos.954)

Additional info on the post can be found from the following links;
Top 5 African millionaire football club owners
For TP Mazembe…the future looks bright
Worlds Top 5 Fan-owned Soccer teams
CAF Club & World Rankings – 2012
Richest Football Clubs in Africa by Revenues – 2008

Ingwe TV – Smart move or ill-advised?

There has been all the hullabaloo about the AFC Leopards-Ingwe TV deal with Zuku and the concerned club’s status with KPL’s sponsored by SuperSport. While the easier path is for KPL/SuperSport to feel infringed by the deal, it’s in the club’s interest to look for alternative sources of revenue and by extension engagement channels. The TV channel which is supposed to screen 36 episodes of half-hour each covering past games, interviews, team news and historical journals. If anything, it has been SuperSport and KPL’s personnel sleeping on the job for lack of initiative to engage local clubs on setting up their own TV channels.

Ingwe TV logocourtesy of www.afcleopards.net

Across the world, major football clubs have their own channels which serve to endear themselves to their fans and provide an added platform for not just engaging with them but also for sponsors, advertisers and related parties to reach the audience.

The main bone of contention is that AFC Leopards playing in the SuperSport-sponsored KPL ( now Tusker Premier League) which sees it enjoy live coverage of their matches and also featured in the weekly football magazine Simba Soccer programme among others. Now if you look at it carefully, this is the same sort of engagement with other clubs in the KPL only that AFC Leopards ( and maybe 3-5 other clubs) would have a rich heritage as that of Leopards affectionately known as Ingwe by its fans.
And though AFC Leopards had earlier tried such a deal with Smart TV before it went under, it is a veritable decision which is bound to cause other clubs to start looking for such alternatives.
If you look at the revenue sources for football clubs in the country, the main ones come from corporate sponsors who still haven’t put enough monies to cater for huge expenses incurred by the clubs in its wages, training and youth facilities. The monies from SuperSport are also not enough with the booty shared according to how well the club does on the standings at the end of the season. Ticket sales on match-days are so haphazard and given the apathy that fans are bound to build following recent spates of fan trouble and violence, it is not yet a reliable source.

This leaves clubs such as AFC Leopards with deals such as Ingwe TV. The challenge now will be on its management and club aficionados to come up with regular and relevant content both from current and past games. If they have rich archives of past glory days ( maybe they can have a chat with KBC management…) and also dig through past dailies and other publications, they would be able to create such content. Engaging past players and current ones too would see it provide a source of livelihood and work for these players.

In Zuku , they would be able to leverage not just on the TV channel but also on the Internet and online platforms which would be quite engaging as we see a major shift of users to online and mobile usage across the country and African region as well. It would also help Zuku attract additional customers to its triple play solutions and hence create a win-win situation for both parties.

As we write this KPL has threatened AFC Leopards with suspension unless it cancels the deal but Richard Bell the Wananchi Group CEO ( which is the mother company for Zuku) has said they’ll stay put since they didn’t infringe on any rights. Hoping sanity prevails between all parties and though commercial interests maybe the main drivers, one without the other will see a loss not just to the club, TV companies but also to the fan who is the ultimate target in the whole of this equation.

AFC Leopards v/s Gor Mahia – Kenya’s Biggest Football Derby ’12 Second Edition

KPL and football pundits are rubbing their hands with glee as the biggest football derby in the country comes to fruition this weekend at the newly refurbished Kasarani grounds ( MISC if you like). A couple of weeks ago, it looked like AFC Leopards had all but sealed the top spot going into the 2nd and final leg of the 2012 season of Kenya’s premier football league. But the last couple of games have ended in draws and a more recent loss to Western Stima in Nakuru reduced the gap between the top 3 teams by 2-points ( NB: reigning champions Tusker FC lead by virtue of a better goal advantage but are equal in points with AFC at 45 points).
On the other hand, Gor Mahia have been on the rise after brushing aside on their worst starts to the league earlier this year. They had to change the management and are currently under Croat Zdravko Logarusic who has steered the ship back into title contention with an unbeaten run 19-games, they look every bit as champions already. Marshalling one of the biggest fan base (and most emotive too), the club shall hope to maintain this streak come Saturday.
It must be the gods blessings that the current season sees both teams in contention for the title and as such making it a mouth-watering game whichever way you look at it. And with 8 games left, the title race is still any club’s taking. This should be the motivation for both teams who’s touch on the top prize in the last 3 years has been close yet so far.

Interesting Facts:

  • Both AFC Leopards & Gor Mahia have won the Premiership title 12 times each;
  • Both teams are currently coached by foreigners Dutchman Jan Koops (AFC Leopards) and Croat-born Z. Logarusic;
  • Gor Mahia finished 4th and AFC Leopards 5th respectively in the 2011 season;
  • Both clubs have the largest corporate sponsorships with Gor Mahia’s Brookside shirt sponsorship tipping AFC’s Mumias Sugar deal;
  • Both teams were recently incorporated into a fan-base drive by one of Kenya’s leading media group dubbed Toklezea na Jalee meant to encourage both clubs’ fans to buy merchandise that will help build their respective kitties. 
  • Both clubs have the biggest fan-base between them, fondly referring to each other as Shemeji, thanks to the politics of the day…which are very fluid in this part of the world.
  • The 1st leg was Gor Mahia hosting AFC Leopards with the game briefly abandoned before ending in a draw – though with officials from both sides blaming each other for fan trouble. This 2nd leg is AFC’s though Safari 7s necessitated the move to MISC and also change of date from Sunday to Saturday.

Saturday 1600hours is the kick-off at the Kasarani stadium ( with SuperSport 9 East screening the game live for those not brave enough to venture into the hallowed grounds) !

Elgon Cup, London Marathon, El Classico – Busy Sporting Weekend

The second last weekend of April represents a nice offering for Kenyan sporting fans. What with all the rains pounding much of the country, it’s a mostly indoors affair for Kenyan (save for the fact that @KenyaPower may have other ideas depending on your side of the hood…)
This one has quite a flurry of activity and sporting events to look out for;



Rugby

Elgon Cup poster

Kenya’s rivalry with Uganda for the 2012 Elgon Cup is renewed tomorrow at the famous Kyadondo Grounds in Kampala. The last few haunts to that ground have not been very successful for Kenyans. The coach Mike ‘Tank’ Otieno has introduced quite a number of fresh players hoping to expose these to the tougher and longer version of the game ( 15-a-side). We pray for a Kenya win and wish the best in their Kyadondo outing.The game will be screened live on SuperSport.


Football
The local league continues with some interesting fixtures such as the AFC Leopards v/s Tusker in Mombasa, Gor Mahia v/s Ulinzi Stars in Nakuru, among others. Leopards is slowly building a gap at the top, but these are early stages and 2-3 games can quickly change what may have seemed like a sterling season. Gor Mahia will be playing their first game after the decision to discipline their fans for the fracas during the AFC v/s Gor Mahia game. There is also the #BongaBoli  follow on Twitter @BongaBoli promo seeking a Kiswahili football-caster for SuperSport as they develop content for their East African channel 9. This weekend they visit the lakeside town of Kisumu.
Internationally there is the EPL big one Arsenal ( which enjoys quite a following around this part of the world) and Chelsea. It’s the feature game on Saturday starting at 1445hours. Later in the evening is the biggest derby in club football in Spain where Barcelona faces up Real Madrid for the title race. Each of these sides came out of UEFA Champions League licking their wounds. It ought to be a cracker as Lionel Messi tries to outscore Cristiano Ronaldo – for the Pichichi Award.

Athletics
After a fairly successful outing of Kenyan marathoners last weekend in Boston, Sunday, the London marathon is back! After taking both the men’s and women’s title, this will be no walk in the park as the Ethiopians and also some Chinese will hoping to make the podium.
This race will help (or further complicate…) the selection process for the Kenyan team for the Olympic Games which come back to this city in July-August later this year.
Emmanuel Mutai will be hoping to defend his win last year but will have to give chase to 3-time winner Martin Lel, world record holder Patrick Makau and world champion Abel Kirui. A tough call to pick the winner right there!
Mary Keitany leads the women’s charge and will be given a run by one of the Dibaba sisters Ejegayehu Dibaba.

Formula One

Bahrain GP

Yes this sport has developed quite a following in the country even when some of the races are in some ungodly hours of Sunday morning or evening. This weekend sees GP teams visiting the Arab state of Bahrain. The first practice session today saw Lewis Hamilton emerge tops amidst controversies and tomorrow the cars and drivers take back to the track to see who attains pole position in the starting grid.
 
All the above action is available on the SuperSport channels for those who feel like staying indoors. If you can afford to hang out at a pal’s or your local hang-out, then these too can provide you with some nice weekend action!

AFC Leopards v/s Gor Mahia – KPL’s Main Highlight this weekend

Kenya’s Premier League’s started in earnest and this weekend the biggest derby in the country’s history unfolds on Sunday at 1500hours.

AFC Leopards v/s Gor Mahia in a past gameimage courtesy of www.futaa.com

This season though, AFC Leopards are currently the fastest kids off the blocks, having won 4 out of their first 5 matches. They had some signings in the off-season which have seen them scalping every team in their wake.
Allan Wanga‘s been their starry-eyed player for the moment for AFC. He’s scored  in all except one match including a delightful free-kick against Ulinzi FC in February which saw him voted by sports journalist as the Kandanda Player of the Month ( taking home trophy & 10,000 to boot). He has ably taken off the load of scoring which had been left to Mike Barasa for the better part of last season. Along with other new signings, the team seems to be gelling faster than the rest. The good tidings for Jan ‘Wephukulu’ Koops also seem to be pouring onto the team’s fortunes as they did for the latter part of last season. Modest financial backing from sponsors as well as favourable ticket sales from match-days have seen the financials fortunes of the club stabilise in the short-term.
Gor Mahia on the other hand have not been able to secure good results which has resulted in the sacking of its entire technical bench. The team’s currently placed 14th, two places from the bottom of the table standings. With the team being bundled out of continental championship and the ‘colossal’ expectations of its huge fan-base, the players will have pride to fight for in this fixture. Their off-season signings have taken long to cobble up a formidable team but if they have the patience, they will be rewarded in good time.
Last season’s similar fixture saw Gor Mahia beat AFC by 3-1 only for the latter to reverse the results by 3-0 margin. As always the stakes are high for both teams { who’s fans affectionately call each other shemeji – (cousins) thanks to the political alignments and geographical proximity of majority of the fans }.

For you the discerning Kenyan football fan, this is surely not to be missed and if in the unlikely event you can’t make it to the Nyayo National Stadium, catch the action on SuperSport 9 East Africa !

Check out this blog which aggregates news about AFC Leopards team activities and games, pre-match and post-match analysis. As for Gor Mahia, this link might help too!