How NSE listing could change the fortunes of Kenya betting industry

Encouraging betting companies to list on the Nairobi Securities Exchange (NSE) could provide a practical resolve to these concerns while also providing benefits for both companies and investors.

Taxation has been a significant hindrance for betting companies functioning in Kenya. In recent years, the Treasury made attempts to tackle the betting craze by increasing taxes and enforcing firm compliance requirements.

Currently, betting companies pay a 15 percent tax on gross gaming revenue, a 30 percent corporate tax on earnings, a 16 percent income tax, and licensing and compliance fees.

The high tax burden has forced a number of firms to abandon the market. The number of regulated betting firms declined to 118 by May, from 128 in January 2024.

Betting companies could benefit greatly from tax incentives afforded to publicly listed companies. For instance, companies that list enjoy a reduced corporate tax rate of up to 20 percent depending on the percentage of shares listed.

Moreover, gains from the sale of listed shares are exempt from capital gains tax, making listed shares more attractive to investors.

Listing also provides the added benefit of continuous industry lobbying for favourable tax regimes that serve both issuers and investors.

Even with regulators like the Betting Control and Licensing Board, the sector lacks transparency. Listed betting companies must follow strict standards, including providing audited financial accounts on a regular basis. This level of transparency may enhance public perception, making them more credible and accountable.

Listed betting companies are more likely to uphold corporate governance standards since they are accountable to shareholders. This would help mitigate the risk of financial misconduct, such as using betting companies for money laundering.

Read: 10 betting firms exit Kenyan market

Furthermore, the revenues of listed betting companies will allow more investors, including ordinary Kenyans, to share in these companies’ success through dividends. This promotes financial inclusion by allowing retail investors such as Kenya’s youth, to gain a stake in this lucrative industry.

Globally, different betting companies have successfully listed on major stock exchanges. Flutter Entertainment, a well-known UK-based betting provider, for example, has grown significantly since its IPO, capitalising on the benefits of increased capital.

Similarly, Phumelela Gaming and Leisure in South Africa offers a regional case study that demonstrates how a publicly traded betting company can handle regulatory compliance problems while benefiting from increased growth potential.

With Kenya leading Africa with 76 percent of its gamblers being youth, the local market offers significant potential for betting companies that list.

The entire economy could benefit from the listing of betting companies. First, the capital influx from the IPOs will rejuvenate the capital market. It would diversify the market by introducing a new sector to it, making it more attractive to investors.

Additionally, the government could still benefit from tax revenue, as the listing would likely lead to increased transparency, more robust compliance, and higher profits for betting firms, which, in turn, could result in greater corporate tax payments.

The writer is Finance Literacy Associate at the Kenya Association of Stockbrokers and Investment Banks