By Lionel Faull and Paul Wafula
(A version of this story was first published by the Daily Nation in Kenya).
A cousin of President Uhuru Kenyatta has quietly accumulated a financial stake in the controversial SportPesa gambling empire, Finance Uncovered can reveal.
The discovery – unearthed in details buried in company documents in Kenya, the UK and the Isle of Man – came as the President signed legislation to scrap a 20% excise duty on staked betting, a levy that helped pull SportPesa out of its lucrative Kenyan. market last year.
The proposal to abolish the tax was included as an amendment to the finance bill, which was passed by the National Assembly last week. The final hurdle for it becoming law was the president’s assent on Tuesday night.
The chairman’s pivotal decision is under scrutiny now that it has been established that Peter Kihanya Muiruri, his first cousin, has acquired stakes in three companies that are part of SportPesa’s international gaming empire over the past 14 months. .
After the government introduced taxes on bets placed by punters and aggressively sued gambling companies for its payment, it prompted a number of major gambling companies to shut down their businesses in Kenya.
The taxes were introduced both to stem the rampant gambling addiction in Kenya and to increase revenue from what has quickly become a very lucrative business.
Now that it has been scrapped, it could see SportPesa, whose main shareholder and founder is Bulgarian national Gerassim Nikolov, re-enter the Kenyan sports betting market and revive the wider gambling industry.
A revival of SportPesa in Kenya would also benefit a member of Kenyatta’s own family.
A presidential spokesman did not return calls or respond to a detailed text message asking if Kenyatta knew about his cousin’s shareholding before signing the bill.
The Kenyatta family business, managed by one of the president’s brothers, has extensive interests in the Kenyan economy, and family members also invest heavily.
Finance Uncovered, working with the Daily Nation in Kenya, accessed documents filed by SportPesa companies in Kenya, the UK and the Isle of Man.
The documents show that Peter Kihanya Muiruri is a shareholder in three companies linked to SportPesa:
- The first is a 1% stake in Pevans East Africa, the company that owns SportPesa in Kenya. Muiruri first appeared on the shareholder register in May 2019, shortly before the start of a government crackdown on the betting industry. Muiruri is now also a director of Pevans. Pevans previously revealed he amassed 20 billion shillings in revenue and generated gross profits of 9 billion shillings (£70 million) in Kenya in 2018.
- The second stake is a 0.5% stake in SportPesa Global Holdings Limited (UK) – a company that owns SportPesa’s non-Kenyan betting companies in Tanzania, South Africa, Italy and Russia. He also owns a highly profitable UK business, SPS Sportsoft Ltd, which provides IT services to sister companies of SportPesa, including Pevans in Kenya. Muiruri acquired the stake last November. SportPesa Global Holdings made an after-tax profit of almost £12million in 2018, according to its financial statements.
- The third is a 3% stake in SportPesa Holdings Limited (Isle of Man). It is an offshore company that collects SportPesa’s revenue from wagers wagered in the UK. Companies based in the Isle of Man, a small British Crown dependency and tax haven in the Irish Sea, do not have to publicly disclose their accounts, so no financial information is available. Muiruri acquired the stake last December.
The value of Muiruri’s shares in the three companies is unclear, as up-to-date financial information on these companies is not available. It is also unclear at this point how much, if any, Muiruri paid for the shares.
SportPesa did not respond to email queries from the Daily Nation.
The company was asked if it lobbied the president, directly or indirectly, for the reinstatement of his betting license or any tax cuts.
The company was also asked to disclose how much the president’s cousin paid for his shares in each of the three companies and when he became a director of Pevans.
There is no suggestion of wrongdoing on the part of Muiruri or SportPesa.
Muiruri himself is a quiet businessman. Little is known about him publicly. Muiruri’s mother is the first cousin of Uhuru Kenyatta, while his grandfather was the younger half-brother of Jomo Kenyatta, Kenya’s first president.
In November 2016, President Kenyatta attended the funeral of Muiruri’s father, the late Mzee Josphat Muiruri Kihanya, at the Holy Family Basilica in Nairobi and delivered a short speech. The presidency also issued an official press release honoring the former official, although it made no mention of the family connection.
SportPesa lost its betting license last July. The company announced it was pulling out of Kenya last September in response to what it called “the hostile tax and operating environment in the country”. Their withdrawal led to the loss of 400 jobs and the abrupt cancellation of its local sports sponsorships.
In February this year, SportPesa also pulled out of its international sponsorship commitments, including a £9.6m-a-year shirt sponsorship with Everton.
The 20% duty was only introduced last November, according to the Kenya Revenue Authority.
The cancellation of any betting tax was not on the cards two months ago, when the Departmental Finance and National Planning Committee chaired by Joseph Limo released the finance bill for public consultation on May 8. At this stage, the bill did not plan to change betting taxes.
Minutes of committee meetings show that an obscure stakeholder group – identified only by a non-existent URL as shade.co.ke – wrote to the committee on May 15 proposing the removal of the 20% excise duty on bets placed. “This has left many betting companies short of cash, reducing their sponsorships to local sports clubs,” they said.
The committee agreed, noting that “the high level of taxation had led punters to place bets on foreign platforms not subject to tax and thus denying state revenue”.
In its rationale for approving the amendment, the committee explained to the National Assembly that it would “reverse the negative effects of this tax on the industry which has led to the closure of betting companies in Kenya, so that international actors continue to operate”.
The committee rejected other proposals from the unidentified stakeholder group to change other tax laws affecting betting, which included reducing withholding tax on player winnings from 20% to 10% and l Exemption of the Betting Industry from the Digital Services Tax.
A gaming nation
While the committee was still reviewing the excise tax proposals in May, Finance Uncovered in conjunction with the Daily Nation published betting income statement figures leaked of the industry for May 2019.
The data showed punters had wagered more than 30bn shillings (£234m) in just one month. SportPesa alone accounted for two-thirds of that betting revenue, according to data that all betting companies submitted to the Betting Control and Licensing Board (BCLB).
Such huge revenue for a single month showed what is at stake for gaming companies in Kenya.
The controversial 20 per cent excise duty would have been levied directly on that income and could have, based on disclosed income data, been worth up to 72bn shillings (£562m) in annual taxes for the Kenya Revenue Authority (KRA).
However, that was when the industry was at its peak, and before the government began its tax and regulatory crackdown last July, including suspending the betting licenses of gaming companies including SportPesa and its next biggest rival, Betin.
Two other associates of the president already hold a significant share of SportPesa’s capital, both locally and internationally.
They are Paul Wanderi Ndung’u, a top fundraiser for Kenyatta’s Jubilee political party in the 2017 elections (17%); and Asenath Wachera Maina (21%), whose late husband Dick Wathika is a former mayor of Nairobi whom Kenyatta described as a longtime friend.
In addition to these ties, SportPesa’s head office in Nairobi shares the same office complex which also houses family-owned investment holding company Kenyatta.
*Main image: Young children play outside a SportPesa branded general store, Laikipia County, Kenya, July 2019
** Editing by Ted Jeory and Nick Mathiason
*** This article was developed with support from the Money Trail Project (www.money-trail.org)