A Nakuru businessman, Zechariah Githuku Kiairie, has opened up about his devastating struggle with sports betting addiction, which saw him lose over KSh 12 million and nearly cost him his life, family, and livelihood.
In a candid interview with Itugi TV, Kiairie recounted how what started as casual betting spiraled into a destructive addiction.
At the peak of his financial success, Kiairie owned a thriving radiator business and several rental properties.
His business was largely supported by trust friends and family lent him substantial amounts of money, sometimes up to KSh 540,000, without formal agreements.
‘When the devil called me’
His descent into gambling began innocently.
In what he describes as a devil’s call, the businessman narrates how a friend lured him into joining popular betting site SportPesa persuading him of lucrative returns not knowing he was walking himself into total destruction.
It started with a small win of KSh 8,000 from a KSh 200 bet, followed by a KSh 64,000 payout, gave him a false sense of financial invincibility.
When he won KSh 95,000, he believed betting was a legitimate path to wealth.
“It felt like easy money. I thought I had found a new way to succeed,” he said. Soon, he was placing bets as large as KSh 100,000.
The addiction took a toll. His daughter once returned to school with fee arrears, and instead of settling the bill, he borrowed money from a shylock and lost it all to gambling.
In a desperate bid to recover his losses, Kiairie sold a piece of land hosting his rental units for KSh 3.5 million. The entire amount was also lost to betting.
Overwhelmed by debt and shame, he fled Nakuru for Mombasa, intending to end his life by drowning in the ocean. “I couldn’t take it anymore. I had ruined everything,” he recalled.
Fate, however, had other plans.
He found work at a construction site, which reconnected him with the value of hard work and rekindled memories of his family.
Still pursued by creditors, his recovery began when his aunt intervened and cleared his debts. His wife stepped in to manage the remnants of their business, giving him a chance to rebuild.
It wasn’t until he requested his M-Pesa statements from the nine years he had been gambling that the full scale of his losses became clear: over KSh 12 million gone.
The government of the United Kingdom is set to inherit Sh2 billion worth of assets held by SPS Sportsoft Limited, a gambling software and support services company which owns SportPesa.
SPS Sportsoft’s top client is Kenya-based Pevans East Africa Limited which shut down it’s operations in 2019 after the Kenyan government declined to renew its operating licence over tax evasion scandals.
“The Registrar of Companies gives notice that, unless cause is shown to the contrary, the company will be struck off the register and dissolved not less than two months from the date shown above… Upon the company’s dissolution, all property and rights vested in, or held in trust for, the company are deemed to be bona vacantia, and will belong to the Crown.” SPS stated.
Bona vacantia translates to vacant goods or ownerless assets. In the UK such assets including those of dissolved firms and estates of people who die without a will or blood relatives are inherited by the government.
SPS has note disclosed the reasons why it is being liquidated but it has suffered losses Kenya where shareholders are embroiled in wrangles. Pevans was the biggest client generating upto £20.6 million (Sh3.1 billion) in 2018 and accounting for 96% of the total revenue of £21.6 million (Sh3.2 billion).
Other clients operating SPS include SPGHL’s subsidiaries which also trades under the Sportpesa brand in Tanzania and South Africa. The firm’s dissolution means that assets worth £13.2 million (Sh2 billion) that will be surrendered to the UK government.
SPS’s creditors also risk losing upto £8.5 million (Sh1.2 billion) that they were owed in the review period. It was required to publish its 2019 accounts by December last year but did not meet the deadline pushing the authorities to have it liquidated without the release of its updated financial statements.
The fall of SPS is a mojor blow to Kenyan businessmen Asnath Maina and Paul Ndung’u and Asenath Maina who fell out with their Bulgarian counterparts over control and ownership of SportPesa.
Pevans’ operating licence was revoked in July 2019 over unpaid taxes and penalties that now stand at Sh95 billion according to the Kenya Revenue Authority (KRA). It was the second largest company by revenue with close to Sh150 billion in 2018, only coming second to Safaricom.
But the Bulgarian investors later teamed with Ronald Karauri, Pevans’ chief executive office to form Milestone Games Limited where they transferred the SportPesa trade name. Sportpesa brand was moved from Pevans to SPGHL for £100,000 (Sh15.1 million) and then to Milestone in transactions that began on June 2, 2020.
One Kalina Karadzhova acted for SPGHL Mr Karauri signed the deed of assignment on behalf of Pevans but it later emerged that Karauri controls close 55% stake in Milestone.
Embattled Kenyan betting giant SportPesa has “disputed” the astonishing Sh95 billion (£633 million) total that the Kenya Revenue Authority says it owes in unpaid taxes.
The figure, reported by the Daily Nation newspaper in January, is thought to be one of the biggest amounts ever claimed from a company by the Kenyan tax collector.
The Daily Nation article was based on a leaked letter from the KRA to SportPesa’s main entity in Kenya, Pevans East Africa, in which it detailed its findings from a preliminary audit of the company’s tax affairs from 2015 to 2019.
SportPesa – through London law firm Schillings – told Finance Uncovered this month the headline Sh95 billion figure was “not a formal finding by KRA or even a formal assessment”.
It added that the KRA had “simply [undertaken] an information-gathering exercise” that is still “in its preliminary stages”.
Schillings said its client “disputed” the figure and because the letter was not a formal assessment there was “no question” of it taking it yet to a Tax Appeals Tribunal. Schillings declined to answer detailed questions about the matter, insisting the letter was confidential.
The KRA, likewise, declined to answer detailed questions.
Has the KRA made a huge error?
However, an analysis of the KRA’s reported findings by Finance Uncovered suggests the tax authority may have made a massive error in its calculations, overestimating its total by at least Sh69 billion (£460 million).
Stripping this error out would leave a preliminary assessment of Sh26 billion (£169 million).
The Finance Uncovered analysis of the KRA’s calculation is based on two main sets of documents.
The first is the original articlepublished by the Daily Nation in January which provided many details of the KRA’s private letter to Pevans.
This letter reportedly contained breakdowns of how the KRA arrived at the Sh95 billion figure, for example, by examining various company accounts and other documents it had obtained during its audit.
The second set of documents was a series of annual company accounts for Pevans between 2014 and 2019. Unlike in the UK, these corporate documents are not usually available for public viewing in Kenya.
By comparing the numbers reportedly used by the KRA in its audit to the actual figures in Pevans’s books – and by examining other important information in the publicly available accounts for SportPesa’s UK operations – it was possible to see a fundamental flaw in the KRA’s assumptions.
This related to the “revenue share” arrangement that SportPesa had set up between its UK and Kenyan businesses. This arrangement had allowed the UK company to bill Pevans for a percentage share of its revenue from Kenyan gamblers.
It was a legal method of sending money from Kenya to the UK.
However, Finance Uncovered has concluded the KRA’s officials applied the revenue share percentage to the wrong revenue figure, thereby massively overestimating the company’s actual turnover.
This had two major consequences for the KRA’s tax calculations because they then not only overestimated the amount of corporation tax that the company owed, but also the total of allegedly unpaid betting tax, a separate levy applied on turnover.
The mistake could be hugely embarrassing for the KRA. It is not known whether it has accepted the error as part of the ensuing private correspondence with Pevans.
Boom and burst: the SportPesa dividends
Meanwhile, a separate examination of the accounts for Pevans East Africa has also revealed the enormous sums the company was able to pay out in dividends and move offshore as it cashed in on Kenya’s betting boom.
They show how the company’s Bulgarian and Kenyan owners bolstered their wealth during a period when many of those using gambling sites became gambling addicts and lost their livelihoods.
Between 2014 and 2019, Pevans paid out Sh7.8 billion (£60 million) in dividends to its select group of 10 shareholders, according to the company’s cash flow statements.
A cousin of Kenya’s president became the 11th shareholder, with a 1% stake, in mid-2018.
In addition, Pevans paid its seven directors – of whom five were non-executives earning much lower fees – a total of Sh558 million (£4.3 million) in salaries and perks between them in that time.
The accounts also reveal that as SportPesa flourished, it created a network of related overseas companies which received money from Pevans for “revenue share” arrangements, “legal and professional fees” and other services.
These monies were used to facilitate the company’s international expansion that saw it land high profile sponsorship deals with the likes of English Premier League club Everton FC.
The overseas companies which received the money from Kenya included firms based in the UK, the Isle of Man tax haven and the Canary Islands.
These offshore structures and payments are not illegal and there is no suggestion of wrongdoing by SportPesa.
The KRA was reportedly examining many of these payments as part of the wide-ranging audit it had conducted on Pevans’s books.
The tax row is the latest low point for SportPesa’s owners after their bubble burst spectacularly in 2019 when the company fell out of favour with the government.
Until then the company had been a darling of the Kenyan corporate world. The accounts seen by Finance Uncovered help paint a fuller picture of its rise and fall.
SportPesa was founded in 2014 by a consortium of Bulgarian and Kenyan investors.
The three biggest shareholders, with a 21% stake each, were Guerassim Nikolov, a former croupier from Sofia who had made Kenya his home in the early 2000s; Gene Grand, a Bulgarian-born, naturalised American citizen; and Dick Wathika, a Kenyan politician who had been an MP and former mayor of Nairobi.
Guerassim Nikolov, SportPesa’s co-founder and equal biggest shareholder (Photo: Facebook)
Wathika died in 2015, and his shares passed to his widow, Asenath Wacera, a private figure who keeps a low profile.
Other significant shareholders include one-time chairman Paul Wanderi Ndung’u, a well-connected businessman with links to the ruling party’s fundraising machine, holding a 17% stake; and its chief executive Ronald Karauri, the son of a former MP who began his career as a pilot for the national carrier Kenya Airways, with 6% initially, rising to 7% in 2018.
Sports betting was a relatively new idea in Kenya at the time, but the Pevans accounts for 2014 showed early promise for the sector: the company received bets totalling Sh1.27 billion (£9 million) that year.
What happened over the next four years was simply extraordinary.
Punters flocked to SportPesa, whose slick product meshed seamlessly with a nationwide mobile phone-based banking system, dominated by a service called M-Pesa, which had become an essential part of everyday life in the East African country.
The bets poured in: from Sh16 billion (£104 million) in 2015 to Sh80 billion in 2016; then Sh111.5 billion in 2017 rising to Sh149 billion (£1.15 billion) in 2018, the accounts show. This was an increase of more than ninefold in just three years.
SportPesa’s Gross Gaming Revenue (GGR), or turnover – the amount it retains after player winnings have been paid out – also followed a steep trajectory, and stood at Sh20 billion (£155 million) by 2018, up from Sh3.49 billion (£23 million) in 2015.
As a gambling craze swept the nation, a wave of social problems rose steadily in its wake. The government tried introducing new taxes to put the brakes on betting.
But eventually it could no longer ignore reports of gambling-related suicides, data showing hundreds of thousands of young Kenyans had been blacklisted for bad debts, and public pleas by influential sections of civil society, such as churches, to bring betting under control.
In July 2019, the government intervened, withdrawing betting licences of 27 companies, including SportPesa. It also ordered telecom companies to stop processing bets on their behalf.
Out of Kenya, into Europe…
But by this time billions of shillings bet by ordinary Kenyans in net stakes had been transferred by SportPesa to its companies overseas as it embarked on a major international expansion.
The accounts for Pevans show the scale of this offshoring: more than one-fifth of its turnover earned in Kenya was transferred out of the country directly.
To help fund sponsorship deals with the likes of Everton and smaller deals with Arsenal, Southampton and Hull City, the company’s bosses established a new corporate structure.
In particular, they established related companies in the Isle of Man and the UK.
And these companies were funded almost entirely by two newly devised revenue streams: a “revenue share” agreement with Pevans, based on a small percentage of the gross bets staked in Kenya; and by billing Pevans for “legal and professional fees”, or shared services.
These were recorded by Pevans in its accounts as costs, which in turn reduced its profits and its liability for Kenyan corporation tax.
These offshore structures and related party payments are not illegal and there is no suggestion of wrongdoing by SportPesa.
Based on the accounts it has seen, Finance Uncovered has calculated that in 2017 and 2018, the total of these costs paid to the overseas companies was Shs10.7 billion (£82.4 million).
Of these, Shs5.46 billion (£42 million) went to the UK company, SPS Sportsoft Ltd, and Shs5.24 billion (£40.5 million) to SP Services Ltd in the Isle of Man.
As a result of this arrangement, the UK company recorded huge profits, but SportPesa’s bosses were able to reduce their tax bills there, too.
As Finance Uncovered reported in 2020, the UK company was able to exploit a 1976 Double Taxation Treaty between Britain and Kenya. This allowed it to offset the Withholding Tax it paid in Kenya on the international payments against the UK corporation tax liability.
This meant it recorded huge post-tax profits in Britain. These were then paid out as dividends to a UK holding company called SportPesa Global Holdings Limited – owned by the same shareholders and in the same proportions as Pevans.
As of the 2018 year-end, the holding company itself was still sitting on £21.8 million of accumulated profit reserves.
A £14 million impairment charge on its investment in SportPesa Italy reduced this reserve to £7 million at the end of 2019, according to the holding company’s latest accounts, released earlier this month.
The Isle of Man company’s profits are unknown, because company accounts are not publicly available in the offshore jurisdiction. However, it would have paid 0% corporation tax on its profits.
Enter the KRA….
Whatever expansion plans SportPesa had in 2019, they hit the buffers as soon as the Kenyan government brought operations at its cash cow, Pevans, to a halt.
In January, the Daily Nation reported many details of the KRA’s preliminary findings of its tax audit of Pevans.
This revealed that the KRA had questioned the huge legal and professional fees incurred by Pevans in its dealings with its overseas companies.
The KRA reportedly also said that certain sports sponsorship costs were not allowed under Kenyan law and it reportedly added these back into Pevans’ taxable profits.
The future for SportPesa is now unclear and there have even been major battles between its original shareholders.
The public fall-out was triggered in October last year after SportPesa transferred its branding rights from Pevans to a company with a newly acquired Kenyan betting licence, called Milestone Games.
Finance Uncovered posed a series of questions to SportPesa back in January about the KRA audit as well as about its 2014-2019 financials. SportPesa responded by instructing London law firm Schillings. Schillings said it acted for both Pevans and Milestone.
In letters exchanged with Schillings over the ensuing months, the law firm said the matter with the KRA was strictly confidential and not subject to public scrutiny. It said its client would not be commenting on any issues relating to the KRA.
It said Pevans was cooperating “fully” with the KRA.
Schillings also said the value of dividends and salaries received by individual shareholders and directors was also “private and confidential”. The lawyers said our calculations on dividends – taken from Pevans’ own cash flow statements – were “incorrect” but declined to expand.
SportPesa has strongly denied any wrongdoing.
The KRA declined to comment.
This Article Was First Published On Financial Uncovered.
Pevans East Africa-the firm that was managed under the gambling brand SportPesa until June 2019 has lost its case in the Court of Appeal where it sought to reverse the High Court ruling that allowed the Betting Control and Licensing Board (BCLB) to revoke its licence.
The appellate court on Friday upheld the ruling by Judge John Mativo issued on August 30, 2019 which dismissed PEA’s application that challenged BCLB’s move to deny them a new licence.
The regulator revoked PEA’s licence on July 1, 2019 after they discovered that the gambling firm was heavily involved in rinsing of dirty money and withholding taxes. The firm was embroiled involving a disputed tax demand from the Kenya Revenue Authority (KRA).
The taxman issued a Sh15 billion tax demand on the firm which was later investigated and rose to Sh95 billion.
Judges Roselyn Nambuye, Fatuma Sichale and Hannah Okwengu of the Court of Appeal dismissed PEA’s appeal arguing that BCLB is mandated to discipline rogue firms and demand for tax documents.
“We think we have stated enough reasons as to why this appeal is for dismissal. It is hereby dismissed with costs,” reads the judgment in part.
The controversial Sportpesa CEO Ronald Karauri [p/courtesy]The ruling will lock out the firm from betting after his founders also fell out over management differences and embezzlement of billions of shillings. This comes after some shareholders acquired a newly formed company called Milestone Games Limited to which now operates the popular SportPesa gaming brand.
PEA’s chief executive Ronald Karauri and Francis Waweru Kiarie acquired 95.3% stake in Milestone through several investment vehicles in a move that has blocked out the initial owner’s who got the licence from BCLB.
The regulator has however managed to shut down Milestone’s operations twice but the new company has been securing temporary court orders to continue with it’s operations.
On October 30, 2020, Milestone was stopped from using the sportpesa trade name on grounds that it belonged to PEA but it was later revealed that Mr Karauri was among other officials who had transferred it to its UK-based affiliate Sportpesa Global Holdings Limited (SPGHL) which later assigned it to Milestone on September 15, 2020.
The transfer of the popular sportpesa brand name has been challenged by Paul Ndung’u, a Nairobi based businessman who owns a 17 % stake in PEA. Mr Ndung’u is claiming that the move was not authorised by the board.
Again on December 4, 2020 the regulator terminated Milestone’s licence arguing that the decision was based on the entry of the new shareholders who were not vetted and authorized to complete the share transactions.
A new proposed law to tame gambling will allow The Kenya Revenue Authority (KRA) and state agencies like Police and National Intelligence Service (NIS) to track betting activities on real time.
The amendments that have received the backing of the state will create a platform that will enable more agencies to trail and apprehend gamblers behind suspicious bets to combat money laundering and flow of dirty money.
The government is forcing the changes amid piling concerns that betting firms are offering services where proceeds of crime and corruption are rinsed without any declarations to the KRA and the Betting Control and Licensing Board (BCLB).
The amendments that are already in parliaments are improvements to earlier changes that only gave the Communications Authority of Kenya (CA) real-time access to gambling activities.
If adopted the new laws will allow security agencies and the Financial Reporting Centre (FRC) which tracks illicit money to be added to the list of institutions that will track the bets whenever they are placed.
“The Board (Gaming board) shall establish a framework to facilitate real time monitoring of online gaming activities which shall be accessible for monitoring by the Communications Authority of Kenya, the board and any other relevant government agencies,” the Bill read.
The law is targeting plungers who deal in large transactions but bet with a small fractions. Those making small, regular and suspicious bets will also be on the radar of the government.
Kenya is known for inflows of dirty money, majorly proceeds of crime, corruption, drugs and shady business deals by tender bandits in government who end up investing in luxurious cars and real estate.
In 2019, state revoked licences belonging to more than 15 betting firms over fresh demands for more taxes and shareholder disclosures which resulted to court fights with giant gambling firms like SportPesa and Betin.
The gambling industry has achieve a combined revenue of Sh204 billion as it becomes the best ground for criminals to ‘rinse’ dirty money.
Criminals collude with gambling executives to feed their illicit money into their betting wallets, bet a small share then cash out the remaining bulk.
The new rules will also force gambling firms to get advertising approval from the regulator. The advert will also have a warning message that must constitute a third of the actual advertisement.
The State has recently lost its bid to freeze betting accounts and seize cash that remains unused for three months in a row amid money laundering concerns.
But the parliament’s committee on Sports, Culture and Tourism rejected the proposal because confiscation of idle cash is the role of the Unclaimed Financial Assets Authority (Ufaa).
In what looked like a move influenced by the deep pocketed gambling cartels, the parliament was also swayed to reject changes to the Betting Bill that aimed to empower CS Fred Matiang’i.
Parliament rejected the move that would see the Interior CS freeze the accounts and order gamblers to show proof and declare source of cash before accessing the money.
The technical and management staff will be supplied with branded apparel, equipment and luggage. Gor Mahia products will also be available for fans to purchase.
@OfficialGMFC products will also be available for fans to purchase.
Ambrose Rachier, @OfficialGMFC Chairman: “As truly indicated by David, Gor Mahia is about to open a new chapter in their quest to begin dining with the elite clubs of African football at the continental table."
“We are delighted that Gor Mahia will be wearing the famous double diamond. They are a club with history and tradition looking to build towards the future, which goes hand in hand with our brand values. We look forward to partnering with Gor Mahia as they take on the next chapter.” David Ricketts, Umbro South Africa Chief Executive Officer said.
“As truly indicated by David, Gor Mahia is about to open a new chapter in the quest to begin dining with elite clubs of African football at the continental table. We are glad and excited that Umbro has agreed to partner with the club towards opening this new chapter. We guarantee to you, Umbro that we will never let you down, we are the mighty K’Ogalo. We share the same values, let us grow the brands together,” Gor Mahia chairman Ambrose Rachier responded to David’s remarks.
Kenya’s 18 times soccer champions Gor Mahia alias K’ Ogalo are almost if not yet already, just like every KPL team, bankrupt.
In a move to cover their shame, Kogalo are now demanding sh4.5million prize money after they won last seasons 2018/19, Kenyan Premier League title.
Sally Bolo, Gor’s treasurer said that KPL’s management is yet to channel the money to Gor’s account five months after they clinched the trophy.
“The club is going through hard times and it is only good for KPL to pay us our money after winning the league for the third time in a row last season. We won the league when KPL had a sponsor and the current situation of lack of funds should not be used as an excuse to deny us money. Why didn’t they pay us when the funds were available?” posed Bolo.
On 25th May this year, Gor culminated KPL with superb wins earning them a prize cheque of Sh4.5Million from then sponsors Sportpesa, and a KPL title.
“In the past they have paid us in reasonable bits and timelines. But it is now five months since last season ended and we have not received even a single cent from them. They should pay us,” asserted Bolo.
Debt ridden Kenyan soccer Championship demands are coming at a time KPL is crippling and the hopes to manage the league dangling on already broke league clubs.
KPL are also broke and the management is cooking yet another storm as the mandate of paying KPL, FIFA approved referees has been assigned to participating clubs. According to KPL clubs managers, the football body has ‘promised’ to refund the clubs as soon as the league gets a new Sponsor.
Gor Mahia is in a thick financial crisis as The market ejected Sportpesa was also the official Jersey sponsor of the reigning champions.
This comes at a time when KPL fixture have been forced to be rescheduled after cash crunch has forced KPL clubs fail to honor their fixtures.
KPL’s Chief Executive Jack Oguda has not responded to the looming crisis that is threating the fall of Kenya’s top soccer league.
