Kenyas government has introduced a five-fold tax hike on online betting in a bid to discourage minors from gambling, and to raise funds that would support sports and cultural activities. On June 21, president Uhuru Kenyatta signed the Finance Bill 2017, which increased tax rates for betting, lotteries, and gambling from the current rate of 7.5% to 35%.

Betting firms in Kenya are now saying the punitive tax measures will not only dent their returns, but also affect jobs in the industry, lead to the defunding of corporate social activities, and discourage investment in an emerging sector.

SportPesa, the leading Kenyan online sports betting platform, said it will withdraw sponsorship from local sports clubs in Jan. 2018when the new bill will come into effect. The company has grown rapidly in recent years and is major sports sponsor at home where it backs the Kenyan Premier League, as well as two of the leagues leading clubs, Gor Mahia and AFC Leopards. The betting company also splashed out on a costly sponsorship both Everton and Hull City in the English League.

Ronald Karauri, the chief executive of SportPesa, said on Twitter that the tax amendments will greatly affect their operations and that their partners should plan accordingly before they withdraw support. Notably, Karauri said the cuts will not affect sponsorships of teams outside Kenya.

The taxing hike augurs how African governments will deal with sports betting and gambling as it grows into a multimillion dollar industry across the continent. Behind South Africa and Nigeria, Kenya is home to the third-largest gambling market in Africa. The betting boom has also caught on in countries like Uganda where the expansion of satellite TV and the creation of a national lottery lured many jobless Ugandans into betting. In Nigeria, 60 million people between the ages of 18 and 40 years spend up to 2 billion naira ($6.2 million) on sports betting daily.

The growing adoption of smartphones has also increased the time people spend gambling in Kenya, with many of them spending hours researching teams, reviewing scores, or learning betting tactics. Authorities say they imposed the hefty taxes in order to deter minors from betting. Local media have reported stories of people committing suicide after losing bets or falling into debt.

The initial proposal from Kenyas Treasury was to actually increase the tax to 50%, but after stakeholder meetings, the rate for all betting, lotteries, and raffle competitions was amended to a uniform 35%.

Karauri says gaming operators in Kenya will barely be able to sustain their businesses come 2018. The expected financial project will force closure of firms and that theres no company in the country which has the capacity of complying to the tax, he told The Star newspaper.

Sign up for the Quartz Africa Weekly Brief the most important and interesting news from across the continent, in your inbox.

See more here:

Kenya thinks a five-fold tax hike on its betting sector can deter child gambling - Quartz