Digital betting takes off in East Africa but legislation is lacking

The vacuum of regulation over digital gambling might expose this thriving industry to threats

Betting and lotteries are not a new occurrence in Africa. In the 80s and 90s the Charity Sweeptakes and horse race gambling were a commonality in East Africa. Now, after years of lull, the betting scene has become one of the lucrative businesses in East Africa, and technology is to blame for the massive shift.

The increase in mobile phone adoption and mobile payments in East Africa has given betting companies easy access to their targeted audience.

Nowadays, users can log in to a site with their mobile browsers or even buy physical tickets. They can also opt to use either USSD or SMS mode to place bets.

There are no official numbers to determine how many users participate or how much revenue such companies are making. Yet unofficial reports say that over five million Kenyans participate in digital betting programmes. 

Companies such as Sportpesa, Betin, BetwayMcheza, Livebet, BetYetu have all sprung up over the last one to two years.

Their massive success can be seen by their media spend which has grown over the past year to match the airtime spend by big boys like telecom companies and beverage companies. Sportpesa, arguably the biggest among the pack, was able to launch a three year shirt sponsorship deal with English football club Hull City worth millions of dollars.

Technology puts the power of betting right in the hands of users making it a point of concern for most analysts.         

“The advent of technology and globalisation has resulted in Kenyans taking to gambling like ducks to water. Kenyans, especially the poor, have taken to spending virtually all their income on gambling,” Bitange Ndemo a former permanent secretary for ICT in Kenya said.

Ndemo has been a critic of the advent of betting services in Kenya where it is now a booming business.


“Use of technology has made it possible to target poor and desperate persons. Several online lottery sites have sprung up in addition to local SMS-based betting systems. It is like an army with sophisticated weaponry declaring war on wretched poor people,” he said.

“Add that to an increasingly globalised world. With the ubiquity of the mobile technology, there is very little hope of ever understanding the impact of cross border betting that is not within the national regulatory framework.”

He even warned that some of the betting services are backed by cybercriminals who might prey on the lack of knowledge of users in this region.


Technology and responsibility

According to Ambrose Kimaiyo, Chief Technology Officer/Product Development Lead at MasterClass, technology has fast tracked services across the betting industry in the region.

MasterClass has developed a product called MyBetMasters which is an analysis service that helps people to bet on sports with the help of statistics.

“The use of smartphones and the adoption of mobile money especially Mpesa are key for the uptake of online e-commerce based solutions,” Kimaiyo tells IDG Connect.

Technology has also allowed him to open his service into the thriving sport betting industry. It uses the SMS platform to provide analysis of upcoming matches to users.

Kimaiyo believes that it is everyone’s responsibility to use the technology around them to make sober judgements. He said, in as much as technology can be used in a negative way, it can also be used to help people make better decision even in betting.

“Criticism is welcome but again it is a personal choice. We emphasise responsible gambling. It should be done for fun and not be relied on as a key source of livelihood. We established a need in the market. Many people are interested in football gambling but they are not good at analysing the matches and that is why we developed the solution,” Kimaiyo adds.

Ndemo on the other hand says that government and stakeholders should use technology to do an audit of new innovations and their impact on society.

“This in my view requires deliberate effort to build human resource capacity in data science to regularly audit big data out of online transactions as well as the mobile providers. Transactional data on the mobile platform and online services must be of great interest to regulators,” Ndemo says.


Technology and legislation

In many African countries where internet and SMS betting are growing, there is no legislation to prevent users from being vulnerable to cases of fraud.

Most countries that have laws to control betting and gambling do not cover the rapid innovations going on in betting circles. According to a report by Gambling Compliance from 2015, most betting laws in Africa lacked a digital element in their construction.

The online gambling debate has taken different angles including which country the servers are hosted and what their legal obligations are.

“Given the pervasive nature of internet-based services and their seamless ability to cross borders, the legal and regulatory position of online gambling, even within a particular jurisdiction, is often unclear and open to different interpretations,” Marthie Crafford Partner, PwC Advisory said in a report called Gambling Outlook: 2013 to 2017 [PDF].

The study looked at the gambling landscape in South Africa, Nigeria and Kenya.

Crafford suggested that even if these aspects add confusion over the legislation of online gambling and betting it is still necessary for governments to protect their users and find ways of taxing the industry.

“Yet, the cross-border nature of online gambling means attempts to regulate purely within borders may ultimately prove unsustainable. Governments and regulators have an absolute need to create certainty and consumer protection around online gambling, while ensuring this activity is fairly taxed. This may take years, but it must eventually happen,” he added.

The fact that it is done online exposes users to other dangers outside the realm of legislation. Companies that have played online or digital betting and gambling need to have strict technology rules that avoid money laundering or cyber security threats for users.

Strict technology audits need to be in place to ensure that rogue betting companies do not thrive but a true random selection of winners happens in the backend.

However, technology opens up many new possibilities. The use of SMS and USSD has stretched the betting opportunities to rural areas expanding the bracket and rolling in more revenue for industry players.

The PwC outlook for 2015 to 2019 [PDF] on gambling predicted that the traditional gambling industry will face stiff competition with digital players in progressive years.

“We expect slower economic growth to lead to slower growth in gross casino gambling revenues in South Africa and Nigeria, while Kenya’s casinos will face increasing competition from legal online and mobile gambling.”

This is already happening with the prevalence of technology and means governments need to get ahead of this game to protect users and ensure a level playing field for all.