Why Kenyans’ love for quick riches is overshadowing normal investments

Gamblers keenly follow as their favourite teams play at Betin betting shop in Nairobi on Thursday31 2017.{David Njaaga, Standard}

NAIROBI, KENYA: As the morning sun bathes Nairobi’s skyline in amber, the city centre is alive with two groups of Kenyans: Those chasing luck and those headed for “real” work.

Two sharply dressed young men walk along Market Street.  If they are headed for a job interview, chances are that they will make it.

But they are neither going to an interview room nor your ordinary workplace. Just one turn and a few metres walk, they enter a gambling shop at Post Bank Building on Koinange Street.

This is Betin Kenya’s pioneer gambling shop that is open for 13 hours daily.

Here, there are 18 huge screens displaying various matches of the day in different parts of the world and the kick-off time. Wi-Fi strength reads “excellent” and the two quickly grab sits.

“I told you Liverpool was not going to win last night. I got the cash,” one of them, obviously happy, starts off.

For them, a day has just started and what will determine the size of their wallets is how accurately they can predict the next matches. They believe that one day, if not today, they may become millionaires.

 

Virtual games

All the 18 screens are blinking with different betting events ranging from dog races to live games but dog race and virtual games seem to be the darling of many. By midday, getting a seat becomes hard.

“There is one guy who came here with just Sh1,000 and predicted the order in which six dogs would finish a four-minute race. He walked away with Sh500,000,” James, another young man we meet buying a ticket says.

Away from the city centre, at Exchange Building along Westlands Road in Westlands, it is 9.00 am and the bell rings to usher in stoke brokers at Nairobi Securities Exchange (NSE). Only one large screen is visible. It is time to speculate and take positions: one group believes it is their right time to sell while another one strongly feels it is time to buy. They all think they are right.

This is where another set of millionaires could also be made, but not as quick as in gambling. “Gambling and stock brokerage are just similar. They both involve speculating and risk but somehow, gambling connects with masses,” a colleague in the newsroom argues.

Investing in stocks involves the long view, sometimes known as “patient capital”. Gains and losses will vary from year to year, so the emphasis needs to be on multi-year performance. That requires positioning not only in the right investments, but also in the right mix of investments that will be likely to perform over the long haul.

And the many people we met at the gambling shops agree. In Pipeline, Embakasi, another shop is barely four months old.

The picture is the same: young people locking their luck in machines with hope that lady luck will smile at them.

They represent millions of youth who in the absence of jobs are counting on luck to turn around their fortunes.

Unemployment levels in Kenya continue to rise with data from Kenya National Bureau of Statistics showing that the number of college levers is rising each year. This is as jobs created grow at a reducing rate. More job market entrants in the next 15 years have already been born according to a 2016 World Bank Country economic memorandum report on Kenya. This could further strain chances of getting formally employed.

For others, gambling is the side hustle. They view it as a means of supplementing their ‘tattered and strained’ pay slip, as Murimi Nyaga, a degree holder working as a cashier at one of the British cuisine joints at Nairobi’s Westlands observes.

“Back in college, it was this betting that helped me meet my daily needs. Even right now, waiting for the end month’s pay seems too far and betting fills the gap that the salary does not cover,” he told Financial Standard.

Nyaga, in his late 20s, says he is not going to stop gambling any time soon.

For him, even on the days he consecutively suffers losses, he keeps chasing the losses until he recovers and makes a gain. He explains that looking at the likely positive outcome keeps him playing.

“In this economy, what can Sh100 do for you? Probably just buy airtime and talk to three friends. Betting with this little money could help me achieve my dreams of a better house, car, land and financial freedom much earlier. What else can I do?” he asks.

Too attractive is gambling to youth that Capital Markets Authority (CMA) — the regulator of capital markets, thinks that the craze is the reason behind the disappointing start of most of the recent products launched on the NSE.

“At the small retail investor level, and particularly among the youth, the surge in mobile based betting and the promise of significant short-term returns has re-directed substantial amounts of small savings that might otherwise have found their way to the capital markets,” says CMA.

Data from the Betting Control and Licensing Board puts the number of registered and licensed casino operators at 50 and bookmakers at 25, though both have a countrywide network of branches.

According to Kenya Revenue Authority, eight major players in the betting sector have cumulatively given it Sh4.71 billion since June 2014. The taxman thinks the collection in the 2016/2017 financial year will more than double from Sh1.2 billion in 2015/16 to Sh3.8 billion.

However, the figure could be much higher given that the estimate is only based on self-assessment reports from the eight firms. Revenues from casinos and bookmakers are also not captured.

On the TV screens, over the radio and in the newspapers are the many tales about people whose “seed capital” of as little as Sh50 opened the way to the land of millionaires.

“I could be the next one,” every gambler hopes and keeps investing.

This has been boosted by the growing population of Generation Z who are currently in their 20s - whose digital technology is their DNA. Generation X and Y are in their 30s and 40s.

According Dr XN Iraki who teaches at the University of Nairobi’s School of Business, the bigger question is if generation Z is enterprising. “They are ingenious. With their money, being their money, they invest in fine things of life from clothes to restaurants. Some invest online, trading in forex and playing the stock market. Others gamble. Illiquid assets like land are not their focus,” he reckons.

This compares to Generation X and Y who loved owning land, animals with some few investing in stocks.

That some lose money and even commit suicide has not put brakes on this gambling craze - especially with all advertisers buzzing gamblers with convincing messages round the clock.

“Dinah won Sh1 million on Sunday and closed last week’s three millionaires. Erick, deposit Sh50 and you could be the first millionaire this week,” Erick Kimani, a gambler who is trying his luck in more than five betting and lotteries firms showed us one of the many messages from Lotto.

He admits to doing exactly that. He wants the world to look at him as a potential millionaire whose star could shine any minute. And more examples keep coming up.

On May 2 this year, Samuel Abisai, 28, won Sh221 million Sportpesa jackpot, which the betting firm hailed as “the biggest payout in African football history.” All Abisai needed was Sh200 and correctly predict outcome of 17 football games. A worker in formal employment earning a net salary of Sh100,000 will require 2,210 months or about 184 years to match Abisai’s windfall. This is on assumption that inflation and salary remains unchanged.

Such boons are making most young people convinced that luck could be all they need to transform their lives.

Even for those in formal employment, the urge to try to win something, just like Nyaga, is high.

Some companies have been forced to block or formally write to staff members warning them against gambling using company’s network.

Nairobi Bottlers which bottles and distributes soft-drinks blocked the betting sites. “Guys were spending too much time betting rather than working.

Sometimes operations could come to a halt as some employees hid in the rest rooms to bet,” an employee who has been at the firm for four years spoke to Financial Standard in anonymity.

However, the firm is alert to the fact that Kenyans are increasingly falling in love with betting, gambling and gaming.

For four months, the company has been running ‘Changamkia Mamilli na Coca-cola’ promotion in which lucky customers have been bagging between Sh50 and Sh5,000 or data bundles daily or Sh1 million weekly by simply consuming a bottle of soda.

This helped boost consumption as luck-hungry Kenyans took more soda with eyes fixed at the millions.

PwC Kenya, an audit and advisory firm has also kept a tight rein on betting.  Additionally, as auditors of one of leading betting firms, Sportpesa, it has advised staff not to bet on the platform to avoid conflict of interest.

An internet service provider, Internet Solutions Kenya has flagged gambling as not work-friendly activity and blocked the sites from the staff.

According to the Head of Research, Planning and Development Raymond Macharia, the firm observed unusual high activity online which was hurting productivity.

“We had to block the site because even more worrying is that betting is addictive and would not only ruin productivity of workers but also wreck their financial plans,” Macharia told Financial Standard. He says the company was forced to organise workshops with employees to educate them on sound financial management activities. For footballers in Kenya, Football Kenya Federation (FKF) President Nick Mwendwa was quoted last year saying that betting is “a serious concern just like doping.”

Cases of players who are on payroll of various clubs gambling to earn extra coins have the potential of leading to match fixing.

“We are dealing with a crop of players who struggle with basics like club contracts and salaries. How then do you expect them to know all these rules and regulations about betting and doping?” posed Mwendwa in a previous interview with The Standard.

Betting adverts in newspapers have also created business for photocopying and secretarial bureaus.

At Embakasi’s CityCentre Cyber, Cyprian Lukale, a young entrepreneur running a cyber café says that the many customers increasingly come asking for photocopy of newspaper pages with football games of the day.

Those with smartphones strategically use the cyber’s Wi-Fi to place bets while others log on to the computers. But those without smartphones and don’t want to log on to desktops opt for text messaging.

“This trend has helped to grow my photocopy and internet revenues. Ladies are not on the fence. They come mostly on weekends with eyes set on the jackpot,” says Lukale.

About 250 metres away from his cyber café shop, there is a group of men gathered to discuss the possible outcomes of upcoming matches. Keenly following the discussion is another gentleman selling roasted maize.

They all work like investment analysts, only placing odds after thorough analysis. But back in the central business district and upcoming towns, betting shops have a solution.

Potential customers are issued with smart card at minimum betting amount of Sh100. This gives them instant access to their gambling accounts through smart machines.

 With such simplicity, the NSE, which is viewed as a preserve for the elites, is chasing shadows to convince low income earners to join the bourse when they can try luck with as little as Sh50.

The much hyped M-Akiba bond which was hailed as the world’s first mobile traded bond is also struggling to convince this pool of “investors”. At 10 per cent interest rate, the bond offers better returns for those eager to recoup their investments.

As at yesterday morning, the bond which has been on sale for eight weeks has only attracted Sh192.5 million or about 19 per cent of the target. The offer closes on September 11.

The love for luck at the expense of hard work is spreading away from just betting. Some people have changed their lives thanks to bizarre and sometimes innocuous acts.

From hanging on choppers and writing letters to the President to granting funny interviews and walking on streets to publicly appeal for jobs, the love for luck is sweeping the nation.