Sportpesa boss Ronald Karauri: We do not know what really hit us
Ronald Karauri, a jovial, flashy former pilot at Kenya Airways, never saw himself as the man who would fly SportPesa from a small struggling company into East Africa’s largest betting firm.
Karauri needs no introduction to Kenyans after his public role as the SportPesa CEO.
A passionate poker player and son of a politician, Karauri first met Guerassim Nikolov, the controversial and principal SportPesa founder, at a poker table on the first floor of the dimly lit Finix Casino in Hurlingham, Nairobi in 2014.
His meeting with the Bulgarian that night was by sheer chance. The two poker lovers clicked from the word go as they faced off in a competitive poker match at the Casino in Hurlingham.
The strangers quickly developed a bond and their camaraderie grew stronger as they sprang from one poker game to the next.
Karauri believes poker, his favourite pastime, has a way of revealing a person’s true character. And on this table, he knew he could trust Nikolov.
“With Poker, there are different hands, different cards. You place bets then the best hand wins. Sometimes, you laugh at each other, but at the end of the day, the best hand wins,” Karauri told the Nation in an extensive interview to get the inside story of the embattled company.
From here, they would meet a few more times before firming up the business decision to run a betting company together.
Biggest betting firm in East Africa
In January 2015, Karauri would officially join SportPesa.
The decision would pay off four years later, after their fortunes rose following the company’s whirlwind success to become the biggest betting firm in East Africa. By December 2018, SportPesa was making revenues of Sh150 billion annually.
He has fond memories of his Bulgarian partners and his first meeting with them.
“I wish you could meet them. There is a perception of Eastern Europeans, Nigerians and all that, but they are good people. There is something about poker. It brings out people's true character and personality,” he explains.
Karauri and his team of Bulgarian shareholders have, for months, kept mum on the developments at the firm since they became a target of an unrelenting government crackdown that has ended up with them losing their betting licence in two companies -- Pevans East Africa and last month, Milestone.
In his first exclusive media interview, Karauri swiftly dismisses claims that some of his Bulgarian partners are criminals and rubbishes allegations that he was dealing with the Mafia.
“Gero (Guerassim Nikolov) is a gentleman. I have known him for many years and all of that time he was here, he was married to a lady here in Kenya and they have two children,” he says.
Nikolov is the man who was running SportPesa as CEO before Karauri came on board and he passed the baton to him.
“I have never seen a very hardworking man like Gero, because taking time off for him was difficult, it is like he can’t do it. We are the ones who have propelled the company to where it is,” the SportPesa boss says as he settles in his seat.
Would-be engineer turned pilot
As fate would have it, Karauri also first met former MP Dick Wathika in 2014, in the same casino where he met the Bulgarians. It is also in that casino where Wathika would collapse one year later, on December 19, 2015, and be rushed to Karen Hospital, where he was pronounced dead.
When he met them, Karauri realised that Nikolov and Wathika were already bosom buddies, having shared a controversial past in betting for more than a decade.
“My history with Wathika starts at the casino while playing poker. Remember the time I met Gero, is also when I met Wathika,” he says.
At the time, he did not know Wathika, other than what he had read about him in the media.
Seated in his office, Karauri’s demeanour does not betray the big fight from within that is tearing apart the giant company.
Karauri is a pleasant host. If he is arrogant or proud as his critics describe him, then he is very good at hiding it at our meeting. Those who love him admire him for his taste in fine things, his lavish lifestyle and his disarming honesty.
He has a quick wit, is likable and there is no doubt that he is media savvy. His hearty laughter reverberates through the boardroom.
He is sharp, a little nervous, but has all the important numbers at his fingertips. In any case, he is a former pilot who scored top grades at Mang’u High School.
He would have been a mechanical engineer had he not dropped out of engineering school at the University of Nairobi in his third year to take up an offer as a graduate pilot trainee at Kenya Airways (KQ).
Became rich and famous
He now sits, almost helpless as the vicious boardroom fight among billionaire investors at the company spreads like a cancer, destroying everything in its wake.
Karauri maintains that Kenyans are very far from understanding what really hit the company, and is quick to absolve the company of all accusations levelled against it -- from tax fraud and money laundering to profit shifting. He is confident that one day the courts will vindicate him and the company will have back its glory.
But betting was nowhere in his horizon, until he met the Bulgarians.
When the company was sponsoring the Kenya Football League, boxing championships, English premier league teams and Formula One, he was seen handing out trophies to the teams.
To some, he was Kenya’s celebrity CEO. In Kenya he quickly became famous because of the sheer amount of money SportPesa put in advertising and, by extension, in the media.
He seemed to enjoy this fame and missed no opportunity to show how well the company was doing, riding in private jets, throwing lavish parties and driving top-of-the-range cars.
Now he says this was merely branding, and he does not own a private jet.
In him, the Bulgarian founders found a talented marketer who switched from flying planes to become the public face of SportPesa.
To get into his office at the Chancery building, you have to pass through a swanky reception furnished with giant seats shaped like gloves and balls.
Taking pride of place in his office, on a wall to his right is an autographed Arsenal jersey of Aaron Ramsey.
University dropout
A tense moment of discomfort passes through the room when we stare at the jersey, perhaps because it is a painful reminder of the glory days of SportPesa. The only consolation now, perhaps, is the fact that the footballer has since left Arsenal.
Next to it is another autographed memento of Hristo Stoichkov, one of the best footballers of his generation and who is considered the greatest Bulgarian footballer of all time.
“To SportPesa, all the best,” Stoichkov writes before his signature in black ink. Below it is another plaque that reads: “Top scorer in 1994 Fifa World Cup, awarded the Ballon d’Or in 1994,” the Stoichkov souvenir reads in part.
Karauri’s story begins in Meru, where he was born. The family moved to Nairobi, where he grew up.
“I think we moved to Nairobi because my dad was a politician, so I grew up in Buruburu, went to Harambee Primary School,” he says.
He completed secondary education at Mang’u in 1996, from where he joined the University of Nairobi to train as a mechanical engineer.
“As I was doing mechanical engineering, the opportunity for Kenya Airways opened up. It was the first time they were doing initial pilot training. So, I dropped out of university in my third year of mechanical engineering and started flying with Kenya Airways,” he says.
He worked at KQ for 11 years. Six years as a co-pilot and five as a captain.
Karauri has been through many storms. As a pilot, he literally flew through storms. And he knows that at the end of every turbulence, there is always tranquility.
At Kenya Airways, he was among the pioneer class that went for pilot training in Ethiopia.
Highflying aviation career
“We are the only people who went to Addis. After coming back and recounting our hardship to KQ, they shifted the training to South Africa. Our conversion was quite difficult at Ethiopia Airline since they used the American system and their exams are much simpler compared to what we come to find in Kenya,” he said.
Nothing can possibly be harder in the life of a pilot trainee than training using a Cessna 122 to fly the Boeing 737.
In 10 years, he had been promoted to become a captain and was flying the biggest planes in KQ’s stable then.
That is before he moved to the powerful aviation union where he became the secretary general of the Kenya Airline Pilots Association (Kalpa).
“The highlight of my flying career was when I became a captain because that is the time you are given responsibility. You are in command of the aircraft, the lives you carry are in your hands. It is also a show of confidence that you can perform.”
So, why did Karauri leave what looked like a highflying career, to bet on sports gambling?
He says before he was convinced to jump ship from KQ, the initial shareholders at SportPesa were just three -- Guerassim Nikolov, Gene Grand and the Dick Wathika.
“The rest of the shareholders joined later. Some joined even after the business had started operating,” he says.
“After sitting and seeing the potential, I decided this is something I wanted to risk. So, I sold a small piece of land and decided to put all the money in. It was a very expensive investment at the time,” he says.
The combined initial investment was $5 million, which works to about Sh543 million at the current exchange rates.
SportPesa's initial shareholders
“It was a big risk but if done properly we really believed that it could take off.”
Grand, the other Bulgarian, was both a shareholder and a director at the time.
“Dick Wathika, Gero, and Gene Grand were very good friends and they had done other business together. The initial shareholders were the three of them, before I joined. Honestly, these were friends who started the company,” he says.
The SportPesa boss says Wathika was one of the people he negotiated with when he acquired his 6 percent stake in the company.
In the initial stages in 2014, when they had a misunderstanding with Safaricom on the nature of their business, he says Wathika led a delegation of SportPesa officials to explain to the telco how it would work.
“Because we had a big misunderstanding with Safaricom, we, at some point, closed for almost a month because they wanted a revenue share,” Karauri adds.
And it is perhaps at this time that Wathika went for his friend and village mate Paul Ndung’u and convinced him to buy shares in the company. Ndung’u, a tycoon who made his billions at Safaricom as a dealer, would help them get Safaricom on board.
Ndung’u and Karauri do not see eye to eye following a bitter boardroom falling out last year.
Ndung’u and other shareholders joined a little later. In total, the company ended up with 10 board members, seven of whom were shareholders.
Ndung’u would become chairman following the death of Wathika after the meeting at Finix Casino.
Crimes that SportPesa committed
“We interacted a lot with Dick. He was a very strong chairman. Actually, we really depended on him for most of the stuff. He really guided us in terms of manoeuvering in the regulatory environment. He had a lot of experience in that, so we were fortunate to have him at that point,” Karauri says.
Before SportPesa came calling, Karauri had tried his hand at a few businesses, the most notable being the Skylux Lounge, a popular club in Nairobi’s Westlands area.
The opportunity was offered to me to come to SportPesa and I realised if you are not part of the operation of that business, sometimes you might miss out on a lot of things,” he says.
But it was a tough task explaining to his family that he was moving from flying planes to gambling.
“It was a tough decision. I remember trying to explain to my family and friends, they thought I was a mad man. I was now at the peak of my pilot’s career. But I was ready to take the leap of faith and to move to the other side.”
Move he did, and his life changed.
“Initially, not much changed because I was still involved in KQ. The business was growing and we were monitoring in terms of registration, so not much changed,” he said.
“But with the publicity and the growth of the company, things changed, especially for me since I was handling a jackpot of about Sh200 million and that is when my life became more public."
Very few companies have been shut down by the government due to a tax dispute. In fact, in most instances, once caught, the taxman prefers to go the easy route of working out a repayment schedule.
In case the taxpayer disagrees with the tax bill, there is a tax dispute resolution mechanism and a parallel court process that has the final word on who pays what. But the government did not allow this process to come to an end.
So just what hit SportPesa and what crimes did the company really commit? BY DAILY NATION
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