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PwC Predicts Tough Times for South African Gambling Industry

Nov 23, 2014
South Africa gambling

Economy is slowing down, gambling is slowing down as well

Competition is getting tougher as the South African gambling industry is diversifying and illegal gambling is growing.

From a financial point of view, South Africa’s casinos are doing very well. As the most popular form of gambling in the country, these businesses are raking in as much as R17 billion every year. But while the land-based casino industry is still the most profitable, competition is getting heated as other forms of gambling are growing at a rapid rate.

This week, accounting firm PwC released a detailed report on how the gambling industry could evolve in the following few years. The document takes a closer look at casinos in South Africa, Nigeria and Kenya and speculates on the trends the industry could follow between this year and 2018.

PwC’s predictions are not too optimistic. As the country’s economy is slowing down, its gambling market will face the same slowdown, the accounting firm said.

BusinessDay: Bingo and sports betting make inroads into casinos

In its report, PwC studied the growth prospects for casinos, as well as limited payout machines, bingo, sports betting and lottery games in South Africa. The country has 37 land-based casinos, which made a total of R16.5 billion profits last year. The industry has grown on a year-to-year basis, but only by a modest 0.6%.

Last year turnover increased 4%, a drop from the 7.6% growth in the previous year and the smallest profit made since 2009.

“We expect continued slow growth in SA over the next two years,” the accounting company said. “We then look for a pick-up in growth in each country as economic conditions improve. Some casino operators in certain locations believe that the slowdown in 2013 was due in part to growing competition from electronic bingo terminals, limited payout machines and sports betting shops, which are becoming more prevalent,” said the report.

Meanwhile, bingo operations have generated 67.5% increased revenue last year, while limited payout machines grew 17.8% and sports betting by 9.1%. According to online gambling news, bingo is the smallest category, with revenue of just R732 million, but the industry is constantly growing. Sports betting went up 18.5% and horse racing grew 4.6%, and PwC expects sports wagering to overtake horse racing in the next five years.

Charl Faurie, a spokesperson for SA’s Casino Association, said the association does not see alternative forms of legal gambling as a threat. However, illegal gambling operations are having a negative impact on the industry.

“The rapid increase of illegal online gambling is of particular concern to us as we estimate billions of rands are lost in tax revenue per year which has an obvious negative economic effect on the country. Casa is taking specific actions to address this threat beginning with a mass-media awareness campaign which will launch in the next few months,” Faurie said.

GamingZion: Online Gambling Sites in South Africa Could Be Banned

For years, politicians have been discussing changing the country’s gambling laws, as the industry expected them to regulate the online casino market. But recent news said authorities were considering doing the exact opposite: banning internet gambling in South Africa.

In addition to this, the media said lawmakers are also talking about setting limits on the number of electronic bingo machines and forbidding dog races. While these measures are just in the form of a proposal at the moment, if the draft becomes law all hope of having legal online casinos in the country will be lost.

Of course, not all officials agree with the proposal. Geordin Hill-Lewis, Member of Parliament (DA) and Shadow Minister of Trade and Industry believes it will cost the state more to enforce the law, than to legalize internet gambling. But others note that the number of problem gamblers has increased in recent years, and so has the level of indebtedness.

In addition to forbidding online gambling, South Africa authorities want to introduce licenses for the horse racing industry, in hopes that this measure will make gambling less accessible.

CityPress: Davies tackles gambling board’s mismanagement

Trade and Industry Minister Rob Davies suspended members of the National Gambling Board (NGB) on allegations of maladministration, wasteful spending and corrupt activities. The agency’s activities will be investigated by authorities, to find out if the accusations are true.

The board is normally responsible for overseeing the gambling industry and regulating South Africa’s multi-billion-rand market. Davies noted that the suspension was a precautionary measure, after an alleged contravention of the Public Finance Management Act through “failing to prevent irregular, fruitless and wasteful expenditure, and making overdraft on the entity’s bank account without the approval of the minister of finance”.

The board is accused of breaking the National Gambling Act by “allowing members whose term of office had expired to continue participating in the board’s activities and representing the NGB”, and there was a mention of “apparent corrupt activities” regarding the National Central Electronic Monitoring System, as well as “unlawful appointments of staff”.

Members of the board were also accused of intimidation, bullying and getting rid of evidence, which is why Davies decided to suspend them until the investigation is over.

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