While African economies continue to struggle, gambling earnings across the continent grew last year despite difficult conditions. Over the last five years, gross gambling revenues in South Africa have seen their second-largest yearly gain, with casinos accounting for the lion’s share of this development, with revenues growing 4.5 percent over the previous year.
Gross gambling earnings in South Africa increased by R2.1 billion in 2014, according to official figures. Gross gambling revenues in South Africa, excluding the National Lottery, are predicted to grow from R23.9 billion in 2014 to R30.3 billion in 2019, representing a 4.8 percent compound annual growth rate (without the National Lottery).
In PwC’s fourth annual edition on the gaming business, entitled ‘Taking the odds: Gambling prognosis for 2015 – 2019 (South Africa, Nigeria, and Kenya), these are some of the highlights. The book focuses on specific aspects of the gaming business and provides thorough projections and analysis for each section. Each chapter describes the most significant patterns that have been identified, as well as the most significant difficulties and opportunities for the future.
Historically, the National Gambling Board of South Africa has been the source of information. Regarding Nigeria, numbers are taken and extrapolated from publicly available firm information in the country. In the case of Kenya, the statistics are calculated and extrapolated from casino taxes collected in the country.
South Africa has the biggest total gambling market of the three nations covered in the study. It is also the most populous. In 2014, gross casino gambling revenues in South Africa totalled R17.2 billion, compared to R497 million in Nigeria and R218 million in Kenya, according to Statistics South Africa.
A statement from Pietro Calicchio, Gambling Industry Leader at PwC South Africa, reads in part:
While the South African gambling business continues to be a lively and attractive sector, the industry is confronted with a number of serious problems, including a declining economic environment and regulatory reforms. Illegal internet gambling is a topic of great concern to the casino industry, and this is a problem that affects the whole industry. Aside from that, several casinos are seeing increased competition from other gaming establishments that are emerging in their catchment regions. As a result of weaker economic development, we expect gross casino gambling revenues to expand more slowly in South Africa and Nigeria, while Kenya’s casinos will face more competition from legal online and mobile gaming.”
Gambling in South Africa has grown significantly in recent years.
As the most significant component of the gambling industry, casinos generate gross gambling revenues that account for 72 percent of overall gross gambling revenues in 2014, down from 76 percent in 2013, indicating that this section of the market has reached maturity. At the moment, a total of 38 out of a potential 40 casinos are open for business. It was announced on the 31st of October 2015 that the Department of Trade and Industry intends to expand the maximum number of casino licenses that may be given in South Africa from 40 to 41.
Increasing competition from other kinds of legal gambling, such as electronic bingo terminals, restricted payout machines, and sports betting shops, as well as from the growth in illicit internet gambling, is putting pressure on casinos to improve their profitability and efficiency. The total gaming income of casinos is expected to climb to R19.2 billion in 2019 from R17.2 billion in 2014, representing a 2.2 percent compound annual increase over the previous year.
Taxes and levies imposed on gambling activities
The total amount of gaming taxes and levies collected in 2014 was R2.5 billion, an increase of 10.7 percent from the previous year. Casinos paid R1.8 billion in provincial gaming taxes and levies or 10.4 percent of their overall gambling earnings in 2014. For the year 2014, the estimated deemed output VAT collected on gross gambling revenues from casinos amounted to R1.9 billion, or 11 percent of gross gambling revenue. This brings the total taxes paid by casinos on their gross gambling revenues to R3.7 billion, or 21.4 percent of their gross gambling revenues.
Gambling at a casino
Gauteng was the top province in total casino gambling earnings in 2014 at R7.2 billion, up 2.4 percent from R7 billion in 2013. The provinces of KwaZulu-Natal and the Western Cape, each of which have five functioning casinos, came in second and third, with R3.2 billion and R2.8 billion, respectively, up from 2013. The combined gross casino gaming earnings from these three provinces amounted for 76.1 percent of the total.
We expect gross gaming revenue growth to decrease to 0.4 percent in 2015, reflecting the weakening economy,” the analysts write. Following that, we expect moderate increases as the economy begins to stabilize and operators such as Sun International and Tsogo Sun continue to grow several of their assets in the region. Calicchio goes on to say that casinos would face more competition from growing LPM and bingo locations.
