Overall gambling revenues in South Africa for the 2016 financial year showed a modest increase in the wake of a highly challenging operating and economic environment. Overall gambling revenues improved marginally by 3.9%, down from the 11.2% increase in 2015 and the smallest gain experienced in the gambling industry during the past four years. This was mainly due to a shortfall in the casino market amid the current economic uncertainty. In addition, illegal gambling continues to be a problem in South Africa.
These are some of the highlights from PwC’s sixth annual edition of the gaming industry entitled Gambling Outlook for South Africa: 2017-2021. The publication focuses on segments within the gambling industry with detailed forecasts and analysis. Each segment details the key trends observed as well as key challenges and future prospects. The National Gambling Board of South Africa (National Gambling Board) and the Casino Association of South Africa (CASA) is the source for historical data.
Overall, gross gambling revenues (“GGR”) in South Africa are forecast to expand from R27 billion in 2016 to R35 billion in 2021, a 5.1% compound annual increase. Gambling taxes and levies will grow at a 5.2% compound annual rate to R3.5 billion in 2021.
Bingo was the fastest-growing category, with a 36.6% increase. Bingo is expected to continue to be the fastest-growing category during the next five years with a projected 11.9% compound annual increase. Casino gambling revenues fell by 1.7% in 2016 mainly due to increased competition from illegal gambling and other forms of gambling, and a weak economy.
Pietro Calicchio, Gambling Industry Leader for PwC South Africa says: “Although the gambling industry is an exciting and vibrant sector it faces a number of challenges, in particular a slowing economy.
“Illegal gambling also continues to be a problem in South Africa. According to a research paper issued by the National Gambling Board, the total impact of illegal land-based and illegal online gambling resulted in R1.9 billion lost in GDP for the 2016 financial year, as well as a loss of 3 785 jobs.”
According to the National Gambling Board, three-quarters of illegal online gamblers are in the 18-34 demographic group who visit the nearly 100 online sites that accept gamblers from South Africa, primarily through mobile phones. Slot machines are the most well-liked type of gambling activity but popular online gambling modes also include other games and forms of betting.
There are signs that stepped-up efforts to curb illegal gambling are gaining traction. Furthermore, there has been progress with regard to illegal lotteries.
Gambling taxes and levies
Gambling taxes and levies totaled R2.7 billion in 2016, up 4.9% from 2015. Casinos remain the largest contributor to gambling taxes and levies at R1.8 billion followed by the betting segment at R430 million. Gambling taxes and levies are forecast to reach R3.5 billion in 2021.
Casinos accounted for 66% of total gross gambling revenues in 2016, down from 70% in 2015, while LPMs and bingo rose by a collective 16.9%.
Currently, the National Gambling Act permits 40 licenced casinos in South Africa but the Department of Trade and Industry (DTI) authorised an additional licence for the North West province. CASA is challenging the authorisation of an additional licence as it is concerned that this sets a precedent for the granting of future licences. There are 38 operating casinos.
Gauteng was the leading province in casino gross gambling revenues at R7.4 billion in 2016, down 1.6% from 2015. KwaZulu-Natal was next at R3.4 billion, a 0.3% decrease from 2015, followed by the Western Cape at R2.9 billion, up 4.5%, one of only two provinces that recorded an increase in 2016.
For the forecast period as a whole, casino GGR is projected to increase at an estimated 3.5% compound annual rate, rising to R21.2 billion in 2021 from R17.9 billion in 2016.
Limited payout machines (LPMs)
LPMs accounted for 10% of gross gambling revenues in 2016, up from 9% in 2015. LPMs gross gambling revenues rose by 14.1% in 2016, continuing the pattern of double-digit annual increases. The number of LPMs rose by 5.2% in 2016 to 11 502. For the forecast period as a whole, LPM GGR is projected to expand at a 7.5% compound annual rate to R3.9 billion in 2021, from R2.7 billion in 2016.
Bingo accounted for 5% of total gross gambling revenue in 2016, up from 4% in 2015, buoyed by a 36.6% rise in GGR – the fastest-growing category. Gauteng generated 65% of the total growth in bingo GGR, with a 37.6% increase to R813 million. For the forecast period as a whole, bingo GGR is expected to increase at an 11.9% compound annual rate, from R1.3 billion in 2016 to R2.2 billion in 2021.
Betting GGR rose by 14.3% in 2016, raising its share of total GGR to 19% from 17% in 2015. Betting is the second-largest gambling category behind casinos. Sports betting rose by 21.3% in 2016 to R2.9 billion, more than three times the R847 million total in 2012. Sports betting includes betting on the outcome of lotteries and similar games which have grown in popularity and aided the growth in sports betting GGR. In addition to regularly scheduled sports events, major international tournaments such as the FIFA World Cup, the Rugby World Cup and the European Championship further boost the volume of betting. For the forecast period as a whole, sports betting GGR is projected to increase at a 12.3% compound annual rate to R5.2 billion in 2020.
Horse racing GGR rose by 6.2% in 2016, but that gain was partially generated by sports betting in the Eastern Cape, which is included in horse racing totals. Horseracing GGR is forecast to increase to R2.3 billion in 2021.
After decreasing between 2012 and 2016, lottery ticket sales increased in 2016 and lottery GGR rose by 34.7% to R2.98 billion. Although the National Lotteries Commission (NLC) did not cite a reason for the jump in ticket sales, the increase may have reflected successful efforts to curb illegal competition and the effects of the introduction of additional games.
It is likely that the gain in 2016 is a one-time boost. National Lottery GGR is expected to increase, but growth will be modest, averaging less than 1% per year. National Lottery GGR is projected to increase to R3.08 billion in 2021 from R2.98 billion in 2016, a 0.7% compound annual increase. However this may be influenced by the introduction of additional games or changes to the current offering.
“The gambling industry in South Africa will continue to be adversely affected in the near term by slower economic growth, but improving economic conditions over the latter part of the forecast period will aid growth.
“The industry remains an important contributor to the economy through the creation of jobs, continued capital expansion and the payment of taxes to both provincial and national government,” Calicchio comments.
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