Business
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The PricewaterhouseCoopers lists South Africa as the largest gambling market in Africa and that the country’s revenue from the sector will improve by 2019
| By Anayo Ezugwu | Dec 14, 2015 @ 01:00 GMT |
PricewaterhouseCoopers, PwC, has predicted that gambling revenues in South Africa will improve in 2019. The company said South African gross gambling revenues across most sectors of the market (excluding the National Lottery), are expected to expand from R23.9 billion in 2014 to R30.3 billion in 2019, a 4.8 percent compound annual increase.
PwC also said that gambling revenues improved in Africa in 2014, despite challenging and weakening economies. It noted that gross gambling revenues in South Africa posted their second-largest annual increase over the past five years, with casinos taking the largest share of this growth by rising 4.5 percent over the prior year. Overall, gross gambling revenues in South Africa rose by R2.1 billion in 2014.
This was contained in the PwC’s fourth annual edition on the gaming industry entitled ‘Taking the Odds: Gambling Outlook for 2015 – 2019 in South Africa, Nigeria and Kenya.’ 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 PwC said that the National Gambling Board of South Africa is the source for historical data. With regard to Nigeria, figures are derived and extrapolated from selected company information. With respect to Kenya, figures are derived and extrapolated from casino taxes.
Of the three countries included in the analysis, South Africa has the largest overall gambling market. In South Africa, gross casino gambling revenues totalled R17.2 billion in 2014 compared with R497 million in Nigeria and R218 million in Kenya.
Pietro Calicchio, Gambling Industry Leader for PwC South Africa, said, “Overall, the South African gambling industry continues to remain a vibrant and exciting sector, but is facing significant challenges, in particular a slowing economic climate and changes in regulation. An issue of particular concern to the casino segment is that of illegal online gambling. In addition, certain casinos are also facing competition from other gambling facilities opening up in their catchment areas.
“We anticipate slower economic growth to lead to slower growth in gross casino gambling revenues in South Africa and Nigeria, while Kenya’s casinos will face increasing competition from legal online and mobile gambling.”
According to the report, in the South African gambling market, casinos are by far the largest component of the gambling market with casino gross gambling revenues accounting for 72 percent of total gross gambling revenues in 2014. It stated that the revenues dropped from 76 percent in 2013, reflecting the maturation of this segment of the market. The report noted that currently, a total of 38 out of 40 possible casinos are in operation. On 31 October, 2015, PwC report said that the Department of Trade and Industry gave notice of intention to increase the set number of maximum casino licences that may be granted throughout South Africa from 40 to 41.
“Casinos face growing competition from other forms of legal gambling such as electronic bingo terminals, limited payout machines, sports betting outlets as well as from the increase in illegal online gambling. Casino gross gambling revenue is projected to rise to R19.2 billion in 2019 from R17.2 billion in 2014, a 2.2 percent compound annual increase.”
The report emphasised that the total gambling taxes and levies amounted to R2.5 billion in 2014, up 10.7 percent from 2013. “Casinos paid R1.8 billion in provincial gambling taxes and levies or 10.4 percent of their gross gambling revenues in 2014. The estimated deemed output VAT collected on gross gambling revenues from casinos in 2014 amounted to R1.9 billion, or 11 percent of gross gambling revenue, bringing the total taxes paid by casinos on their gross gambling revenues to R3.7 billion or 21.4 percent of their gross gambling revenues.
“Gauteng was the leading province in gross casino gambling revenues in 2014 at R7.2 billion, up 2.4 percent from R7 billion in 2013. KwaZulu-Natal and the Western Cape, each with five operating casinos, were next at R3.2 billion and R2.8 billion, respectively, each up from 2013. These three provinces accounted for 76.1 percent of total gross casino gambling revenues.
“We project gross gambling revenue growth to drop to 0.4% in 2015, reflecting a slowing economy. We then look for modest improvements thereafter as economic conditions stabilise and operators such as Sun International and Tsogo Sun expand certain of their properties. At the same time, casinos will face increasing competition from expanding LPM and bingo outlets,” it stated.
The PwC report noted that the Limited payout machines, LPMs, primarily located in bars, clubs and restaurants, accounted for 9 percent of gross gambling revenues in 2014. And that the LPM gambling revenue is expected to expand at a 10.3 percent compound annual rate to R3.4 billion in 2019 from R2.1 billion in 2014. Accordingly, the report said the introduction of new machines and new sites is substantially expanding the market. However, competition from electronic bingo terminals is likely to lead to slower LPM growth over the forecast period.
It stated that Bingo is the smallest category, accounting for only 5 percent of total gross gambling revenue in 2014, but rose from 3 percent in 2013 on the strength of a 52.6 percent increase. “Bingo became available in KwaZulu-Natal in 2014 and benefitted from a full year of operations in the Eastern Cape and North West. Gauteng continues to dominate the market with revenues totalling R903 million, followed by the Eastern Cape at R114 million. Electronic terminals have not yet been introduced in the Western Cape, Limpopo, Free State and Northern Cape.
“Bingo is expected to continue to be the fastest growing category during the next five years with a projected 19 percent compound annual increase in gross gambling revenues from R1.1 billion in 2014 to R2.7 billion in 2019.”
In sports betting, the report said horseracing remained the dominant component of the sports betting market in 2014 at R1.9 billion compared with R1.6 billion for sports events. However, betting on sports events has been driving the market, accounting for 75 percent of the increase over the past five years. Gross sports betting gambling revenues increased by 57.6 percent in 2014, more than three times the 18.5 percent rise in 2013, largely reflecting the wagering associated with the FIFA World Cup held in Brazil during June and July 2014. In addition, an 18% increase in the number of operational bookmaker outlets contributed to the 2014 increase.
“In 2015, it is anticipated that the absence of wagering related to the FIFA World Cup will have an adverse effect on the market. A further increase in sports betting of 36.6 percent is expected in 2018, associated with the next FIFA World Cup in Russia, followed by a modest 1.8 percent advance in 2019. Sports betting are projected to rise at a 12.5 percent compound annual rate to R2.9 billion in 2019. The National Lottery is expected to remain the slowest-growing category at under 1% annually throughout the forecast period. Gross gambling revenues from the National Lottery are projected to rise from R2.28 billion in 2014 to R2.33 billion in 2019.”
In Nigeria, the report noted that the gross casino gambling revenues in the country rose by 17.1 percent in 2014, continuing the pattern of double-digit annual increases. The casino market was not harmed by the recent terror attacks or the Ebola outbreak that hit the country in July 2014. “As a result of a slowing in the economic growth rate, slower growth is expected in the industry. For the forecast period as a whole, gross gambling revenues will expand at a projected 8.5 percent compound annual rate to USD68.9 million in 2019. Although growth will be substantially lower than during the past five years, Nigeria is expected to continue to expand at a faster rate than either Kenya or South Africa.”
For Kenya, casino gambling revenues rose by 6.9 percent in 2014, down from the 11.2 percent increase in 2013 and the 24.2 percent compound annual increase between 2009 and 2011. It is believed that the imposition of a 20 percent withholding tax on gambling may have contributed to the slowdown. In addition, increasing competition from legal online gambling and from a new national lottery may also have contributed to the slowdown for the 13 licensed casinos.
Kenya, like Nigeria, has been troubled with terrorism, which has hurt the tourism industry. However, the country’s casinos do not rely on foreign tourism and have fared well. For the forecast period as a whole gross casino gambling revenue is projected to increase at a 7.5 percent compound annual rate, rising from USD20.1 million in 2014 to USD28.9 million in 2019.
“Overall, the gambling industry in South Africa and Nigeria is dynamic and ever-changing. However, the industry will be adversely affected in the near term by slower economic growth, but improving economic conditions over the latter part of the forecast period will fuel spending at a faster pace. In Kenya, growth will remain relatively stable during the next five years compared with the increase in 2014. In the three market regions as a whole, gross casino gambling revenues will total an estimated R19.9 billion (USD1.8 billion) in 2019, a 2 percent compound annual increase on the R18 billion (USD1.7 billion) in 2014.”
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