Business climate

South Africa is an emerging market with a comparatively well-developed service sector and a young population. It is an attractive target for inward investment especially compared with other African countries and mid-income nations around the world; tax rates are low, regulation is moderate, corruption is less pervasive than in some of its counterparts, and access to credit is good. However, violent crime rates are among the world’s highest, unemployment is significant, and a large minority of the population receives welfare. Affirmative-action programmes have a strong influence on employment practices.

Gambling (apart from betting on horse races) was long banned in South Africa but the proliferation of illegal casinos led to a reversal of policy in the late 1990s and the market has grown rapidly since.

According to a 2006 study, 87 percent of the population participated in the national lottery; 28 percent played slots; 23 percent bought scratch-cards; and 12 percent wagered on horse races. Only eight percent of South Africans said they never gambled.

Size of the industry

In the 2010-11 financial year, total turnover was ZAR233bn (€23.3bn). Nearly 90 percent of this was from casinos, and just 3.7 percent from limited payout machines (LPMs), as slots are known in South Africa.

LPMs fared somewhat better in terms of gross gaming revenue, however. For the gaming sector as a whole, this increased by 5.4 percent on the previous year, to ZAR17.1bn (€1.7bn), with LPMs accounting for 5.3 percent of the total.

Regional breakdown

There are sharp differences in the size of the gaming sector among provinces. Of that total GGR figure, 43.7 percent came from Gauteng province, 19 percent from KwaZulu-Natal and 17.6 percent from Western Cape, with other provinces contributing considerably less.

For LPMs, however, Western Cape is by far the dominant province, distantly followed by KwaZulu-Natal, where high taxation may be a factor.

LPMs

LPM revenue has been rising steadily – from a zero start – for a decade. There are also LPMs in Eastern Cape, Gauteng, Limpopo, and Mpumalanga provinces; they have not yet been rolled out to not yet rolled out to Free State, North West or Northern Cape.

The enabling legislation specifies that the maximum number allowed in the entire country is 50,000. These are further limited per province, as follows:

Eastern Cape 6000

Free State 4000

Gauteng 10000

KwaZulu-Natal 9000

Mpumalanga 4000

Northern Cape 2000

Northern Province 3000

North West 3000

Western Cape 9000

Stakes are capped at ZAR5 (€0.50) and payouts at ZAR500 (€50); return to the player is just under 90 percent, with slight variations among provinces. Double-ups and progressive jackpots are not permitted.

LPMs are linked to a central monitoring system.

LPM licensing

Licences are issued to route operators, site operators whose machines are provided by a route operator, or site operators who manage their own machines.

Provinces can issue licences for up to five machines on a single site. The national government may, if a province requests it, approve up to 40 on a single site but a province cannot authorise this number on their own.

Amusements

Amusements without cash prizes are permitted, although they may not be based on gambling games other than bingo.

Casinos

South Africa has the largest casino sector on the continent, with about 45 venues and a little under 40,000 slots as well as table games. (The next biggest is Egypt’s, with some 25 sites.) Operators include Sun International, Gold Reef Casino Resorts, and Peermont Global.

In the 2010-11 financial year, casino turnover was rising again after three stalled years that had followed a half-decade of steady year-on-year growth.

Online ban

South Africa has banned online gaming. Not only operators, but also players, Internet service providers, media that advertise gaming Websites, and firms such as banks that handle gambling-related transactions can be punished with fines of up to ZAR10m  (€1m) and prison sentences of up to ten years, as well as being excluded from applying for online gaming licences when they are introduced.

Regulatory developments

There is concern over the government’s plan to impose a 15 percent withholding tax on all gambling winnings of more than ZAR25,000 (€2500). It would effectively increase operators’ hold percentage, it has been suggested, and dissuade consumers from spending their leisure budgets on gambling. Betting on horses is also expected to suffer if the tax comes into force.

Casinos in South Africa must now report financial transactions over ZAR25,000  (€2500), as part of an effort to combat money laundering. It is believed that criminal syndicates using casinos as well as the property market have made the country into one of the world’s black spots for cleansing ill-gotten funds.

Other sub-Saharan markets

South Africa is not, by any means, the only sub-Saharan gaming market. Other territories of importance include Botswana, Cameroon, Ghana, Namibia, Uganda and Zimbabwe. Pari-mutuel is popular in some areas, with Ivory Coast having a national automated system.

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