By Simona Levet
South Africans are high-rollers. According to PwC’s Gaming Outlook 2012: Betting on the future, “in 2011 South Africans wagered R257.6bn, which equates to more than R8 000 per adult gamer”.
The report shows that gambling revenue is highly correlated to the state of the economy: when the economic chips are down, gaming revenue declines and vice versa. The gaming industry has shown significant growth in 2011; according to the report, the total amount wagered by players across all types of gambling increased 10.6%. With a steady economic growth profile, PwC projects that this could grow to R349.6b in 2016.
Of the provinces, the report reveals that Gauteng gamblers wager the most on lady luck. The province generated 42.7% of total gaming revenues in 2011, followed by KwaZulu Natal (18%) and the Western Cape (15%).
Total gaming revenue – the amount wagered minus the amount returned in winnings – totalled R18.4 billion in 2011. Casino gambling takes top slot, generating R14.9bn or 80% of the total. Sports betting follows at R2.2bn.
Stereotyped as the preserve of the grey-haired residents of old-age homes, bingo is in fact one of the fastest growing segments – although it accounts for just 1.3% of total revenues. Between 2012 and 2016, PwC believes that turnover for Bingo will rise by 20% per annum (Compound Annual Growth Rate).
The gambling industry is high-stakes in more ways than one. As Nikki Forster, Leader-Gaming at PwC, explains in the report, “the margins are low, a large portion of the costs are fixed, regulatory compliance is stringent and profitability depends on volume”.
The proliferation of sports betting companies, particularly online, is not surprising when you consider that this segment has the highest gross margin – 12.2% in 2011 – and an average of 15.9% during the past five years. Horseracing makes up 78% of sports betting, generating R1.7bn in gross gaming revenues in 2011.
When it comes to sports betting (both online and offline), Gauteng again has the biggest stake – over 60% of total revenues.
Is it true that the house always wins? The report authors write that “because of their high payout rates, part of the appeal of casinos, LPMs, sports betting and bingo is that there is a reasonable chance a gambler may come out ahead, although over the long run, gamblers in the aggregate lose”.
One of the gaming industry winners is the government. Gaming taxes and levies contributed R1.8 bn in 2011, up 9.8% from 2010. Casino gaming made up 76.7% of the total.
According to the report, the anticipated imposition of a 1% tax on casino gross gaming revenues next year will result in a 16.9% increase in taxes and levies for casinos in 2013.
You can download the full report from the PwC by clicking here.