Daily Dispatch

Dicey economy, other betting options hit casinos

- By ADELE SHEVEL

THE tables have turned for South African casinos – patronage has increased marginally but spending is down.

Not long after the first democratic elections, legalised gambling was unleashed on South Africans, who promptly flocked to the growing number of casinos, each more ostentatio­us than the next.

But the depressed share prices of the country’s two big casino and hotel operators – Tsogo is down more than 20% and Sun Internatio­nal’s share is nearly 40% lower in the year to date – raise the question of whether there is still scope for growth in this industry, especially as consumers are under pressure and there has been a proliferat­ion of alternativ­e gaming options.

The recent poor results from Sun Internatio­nal underline this trend.

It’s not that the industry has shrunk. Casinos are still a multibilli­on-rand business.

A survey by the Casino Associatio­n of South Africa says that for financial 2015-16, revenue was R18.2-billion, but the illegal gambling industry cost the fiscus R140-million in lost gambling tax revenue in the same financial year. And casinos are losing their share of the gambling rand to other betting options, horse racing, bingo and limited-payout machines.

National Gambling Board statistics show casinos now have 66.4% of the total gambling market compared with 84.4% in 2010.

Pietro Calicchio, a director of PwC, said although alternativ­e forms of gaming had shrunk casinos’ share of the total gambling market and the casino market was now mature, there was still room for growth. But this would depend on improvemen­ts in the local economy and an increase in consumers’ disposable income. “Given the current local economic conditions there is pressure on casinos,” he said.

National Gambling Board statistics for the year ended March show casino gross gambling revenue decreased by 1.8% when compared with the previous financial year.

Horse racing and sports betting represent 18.9% of total gross gambling revenue in 2017.

There has been a marked growth in the betting industry mainly due to bookmakers offering betting on sport – up 22% for financial 2017.

Limited-payout machines represent 10% of total gross gaming revenue, with increases attributed to an increased number of active machines in all provinces.

However, there will no further roll-outs of casinos. The number of authorised casinos is capped at 41, including two that are yet to have licences issued: one in the Eastern Cape and one in Mpumalanga.

In its gambling update released this year, PwC forecast that money spent on casino gambling would increase from R18.23-billion in 2015 to R22.38-billion in 2020.

The National Gambling Board estimates that 17.5% of the gambling population engages in illegal gambling and that this remains a competitiv­e threat to licensed gambling.

An analyst who declined to be named said that in South Africa, young people still went to casinos compared with places like the US, where mainly older people patronised casinos.

“South Africa still has a pretty young profile of casino-goers.”

But despite these younger customers, growth is likely to be constraine­d.

De Wet Schutte, an analyst at Avior Capital Markets, said the casino industry was now mostly mature and almost certainly on a lower growth trajectory than in the past.

“There was strong growth in the early years when the novelty factor was still quite strong, so the argument is that it’s a bit more mature now and more dependent on the shape of the economic cycle than in the past.

“The industry needs positive sentiment and a wealth effect in the economy for the situation to improve meaningful­ly. It is difficult to see that happen over the near term,” he said. — DDC

 ?? Picture: FILE ?? HARD LUCK: With consumers under pressure, growth in the casino industry is likely to be constraine­d
Picture: FILE HARD LUCK: With consumers under pressure, growth in the casino industry is likely to be constraine­d

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