Good odds on casino move?
Who will be the big winner if the law is changed to allow Cape Town to have a second casino licence?
The Cape Town casino market could soon be dealt a new hand, with gaming giants Sun International and Tsogo Sun betting on very different outcomes.
Changes have been on the cards since 2013, but a final decision seems imminent regarding the Western Cape government’s proposal to amend legislation to allow the transfer of an existing provincial casino licence to the Cape Town metropolitan area.
At the moment Sun’s Grandwest casino in Goodwood is enjoying an extended period of exclusivity (its official exclusivity period ended in 2013) in Cape Town.
After a prolonged period of stasis, the proposal for a second casino licence for the city was put back on the table in February this year when a notice was placed in the Government Gazette.
Initially the Western Cape government wanted comment about the proposal before the end of June 2018, but this deadline was extended to the end of this month.
The development of a new Cape Town casino could realistically be as far as three or four years away.
The nub of the proposal is that the Western Cape government, in an obvious bid to bolster tax revenues, has proposed that one of the existing provincial casino licences be allowed to be relocated to either the city centre-va Waterfront hub, the Goodwood-bellville area or the Strand-somerset West neighbourhood.
The four provincial licences, one of which could be mobilised for a move to Cape Town, are the Golden Valley casino in Worcester, the Garden Route casino near Mossel Bay, the Caledon casino and the Mykonos casino near Langebaan.
Worcester is under the control of Sun, but the other three provincial licences are controlled by Tsogo. Tsogo has also managed to snag a significant minority stake in the Golden Valley casino as well as in Grandwest.
The key premise behind having the five provincial casino licences was to spur development, job creation and revenue generation, especially in vulnerable economic hubs.
The Garden Route and Mykonos casinos can be considered vibrant operations with a fair economic impact on the surrounding area. Caledon and Worcester, on the other hand, appear to be subscale operations with a limited economic effect on local communities.
With this in mind, one could easily presume that Tsogo would look at relocating the Caledon casino to Cape Town. If Sun had the appetite (and the balance sheet) to develop a second Cape Town casino, the Worcester casino could come into play.
But there are obvious complications.
Sun is labouring under a heavy debt load. Simply put, it would battle to find the capacity on its balance sheet even for developing a small casino node.
Sun, through the cash-spinning Grandwest, is also the dominant player in the Western Cape and Cape Town casino market. It would be unlikely, then, that it would be allowed to further consolidate this dominant position by relocating a second licence to Cape Town.
Electus Asset Management analyst Damon Buss believes Sun risks losing the most.
“The decision to sell a piece of its crown