South African Recession Creates Increase in Illegal Gambling

Confirmed by a new auditory report, illegal gambling in South Africa is rising – and the cause is down to the recession.

The regulated gaming industry in South Africa has also grown its revenue by 3.5% year on year to the end of March 2018. But the recession in the first six months of 2018 has generated an increase in illegal gambling operations in the country.

Regulatory uncertainty

The gambling industry in South Africa is facing regulatory uncertainty, making it difficult to thrive in the current market. The industry is responsible for approximately 38,000 jobs in South Africa, and the country’s Casino Association (Casa) said this week that it is concerned that challenges faced by operators that had previously led to a drop in profits are worsening.

The 3.5% increase in gambling revenue was below the rate of inflation, so in real terms profits are shrinking and continuing the bleak trend left over from 2017. Last year, gambling-generated revenue (GGR) fell by 1.8%, which was the first fall in revenue since the industry marker was created in 1997.

Casa said it paid 37% of GGR in taxes and levies across national, provincial and local levels in the year to date, which made the government the recipient of the largest portion of Casa members’ revenue.

Positive growth on horizon

Auditor PwC has compiled a report that predicts better figures for the industry in coming years, with a predicted 5% average growth every year until 2021. Themba Ngobese, Casa’s chief executive, has said the organization and its members are committed to growing the industry and ensuring that gaming becomes a major contributor in making South Africa’s economy better.

He said: “Casinos attract investment and tourism to the country, and the money members pay in taxes and levies is used to improve everything from education and healthcare to infrastructure and housing. One of our biggest concerns is the exponential growth of illegal gambling operations.

“These illegal operators pay no tax or levies and contribute nothing to the South African economy. As an industry, we once again urge law enforcement to take a tougher stance on these illegal operations, which are essentially stealing from us all.”

Illegal gambling machines

Illegal gambling in South Africa is prominent both on land and online. Ngobese has been trying to combat the issue for years.

He said: “Not nearly enough is being done to combat illegal gambling. There are laws in place, but they are meaningless without a firm and consistent commitment to enforce them. Unfortunately, there will always be people who believe that this is a victimless crime, but nothing could be further from the truth.”

The gambling regulator does not have the legal authority to arrest anyone found to be carrying out illegal gambling activity.

Nogbese added: “People don’t realize how big the industry is and the associated problems with it. That is why we are pushing for the government to do something.”

He believes that stronger regulation of the market would help consumers, legally operating gambling companies and the economy on the whole due to increased revenue from taxation.

He is hoping the government will realize the potential income a crackdown could generate. He sais: “We are hoping that, as the government struggles to collect the tax debt shortfall, at some stage they realize that they need to tighten the tap and not be losing money where they shouldn’t have to.”