People gamble for different reasons. For some, money is the motivation, while for others the thrill of winning is enough reason to play. But for most people in Africa, the former is the reason and it is why gambling revenues improved on the continent in 2014, despite challenging and weakening economies.
South Africa recorded a growth of 1.5 percent in 2014, the weakest performance since the global financial crisis but despite this, gross gambling revenues in South Africa posted their second-largest annual increase over the past five years, rising by R2.1 billion ($145.4 million) in 2014. This is expected to continue.
According to a new report by professional services firm, PwC, entitled ‘Taking the odds: Gambling outlook for 2015 – 2019 (South Africa – Nigeria – Kenya)’, South African gross gambling revenues across most sectors of the market (excluding the National Lottery), are expected to expand from R23.9 billion ($1.65 billion) in 2014 to R30.3 billion ($2.1 billion) in 2019. The report say Casinos will take the largest share of this growth, by rising 4.5 percent over the prior year. In South Africa, gross casino gambling revenues totaled R17.2 billion ($1.19 billion) in 2014 compared with R497 million ($34.4 million) in Nigeria and R218 million ($15 million) in Kenya.
Casinos are the largest component of the gambling market in South Africa with gross gambling revenues accounting for 72 percent of total gross gambling revenues in 2014. But they face growing competition from other forms of legal gambling such as electronic bingo terminals, limited payout machines and sports betting outlets. They are also threatened by the increase in illegal online gambling.
“Overall, the South African gambling industry continues to remain a vibrant and exciting sector, but is facing significant challenges, in particular a slowing economic climate and changes in regulation,” says Pietro Calicchio, Gambling Industry Leader for PwC South Africa.
“We anticipate slower economic growth to lead to slower growth in gross casino gambling revenues in South Africa and Nigeria, while Kenya’s casinos will face increasing competition from legal online and mobile gambling,” Calicchio adds.
In Nigeria, gross casino gambling revenues rose by 17.1 percent in 2014, as double-digit annual growth continued. Gross gambling revenues is projected to expand at 8.5 percent compound annual rate to $68.9 million in 2019. The report adds that although growth over the next five years will be substantially lower than in the past five years, Nigeria is expected to continue to expand at a faster rate than either Kenya or South Africa. Sports betting has also become very popular in Nigeria, with an estimated spend of N1.8 billion ($9 million) daily.
Casino gambling revenues rose by 6.9 percent in Kenya in 2014, down from the 11.2 percent increase in 2013. The slump was blamed on the imposition of a 20 percent withholding tax on gambling. Legal online gambling and a new national lottery may also have contributed to the slowdown for the 13 licensed casinos in Kenya. However, gross casino gambling revenue is projected to increase at a 7.5 percent compound annual rate to $28.9 million in 2019 from $20.1 million in 2014.
“Overall, the gambling industry in South Africa and Nigeria is dynamic and ever-changing. However, the industry will be adversely affected in the near term by slower economic growth, but improving economic conditions over the latter part of the forecast period will fuel spending at a faster pace. In Kenya, growth will remain relatively stable during the next five years compared with the increase in 2014,” Calicchio concludes.