Gambling Giants Set to Dominate South Africa – New Law Can Change the Market
A new online gambling South Africa the gambling market is ready. The government aims to deprive the current national operator of its online betting monopoly and open the market for foreign online casinos in South Africa.
The government has agreed to open online gambling, and the draft bill to dismantle the current monopoly and open South Africa to online casinos is complete. The bill is awaiting public consultation.
The gambling regime is already in turmoil. That was evident at a public debate in which politicians were discussing future gambling industry developments.
One of the event's organizers, the South African Gambling Association, stated its aim is to create awareness and assure independent dialogue on gambling.
Actually, the association is operated by bodies that receive instructions from overseas gaming companies.
The session chair, Minna Ripatti, employed by the Gambling Association and partner at Legal Gaming, continued that South Africa is not necessarily a huge market, but one that is attractive to large international operators—perhaps because some already operate there. Those companies are not yet permitted to promote or advertise in South Africa, however.
"South Africans enjoy gambling, so it's an interesting market in that sense," says Ripatti.
She also added that foreign casinos would need 9 to 12 months to bring their systems in line with South Africa's new legal framework.
The National Operator to Be Split into Two
The national gambling operator is in for a big change. It presently holds about half the market share for South Africa's online gambling. The other half is occupied by firms that are not allowed to advertise.
The reform would allow South Africa to license operators, giving them the right to market their games as long as they adhere to local regulations and pay tax to the country.
The national operator is ready to compete.
The bill also includes a plan to split the operator in two. One would compete with licensed international operators in internet gambling, while the other would continue to run lottery and traditional games on a monopoly basis.
It would be a win-win for everybody, say executives. South African players would enjoy more choice, gambling harm would be curbed through better regulation of offshore sites, firms would finally be in a position to advertise, and the government would get tax revenue.
The new law is also set to allow the national operator to compete overseas. Preparations are already underway for this.
Two years ago, the operator set up a subsidiary, Fennica Gaming, which provides gaming products and services to business clients. The firm has operations in international markets, such as in some U.S. states, Peru, and Brazil.
Gambling Giants Already Courting Sports Teams
Several firms are preparing themselves to enter the market, said Jari Vähänen, chairman of the South African Gambling Association.
Vähänen, also a founding partner at Gambling Consultants Inc., declined to name the operators eyeing South Africa but pointed to the Association for Gambling Industry Interests, which lobbies for gaming operators to be allowed in the country.
Its seven members include seven big gaming companies, such as Kindred Group, Betsson, and Flutter Entertainment.
"These are the biggest operators globally, so it's quite clear that they're interested in entering South Africa," Vähänen said.
Attempts to gain a presence have already begun.
Leading South African sport teams and organizations, including the national football and hockey leagues, have been courted by major international online casinos. South African sport organizations are also seeking gambling industry sponsors.
However, genuine partnerships will only occur once the legislative process is concluded.
Researcher: No Real Benefit for Gambling Addicts
The government cites gambling addiction and other issues in the current system as reasons for the change in law.
Janne Nikkinen, however, a researcher at Helsinki University, is skeptical that the reform will reduce the problems associated with gambling.
"There seems to be an idea that gambling in itself is good. Actually, it's not good for most. It's few who win—usually the house," says Nikkinen.
According to him, the benefits do not outweigh the harms. Even with tax revenue from foreign operators, an increase in gambling is not in the public interest.
“Perhaps we’ll gain a hundred million in taxes, but then spend the same amount on treating the resulting harms. It’s like patching a quilt at one end while it unravels at the other,” Nikkinen argues.
He believes the question should rather be: what value does gambling bring to society? He is also dubious about the generation of new jobs. Malta-based firms, for example, will remain there.
Sweden's Marketing Boom After Reform
In the Nordic region, Sweden and Denmark have already launched similar license systems. Norway has not.
Sweden opened up its online gambling market through a licensing regime, and the country was soon flooded with gambling adverts.
Legal Consulting's Minna Ripatti thinks South Africa's model will most closely resemble Sweden's.
"The Swedish model is not perfect—it has had its issues—but it is a good reference point for South Africa."
South Africa is following the lead of Sweden and Denmark in liberalizing its gambling market.
South Africa Liberalizes While South Africa Tightens
Researcher Nikkinen points out that the entire continent of Europe is not heading in the same direction. South Africa and Belgium, for example, have tightened gambling advertising legislation.
The gambling bill being sent out to consultation is by no means guaranteed a smooth passage.
There are also divisions within the government. Some parties wish to have tighter controls on advertising, whilst others wish to be more permissive.
Even conservative organizations seem to have altered their stance over the years, Nummikoski of Veikkaus says.