SA’s casino industry has been in business for 21 years, a period during which it has grown into one operating 38 casinos, providing direct and indirect employment to 60,000 people and generating annual gross gaming revenue (GGR) of around R18bn.
It is also an industry facing a multitude of challenges, not least pedestrian GGR growth.
In the first decade of its existence the casino industry enjoyed double-digit annual growth in GGR. That changed in 2008 when the global financial crisis plunged SA’s economy into a recession, from which the industry has yet to recover fully.
In the nine years to March 2017, GGR crept ahead at an annual average of a mere 3.47%, with the first decline in its history recorded in 2016/2017, when it fell 1.8% to R17.84bn.
The growth pace is even bleaker when measured in terms of total casino revenue. This is in essence the value of money wagered, including "recycling", which refers to amounts staked on more than one occasion during a casino visit.
In 2016 money terms, casino revenue peaked in 1996/1997 at R310.6bn and went on to fall 17% to R256.9bn in 2016/2017.
Growth in GGR over the past 10 years was well below potential, says Jacques Booysen, CEO of Tsogo Sun, owner of 14 casinos including heavyweights Montecasino in Johannesburg and Suncoast in Durban.
"Over the long term, gambling revenue should grow at the same pace as nominal gross domestic product [GDP plus inflation]," says Booysen.
Discretionary spending is driving GGR, but it has been hammered by low consumer confidence and financial constraints in recent years.
"In many respects casinos find themselves competing with retailers," says Themba Ngobese, CEO of the Casino Association of SA (Casa).
If forced to choose between going to a casino or buying necessities, most consumers with limited financial resources will stay clear of the casino, says Ngobese.
Casinos are also far from the popular image portrayed of high rollers playing the likes of blackjack and roulette at gaming tables.
"The casino industry is a volume business supported primarily by people who come to spend R200-R400," says Ngobese.
Reflecting this, Casa data for the year to March 2017 shows the industry’s 891 gaming tables accounting for R3.69bn (20.7%) of GGR and its 23,498 slot machines for R14.15bn (79.3%) of GGR.
It was also slot machines that were worst hit by last year’s weak performance, with their GGR take sliding 11%.
In recent years casinos have also been faced by competition from other forms of gambling. The biggest challenger to have emerged is bingo played on electronic bingo terminals, which are really just slot machines with a different name.
"Bingo is definitely eroding casino revenue," says Ngobese.
"Many people view bingo venues as being mini-casinos."
Growth in bingo GGR has been rapid, rising from a mere R90m in 2007/2008 to R1.28bn in 2016/2017. In the past year alone bingo GGR jumped 37%.
Casinos face competition from other legal forms of gambling but to a lesser extent than from bingo.
Limited payout machines (LPM) are among the casinos’ other challengers. "LPMs are targeted at a different market," says Ngobese. "They enable people to place a R5 bet with the maximum payout limited to R500. We view them as being of interest only to novice gamblers."
In 2016/2017 LPMs racked up GGR of R2.7bn, 14% more than the R3.36bn in the previous year and almost R2bn more than in 2009/2010.
Another form of gambling that has gained significant traction is sports betting. Reflecting this, total betting GGR jumped from R1.6bn in 2009/2010 to R5.1bn in 2016/2017.
The data includes horse-race betting, a segment that has had minimal growth for many years.
Ngobese shrugs off the sports betting challenge. "I would be hard pressed to say that it was eroding casino revenues significantly," he says.
But while casino industry players may argue that, excluding bingo, other forms of gambling are not a big threat, this is not borne out by hard facts. This is evident in casinos’ share of total gambling GGR, which Casa reports fell from 84.4% in 2009/2010 to 66.4% in 2016/2017.
It is not only other forms of legal gambling that are chewing away at casino revenue. Illegal gambling has emerged as a major threat.
"Illegal gambling includes online channels but that is a relatively small problem," says Ngobese. "The serious threat is from mini-casinos fronted as Internet lounges. There are at least 280 in Gauteng alone."
Visitors to illegal casinos are able to engage in all forms of gambling available in a legal casino, explains Ngobese.
The difference is that they access them through a computer terminal running off a remote server.
"They are very difficult to shut down," says Ngobese. "Any hint of a raid and they shut down the terminals."
Despite the casino industry’s many challenges, Booysen remains positive about its ability to again thrive given better economic conditions. "Intrinsically it remains a good industry to be in," he says.
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