The Mpumalanga government outdid itself. The province might have trouble filling the scores of potholes on the roads to Graskop Gorge, one of its top tourist attractions, but it beat its own ambitious forecast for online gambling revenue by a considerable margin.
According to Mpumalanga’s 2023 budget, the province expected to generate R541m from online gambling in 2023/2024. Instead, there was an increase of 140% to R759m. The figure was only R16m in 2016/2017; it shot up to R52m in 2019/2020 and hit R252m in 2021/2022.
What is classified in the provincial financial statements as “horse racing tax revenues” is actually revenue derived from taxing online betting, ranging from sports bets to casino games. The horse racing reference is a legacy of apartheid days when racing was the only activity where gambling was allowed, and it was a provincial competence (as it still is, along with other forms of gambling).
The gambling authority in the province is the Mpumalanga Economic Regulator (MER). With offices in White River, a staff of 80 and an annual budget of R107m, it is now one of the major industry drivers in the country.
Provinces have only a handful of sources (vehicle and liquor licences as well as casino taxes) for their own revenue, aside from grants from the National Treasury. Though provincial gambling regulators have long allowed bookmakers to use the “lottery loophole” to offer online betting, the MER has fully embraced this legal argument as a way to generate revenue for the province.
It is so committed to defending the loophole that it even sided with Lottostar, one of its licencees, in a court case against the National Lotteries Commission and the National Gambling Board.
Mpumalanga in particular has exploited online betting, so much so that its so-called horse racing tax revenue went from 1.2% of provincial taxes in 2016/2017 to 35.4% in 2023/2024. Mpumalanga accounts for 31.4% of all the money waged in South Africa, followed closely by the Western Cape at 30.9%.
Overall, the amount of money spent on gambling through Mpumalanga-licensed operators is astounding; in 2024 it was R359bn.
The dramatic rise in tax revenue coincided with a change to Mpumalanga’s regulatory structure. Before 2017, the province had separate authorities for liquor and gambling, but then merged them to create the MER.
The new body soon developed a reputation as an effective and efficient regulator. It is regarded by many operators as the preferred place to obtain an online gaming licence. This competition between provinces for what is in effect a national revenue pool has changed the nature of gambling in South Africa.
Overall, the amount of money spent on gambling through Mpumalanga-licensed operators is astounding; in 2024 it was R359bn
Before the pandemic five years ago, gambling was dominated by physical casinos, with a maximum of 40 licences available. But online gambling has no statutory limit on the number of licences provinces can issue. Understandably, casino operators are crying foul over how easily online operators can obtain a licence.
There is a competitive bidding process to procure a casino licence. Bidders have to pay a nonrefundable deposit of about R100,000. The winner has to pay about R1m in taxes annually, as well as a percentage of the take of every table game (such as roulette and card games) and slot machine to the province. In addition, they have to support corporate social investment (CSI) initiatives and are required to have an empowerment partner.
By comparison, the online operator annual licence fee is only about R15,000. Holders also have to pay a percentage of their take to the province, but there are no CSI or empowerment criteria.
Sun International CEO Anthony Leeming points out that there are also huge differences in the provincial percentage take. For casinos, they vary from 9% to 18%, whereas online operations only pay about 6%-6.5%.
The MER has done research on the extent of problem gambling — the socioeconomic impact — in Mpumalanga since online gambling took off during the pandemic, but says in its 2024 annual report that the findings are still being considered. Of course, the scope of such a review (such as the Western Cape’s) should be national, because the impact of gambling licensed by one province is not restricted to that province.
The current financial year looks to be another good one for Mpumalanga. The annual report projects that ”revenue collections will surpass the R1bn mark in the 2024/2025 financial year”.
But some gambling authorities are clearly not happy with how Mpumalanga and the Western Cape’s dominance of online gambling has swallowed up gaming revenue.
Gauteng Gambling Board (GGB) CEO Karabo Mbele’s annoyance is palpable in the 2023/2024 annual report. “Despite the reported 2% increase in [Gauteng’s] gambling revenue, the GGB has experienced attrition or lower gambling revenue due to the increased participation in interactive gambling or online betting, which is regrettably regulated by other provincial licensing authorities rather than the GGB.”
The GGB says in its annual report that it is looking at amending provincial legislation to enable it to issue online gambling licences.
With provincial regulators such as the MER enjoying steadily and steeply rising tax revenues from online gambling, they themselves should perhaps call the responsible gambling helpline to find out if they have a problem instead of recommending punters do so.
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