The South African gambling scene has been turned on its head over the last five years with the rise of online gambling. This shift to online has created many opportunities and challenges, particularly when analysed through an ESG lens. This article explores how the industry has evolved; how punters behaviour has changed and the path going forward from a sustainability point of view. All statistics referenced are from the National Gambling Board (NGB) of South Africa unless stated otherwise.
The rapid evolution of South Africa’s gambling landscape
In South Africa, gambling is big business, raking in R59 billion in gross gaming revenues (GGR) in 2024, growing 26% year-on-year [1] and 10% per year over the last twenty years. It is also evident that betting has experienced explosive growth post- COVID, growing at 42% per year since 2020 [Figure 1 – grey bars].
Gambling is roughly 1% of South Africa’s GDP, contributing R4.8bn to the fiscus and supporting over 32 000 jobs. It’s therefore a meaningful contributor to economic activity. Provincially, the top contributors to GGR are the Western Cape, Gauteng and Mpumalanga with 32%, 22% and 22% respectively[2]. Whilst there are five legal gaming modes, we focus on the main two: betting and casinos – which account for 61% and 29% of GGR respectively.
A tale of two diverging markets
There are diverging fortunes among the different categories of operators within the industry [Figure 2]. On one side are the traditional operators (casinos, bingo, and LPMs) dominated by Tsogo Gaming, Sun International and Peermont, who collectively control over 90% of this segment. On the other side are the betting platforms, predominantly online, that are experiencing rapid growth and transforming the industry.
The incumbents face fierce competition from nimble online platforms whilst operating in a low growth economy. To stay competitive in the long term, the incumbents have two clear options:
- Invest significantly in online offerings to capture the growing digital market.
- Enhance land-based offerings to retain and engage existing customers.
The incumbents are not sitting idle while the industry evolves. Sun International has bolstered its online presence through SunBet, with revenues surging fourfold to R733 million in between 2021 and 2023. SunBet now contributes roughly 8% of Sun International’s GGR. Tsogo Gaming is betting on the potential of a new Western Cape casino to diversify its revenue streams. At the same time, it is scaling up its play TSOGO online platform, which currently generates R200 million annually – roughly 2% of its GGRs. Public disclosures on the betting segment are limited but the major players driving its rapid growth are the likes of Hollywoodbets, Betway and SupaBets.
The rise of online gambling: steady and then suddenly
The COVID-19 pandemic had a major impact on punter behaviour, with online betting attracting a lot of first-time players plus taking share from the traditional modes. Online has several advantages which have contributed to its rapid growth – for example, the ability to place bets anywhere and anytime through slick apps and convenient payment gateways create a compelling value proposition for punters. This creates a highly profitable and scalable business that does not require a great deal of fixed capital to grow compared to land-based operations. GGR is mainly a function of turnover (the amount that punters wage) multiplied by the win-margin (the percent the operator keeps after paying out punters’ winnings).
Different games have different average win-margins, however, online betting has among the best win-margins in the industry given the rise of parlay bets which provide higher perceived payouts but a higher win- margin for operators. The combination of larger aggregate wagers plus higher average win-margins enable online operators to win a disproportionate share of the industry’s GGR [Figure 2]. Another anomaly is gaming taxes – in 2024, casinos paid roughly 10% of their GGR as taxes whereas betting operators paid 7% creating an unfair playing ground at a fundamental and regulatory level.
Financial strain fuels gambling behaviour in South Africa
Post-COVID, South Africa’s gambling incidence of 65% [3] is double 2017’s level and is the highest on record largely driven by the strong growth in online gambling [Figure 3]. Provinces with the highest incidence levels are the Free State, Northern Cape and KwaZulu Natal which is recorded at well above 70%. Reasons for gambling appear to be increasingly connected to financial strain with 56% of surveyed punters claiming that they gambled because they needed the money. When gambling goes beyond recreational use, the effects can be catastrophic for gamblers and their loved ones.
“Problem gambling”[4] prevalence has increased five-fold to 31%[5] between 2017 and 2023 with the underlying data showing an unhealthy profile. 21% of problem gamblers claim that they are unemployed with 84% earning under R15,000 per month. This highlights that a large portion of gamblers are trying to use gambling activities to improve their financial situation.
These trends are unsustainable in our view, and something needs to change. Figures 4 to 7 illustrate the problem gambling profile in South Africa.
A market driven by problem gambling is not sustainable
We find that South African gambling operators lag their international peers in key areas of responsible gambling disclosure. This is concerning given the country’s high propensity to gamble. Additionally, the rapidly growing online market, dominated by private companies like Hollywood Bets, lacks public transparency. If left unchecked, “problem gambling” has the potential to destroy South Africa’s social fabric.
While excessive gambling may boost short- to medium-term profits of companies, it is not sustainable. Problem gamblers often face financial ruin and burnout, making their lifetime value (LTV) highly volatile. A market reliant on problem gamblers has significant ethical and regulatory risks, as operators may be seen as exploiting vulnerable individuals. This opens them up to lawsuits with fines sometimes being multiples of the revenue earned from problem gamblers. Recreational gamblers, by contrast, provide a more stable revenue stream over a longer period, with reduced risk of reputational damage and regulatory penalties – this is the ideal model.
At Perpetua, we take the issues of addiction seriously when allocating capital and engaging with companies. We believe that the most responsible operators will be the most successful over the long-term. To evaluate companies, we monitor key metrics such as:
1. Cash contributions towards responsible gambling initiatives.
2. Customer interactions regarding problem gambling.
3. Stakeholder training and education.
4. Product safety measures.
5. Self-exclusion statistics.
6. The link between responsible gambling and executive compensation.
7. Controversies.
At crossroads
The NGB expects betting to grow at +20% per year between 2024 and 2027 whilst casino GGRs are expected to be flat. This has potentially serious implications on two fronts. Firstly, problem gambling prevalence is likely to increase further which may trigger industry wide regulatory crackdowns. Secondly, Tsogo Gaming and Sun International employ half the industry’s workforce so if they struggle to compete with the online platforms, earnings will deteriorate, people will lose jobs and shareholder value will be destroyed.
In conclusion, the gambling industry in South Africa stands at a pivotal crossroads, balancing rapid growth with the pressing need for responsible gambling practices. A sustainable industry, in our view, is one where all operators are held to a high standard of responsibility, with recreational gambling driving long-term growth. By increasing transparency, investing in education and treatment, and harmonising regulatory standards and taxes, we believe the industry can become more stable and sustainable. As part of our commitment, we will continue to engage with gambling operators to ensure they play their part in shaping this responsible future.
This article was first published in our 2024 5th Annual Stewardship and Sustainability Report, released on 28 March 2025.