ULRIK BENGTSSON

The South African Reserve Bank (Sarb) delivered an important corrective to one of the most potent claims driving the country’s current regulatory debate around online gambling in its quarterly bulletin two weeks ago.

Despite the growth of online betting that has so alarmed politicians, civil society and the media, household spending on gambling remains, in Sarb’s own words, “relatively insignificant” compared to spending on essential goods and services.

The claim it corrects — that online gambling is consuming household budgets at a catastrophic scale — has been central to the panic gripping South Africa’s policymakers.

And as the Reserve Bank points out, the R1.5-trillion figure that has featured so prominently in the public debate does not represent what South Africans spend on gambling. It represents wagering turnover — the cumulative value of bets placed and recycled.

The vast majority of that sum (between 90 and 97%) is returned to players as winnings; what operators actually retain in the form of gross gaming revenue (GGR) is a fraction of that figure.

I raise this not to be dismissive of legitimate concerns about problem gambling. The concerns are valid, and Sun International takes them seriously. I raise it because good policy must be built on accurate data and sensible analysis. Because, when the factual foundation is flawed, the interventions that follow will be too.

Cape Town Archbishop Thabo Makgoba recently joined those who have called for a ban on online gambling. The archbishop speaks from a place of genuine moral concern, and I respect that. The suffering that problem gambling causes to individuals and families is real, and we all have an obligation to address it. But the important point is that when a government bans the licensed domestic industry, it does not eliminate gambling. It hands the most vulnerable consumers to operators outside the government’s regulatory reach.

The very real danger is that a punitive tax on the legitimate, local gaming industry will drive consumers to platforms outside the regulatory net

Online gambling cannot be switched off. According to the South African Bookmakers Association, there are already more than 2,000 unlicensed offshore platforms actively targeting South African consumers.

The billions of rands that flow to these platforms leave the country entirely. The money that leaks offshore contributes nothing to the South African tax system, nothing to the responsible gambling programmes that licensed operators are required to fund, and nothing to the communities in which the licensed industry operates.

Central to this debate is a concept that rarely features in public discussion: channelisation. It refers to the proportion of total gambling activity that flows through licensed, regulated operators rather than offshore, unlicensed alternatives. High channelisation means more consumers are protected, more tax is collected, and more responsible gambling tools are in active use.

Channelisation is hard to measure for the same reason it is hard to quantify any illicit market. But, according to H2 Gambling Capital, one of the world’s leading gaming research firms, South Africa’s online channelisation rate is in the region of 83%. This means that one rand in every six wagered flows to offshore, unlicensed operators beyond the reach of South African regulators.

Of course, these outflows are problematic. But the problem will become significantly worse if the regulatory environment tips against the licensed industry. The question that consumers, regulators and industry must therefore answer is whether a proposed policy intervention will help channelisation or hinder it.

Whatever one’s views on the gambling debate, I’m sure we can all agree that the goal of any sensible regulatory regime must be to draw more activity into regulated, tax-paying, consumer-protecting channels. And, conversely, every policy choice that makes licensed operators less competitive relative to their offshore alternatives should be avoided.

This brings us to the National Treasury’s current proposal of a 20% national tax on gross gaming revenue. Layered onto existing provincial taxes (and a 15% VAT obligation that South African operators must absorb and cannot pass to consumers), this would push the total burden on licensed operators to as much as 44% of gross gaming revenue.

Some commentators may argue that this tax rate is acceptable. But it is important to bear in mind that unlicensed offshore operators bear none of these costs, enabling them to use that cost advantage to offer more competitive products. The competitive asymmetry this creates is significant, and the Treasury’s revenue projections do not appear to account for it.

The very real danger is that a punitive tax on the legitimate, local gaming industry will drive consumers to platforms outside the regulatory net and undermine the very consumer protections that it purports to promote.

While we support meaningful player protections, we do not support regulations designed to look decisive but that achieve the opposite of their stated purpose

The international evidence is unambiguous. In Kenya, for example, successive waves of punitive taxation caused licensed operators to exit the market while gambling activity continued on unregulated platforms.

The government collected less revenue, consumers had fewer protections, and the situation worsened. The lesson is clear: when the tax burden on licensed operators widens the competitive gap with offshore alternatives beyond what consumers will tolerate, they move away and they rarely come back.

Sun International is wholly committed to regulatory reform. We completely agree that South Africa’s gambling legislation is outdated and does not adequately provide for online gambling. This needs to change. The country needs a harmonised, national legislative framework that supports a competitive and licensed industry, ensures that tax revenue from gambling flows to the fiscus, and genuinely protects consumers.

We are South Africa’s largest integrated gaming and hospitality operator, with 25 years of commitment to responsible gambling through our founding role in the South African Responsible Gambling Foundation. This programme funds public awareness and counselling and, importantly, has no equivalent among the offshore platforms that stand to benefit most from the dismantling of the licensed domestic industry.

Sun International is also a founder member of the newly established Betting Industry Body, which brings the licensed industry together to engage government constructively on the regulatory framework South Africa needs.

As Sun International, we’re prepared to go further on responsible gambling measures such as customer deposit limits, age verification, self-exclusion tools and advertising restrictions to minimise underage exposure. However, while we support meaningful player protections, we do not support regulations designed to look decisive but that achieve the opposite of their stated purpose. The last thing South Africa needs is a ban or a punitive tax that drives its citizens toward criminal offshore operators.

The Reserve Bank has done us all the service of grounding this debate in evidence, and we look forward to a constructive discussion with all stakeholders. Our hope is that, through dialogue, we can develop a regulatory framework that serves the best interests of South Africa and its people.