There’s a well-worn adage that the house always wins. But that’s clearly not the case in South Africa, where casinos are starting to take strain, as recent lay-offs suggest.
Themba Ngobese, CE of the Casino Association of South Africa, reckons the reason we’re not gambling enough to keep the house on its winning streak is because we’re prioritising our spending. We’re choosing food and other essentials over leisure activities like Black Jack and one-armed bandits.
Themba says that the interest rate hike announced this week will only put more pressure on consumers and, as a result, the casino industry. However, I’m not convinced we can blame the casino industry’s woes on the economy or interest rates.
Elsewhere in the world online gambling is big business. Although it’s not legal in South Africa, there are ways around that. Tablets and smartphones have brought the world’s casinos into our living rooms and pockets. – JC
South Africa’s gambling industry: Are good times over for casinos?
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GUGULETHU MFUPHI: Well, judging by that lovely insert, you can tell that the theme across our shows today, is gambling. Gambling is an attractive form of entertainment for many across the globe who like to take risks and perhaps tempt fortunes. Themba Ngobese who is the Chief Executive of the Casino Association of South Africa joins us now as we look at South Africa’s gambling landscape. Themba, thank you so much for your time today. You’ll be speaking from a casino’s perspective in South Africa. Perhaps you can paint a picture for us as to what the gambling landscape regarding casinos looks like in South Africa.
THEMBA NGOBESE: Thank you. Thanks a lot for the opportunity and thanks for inviting us. The government decided way back – this was in 1996 – to legalise gambling in the country. We now have 35 operational casinos out of a possible 40. The other four are either not issued or not operational. At least one is not operational. That is the number of casinos that we have in the country. Certainly, in each province, there are a number of casinos and the biggest concentration is in Gauteng, which has seven casinos.
ALEC HOGG:  Themba, I’m sure you picked up this morning’s number from Sun International. They’re going to be laying off 1700 people – the biggest gambling business in South Africa. It’s 15.5 percent of their staff – a huge cut – suggesting that things are not going all that well in the industry.
THEMBA NGOBESE: I think ‘not going that well’ would be a strong statement. Certainly, there will be difficulties and difficult times in terms of trading levels simply because a number of factors affect it. The main one is the fact that people always forget. We actually compete for the same disposable income and people prioritise in terms of what they are going to use their money for, and in difficult times when people are saving money, priorities change. Obviously, people have to eat so they will always buy food and they’ll buy petrol. However, if you have a repo rate like it’s just gone up yesterday and another possible increase that professionals think may happen again before the end of this year, then people really don’t have money to gamble. Obviously, if it’s a choice between food and going to gamble, people are just going to buy food and pay for things that they really have to pay. You don’t have to gamble. You gamble as a form of entertainment.
GUGULETHU MFUPHI:Â Themba, can we perhaps pick up on that repo rate hike yesterday? Â How does it affect the casino industry?
THEMBA NGOBESE: As I said earlier, it’s really about the fact that households are really tightening their belts, money is scarce, and obviously, the less money people have to spend… They prioritise in terms of how they are going to spend and I promise you, gambling will be somewhere at the bottom of that list.
GUGULETHU MFUPHI: How do you then increase foot traffic coming into the casinos – increase marketing perhaps?
THEMBA NGOBESE: As with any business, you increase your marketing, try to get people in, and you have more shows etcetera, but it really is a battle and a hard thing to do, especially in difficult times when money’s not around.
ALEC HOGG: Themba, you said that 35 of 40 licenses have been granted. What’s the status of those other five licenses? Have there been applications?
THEMBA NGOBESE: Yes, one is in the Northern Cape. It had been awarded, but it has just been fraught with legal difficulties. It has never really taken off. One is in Mpumalanga. It’s really one of those that had just never been granted at any stage. There is a request for applications in Umtata in the Eastern Cape. The applications closed, I think, late last year so there’s a possibility that it might be issued. There is one in Limpopo that has been granted in Bakersford and a casino operator, which is a member of the association. Piermont is looking at building that casino during the course of 2014.
ALEC HOGG: Just to follow up or a little more elaboration on the Western Cape, we do know that the biggest casino in the country is the one that is here and run by Sun International. There is a lot of concern amongst investors that perhaps there’s going to be a competitor. What is the status there?
THEMBA NGOBESE: I’m not sure. You said ‘the biggest casino’.
ALEC HOGG: Well, the most profitable one… If you have a look at the Sun International annual report, the one that makes the most money is the one in the Western Cape.
THEMBA NGOBESE: I think I took that out of context because when you said ‘the biggest’…there are others that are bigger in terms of size and just the size of the building that you have. I’m sorry. Can you repeat the question for me?
ALEC HOGG: Well, the fact that it is so big – the casino – that they have in the Western Cape in Cape Town…there’s a lot of discussion about another license or another casino coming into Cape Town – into the Metropole itself – and I was wondering if there was any update you had on that.
THEMBA NGOBESE: Unfortunately not, they are still with government. It is a decision that will be made by government and unfortunately, we just have not had any further developments since the discussions that have happened over the course of the last two years or so.
GUGULETHU MFUPHI: Themba, we are in the digital age and I often question. Have you seen casinos having to change their business models perhaps, to attract those who are interested in the digital age for example, digital gambling/using their smartphones?
THEMBA NGOBESE: Certainly, when we started in 1996/1997, casinos were really about bricks-and-mortar. People had to drive to go to a casino. Over the years unfortunately, we’ve not been able to offer online gambling because it’s still not legalised in this country…We tried to introduce the concept of having online gambling at some stage but unfortunately, they don’t offer online gambling as a gambling form because it’s just not allowed.
GUGULETHU MFUPHI:Â Perhaps you can tell us why.
THEMBA NGOBESE: When the 2004 legislation was passed, there was the intention to have a Bill especially to deal with online gambling. It’s called interactive gambling in this country. Unfortunately, that Bill was just never passed. As a result, any online gambling that you see is certainly illegal – offered offshore. Swaziland was one of those that was well known – Piggs Peak. It recently shut down following a Constitutional Court judgment – a Supreme Court judgment – and the rest of them are offered all over the world into the country. There is no denying that people in this country engage in online gambling, but it’s not legal and the casino operators in this country do certainly not offer it.
ALEC HOGG: It’s interesting to see the relationship that has been established between horseracing operators and the casino operators. Is that unusual in a global context?
THEMBA NGOBESE: Not really. Obviously, they are two separate businesses and the clientele is not quite the same, but there are things that go together in terms of the two. You have synergies and it’s certainly not something that is necessarily innate in this country.
ALEC HOGG:  I’m sure the horseracing operators would love to have more casino licenses as well. Is there any chance that they could pick those up?
THEMBA NGOBESE: Unfortunately, in this country unless the framework changes there are only those four and others have already been taken – that are available – and they’d just have to beat those and/or buy current licenses from the operators who already have licenses.
GUGULETHU MFUPHI: Themba, usually people have negative perceptions towards casinos, that they cultivate a culture of gambling, which leads to an addictive behaviour. Has that changed over the years?
THEMBA NGOBESE: It’s still a battle. The industry invests a lot in terms of advocacy, training, and counselling. The casino industry sponsors funds – the National Responsible Gambling Program. It has a budget of over 50 million per year to try to address those issues.  The point that I always make is to try to say that an addicted gambler is very bad for a casino business operator because you cannot have… Casino licenses are offered in perpetuity and you want to be able to have a client for life. I certainly wouldn’t want to have Gugu as my client for this year, make lots of money off her, and then next year she’s bankrupt and I don’t have a client. That’s just not how business works. You would want to have Gugu come in, and spend R200.00 per month, but for the rest of her life. That’s a good customer.
GUGULETHU MFUPHI: A sustainable model is what it sounds like. Well Alec is laughing in the background, so I must just add a disclaimer perhaps that I’m not an addicted gambler.
ALEC HOGG:  Yes, you don’t want Gugulethu in front of one of those one-armed bandits.
THEMBA NGOBESE: I know because generally people tend to believe that we would want to have a customer that comes in, draws all her money, spends it on gambling, and the next thing she has nothing. Unfortunately, the problem is that yes, this year we might make a profit. What about next year? Unfortunately, we still have shareholders to make money. We still have stuff to pay. We still have resort properties to maintain. As a result, it’s much better if that customer comes in, spend a little money every year, and at least you keep that customer for life.
