Reevaluating Online Gambling in South Africa: Facts, Risks, and Regulatory Challenges

Clarifying Misconceptions About Gambling Expenditure

In its recent quarterly bulletin, the South African Reserve Bank (SARB) provided a crucial clarification amid the heated discourse surrounding online gambling regulation. Contrary to widespread alarm, household expenditure on gambling remains relatively minor when compared to essential living costs, according to SARB’s analysis.

A prevalent misconception fueling policy anxiety is the belief that online gambling is draining household finances on a catastrophic scale. This narrative has dominated public debate, yet SARB highlights that the often-cited R1.5-trillion figure does not represent actual consumer spending. Instead, it reflects the total wagering turnover-the aggregate amount bet and re-bet-which is substantially recycled back to players as winnings.

Understanding Gross Gaming Revenue Versus Turnover

Between 90% and 97% of the total wagered amount is returned to players, meaning the gross gaming revenue (GGR)-the actual income retained by operators-is only a small fraction of the turnover. This distinction is critical for informed policymaking, as misinterpreting turnover as consumer loss can lead to misguided regulations.

While concerns about problem gambling are legitimate and must be addressed, effective policies depend on accurate data and nuanced analysis. Without this foundation, interventions risk being ineffective or even counterproductive.

The Moral and Practical Dimensions of Online Gambling Regulation

Prominent voices, such as Cape Town Archbishop Thabo Makgoba, have called for a ban on online gambling, motivated by genuine moral concerns about the harm caused to individuals and families. Such concerns deserve respect and action. However, banning licensed domestic operators does not eradicate gambling; it merely shifts consumers toward unregulated offshore platforms beyond governmental oversight.

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

The Challenge of Offshore Gambling Platforms

Online gambling is inherently difficult to control. The South African Bookmakers Association reports over 2,000 unlicensed offshore sites actively targeting South African players. Billions of rands flow offshore annually, escaping taxation, responsible gambling programs, and community reinvestment.

This leakage undermines both public revenue and consumer protections, as offshore operators are not bound by South African regulations or responsible gambling initiatives.

Channelisation: A Key Metric in Gambling Regulation

A critical yet under-discussed concept in this debate is channelisation-the share of total gambling activity conducted through licensed, regulated operators versus unlicensed offshore entities. Higher channelisation rates mean more players are protected, more tax revenue is collected, and responsible gambling tools are effectively deployed.

Although difficult to measure precisely, research from H2 Gambling Capital estimates South Africa’s online channelisation at approximately 83%. This implies that roughly one in every six rands wagered is lost to unregulated offshore platforms, highlighting a significant regulatory challenge.

Policy Implications: Balancing Taxation and Competitiveness

The current proposal by National Treasury to impose a 20% national tax on gross gaming revenue, combined with existing provincial levies and a 15% VAT that operators must absorb, could push the total tax burden on licensed operators to nearly 44%. This heavy taxation risks making local operators less competitive compared to offshore platforms, which face no such costs.

Such a disparity may incentivize consumers to migrate to unregulated sites, exacerbating the very issues the tax aims to mitigate. Treasury’s revenue forecasts appear to overlook this competitive imbalance, potentially leading to lower tax collections and diminished consumer protections.

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

Lessons from International Experiences

Kenya’s experience offers a cautionary tale: successive punitive taxes on licensed gambling operators led to market exits, while unregulated gambling flourished. The government’s tax revenue declined, and consumer safeguards weakened. This underscores the risk that excessive taxation can push players toward illicit platforms, undermining regulatory goals.

Sun International’s Commitment to Responsible Reform

Sun International acknowledges the urgent need to modernize South Africa’s gambling laws to accommodate online betting within a unified national framework. Such reform should foster a competitive, licensed industry that ensures tax revenue supports public services and that consumers are genuinely protected.

As the country’s largest integrated gaming and hospitality operator, Sun International has championed responsible gambling for over 25 years, including founding the South African Responsible Gambling Foundation. This initiative funds public education and counseling services-resources unavailable through offshore operators.

Additionally, Sun International is a founding member of the Betting Industry Body, which seeks constructive engagement with government to develop effective regulatory policies.

Advancing Player Protections Without Driving Consumers Offshore

Sun International is prepared to enhance responsible gambling measures, including implementing customer deposit limits, rigorous age verification, self-exclusion options, and advertising restrictions to reduce underage exposure. However, the company cautions against regulations that appear robust but inadvertently push players toward unregulated markets.

The priority must be to strengthen the licensed industry’s ability to compete fairly, thereby safeguarding consumers and preserving tax revenues.

Looking Ahead: Evidence-Based Dialogue for Sustainable Regulation

The Reserve Bank’s data-driven approach provides a valuable foundation for informed debate. Moving forward, collaboration among government, industry, and civil society is essential to craft a regulatory framework that balances economic, social, and consumer protection objectives.

By focusing on channelisation and competitive fairness, South Africa can develop policies that curb problem gambling while supporting a thriving, responsible online gambling sector.

• Ulrik Bengtsson is CEO of Sun International