The bill, introduced last week, aims to see the issuance of licences regulated by the relevant provincial authorities rather than the centralised National Gambling Board (more on this below).
It also provides procedures for objections to the issuance of licences, while aiming to regulate the advertising of online gambling entities, ensure the protection of minors and vulnerable persons, and mandate compliance with the country’s Financial Intelligence Centre Act (FICA).
Below, NEXT.io provides an in-depth analysis of the implications for this up-and-coming market, ahead of the release of a full market report in the coming weeks.
The next big market
South Africa is consistently touted as one of the next big markets for the iGaming industry, discussed fervently at trade shows and within investor circles.
Often likened to Brazil in of its size and potential, the country has seen consistent growth in gross gambling revenue (GGR) over the years.
In FY 2022/2023, GGR reached ZAR47.2bn (€2.3bn), reflecting a 36.9% rise from the preceding year.
However, the sector continues to grapple with various challenges hindering its full potential.
According to industry insiders who recently spoke to NEXT.io, one key obstacle is an outdated regulatory framework ill-suited for the digital age.
Regulatory complexity
South Africa has long been a tightly regulated market, with gambling regulations in place since 1995, preceding the end of apartheid.
Presently, the National Gambling Act of 2004 serves as the sector’s primary legislation, but it only covers land-based casinos and online sports betting.
The complexity of South Africa’s gambling landscape is further compounded by the presence of several regulatory authorities, each claiming responsibility for different facets of the industry.
While the National Gambling Board (NGB) serves as the national regulator and the National Lotteries Commission (NLC) oversees the lottery sector, South Africa’s quasi-federal governmental structure grants considerable autonomy to its nine provinces in shaping gambling policies.
A few years ago, a group of gambling operators in South Africa sought permission from provincial gambling boards to expand their offerings to include online casino games.
A legal loophole was found that allows operators to adapt traditional casino games so that they can fit under the umbrella of existing sports betting regulations.
Two provinces, the Western Cape and Mpumalanga, remain at the forefront of this evolution, by allowing fixed odds bets on casino games, live-dealer games, and virtual games.
As a result, the majority of online operators today hold licences issued in these two provinces.
Challenges remain
Despite this regulatory workaround, NEXT.io understands that operators still face challenges in dealing with suppliers and service providers due to varying regulatory approaches.
Local banks and media partners in South Africa are aware of the national “ban” on online casino games but may not fully grasp the nuances of the provincial approach and the legitimacy of “regulating casino-style games.”
Moreover, securing regulatory approval and the certification of “adapted games” from testing labs remains a costly and time-consuming process.
“It’s a very heavily regulated market, and it’s a lot harder getting your software approved here than in many other territories,” one gaming executive told NEXT.io.
Black market activity
South Africa’s gambling industry presents a diverse landscape served by both local and international operators.
While obtaining precise market share figures proves challenging, South African-founded Hollywoodbets emerges as a major domestic player alongside other local brands such as World Sports Betting, Tic Tac Sports Betting, Gbets, and Fafabet.
International operators such as Betway, Betfred, and Sportingbet have also secured significant market share, while Supabets, Superbet, Lottostar, and Lottoland are also recognised names in the field.
Recently SuperSportBet, a brand backed by South African TV channel SuperSport, entered the market.
Conversely, operators like 1xBet, Springbok Casino, and PlayLive Casino, though popular, are associated with black market activity in South Africa, operating under Curaçao licences.
Regulatory bodies are often criticised for their perceived ineffectiveness in reining in the black market, as they are largely dependent on strained cooperation from law enforcement agencies like the South African Police Service and the National Prosecuting Authority.
Exchange control provisions and banking legislation aimed at consumers who gamble on unregulated websites in South Africa are considered the most effective means of exerting pressure on black market operators.However, enforcement efforts through these channels primarily target consumers rather than the illegal operators themselves, as banks often halt transfers to players.
Past reform efforts
Numerous efforts have been undertaken to reform South Africa’s gambling regulatory system.
In 2008, the National Gambling Amendment Act, designed to regulate online gambling, received presidential assent.
“However, after nearly 16 years, it has still not been brought into operation, meaning that a legal gap continues to exist in the industry,” Maherson stated.
“It is highly concerning given the massive strides and advances online usage has increased and grown since then.
“By not regulating this gambling activity, the erosion of the rule of law and criminal activity is being encouraged, while the public is not effectively protected as they are when using land-based gaming operations.
“At the same time, a lack of regulation is resulting in revenue worth billions of Rands and jobs being lost to other gambling jurisdictions,” he added.
Maherson’s predecessor, Geordin Hill-Lewis, introduced a similar version of the RGB in 2015, aiming to consolidate interactive gambling under a central national regulator with a refreshed legal framework.
However, the bill failed to garner the necessary majority and did not progress further.
An election year
2024 marks an election year viewed by many as the most significant since the dawn of democracy in South Africa and the end of apartheid in 1994.
Concerns among ers of the ruling African National Congress (ANC) loom large, with many fearing that the party’s three-decade majority reign may falter if the party is unable to secure the necessary 50% of votes to retain power.
Several sector experts previously indicated that significant progress on regulatory reform may not occur within the next three to five years.
Prominent gambling lawyer Wayne Lurie described the introduction of a bill as “a surprise move.”
The assumption was that gambling reform is “not on the priority agenda” at the moment, given the country’s economic challenges and the fact that 2024 is an election year in South Africa.
Elections are scheduled to take place on 29 May and according to observers, for the first time in 30 years the ANC faces the prospect of losing its outright majority in the legislature.
To retain power, it may need to establish a coalition with other political parties.
Maherson criticised the ANC for neglecting adequate protection and regulation in the online gambling industry.
He accused the government of disregarding player and industry safety over the past 16 years and described the NGB as a mere “shadow of itself.”
He went on to say that the ANC appears poised to fall well below the 50% majority threshold, “which means that in the new parliament, it will no longer have its majority to reject legislation on frivolous grounds only out of spite because it came from an opposition party.”
What’s next?
Lawyer Lurie, meanwhile, highlighted that the RGB must now navigate a “lengthy and possibly arduous” process.
It must first withstand scrutiny from the Parliamentary Portfolio Committee on Trade and Industry and then gain strong majority in both the National Assembly and the National Council of Provinces.
“If the RGB in fact es into law, regulations will need to follow,” he added.
On the positive side, the RGB allows for a mix of national and provincial regulations, with provinces having the authority to determine certain specifics, “that very interestingly might cause a variance and even potentially make some provinces more attractive than others.”
These details include the process for obtaining remote gambling licences, associated fees, and levels of disclosure.
Given the complexity of the process, Lurie anticipates that it may take at least two to three years before licences become available to operators.
Nevertheless, he views the RGB as a positive step forward, particularly in recognising the importance of provincial regulators’ expertise and the impracticality of a centralised regulatory model.
“A central or national regulation model would, in our view, not only have been impractical but would undoubtedly have doomed the RGB to years of litigation in the apex Constitutional Court on matters of concurrent competency and the like,” he stated.
“We would also hope that the ruling party lends its to the RGB and understands the dire need for reform in regulation of this sector and also sees the significance of the very substantial tax revenue both being generated and lost, by the online gaming sector, as worthy of modern and efficient regulation,” he concluded.
