South Africa’s regulatory fragmentation is not the primary cause of black market growth, according to Sean Coleman, but provincial structures “do have an undeniable part to play”.
Speaking to SBC News regarding the country’s struggles to contain illegal gambling, the South African Bookmakers’ Association (SABA) Chief Executive Officer pointed instead to national shortcomings.
He argued that enforcement sits “squarely in the domain and legal framework” of the National Gambling Board (NGB), but that the body is currently under-equipped to deal with the scale of the problem.
This came after a recent YieldSec study, which found that 62% of gambling activity in South Africa came via unlicensed sites that are not regulated in the country.
“They are inefficient, lacking resources and skill sets to deal with the illegal market,” Coleman said.
“Industry is wanting and willing to make this happen. Despite our offers, we have yet to be approached.”
He referenced the Gauteng regulator’s action against offshore operator Piggs Peak Casino in 2011, where the Gauteng Gambling Board moved to block local advertising and access to the Swaziland-based online casino on the basis that it was offering unlawful gambling in the province.
The dispute, ultimately decided by the Supreme Court of Appeal of South Africa, confirmed that online gambling is deemed to take place where the player is located, bringing such offshore operations within South African regulatory reach.
‘Operational nightmare’ remains
Coleman reiterated his longstanding description of South Africa as an “operational nightmare for bookmakers”, particularly those with national retail footprints.
“It is really challenging to ensure that your company’s standard operating procedures meet the nuances of nine different sets of gambling laws, compliance and licence conditions imposed,” he said.
“Whilst attempts at creating national norms and standards have started, they too sit in the ‘fail’ column with the National Gambling Board.”
On enforcement, he was clear that no single measure will be sufficient for completely tackling the unlicensed market. Instead, he called for “a multi-pronged approach” which must be led by stronger collaboration between both government and industry.
He added: “There does, however, have to be a willingness for our government to partner with the industry in this regard.”
He pointed to international benchmarks, including work by the Gambling Commission in the UK and Australia’s regulatory model, as examples of more effective disruption strategies.
Referencing the UK, Coleman highlighted the recent £26m funding commitment to tackle illegal gambling, alongside expected new powers that will enable the regulator to block IP addresses and domains linked to unlicensed operators.
The UK Government has received many negative responses from the industry regarding their approach to tackling unlicensed operators – but there is, at a minimum, funding there to do so.
Coleman continued: “It will help strengthen efforts to disrupt illegal gambling and protect consumers. In addition, forthcoming legislation, including the Crime and Policing Bill, is expected to provide the Commission with enhanced powers, such as the ability to seek the blocking of IP addresses and domain names linked to illegal websites. Legislative and operational agility is key.”
Market open – but scrutiny remains
Despite these structural issues, Coleman stressed that South Africa remains accessible to compliant international operators, pointing to the recent market entry by Virgin Bet as evidence that the country is “open for business”.
“For those who conduct themselves in international markets legally and compliantly, entry into SA is relatively easy,” he explained.
“On the other hand, those operators who have operated illegally (in offering bets to SA consumers from pseudo licensing jurisdictions) have a greater challenge in advancing a fit and proper probity status in any new SA application.
“Then of course there is the issue of allowing an illegal operator into a legally operated market with a chequered history. What level of amnesty or reparation are they entitled to?”
Illegal operators gaining ground
The scale of South Africa’s black market remains significant. Coleman cited estimates of R50bn (£2.26bn) in gross gaming revenue flowing to illegal operators, alongside billions more in lost provincial taxes and VAT.
Traffic data indicates that offshore brands are very popular among local players – despite not being licensed in South Africa.
According to Coleman, this is no coincidence. “Advertising strategically has been key,” he pointed out.
“Illegal operators should not be allowed to sponsor in South Africa, period! We have had cases of Dafabet, whilst illegal, sponsoring both the men’s and women’s cricket teams in South Africa.
“1xBet sponsor teams in the Betway SA 20 – these strategies manifest when the games are broadcast live into different territories where cricket is loved, for example, India and Pakistan, where gambling is illegal online.
“When you correlate this type of strategy with traffic numbers is an understandable value proposition and strategy for an illegal.”
And with the South African government currently lacking the necessary IP blocking powers to effectively nurture a sustainable licensed-only market, Coleman’s words about an under-equipped regulatory framework ring even louder.
Things, however, do seem to be taking a positive turn, with the NGB recently making genuine moves to tackle the black market directly through the creation of its brand new online gambling whitelist. How effective would that be in practice, however, remains to be seen.
Tax uncertainty continues
On the regulatory front, uncertainty remains around proposed increases to the national tax rate on online gambling profits to 20%.
The tax increase proposal came about after the NGB estimated that 66% of adults engage in online gambling, up from 30% in 2017. The initial deadline for consultations was 30 January, but was later pushed back to 27 February, at which time there was still no noise.
Coleman confirmed that consultations have concluded, but “we have heard nothing further at this stage”, leaving operators awaiting clarity on the fiscal environment.
Despite the challenges, Coleman maintained that South Africa’s regulated market is fundamentally “stable and settled”, with the biggest opportunity lying in reclaiming revenue from illegal operators.
He concluded: “The biggest opportunity that exists for all stakeholders is to work together to limit access to the illegal market, and share in the benefits of the re-channelisation back to the legally licensed market.”
