Impact of Foreign Investment in South Africa’s Casino Industry

Impact of Foreign Investment in South Africa’s Casino Industry

Town Buildings and Casino Cards

South Africa is home to one of the world’s fastest-growing casino and gambling industries. Whereas many European national gambling industries have started to stagnate amidst oversaturated markets and prohibitive regulations, the African continent as a whole is thought to hold the most potential worldwide when it comes to developing online gambling markets. In recent years, the Rainbow Nation has benefited from an influx of offshore investment centered on the country’s burgeoning casino industry. Let’s examine the role of offshore investment in South Africa in more detail and consider what the future may hold for players and operators in the country.

Digital Infrastructure in Gambling Industry

The Role of SA’s Digital Infrastructure in Gambling Industry Growth

In recent years, there has been significant growth in overall foreign investment in South Africa. In many cases, SA has even underestimated its trading power on the global stage – as an example, South African President Cyril Ramaphosa’s commitment to muster an offshore investment target of R1.2 trillion has already been exceeded by 26%, rising to a whopping R1.5 trillion well ahead of schedule. SA’s increasing global trade and offshore investment potential has been best exemplified in the country’s technologies and electronics industries, which are experiencing unparalleled growth. This is largely due to technological innovations and a shifting cultural landscape in which digitalization has come to the fore.

The country is now a veritable breeding ground for startups and small digital businesses (the number of startup companies receiving state funding has been increasing incrementally since 2015), with SA serving as one of the main tech hubs on the African continent. Most notably, the country’s gambling and casino sectors have been at the heart of much foreign investment, with a ripe national casino games industry that’s projected to yield a total market volume of US$16.14m within the next 3 years. It’s clear that South African casino gaming is on the rise, but what have been the main deciding factors in this economic growth and rising rates of investment?

  • Increase in Smartphone Penetration Rate – More South African consumers and business owners now have access to smartphones and mobile devices than ever before, which has fuelled the establishment of digital and mobile services. In 2023, 20 – 22 million smartphone users were recorded in the country, the equivalent of around ⅓ of the population. This has significantly strengthened the mobile gaming market and attracted offshore investment. The smartphone penetration rate is forecasted to peak in 2029 at 37.96%.
  • Growth of Broadband Internet Access – Along with rising smartphone ownership, South Africa has seen a vast increase in the quality and availability of high-speed internet over the past decade. Since 2011, more than 10 million households have gained internet access, which has had a considerable impact on attracting overseas investors and businesses to the region. The Internet penetration rate is expected to continue to rise each year until 2029 and is projected to hit the 98% mark within the next 5 years.
  • Young Population / Unemployment – South Africa is generally considered to have the highest rate of unemployment in the world (recorded at 32.1% in 2023), which is also combined with one of the youngest populations. From a total population of approximately 60.6 million, there are around 22.12 million people aged between 0 – 19. It’s thought that the younger population is more tech-savvy and thus more likely to make use of digitalized services in the future. This relatively severe employment/generation gap can actually be seen as an attractive factor for offshore investors looking to capitalize on future trends in terms of a potentially mobile digital workforce.

World Map With Connected Points

Rates of Offshore Investment from the UK and China

In recent years, the country’s economy as a whole has provided a mutually beneficial impact for a range of global leaders, such as the United Kingdom and China. It’s clear that the Rainbow Nation has been notably increasing its bargaining power on the worldwide stage, with many global investors being attracted by the country’s burgeoning technologies and electronics industry, of which the growing online casino sector is a key element. Most notably, South Africa has started to capitalize on China’s increasing interest in the African continent, which is perhaps best embodied by the recent Sino-Senegalese trade deals in West Africa and beyond. The Chinese government has been investing steadily in the country since at least 2003, with a recorded peak (US$ 5.5 billion) being attributed to the Industrial and Commercial Bank of China (ICBC) purchasing significant shares in the Standard Bank of South Africa in 2008. In 2021, China’s foreign direct investment in the country stood at a sizeable 5.74 billion U.S. dollars.

Similarly, according to the UK government, South Africa now stands as the country’s 28th largest trading partner, having been accountable for approximately 0.6% of its total trade in 2023. This trade growth has been recorded as an upward trend for a few years, which has benefited both countries’ economies significantly. For instance, in 2021, the outward stock of foreign direct investment from the UK into South Africa amounted to £21.5 billion, or around 1.2% of the UK’s outward foreign direct investment worldwide. In return, the Rainbow Nation accounted for an inward foreign investment of £7.9 billion into the UK. Towards the end of 2023, the total trade in goods and services between the two countries (essentially, this accounts for imports and exports) amounted to a whopping £10.7 billion, which signifies a slight reduction of approximately 1% from 2022.

Casino Cards and Chips

The Role of Gambling Culture & Regulations

Despite displaying a historically prohibitive legislative attitude towards gambling and casinos, South Africa is home to some of the most active gamblers on the globe. SA players tend to gravitate towards horse race betting, sports betting, lottery games, slot machines, and classic table games. For those seeking online gaming options, TestCasinoEnligne is a valuable resource, offering in-depth reviews of the finest South African online casinos in 2024, ensuring an enjoyable gaming experience for mobile and desktop players. On the other hand, land-based casinos are also a key driver for the tourism industry, with thousands of visitors enjoying the country’s array of over 40 casinos each year – this includes world-famous venues such as Gold Reef City, Monetcasino, Sun City Casino, Carnival City, and the Boardwalk Casino.

Considering that South Africa has a pronounced gambling culture that stretches back for hundreds of years, it’s no surprise that offshore investors have been attracted to the region, especially those interested in gambling and casinos. Similarly, relatively strict gambling regulations (overseen and enforced by the National Gambling Board) could be seen as a positive aspect for investors looking to navigate this fast-growing industry safely and securely. Comparatively, increased regulatory scrutiny is more likely to deter unscrupulous or illegal casino operators, in turn keeping players safe and ensuring that homegrown revenue is channeled back into the domestic economy.

Positive Chart

The Positive Effects of Offshore Investment

There are numerous obvious benefits associated with offshore investment from the perspective of both parties. From the perspective of offshore investors, potential benefits include tax advantages, business diversification, and asset protection, gaining a foothold in one of the fastest-growing gaming industries in the world ahead of their competitors. Domestically, offshore investment can have a range of unparalleled beneficial effects, most notably related to revenue retention, a boosted economy, and an improvement in the quality of digital services in South Africa. If the current growth continues, the high national unemployment rate is expected to drop dramatically, which could have untold social and economic benefits for the Rainbow Nation.

Because investors are more likely to input their own funds based on evidence of the previously successful ventures of others, it’s highly likely that the overall increase of investment in South Africa will continue to upturn on a cyclical basis. The future of the casino industry is certainly looking bright!

Shaun Bakamoso

Greetings. I'm Shaun Bakamoso, and I'm thrilled to be your guide through the dynamic world of business news in South Africa here at mbendi.co.za. With a passion for staying informed and a keen interest in the ever-evolving landscape of business, I've dedicated myself to providing you with timely, insightful, and comprehensive coverage of the latest developments impacting the South African economy. bakamoso@gmail.com / Instagram