Odds-on favourite: How online betting is cleaning up in Africa

Eye-popping growth by online sports gambling companies shows how the new form of wagering is taking Africa by storm, raising questions about administration, regulation and investment. Are they worth a punt? Or are they a regulatory risk?

After years of gradual growth, the ground is moving at lightspeed under traditional gambling companies, and the new winners are the online betting companies that are beginning to dominate the field. 

There are huge numbers of casino companies around the world that have tended to regard online betting companies as a manageable side risk. Yet as the online companies are starting to list on public exchanges and to report public numbers, the full extent of their growth and size is becoming visible. 

Notable on this front was the publication of the first-quarter results of Super Group (no relation to the South African transport company Supergroup) which listed on the New York Stock Exchange more than three years ago, in 2022, through a merger between Betway and Spin Casino, and a special purpose acquisition company. 

Betway has been one of the biggest Africa online betting companies, and this quarter the group’s results were very strong, particularly in Africa, its largest region, where it recorded 54% year-on-year growth to $203m, particularly in South Africa, Ghana, and Botswana.

The group also operates in Europe, where revenue rose by similar proportions, and North America, where Canada’s online casino segment contributed $181m in turnover, while its US business iGaming narrowed losses to $10m, indicating progress.

Betway is just one of seven licensed online betting companies. The other heavyweight is Hollywoodbets, which is unlisted but very visible in its South African marketing efforts, and its sponsorship of the Sharks rugby team and Brentford Football Club.

A long history of involvement in the building of betting software that lies behind many of the online companies has created the foundation for South Africa to become one of the larger players in this industry internationally. Super Group is now in the top 10 global online betting companies by turnover. 

The growth of the online market, around half the total market in 2022/23, according to the data from the National Gambling Board, shows sports betting is proving a headache for traditional gambling companies around the world, including Sun International locally. 

Sun International has squared this circle by starting its own online betting business, which is smaller than the exclusive players, but growing just as fast, and providing an avenue for growth outside traditional resort and casino-based businesses. In its full-year results for 2024, released in March, the company reported income flat for its urban casinos at R6.7bn, resorts and hotels were up a bit to R3.3bn and Sun Slots was down by 3.1% to R1.4bn. 

But the star of the show was the online betting business SunBet, which achieved record income of R1.2bn, a 60.6% increase, driven by growth across all verticals and a 35% rise in active players.

Cannibalising casinos?

But precisely how much of a problem is the online industry for traditional casino companies? Industry stalwart and outgoing CEO of Sun International Anthony Leeming says the effect is becoming noticeable. “We know that the growth has been really strong and we’ve also grown very strongly. I’m estimating that online [is] somewhere around R40bn at the moment, if not a little bit more.”

Casinos are still below 2019 levels, so ultimately a lot of the growth has been online growth. There has been a “bit of the cannibalisation of land-based betting”, says Leeming. “We’ve seen that our revenues are starting to flatten but people still want to go to casinos. They still produce good cash flow. But there’s no doubt online is the biggest share of the gaming market by a long, long way.

The big difference between the two is that online betting has “a much bigger variable cost in terms of how much you are gonna spend on marketing. It’s a big number and you can switch it on and off, so you can dial up your budgets quite high,” he adds.

In addition, there’s no capital expenditure for online, whereas land-based casinos have maintenance and refurbishment costs.

It means Sun International has had to accept that people are going to bet online, thereby cannibalising casinos. “So rather they play with us,” he says. “And I think as a result, our casinos have gained market share in most provinces because we’ve looked after the customer better.”

One thing casino operators can do – and which Sun International is doing – is to create something called “omnichannel” operations, in which the casinos host an event, and also provide the online betting opportunity, and the company is working on making the process more seamless. 

What about regulatory and social issues? These were highlighted last year by Capitec CEO Gerrie Fourie, who said sports betting had become deeply rooted in South Africa, and, worryingly, more of the bank’s clients were seeking additional income through betting activities. He stressed the need for a national conversation on the implications of this trend.

Leeming pushes back on this narrative, saying: “I don’t think people ever fully understand the industry but obviously the amount that we are spending on sports betting is important.

“We have to be very socially responsible in how we promote the industry, and we are really starting to say, hang on, we better have a bigger look.”

Worth a flutter?

So from an investment point of view, are online gambling companies worth a punt? Growth-wise, absolutely, says Peter Armitage, CEO of brokerage Anchor. The particular advantage of the online companies is that they have the ability to process a lot more smaller bets, and that their marketing tends to consistently build a customer base. Income from gambling companies, online and land based, tend to be very consistent because their margins are often algorithmically set. 

Overall margins between the online companies and the traditional casino businesses are currently roughly the same, somewhere between 20% and 30% on an earnings before interest, tax, depreciation and amortisation basis – but that may change over time, he says.

“What you have got with a physical casino is exclusivity. You’re much more protected. You’ve got a license and you measure your capital expenditure on the basis of exclusivity for a region. So it feels more comfortable. In the online world you have to market your product, and it’s all about service and advertising,” says Armitage. 

But for some investors, taking an investment bet on gambling companies is just not on. Fund manager Paul Theron says: “I would never buy shares in any business connected with gambling, lotteries or sports betting. That extends to casinos and the companies that provide the technology platforms.

“The whole industry is a giant net zero for humanity. That’s why these companies are mostly privately held, I imagine. It’s a bit like the porn companies – no-one feels comfortable owning them.”

This story was produced in partnership with Standard Bank.