It’s a sad fact of life that when an activity is ruled to be against the law, there will always be a number of people who are prepared to indulge in it illegally. One only has to look at alcohol prohibition in the United States in the 1920s or the global recreational drugs trade today to see two good examples.

For South Africa, gambling is in just such a position. Although there are only around 40 licensed casinos in the country, as long ago as 1995 it was estimated that there were as many as 2000 places operating illegally. Today, although the underground nature of illegal gambling makes it hard to get total figures, this number is thought to have risen exponentially. Drilling down to a local level, the area of Gauteng is thought to have 300 places operating against the law.

Illegal casinos often are operating in plain sight with many looking like internet cafés or lounges. They are also often located in places where one would least expect to find a gambling den, such as in local malls or shopping centres. However, there are certain tell-tale signs. These include having darkened windows, an unusual number of security operatives on patrol and a secretive back room where the gaming takes place. Genuine licenced casinos, on the other hand, must have the word “casino” visibly displayed above the door and have their official licence on show inside.

The history of gambling in South Africa

The rise of the illegal casino may also have its roots in the country’s long and troubled relationship with gambling. All forms of the activity were banned way back in 1673 when the country was under Dutch rule, with the exception of horse racing. This ruling remained in force for over 300 years until the 1994 arrival of the democratic government.

However, in 2004, as online gambling was starting to emerge as a phenomenon. The National Gambling Act made this illegal. Although there have been subsequent attempts to loosen the laws around this, so far, they have been unsuccessful. It was hoped that the amendment to the act, which had been open for debate for a decade and was finally passed in summer 2018, would include a relaxation on the ban, but it failed to do so.

Some of the most vocal opponents of legalising online gambling come from CASA – The Casinos Association of South Africa. It is this body which is also especially concerned about the effects that illegal gambling is having on the profits of its members. Figures that they released in late 2018 showed that the gross gambling yield for the year had dropped by 2% which members attributed to illegal gambling taking away custom amounting to almost R 37 million.

It’s not just money that CASA believes is being lost. They also estimate that illegal gambling costs as many as 4,000 jobs, a figure which could make a definite difference to employment figures in areas like the Western Cape where many top casinos operate.

The dark side of illegal gambling

As well as financial damage to the legitimate industry and the economy in general, it’s thought that illegal gambling has links to the criminal underworld. So, it can be linked to money laundering, with the funds going towards everything from drug smuggling to human trafficking. However, if the money was directed into legal forms of gambling, it would be the mainstream South African economy that would benefit.

Currently, all legitimate casino operators and other gambling sources give over 36% of the revenue they generate to the government in the form of taxes. Naturally, this is a figure that could make a significant difference to many peoples’ lives.

Possible solutions

Now, onto how the issue could be addressed. There are two schools of thought. The first is the more libertarian approach that hinges on the supposition that legalising an activity is the most straightforward way to destroy its illegal counterpart. Looking to the UK, it’s clear it is possible to regulate online gambling, what’s more, the revenue it generates amounts to £5.4 billion (R 100 billion) per year according to official figures. And through tight regulation overseen by the country’s Gambling Commission, it’s a system that works well, providing users with a safe environment to play live online casino games, without the fear of funding illegal activities or having their details stolen. Online gaming sites which follow the regulations provide players with an array of, while contributing to the economy. By normalising the activity, the government has succeeded on several fronts, including driving out illegal online gambling, raising huge tax revenues and creating employment for many thousands of people.

However, one group who may not be quite so in favour of the increasing popularity of online gambling are the owners of land-based casinos who see it as a direct threat to their business. It’s no surprise that they see the only logical way of dealing with illegal gambling is by imposing an immediate and harsh clampdown.

This is certainly the preferred option of CASA. Its CEO, Themba Ngobese is on record as saying that illegal gambling, “not only affects the bottom line of licensed casinos‚ but society at large‚ as tax revenues‚ employment opportunities and associated economic activities are suppressed. So, CASA implores the authorities to prioritise the shutting down of illegal gambling operations‚ before they grow to insurmountable proportions”.

Looking to the future

For the moment, it looks like that the authorities are more likely to accede to Ngobese’s wishes as the 2018 amendment the National Gambling Act predominantly tightened up on activities, and even banned dog racing.

But with the potentially huge tax revenues that could be generated and the uncertain economic future, it may not be too long until the government starts to review its position.