Casino revenues to fall 5pc due to new tax policies

Revenues reported by casinos are expected to fall this and next year after a 20 per cent withholding tax on winnings was slapped.

A new report on gambling outlook in South Africa, Nigeria and Kenya released Thursday by global financial advisory firm PwC indicates that revenue growth in Kenya is expected to slow down 4.9 per cent in 2014 and to 4.1 per cent in 2015.

This is mainly due a 20 per cent withholding tax on gambling winnings, and slower economic growth.

“We expect slower economic growth to lead to slower gross casino gambling revenues in Nigeria and Kenya, and continued slow growth in South Africa over the next two years,” the report said.

It added: “The Kenyan economy is not expected to grow as fast as Nigeria’s, but may outperform the South African economy. We expect a similar pattern for casino gambling”.

The report says gross casino gambling revenues grew robustly in Nigeria by 19.6 per cent and in Kenya by 7.7 per cent in 2013, rising faster than growth in 2012 due to the strength of the two economies.

In South Africa, the growth in revenue dropped to 0.6 per cent due to a weakening economy and an increase in the pay-out rate to winners.

But revenue in gambling is expected to grow at an average 6.8 per cent from Sh1.7 billion ($18.4 million) in 2013 to Sh2.3 billion ($25.6 million) in 2018.

“The casino market held up well in 2013 despite concerns about terrorism, particularly after the Westgate shopping mall attack in September 2013.

Gross gambling revenue rose by 7.6 per cent, an improvement over the 5.6 per cent increase in 2012, but well below the double-digit gains recorded between 2009 and 2011,” PwC’s South Africa Gambling Industry leader Nikki Forster said.

ALL FORMS PERMITTED

Virtually all forms of gambling are permitted in Kenya, including online and mobile gaming. Kenya has about 13 casinos firms, compared with 37 licensed in South Africa and only three in Nigeria, according to the PwC report.

South Africa has by far the largest overall gambling market in Africa. Kenya’s Betting Control and Licensing Board and the Council of Governors are currently in a dispute over who has the authority to issue licences to casinos.

Early this year, the Association of Gaming Operators went to court contesting the imposition of a 20 per cent withholding tax on winnings from gaming and betting. The association said the 20 per cent withholding tax would have adverse effects on their business as it would push away customers.