A bird’s-eye view of bookmaking in South Africa

Sean Coleman, CEO of
KwaZulu-Natal Bookmakers’ Society

There are some 250 betting shops in South Africa, and with South African racing having long been a staple diet in Britain’s shops, it was good to welcome three members of the KwaZulu-Natal Bookmakers’ Society (KZNBS) and their CEO to the Bookmakers’ Trade Fair at Wolverhampton in October.

Sandwiching their visit between a conference in Istanbul, attending the Leaders in Racing Conference and the Prix de l’Arc de Triomphe weekend, were Sean Coleman, chief executive officer of the KZNBS, and directors Dave Lavarack, grand master of Kruger Racing, Trevor Fourie of Fourie’s Sporting Club, and David van der Vyver of Van der Vyver Racing.

Post-Trade Fair conversations with the quartet revealed some major differences in the modus operandi of the two nations’ betting industries, among them being that most South African shops are far larger, with the majority having secure on-site parking for between 30 and 50 cars. They are also allowed to sell alcohol under licence and food, including pub-type meals.

There are no virtuals, limited numbers, no exchanges and no dominant major chains. The biggest, Betting World, is a wholly owned subsidiary of Phumelela and currently has 42 outlets and an online presence. The next biggest is Hollywood Racing with around 35 shops, followed by Marshall’s World of Sports with about 30. There is then a significant drop to the 10- to 12-shop operators, right down to the single shop men and women located in small towns.

But there are similarities too. As with ATR and RUK here, South Africa has its own dedicated racing channel, Tellytrack, broadcast into homes and shops on cable; there’s an equivalent of the Gambling Commission in the form of national and provincial Gambling Boards; limited payout machines (LPMs) equate to FOBTs with a maximum of five per shop; racing’s share of business is declining as soccer betting burgeons; and our ABB operates on similar lines to South Africa’s associations.

The KwaZulu-Natal Bookmakers’ Society is one such trade body; a co-operative association formed by bookmakers to provide strength in numbers. When new provincial legislation is tabled they speak with one voice. There are equivalent societies in Gauteng, the Western Cape and the Eastern Cape, which, along with KZNBS, work together to fight their corner regarding national laws.
KZNBS’s odds service

KZNBS also provides a betting odds service for the bookmakers in South Africa, as Sean explained: “We compile the odds for all the South African racing, as well as the racing from Zimbabwe (Borrowdale Park) and Kenya (Ngong Forest). We compile those odds from our studio in Durban and disseminate them across 240 betting shops in South Africa.

“That’s been up and running for just over ten years and it’s a very stable product. By default, we have a monopoly in the market but it’s one that‘s tried and trusted. Our time-of-race odds are the same odds that are taken by SIS via Phumelela.

“On any given day we’ll run from 10 in the morning until 10 at night. It’s a 364-day operation; the only day we can’t race is Christmas Day.

“We start by taking two or three Australian venues – mainly harness racing – we’ll run three or four races from a couple of centres, and then we move into our own local racing, which generally begins around 11.30 or midday. The UK racing pictures come on line via Phumelela and we’ll take two or three meetings, then in our summertime we have night racing, either from Greyville or Turffontein.

“On Saturdays we compile odds on the Mauritian racing, plus a sprinkling of Zimbabwe or Kenya when they’re racing.

“We run our model on pretty much the same lines as the BTC consortium. It’s non-profit, we amalgamate all the overheads, put the budget together and divide that by the number of shops and that determines the price of the product. We’re not commercially driven in terms of looking to make major profits out of the service that we provide. We’re there for the benefit of the bookmakers.



KZNBS’s David Van Der Vyver,
Dave Lavarack and Trevor Fourie.

“Because there’s no volume on-course we don’t take SPs from the course. The SP comes from our compilation of the odds. Staff in the studio monitor the trading on the markets and they compile the SP on the basis of what the market indicators are telling them.

“We obviously bet to certain policies: we look to what we believe is the standard industry norm of a return of between 14 per cent and 16 per cent, which we believe are fair and reasonable margins in terms of international standards.

“There’s a dedicated racing channel called Tellytrack, which you can get in your home on cable, but the bookmakers pay for that same supply to their shops to use it for commercial purposes. It’s exactly the same pictures, and the odds which are scrolled come from the dissemination of our studio. Bookmakers pay a fee to Phumelela for those picture rights, and they pay us for the data dissemination. Whereas in the UK it’s under one fixed fee, in our case there are two separate providers.”

Interest in UK racing is increasing as punters become familiar with the jockeys, trainers and horses.

At the moment it accounts for approximately 35 per cent of turnover, compared to only 14 per cent on South African racing, with up to three British meetings being shown every day.
Balancing interests

“The KZN Bookmakers’ Society is in essence two-fold,” Sean continued. “The betting odds service is the operational side, but there’s also the ‘front office’, which is what I’d align with the ABB, whereby, from a KZNBS perspective specifically, we look after our members’ interests in KwaZulu-Natal, making representations to the various regulators including the Provincial Gambling Board, which has regulatory jurisdiction over our members and is our equivalent of the Gambling Commission. We comment on pending legislation that they’re looking to bring in to regulate bookmakers and we make representations to Parliament and to the Government regarding various taxation issues and such matters.

“We have a non-executive board that runs the Society and we operate on the basis of looking after our members’ interests. We’re very conscious of the small one-shop, one-man-band and the bigger groups.

“It’s a difficult trade off at times but, whereas in the UK, the bigger firms have broken away and the independents are trying to band together, we haven’t seen that major divorce, but at times it can be quite challenging trying to keep everybody together, both for the industry and for the bookmakers as a whole. What the bigger firms want may be to the detriment of the smaller guys, and we’re in the middle trying to balance the best interests of both, as the small guy pays the same membership fees as somebody with 30-40 shops.”
Racecourses in decline

South African racing is under pressure. Gauteng has sold three of its racecourses; KwaZulu-Natal has just sold one of theirs and there is a pending sale of one in the Eastern Cape.

Bloemfontein, Gosforth Park and Newmarket have all disappeared, though there is talk of horse racing being introduced at the Randjesfontein training centre. KwaZulu-Natal now only has Greyville and Pietermaritzburg (Scottsville), with Clairwood having recently been sold, albeit with a right to use it for a further 18 months, which will allow time for an all-weather track to be built on the inside of Greyville’s turf course.

Whilst there is money available in the short-term resulting from the sale of its courses, there are inevitably long-term problems when an organisation sells assets to keep itself afloat.

On-course betting accounts for little more than 1 per cent of racing turnover, and racing itself has only a small percentage of the gambling rand. Casinos take most of it. There are 40 casino licenses available in South Africa, though only 26 of those are currently operational.

A maximum of seven bookmakers are now allowed to stand on-course on any racing day; there used to be more than twice that number. And whereas a pitch in Britain can change hands for £200,000, it’s not something that can be bought or sold in South Africa, where there is a waiting list of bookmakers wanting to stand on the racecourse, which is regarded as a privilege rather than a right.

Despite free admission, the public simply doesn’t go racing anymore.

Outside of the flagship days, such as Kenilworth’s J&B Met or the Durban July, racecourse attendances have fallen drastically, especially now that consumers have all the facilities at home to place a bet and watch the race live on TV.
Punting preferences

Exotic bets have long been the backbone of South African racing, in particular the Pick 6.

The exotics carry racing in its bid for the South African rand. Win and place bets will attract around R70,000 on the tote but the Pick 6 generates in excess of R1 million, while place accumulators produce R800,000 or R900,000.

That’s net after the 25 per cent deduction on Pick 6, place accumulators, jackpot, quartet and trifectas, compared to 18 per cent win and place.

It’s down to the mindset of the people, say the bookmakers. They’re looking to win R50,000 for R10, rather than staking R10 on a 6-4 or 2-1 shot to win R15 or R20.

In a population of 50 million, there is a large, comparatively uneducated segment that has little in the way of disposable income, so they’re looking for as big a return as they can get on their R2 to R5 bets. Many of them are at the lower end of the scale and this represents a chance to get out of it. If they win R10 on the tote it’s not really going to help them.

For some time this section was largely ostracised by the totalisator operator who imposed a minimum bet of R6.

The bookmakers came to the rescue, being only too happy to accommodate their R2 and R3 bets. Hence the tote’s ‘R6 or nothing’ approach resulted in a considerable amount of lost business while bookmakers benefitted from accommodating those customers.

In South Africa, for people who aren’t educated in horse racing, it’s a difficult product to sell. Punters regard it as being too involved when they have to study form. Nowadays it’s the soccer pools that are helping to sustain racing. Even with a 33 per cent deduction, soccer pools, mainly on overseas soccer, have blossomed into an ever-increasing market. One shop in Gauteng has 21 clerks selling bets on soccer alone.

Since South Africa hosted the 2010 World Cup, the population has grown to understand and appreciate football far better.

There’s a sprinkling of niche market interest in rugby, tennis and, to a lesser extent, golf, but it’s soccer that’s driving the country’s sports exposure, to the extent that sports betting now accounts for around 25 per cent of the gambling product.

“The growth in sports betting has really taken off,” says Sean, “particularly in the soccer market where punters can still win big for their R2 and R3. If they string 10 or 12 teams together and take a lot of the short-priced teams, such as Manchester United, Real Madrid or Barcelona, who generally win 85 per cent of their games, we’re seeing returns of R50,000 for R2, R100,000 for R20, and so on.

“We’re terming it almost like a ‘Soccer Lotto’, where they pick teams as opposed to picking numbers. With full accumulative odds multiplication you’re getting a reasonable return, so that’s working really well.

“In terms of our sports offering, we partner with BetRadar. I negotiated a consortium model to get the BetRadar feed directly into our system and then redistribute it on a per shop model basis for the benefit of our members. Previously we had odds compilers in the sport department but the volume of sport that’s out there is just so huge and I convinced our executive at the time to consider an automated feed coming in on a per shop basis.”
Betfair

South Africa does not have a Betfair presence. The exchange has been lobbying behind closed doors but the betting industry per se is opposed to it, chiefly on the basis of the perceived possibility of corruption.

“We’re in a highly regulated environment,” said Sean, “and KZN specifically has been regulated since 1957, whilst a lot of other gambling boards only came into existence around 1994 with the advent of casinos. Racing had hitherto been the only form of legalised gambling but in 1994, when the new government came in, they began issuing casino licenses.

“As an industry we’ve lobbied hard against betting exchanges. The manipulation that comes with it is a concern for us and is something that we don’t want to see.

“We’ve always made representation that bookmakers are licensed and have to pay licence fees to be able to operate, whereas anybody can be a backer or a layer on Betfair. You can be a bookmaker with no overheads, you don’t have to pay a licence fee and you are not the subject of regulation.

“Last year Betfair came over and made a presentation to the Gambling Review Commission. One of the questions the Commission asked Betfair was whether they had any South African customers, as it is illegal for South Africans to bet on overseas betting sites. Betfair conceded that they did have South African customers and since then we’ve seen Betfair closing down any such accounts because they were by their own admission breaking the law. It’s similar to the situation in America where you’re not allowed to bet on an overseas betting site. South Africa currently has that same protection.”
Virtual racing and FOBTs

As with exchanges, virtual racing is not permitted. Explained Sean: “The Gambling Boards have been lobbied but there’s an argument as to whether virtual is gaming and belongs in the casino or whether it is actually a bookmaking product. At the moment, the position of our Gambling Boards is that it’s gaming. You’re talking about something that’s generating a random number which is giving you the result of a virtual race, which in their view puts it on the gaming side.

“We don’t have the outlets of FOBTs but recently what are called LPMs, limited payout machines, have been allowed and bookmakers have put them in their shops. There’s a limitation of five per shop at the moment. Just like the FOBTs in the UK, it’s helping to recover and sustain the bookmakers’ overheads relative to rising costs.

“There has also been lobbying for what is now termed the medium payout machines, where the payouts are higher to attract more people into the shops.”
The challenges

“As is case with the UK bookmakers, we’re at the behest of providers,” Sean acknowledges. “In our case it’s Phumelela, in terms of their picture charges. At the moment there are discussions in progress about the price of their pictures and what they want to charge for it.

“We’ve also got VAT of 14 per cent on bets in South Africa. You can claim back your losses and your payouts so you take the net position and pay the VAT over.

“There’s also Corporate Tax in terms of running your business, which in a corporation can run at 30 per cent but as an individual can run up to 40 per cent or higher if you’re in a partnership type of environment.

“It starts to hit hard. Ours is a risk-based business, as we all know, so first of all you’ve got to get the results in your favour. VAT comes off the top of that and then you’ve got to settle up your overheads and make it sustainable.”

Clearly, South African bookmakers face challenges in much the same way as their UK counterparts.

from BOS magazine January 2013

shame these poor bookies are having such the tough time! funny not one in the photo look like they missed the meal for many years!

Is there only 250 bookie shops in South Africa? 9000 in the uk with a similar population

we in need of plenty shops, remember the times i visited family in London , bookie shops around every 3rd corner , couldnt resist walking past , now here in gauteng their is not even 50 in Jhb and Pta combined

Bookie shops must be in every shopping centre like beauty saloons or barber shops , will make a killing

Flash Harry Wrote:

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> shame these poor bookies are having such the tough
> time! funny not one in the photo look like they
> missed the meal for many years!

LOL Flash................5 meals ahead and 3 sh!ts behind.

rob the bookies here never have it better. sport betting is the saviour for these parasite. around 20 year ago you can buy the bookie right for r5000 today you pay millions. why? because of the sport. i dont now why these guys cry

Flash Harry Wrote:

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> rob the bookies here never have it better. sport
> betting is the saviour for these parasite. around
> 20 year ago you can buy the bookie right for r5000
> today you pay millions. why? because of the sport.
> i dont now why these guys cry

I also think that SA punters are at a real disadvantage relative to many countries........limited choice and poor value generally!

hibernia Wrote:

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> Is there only 250 bookie shops in South Africa?
> 9000 in the uk with a similar population


love to know how many actual bookies there are, not one bookie having more that one shop/shops.