Don't bet on it
South Africa just cannot catch a lucky break: Our poor economic performance was confirmed by Stats SA in early December when they announced a contraction in GDP during the third quarter of 0.2%. Factors to blame were continued loadshedding, crumbling transport infrastructure (both trains and sea ports are operating far below capacity) and, in the case of agriculture, bird flu. Given the many perils private enterprises face, it is surprising we’re not in a deeper recession.
But there is one industry that has seemingly avoided these perils: sports betting. Have a look at the figure below. It reports the gross revenue of bookies for two types of gambling: horse racing and sports betting. Horse racing revenue has increased slightly over the period, reflecting the poor state of the economy. But sports betting is an entirely different picture. From 2017 to 2023, sports betting has grown by more than 30% annually. In just the last two years, sports betting revenue has increased from R8.1 billion to R20.6 billion. (To put that number in perspective, that is more than the total amount South Africans spent on buying computers and related equipment in 2022.)
Of course, mixing sport and gambling is not a new phenomenon – and nor are its financial consequences. In 192 CE, Emperor Commodus, known to us from The Gladiator, turned the Roman imperial palace into a casino. The palace’s conversion was part of Commodus’ extravagant spending, which heavily burdened the empire’s finances. The costs of maintaining the casino and his other luxuries, including paying himself a hefty 25,000 pieces of silver for each of his 735 gladiatorial appearances, drained the imperial treasury, a legacy his successors ultimately failed to bring under control.
However, the more structured form of sports betting, akin to what we know today, began to take shape in the 18th century with horse racing in England. This era marked the transition from informal betting among spectators to a more organised system with bookmakers or ‘bookies’ who set odds and accepted bets. The establishment of prestigious horse racing events like the St Leger Stakes (1776), the Oaks (1779), and the Derby (1780) further institutionalised sports betting in England, making it a popular and socially accepted pastime.
In the 20th century, sports betting expanded beyond horse racing to encompass sports like football, basketball, cricket and tennis, propelled by their growing availability and popularity. But it was the advent of the internet in the early 21st century that revolutionised sports betting, making it more accessible and widespread. Online betting platforms emerged, allowing bets on live sports across the globe, all from the comfort of one’s home. It allowed in-play betting, where bets could be placed on events within a game as they unfolded, adding a new dynamic.
Many of these innovations happened during a time when sports betting was illegal. But despite these legal restrictions, the industry found ways around them, forcing many countries, most notably the US in 2018, to legalise it, bringing sports betting into mainstream sports culture.
Tune into any sports broadcast today and it is difficult to avoid sports betting advertisements. Let’s take one of the first in the space – Betway, a group headquartered in Malta with offices in Guernsey, London and Madrid – as an example. Betway is the title sponsor of the T20 domestic cricket competition in South Africa. It is an official sponsor of the Springboks; its emotional ‘I believe’ advert during the Rugby World Cup featured prominent South African sports personalities like Lucas Radebe, Jean de Villiers, Siphiwe Tshabalala and Victor Matfield. It sponsors Premier League teams Arsenal, West Ham and Brighton.
If these well-known sports brands and personalities are happy to be associated with sports betting, it surely must be a net positive for society. Right?
The truth is sadly not so straightforward. Sure, sports betting may add ‘entertainment value’ to live sports; the excitement of having a personal stake in the outcome can enhance the viewing experience for fans. But there are downsides, too: the prevalence of sports betting advertisements can normalise gambling behaviour, potentially leading to an increase in gambling addiction. Endorsements by trusted sports brands and personalities may imply a level of safety and legitimacy, possibly downplaying the risks associated with gambling.
Most importantly, it often ignores the real reasons why the poorest participate in sports betting: to pay for ‘lumpy’ expenditures. A 2021 paper by Sylvan Herskowitz in the American Economic Journal: Applied Economics examines the relationship between sports betting and financial management strategies among individuals in Kampala, Uganda. Herskowitz shows that unmet liquidity needs for indivisible or ‘lumpy’ expenditures increase the demand for betting as a method of liquidity generation, especially in the presence of financial constraints. Herskowitz surveyed 1708 sports bettors and demonstrated that their targeted payouts were closely linked to anticipated expenditures. In other words, winnings from betting were found to significantly increase lumpy expenditures. These betters were not betting because of the entertainment value; they were betting to buy a new fridge, television or even a car.
This is, of course, a terrible way to save for big expenses. Indeed, when Herskowitz offered an alternative form of saving, the demand for sports betting decreased, indicating that unmet liquidity needs and saving abilities are key factors driving this behaviour.
Herskowitz shows that the traditional view of gambling as merely a form of entertainment or a result of misunderstanding odds or addiction is misplaced. Instead, for individuals without access to formal banking services, sports betting may serve as a second-best strategy for liquidity generation. This is particularly relevant for countries in Africa, where access to credit is limited and saving options are constrained for a large part of the population.
The reality is that sports betting is here to stay. In November, Multichoice announced Supersportbet, a new entrant in the South African sports betting scene. Multichoice owns 49% of Nigeria’s loss-making KingMakers and hopes that expanding these services to South Africa will help the firm turn a profit. Expect more Supersport presenters to endorse these types of activities soon.
But below the veneer of glamourous entertainment is the reality that sports betting is the only source of liquidity for the unbanked in South Africa. Many will bet their meagre savings, hoping for lumpy returns. Most will lose. The inevitable consequence is further financial ruin, just like it was for Roman Emporer Commodus. Instead of entertainment, his extravagant expenses brought him and his empire to its knees. Let’s hope South Africans can learn from his bad bets.
An edited version of this article was first published on News24. Image created with Midjourney v5.2.
Gambling preys on weak minds, and, like sport, distracts people from improving their lives or being politically informed. It's amputates the brain. It severs families. I despise it.