As we have discussed in detail throughout this cover section, the African gambling region presents significant growth opportunities; but these opportunities are increasingly matched by the need for more sustainable regulatory frameworks. As markets across the region continue to develop, regulators, lawmakers and operators face the challenge of supporting growth while limiting the expansion of illegal gambling activity. These issues were at the centre of discussion during the Future of Taxation, Channelisation and Sustainable Market Growth panel at the Africa Summit, held during iGB Live in London. The first-ever Africa Summit in London brought together regulators, operators and industry leaders from across the continent. Together, they examined the key issues shaping the future of gaming.

Taxation strategies central for regulated markets

Ed Birkin, Managing Director at H2 Gambling Capital, opened the panel by noting that, outside Africa, operators fall into two main categories: regulated businesses that pay taxes and meet consumer protection standards; and illegal operators that avoid both taxation and player protection measures. Africa, however, presents a more complex picture. Birkin pointed to a third category of operators: companies that hold licences but are still failing to make their full contribution through taxation. When combined with unlicensed activity, this creates a significant impact on government revenues and market integrity. Based on H2’s analysis, using a 20% gross gaming revenue (GGR) tax rate, which it estimates across 150 markets to be close to an optimal level, Africa is losing up to $11bn over five years.

An obvious solution

Birkin concluded that GGR is the optimal taxation framework in practice, while warning that alternatives such as turnover taxes, withholding taxes on player winnings and excise taxes on deposits and withdrawals are suboptimal. The conversation then turned to South Africa, which was highlighted as one of the best-performing African markets, with relatively low GGR taxes. However, the country is facing discussions around a proposed 20% national online tax on GGR, in addition to existing provincial taxes, while also dealing with challenges from the illegal market. One growing issue in South Africa is brand spoofing, where illegal operators clone legitimate websites. Consumers may believe they are using a recognised platform, only to later discover they cannot access their winnings or are asked to pay additional fees to receive their funds.

Why taxation is not just about the money...

Indeed, as higher taxes can push more consumers towards illegal operators, the discussion concluded that taxation should not be viewed purely as a revenue measure. It must also have an economic and social rationale, with policy decisions considering the wider objectives of the gambling sector, including investment, consumer protection and market sustainability.
If regulated operators are placed at a disadvantage through excessive taxation or restrictive measures, players may naturally migrate towards illegal alternatives. However, South Africa and other African markets must consider their unique structures when benchmarking taxation policies. A tax rate that appears successful in one market may not deliver the same results elsewhere.

So, as we conclude our Africa section in this issue of Global Gaming Insider magazine, we can see that African markets are facing some of the very issues European nations are, with taxation sitting right at the top of that list. Here, the onus is on regulators and legislators to get things right (and we know how difficult that can be, even before we consider the pressure of various anti-gambling lobbies). For operators and suppliers, though, the practical advice here is to adapt cost structures where possible – and collaborate with authorities as best as you can. Any brands with a poor compliance history may realistically be excluded from the important legislative conversations thanks to their own actions. Get the basics right – and there will at least be a seat at the table.