Table of Contents
Abstract…………………………………………………………………………………………………………………………………. i
CHAPTER 1: INTRODUCTION…………………………………………………………………………………………………….1
1.1 BACKGROUND AND INTRODUCTION……………………………………………………………………………………1
1.2 PROBLEM STATEMENT……………………………………………………………………………………………………….7
1.3 RESEARCH OBJECTIVES ………………………………………………………………………………………………………7
1.4 SCOPE OF THE RESEARCH …………………………………………………………………………………………………..8
1.5 RESEARCH METHODOLOGY ………………………………………………………………………………………………..9
1.6 LIMITATIONS …………………………………………………………………………………………………………………..11
CHAPTER 2: LITERATURE REVIEW……………………………………………………………………………………………12
2.1 INTRODUCTION……………………………………………………………………………………………………………….12
2.2 THE LEGALIZATION AND REGULATORY OF SPORT BETTING IN SA ………………………………………….13
2.3 THE GROWTH FACTORS OF SPORT BETTING IN SA……………………………………………………………….16
CHAPTER 3: METHODOLOGY ………………………………………………………………………………………………….20
3.1 MODEL AND VARIABLES……………………………………………………………………………………………………20
3.2 DATA SOURCES ……………………………………………………………………………………………………………….23
3.3OBJECTIVES ……………………………………………………………………………………………………………………..24
3.4 HYPHOTHESIS………………………………………………………………………………………………………………….24
CHAPTER 4: ANALYSIS OF RESULTS………………………………………………………………………………………….25
4.1 INTRODUCTION……………………………………………………………………………………………………………….25
4.2 DESCRIPTIVE ANALYSIS (Ordinal Least Squares)…………………………………………………………………..25
4.3 AUTOCORRELATION TEST …………………………………………………………………………………………………29
4.4 HETEROSKEDASTICITY TEST ………………………………………………………………………………………………31
4.5 CONCLUSION…………………………………………………………………………………………………………………..32
CHAPTER 5: CONCLUSION, LIMITATIONS AND RECOMMENDATIONS ………………………………………….34
5.1 INTRODUCTION……………………………………………………………………………………………………………….34
5.2 OVERVIEW OF THE STUDY ………………………………………………………………………………………………..34
5.3 LIMITATION / SHORTCOMINGS………………………………………………………………………………………….35
5.4 RECOMMENDATION ………………………………………………………………………………………………………..36
Bibliography …………………………………………………………………………………………………………………………37
Abstract
An attempt was made to determine the relationship between the revenue made
in sport betting within South Africa and the country`s gross domestic product.
The aim was to determine whether sport betting is a significant contributor
gross domestic product comparing to other GDP contributors. Sport betting is
deemed to be addictive and not good for public, however, it has been growing
dramatically for the past few decades and its involvement in economic activities
has been noticeable. The OLS method was used to generate the regression
results and autocorrelation and heteroskedasticity were carried out. The
analysis and interpretation of results indicated sport betting is not a significant
contributor to GDP but has a positive relationship with GDP.
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CHAPTER 1: INTRODUCTION
1.1 BACKGROUND AND INTRODUCTION
Sport is no longer an activity that people engage in just for the sake of passing time but it has
evolved to be a means of living, competitive business and professional career industry. There
are different literatures that have confirmed the view. “Sport is no longer only seen as a
relaxing way to exert energy and interact with friends and families but it is a universal
language that can bring nations together, educate individuals, entertain millions and in the
past decade a business that can generate billions. Sport has grown into a multi-dollar industry
that has generated millions for players, sponsors and sport partnerships” (Wyk, 2008). A
proof that sport has evolved over time into a multi-billion dollar activity, can be seen through
an example of the prize money being put in to the game.
An early Wimbledon competition, a prestigious tennis competition, which was played in
1877 and won by Spencer Gore, had prize money of $18 for the men category. In 2010, men
and women champions, Roger Federer and Serena Williams, respectively, took home a
staggering amount of $2.1 million each. This did not include endorsement deals and
television revenues (Gittings, 2010). Another prize evolution in sport is being provided
through looking at the 1860 first British Golf Open Championship. The Open as it is fondly
known, its first prize was a mere a red leather belt for a champion. However, more than 100
years down the line that had changed for the better, as the red leather belt was replaced by a
claret jug accompanied by huge prize money of $1.8 million which was won by Zach
Johnson in 2015(Sandritter, 2015). Over the years, more and more people have been getting
interested and attracted to sport. This means that more money is being injected into sport. The
evolution of sport has been realised throough commercialisation. Commercialisation led to an
increase or created more opportunities for different stakeholders such as professions
2
(players), media outlets, merchandisers, and sport venues. Commercialisation assigned a
value to sport as it transformed completely from being considered as a past time active into a
wealth generating avenue and a multi-billion dollar business. “In the past two decades, sport
has moved from being a pastime to a business as a result of the process of commercialisation,
which has led sport managers and organisations to become concerned with business
principles. This commercialisation process has led sport organisations to be described as
‘business-like’ as they become market oriented, pursue operational strategies that maximise
profit or revenue, and become responsive to the needs of customers” (Robinson, 2008).
“Commercialisation is ‘the process of transforming ideas, knowledge and inventions into
greater wealth for individuals, businesses and/or society at large’. Commercialisation is a
subset of the broader process of innovation. It is driven by market and profit motives, with
firms and others seeking to gain a positive return on investment in research, licensing,
product development, and marketing, including through the creation of competitive niche
markets” (Government, 2003). Indeed, sport has envolved to be one of the most moneyspinning entertainment businesses. It has all the possibilities to generate billions dollars on a
daily basis for all the state holders involved. Given the above information, one can gather that
sport commercialization is a process of generating income through handling the business
aspect of sport. Robinson (2008), deduced that there are four fundamental factor drivers of
sport commercialization namely sport management, spectating, level of technology, and the
rise of competition.
The magnitude of sport commercialization is understood when looking at the Soccer FIFA
World Cup competition. This is the biggest sport competition in the globe and since its
inception it has been generating billion dollars for the host countries, soccer clubs, FIFA
(governing body), players and their clubs. Economies of host countries and their
3
infrastructures are left enhanced after the tournament which holds every after four years.
Sources of the FIFA World Cup are reported to be ranging from television broadcasting
rights, licensing rights, marketing rights, hospitality rights, other event-related revenue and
other avenues.
Fig1.1
(Statistica, 2018)
Figure 1.2 (in $ million)
SOURCE YEAR
2006 2010 2014
1. TV Broadcasting Rights $337.81m $717.98m $742.64m
2. Licensing Rights $43.65m $26.10m $54.23m
3. Marketing Rights $163.62m $342.94m $465.08m
4. Hospitality Rights $53.36m $40.0m $110.64m
4
5. Other event-related revenue $118.83m $52.22m $537.37m
These two above figures are showing the trends of sources of income for Federation
Internationale de Football Association (FIFA) from 2003 to 2017. Figure 1.1 shows sources
of income measured in US Dollar million for fifteen years (2003 -2017) not considering with
competition is taking place. Figure 1.2 has narrowed down the results to focus more on the
trends during the world cup competition years. Television broadcasting rights is the leading
source as it increased from $337.81 million, in 2016, to $717.98 million, in 2010. Also there
was increase in the source between 2010 and 2014, from $717.98 million to $742.64,
respectively. The second most contributing avenue is the marketing rights that indicate a
constant increase during these three world cup years. The other three sources which are
licensing rights, hospitality rights, and other event-related revenue decreased in 2010 when
the competition was held in South Africa, Africa for the first time in history. This is evidence
that stakeholders involved on these sources did not value the competition as much they did in
German in 2006, and these sources contributed much when the competition was held in
Brazil in 2014.
However, holistically, FIFA managed to generate revenue of $2.9 billion in German in 2016
and it went up in 2010 to $3 billion, and then generated staggering revenue of $4.1 billion in
Brazil in 2014. This is the proof that sport is a lucrative entertainment business which also
affects other businesses and industries (Sheetz, 2018).
The value being put on sport is due to the process of commercializing sport. The activity is no
longer just a mere entertainment commotion. Sport comes as a package with some side
attractions other than the actual sport game.
5
Spectators have different reasons of watching and attending matches. The main reason being
the entertainment value they get. However, sport commercialization brought some
advancement to the sport industry. Sport business stakeholders decided to package sport to be
more than just an entertainment activity but rather include other attractive elements. Some
people engage into sport because they want to escape or rather take some time-off from their
busy and stressful lives. Others attend matches because they want to mingle, socialise and
make new friends. According to Robinson (2008), some newly included elements to the sport
package include the likes of half-time live music, hospitality, merchandising, opening shows
and activations. “It can be seen that sport provides an avenue for entertainment, and one of
the avenues running parallel with sport is sport betting” (Nienaber, 2016).
Betting on its own is a form of entertainment which creates interest and competition in every
activity. It can be cock fight, soccer match, golf, fist fight, or cricket match; there is always
someone who is willing to bet on the results of the activity. Betting in sport creates more
interest and moreover enhances competitiveness of the game, especially for the live matches
(Church-Sanders, 2011).Sport betting is said to have a natural part of sport culture since sport
has been played competitively and not everyone has been betting for profit but mostly for
leisure then entertainment (Church-Sanders, 2011). Since sport betting has been part of
competitive sport, therefore, commercialization did not only occur in sport but also in sport
betting. Betting evolved from a traditional method of placing it over the counter face to face,
in cash, with a bookmaker, to modern digital methods of placing wagers online anytime and
anywhere. Moreover, one can bet through a telephone call, mobile applications or directly in
the internet.
Sport betting occurs in a form of an exchange activity. It can be defined as a process of
predicting or guessing an outcome of a certain sport. A punter or bettor predict the outcome
6
and places a price then hand it over to a wager. However, a punter does this after analysing
the past performance and results of the two competing opponents. “…is where punters bet
against each other in a controlled environment. The odds on a game are determined by the
punters, the more the individuals who place money on a game, the lower the odds are the less
the payout are. Punters bet against each other and not against a specific organisation, making
the risk less” (Nienaber, 2016).
HOW HAS SPORT BETTING BEEN DOING SINCE IT WAS LEGALIZED?
South African sport betting industry has been doing fantastically well for the past few years
with the gambling sector, even compared to other industries. Other components, with sport
betting, that make the South African gambling sector include casinos, national lottery, bingo,
and limited pay-out machines (LPM). Sport betting is the largest component after casino
gambling with regard to revenues generated.
Figure 1.3 Gross Gambling Revenues (R millions), 2012 vs. 2017
PwC (2017)
The above graph shows the Gross Gambling Revenues, in million Rands, of 2012 and
compared to 2017. The Gambling Gross Revenue is the money generated from all gambling
activities, as seen on the graph, which are Casino gambling, Sport betting, limited payout
7
machines, and bingo. All these activities are legal and regulated by the National Gambling
Board. From the graph, Casino are and always been leading the gambling industry in terms of
revenues and popularities. Sport betting is the second most gambling activity that generates
revenues. Limited payout machines and bingo are least ones. There was a noticeable increase
from 2012 to 2017. Sport betting generated, in 2017, R3 835 million which increased by
approximately 49.28% from 2012 revenue of R2 569 million. This revenue increase shows
how the industry of sport betting is growing in the country.
1.2 PROBLEM STATEMENT
There has been a widespread myth that sport betting is just mere money and time wasting and
illegal activity and some consider it as gambling. However, it is much better than that as it is
a regulated economic activity within South Africa.
This is due to the lack of information that people have and also because there is no much
research on the field. Nonetheless, the dynamic nature of technology has made it to easier for
those interested in sport betting to have access to information. The presence of televisions,
broadband and mobile cell phones has been a positive contribution to the field as people can
search and be provided with real-time information regarding sport betting.
Though, most people are still in the dark about the impact and significance of sport betting to
the country`s economy. This brings to the study`s objectives which are listed in the following
section.
1.3 RESEARCH OBJECTIVES
1.3.1. Primary Objective
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The primary objective of this research is to investigate whether Sport betting industry in
South Africa is a significant as a gross domestic product contributor.
1.3.2 Secondary Objectives
To investigate whether gross domestic product has a relationship with South African
industries such as manufacturing, mining, tourism, agriculture, wholesale & retail
trade, finance & business services and sport betting.
To statistically determine which industry is the highest contributor to the gross
domestic product.
Consider the laws and regulations in the sport betting industry.
Analyse the factors that contribute to the increasing of sport betting.
1.4 SCOPE OF THE RESEARCH
For government to consider developing and supporting sport betting industry, it is of utmost
important to understand the effect and impact of the industry to the economy and lives of the
people in general. This research will provide an analysis of the sport betting industry in South
Africa in terms of its significance as the gross domestic products contributor. The quantitative
data that will be used in the analysis will be gathered from 1994 till 2017.
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1.5 RESEARCH METHODOLOGY
The research is designed to offer an analysis and description of sport betting industry in
South Africa. This section of research design will outline how this will be accomplished.
1.5.1 Research Design
Sport betting industry in South Africa is considered an emerging one because it started to be
legally considered in 1994 and before that there are no researches that were done pertaining
to it. Due to that there is very limited information available on the industry, especially its
contribution to the gross domestic products. One has to browse through many different
websites to find proper and relevant information.
As there are three types of research methods namely exploratory, descriptive and explanatory
research method. For this study, an exploratory research method will be used due to the fact
that the industry is still emerging and there is nothing much known about it.
1.5.2 Research Approach
The research will make use of the data that has been gathered from 1994 up until 2017 based
on Gross Domestic Product contributors including sport betting industry.
1.5.3 Data Collection
Quantitative data, which will be measured in US dollars, will be collected for twenty three
years in order to determine an existing relationship between the country`s gross domestic
products and fundamental contributing industries.
10
Due to a very limited data available on sport betting industry in South Africa, hence, it is an
emerging industry; therefore, data collected was only secondary from different sources.
Websites, journals and reports were the main sources of data for this study. Data collected
was for the prominent industries that are contributing massively to the country`s gross
domestic product.
1.5.4 Data Analysis
The study will make use ordinal least squares to determine the relationship between Gross
Domestic Products explained by the eight vital industries in South Africa. Dependent variable
will be the Gross Domestic Product (GDP) and independent variables will be the eight GDP
contributors; manufacturing, mining, agriculture, communication, tourism, wholesale & retail
trade, finance & business services, and sport betting, The collected data will be analysed
through a regressed model and complemented by the validated literatures. Also will run
Breusch-Pagan, Abridged White test, and Durbin-Watson test will be used as an analysis
tools. They will be used to test for heteroskedasticity and autocorrelation.
We hypothesize that sport betting is not a significant contributor to gross domestic product,
regardless of its performance. This implies that the alternative hypothesis is sport betting is a
significant determinant of gross domestic product.
H0: u = sport betting is not a significant contributor to gross domestic product
Ha: u= sport betting is a significant contributor to gross domestic product
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1.6 LIMITATIONS
During every research undertaken there are occurrences that come up and distort or halt the
research. These factors also influence the results and analyses of the study (Murnan, 2004).
Limitations of this particular study are being detailed in chapter four.
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