Western Cape Business News

Send  Share  RSS  Twitter  28 Apr 2010

GAMBLING: Gaming Exclusivity Shaken Up


Recent Western Cape Business News

IF the proposed merger between casino giants Tsogo Sun and Gold Reef Resorts (GDF) is successful then all the Western Cape based casinos will effectively be controlled by two gaming entities.

Conceivably there could be a scenario where the new look GDF/Tsogo company would control the Mykonos, Caledon and the Garden Route casinos, while Sun International would control the GrandWest in Cape Town and the Golden Valley casino in Worcester.

To be perfectly honest it’s still Sun International that holds the ace – that being the GrandWest complex, which – even in tough economic times, is still spinning reassuring cash flows.

The worry for GDF/Tsogo axis is that its smaller – more peripheral casinos – are struggling in a market characterised by markedly less discretionary spending.

The one thing that the Tsogo/GDF merger does bring to the party is considerable financial muscle.

This muscle comes mainly from the merged entity’s strong position in Gauteng (where it operates the Montecasino, The Gold Reef City casino and the Silverstar casino) as well as a very profitable niche in KwaZulu-Natal (via the highly profitable SunCoast casino and the Golden Horse in Pietermaritzburg).

Pior to the merger, GDF had caused quite a stir in local gaming circles when it suggested challenging Sun International’s exclusivity arrangement in Cape Town, whose casino licence expires at the end of this year.

GDF’s CEO Steven Joffe was quoted as saying he was “keen to explore the option of opening a casino nearer to Cape Town…”

When Joffe spoke to CBN in late 2009, he explained that Gold Reef would approach the Western Cape government with a scheme that required gaming participants to pay for casino exclusivity in Cape Town after the end of 2010.

He believed such a scheme would bolster government coffers in terms of social spending.

Sceptics, though, pointed out that GDF would need to commit to spending (or rather investing) large sums in order to convince local government there was considerable advantage to the Western Cape economy.

But it’s not only the billions required to develop a Cape Town-based casino, but also the fact that such a development would effect the Mykonos casino, which is a major employer in an area that is low on new job opportunities.

Joffe previously admitted that compen-satory investments would need to be made in Mykonos.

He envisaged Limited Payout Machines, bingo centres or the construction of a hotel in a bid to ensure staff were not left in the lurch.

This is costly stuff, But the GDF/Tsogo entity – presuming it can pass muster at the Competitions authorities – will be a massive profit spinner with annual gross profits clearing R3.5 billion.

Certainly there will be enough cash flow to gear up for an all-out assault on the Cape Town casino market.

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