Gambling a last resort for broke South Africans

• Betting up 35% from a year ago, Capitec interim results show

An increasing number of consumers are resorting to gambling in a desperate attempt to lay their hands on cash as the credit market in SA tightens in response to high bad debts, results from Capitec show.

One of SA’s biggest unsecured lenders, Capitec said in its results for the six months to end-August that gambling transactions increased 35% year on year “putting further strain on household cash flow”.

CEO Gerrie Fourie said consumers need to be circumspect to avoid getting into a deeper financial hole.

“Consumers must learn to live within their means and they need to be disciplined.

“We all know what inflation and high interest rates have done, but we must all try to rein in unnecessary spending. I am very pro-credit when it comes to things like asset accumulation and education. But we must be careful not to use credit for consumption,” he told Business Day.

“But we are starting to see salary increases and bonuses coming through.

“And with inflation also trending lower, we should normalise a year from now.”

The bank, which has an army of 21-million customers, said it has put in place stringent creditgranting criteria in reaction to elevated levels of cash stress experienced by clients. Bad debts surged 62% to R4.7bn.

This is in line with impairments reported by other banks. Standard Bank’s credit impairment charges in the six months to June leapt 42% to R8.4bn.

Standard Bank also reported that its credit loss ratio, the amount of loan losses relative to its total loans, rose to 97 basis points (bps), near the top of its target range of 70bps-100bps.

Absa in its interim results reported a 60% surge in total credit impairments to R8.3bn, while Nedbank’s impairment charge increased 57% to R5.3bn.

Capitec said it has taken a conservative approach in extending credit because of the prevailing environment.

“Credit granting criteria for all retail loan products, which had already been tightened during the 2023 financial year, were tightened further.”

Capitec, worth just under R200bn on the JSE, is the first lender to show a rise in gambling as consumers scramble to stay afloat. The latest results of gambling groups have also shown an increase in profit, particularly in online betting.

Sun International, which owns a portfolio of casinos, hotels and resorts, said in August at its sports betting business, SunBet, first-time depositors increased 469% and deposits jumped 216% in the six months to June.

Capitec reported a greater

interim profit and hiked its payout to investors.

“Margins on the loan book and the investment portfolio benefited from the 275bps increase in the repo rate since August 2022 and net interestbearing assets grew by 2%,” the company said.

High inflation and elevated interest rates, along with power cuts and unemployment, have cut into the disposable income of consumers as SA’s economy continues to stagnate.

Despite these challenges, headline earnings per share, a common profit measure in SA that excludes certain items, grew 8.9% year on year to 4,072c and the fiscal profit 8.6% to R4.7bn.

The dividend was raised 9.3% to 1,530c per share.

Over the years Capitec has diversified from a lender and a bank to offering business banking, insurance, payment services and telecommunications.

Retail banking still accounts for the bulk of the group’s profit at 62.5%, followed by insurance (32.5%), with the rest coming from business banking.

The company’s customer base continued to grow as it added 1-million more active clients, bringing the total to 21.1million from 19-million in the same period last year.

Capitec received its longterm insurance licence in October 2022 and began underwriting its own credit policies in May, with 248,224 policies underwritten by end-August.

“We have reaped the benefits of our investment in our own insurance team. Improvements made to our insurance products by this team contributed to the growth in policy sales and insurance income,” the bank said.

“Nonlending income now comprises 44% of income from operations [August 2022: 42%] and provides the group with continued growth when lending income is impacted by a tough economic climate.”