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COMPANY COMMENT: TSOGO SUN

SOUTH Africans may keep on drinking when times are tough, but according to Tsogo Sun CEO Marcel von Aulock they do not gamble as much. He says people tend to gamble when they are happy about the economy and their standard of living. “That is when they have money to spend on leisure, but currently the economy is struggling and consumers are under severe pressure,” he said.

His comments suggest South African consumers are more responsible than they are often given credit for. One wonders then why Finance Minister Pravin Gordhan regularly moans that we do not save enough. We may live on credit. But it seems we are not gambling on credit.

Nevertheless, the group’s adjusted headline earnings rose 20% in the six months to September, and Mr von Aulock said returns from its hotels were stronger than from its casinos so far this year. But shareholders may have to wait for Tsogo’s next set of financials to see whether this trend continues.

If so, the biggest threats to the gambling industry will come from any shock to middle-class disposable income. “Rates and electricity bills for the middle-class South African have risen fourfold in the last couple of years,” Mr von Aulock said. “Then we have e-tolls and power cuts looming, so people are under scary pressure. I am just hoping the economy can maintain growth of 2%.”

Source: BDLive – Dave Marrs edits Company Comment (marrsd@bdfm.co.za)