Gambling with our Future? The Benefits and Costs of Legalised Gambling in Uganda

Gemma Ahaibwe  is a Research Analyst and  Anita Ntale is a Research Associate  at EPRC

The overwhelming proliferation of lottery, casinos and sports betting in Uganda has seen the gambling industry develop in terms of penetration and revenue generation. Gambling related tax revenue has increased by about thirty-fold over the past decade, from UGX 0.24 billion in 2002/3 to UGX 7.4 billion in 2012/13. These revenues are set to increase even more with the introduction of a new 15% tax levied on winnings as per the 2014/2015 budget. As the government continues to search for more financing options for the national budget, the gaming industry is fast being recognised as one of the more underutilised potential tax bases.

In contrast to the welcome revenue and taxes, gambling is also associated with undesirable socio-economic problems, which makes it particularly problematic for policy makers. Excessive gambling can result in financial family distress, and can be a trigger for other negative externalities on communities like increased crime and higher individual debt. Consequently, there is an increasing need to find the balance between capitalising on potential revenues while also curbing socio-economic costs.  A major component of finding this balance is in comprehensively regulating and supervising gaming activities/institutions so as to hold them to a code of conduct and make them more accountable.

Gambling booms amidst inadequate legal framework

Currently, the lottery and gaming industry is regulated by the National Lotteries Board (NLB) and is guided by the National Lotteries Act of 1967, the Gaming and Pool Betting (Control and Taxation) Act of 1968, and an addendum of statutory guidelines introduced in 2012/13. However, as the gambling industry continues to flourish in both pervasiveness and popularity, it is becoming increasingly evident that several facets of the current laws and regulations are significantly out-dated with the introduction of new games and technologies. With the relatively weak regulatory framework and inadequate capacity of the NLB to regulate all gambling and betting activities in the country, efforts are underway to amend the current laws and to establish the National Lottery and Gaming Board to comprehensively regulate the industry and raise revenue.

Socio economic effects of gambling

More often than not however, the push to legalise and regulate gambling is primarily driven by the will to enhance tax revenues and not the need to control and curtail the resultant social costs. This is underpinned by the thinking that the generated revenue represents a significant net social gain. However, this gain can be offset by increased government expenditure where additional resources are redirected to address problem gambling/addiction induced problems like crime, suicide, debt dispute settlements and costs incurred to ensure that gambling operates according to government regulation.

Other than the prospective revenue gains, development of the gambling industry has the potential to increase employment opportunities through direct employment at gaming venues and indirectly through gaming related sectors. However, most jobs at gambling venues are low paying and part time positions and generally require skills like accounting, computer operations, card dealing, crowd control, security etc. hence growth in the industry is likely to pull skilled workers from other businesses and professions. In addition, the skills requirements would exclude rural less skilled dwellers from employment in the industry.

Furthermore, gambling has a differential financial impact on people of different socio economic levels. It is largely economically regressive and thus poses particularly different challenges in developing economies. Research shows that poorer people spend/lose disproportionately more income in gambling activities than those with higher incomes, and the costs are not borne by gamblers alone. Only research can ascertain whether this phenomenon holds for Uganda.

Critical need for research to analyse the benefits and costs of gambling in Uganda

As the debate on the economic viability of gambling and its effect on the society continues, the Economic Policy Research Centre (EPRC), is currently undertaking a study to investigate the applicability of lottery and gaming in the Ugandan context and its socio-economic implications. The study seeks to understand how lottery and gambling impact on various aspects of welfare and economy; What sections of the population are most affected; and to benchmark Uganda’s regulatory framework against other countries that have legalized gambling and reaped benefits from the industry with minimal social costs. The findings of this study will inform the policy formulation in the gambling industry in Uganda.