It’s often said that horseracing in South Africa would thrive without fixed-odds betting and an analysis of how much more bets placed on the tote contribute to the sport, as opposed to fixed-odds bets with bookmakers, shows why. To cut a long story short, prize money for races in Phumelela regions would increase dramatically if the money currently wagered with fixed-odds operators was bet on the tote instead!

Put another way, if the money currently wagered on the tote was bet with fixed-odds operators, horseracing would have to close its doors.

Fixed-odds betting has an obvious appeal for horseplayers in instances in which a fixed price is obtained about a runner that then shortens significantly in the betting. By and large, however, tote payouts compare more than favourably with starting-price returns from fixed-odds bets and the bottom line is that every rand bet with a bookmaker instead of the tote hits owners where it hurts – in their pockets!

Every R100 bet on the tote in Phumelela regions yields R20 on average for horseracing, of which about R6 goes directly into stakes in terms of an agreement between Phumelela and the Racing Association, which represents owners in Phumelela territory.

By comparison a R100 fixed-odds bet with a bookmaker yields R2.70 for horseracing. This assumes a 10% profit for fixed-odds operators with them retaining R10 of every R100 wagered with them. Of the assumed R90 left over, R84.60 is returned to horseplayers with R2.70 to horseracing and R2.70 for provincial taxation.

Let’s look at the post-race distribution of the money from a R100 bet on the tote in Phumelela regions:

Returned to punters: R76.00
Provincial tax (average rate): R  2.00
Vat: R  2.80
Stakes: R  6.00
Phumelela: R13.20

Of the R13.20 accruing to Phumelela, only some 4% (50c) translates into bottom-line profit for the company. This is because of the costs of maintaining racing facilities, conducting race meetings and operating a tote network. These expenses collectively amount to R12.70 of the R13.20 accruing to Phumelela from every R100 bet on the tote.

The breakdown of the R13.20 is as follows:

Staging race meeting: R 3.50
Betting operations: R 6.00
Head office expenses: R 1.70
Product Royalties: R 1.50
Profit: R 0.50

A variety of expenses are incurred staging a race meeting. These range from maintaining a database for the dissemination of information about runners to punters (without which minimal betting would take place) and the maintenance of training centres, racetracks and racecourse facilities to the transport of horses to and from race meetings, marketing, security and contributions to the National Horseracing Authority to enable them to regulate the sport and ensure that races are run according to the rules.

Betting operations’ costs include capital and maintenance expenditure for the computerised tote betting system, the rental, maintenance and operation of the network of TAB branches, telephone betting centres and an online betting site, as well as commissions to TAB agencies.

It is estimated that some R7 billion is bet on horseracing nationally every year with R2.8 billion being wagered on the tote in Phumelela regions in 07-08. This yields some R560 million for horseracing of which R160 million flows into stakes at Phumelela racecourses.

Assuming that fixed-odds betting turnover in Phumelela territory is R1.4 billion (50% of the tote betting turnover), it’s easy to calculate what would happen if that money was wagered on the tote instead. Horseracing would get some R280 million annually, instead of the R38 million it receives from fixed-odds betting currently, and stakes at Phumelela racecourses would rocket by some R80 million- a 50% increase!

What is even more damaging for horseracing currently is that many bookmakers are laying the “open bet”. Put simply, a punter takes a tote bet with a bookmaker, say a Swinger or a Trifecta. The bookmaker does not place the bet on the tote, but holds the money and pays the punter the tote dividend if the bet wins. The odds are not fixed at the time the bet is struck, hence the term “open bet”.

Given the average return of R76 for every R100 wagered on the tote, a bookmaker retains R24 of every R100 in open bets. Of the R76 left over, R71.44 is returned to punters with R2.28 for provincial tax and R2.28 to horseracing, which would get R17.72 more if the R100 had been wagered on the tote.

The message is clear – owners seeking higher prize money and those who love the sport need to think twice before betting fixed odds or taking open bets with fixed-odds operators.