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TRADE & INDUSTRY PORTFOLIO COMMITTEE
8 September 1999
GAMBLING MATTERS SECOND AMENDMENT BILL: BRIEFING
Documents handed out:
National Gambling Second Amendment Bill [B43-99]
Explanatory memorandum by the DTI on the Gambling Matters Second Amendment Bill (see Appendix)
Mr A J Sooklal from the Department of Trade and Industry (DTI) presented a briefing on the Gambling Matters Second Amendment Bill. (See Appendix 1)
Mr Sooklal added that there are presently many buyers who want to buy shares in the North West Development Corporation. Judicial management is of the opinion that with the award of new casino licences the shares that are presently listed may rise considerably in the immediate future.
The Chairperson said on Monday 13 September 1999 the committee will have a hearing where interested parties will be given an opportunity to present their views on the Bill and on Tuesday 14 September 1999 the committee will meet to make a decision and put time frames in place.
Since there were no further matters to be discussed the meeting was adjourned.
Explanatory memorandum by the DTI on the Gambling Matters Second Amendment Bill
EXPLANATORY MEMORANDUM BY THE DEPARTMENT OF TRADE AND INDUSTRY ON THE GAMBLING MATTERS SECOND AMENDMENT BILL
1. The principle of extending the date for the disposal of shareholdings of organisations with which the State is concerned was fully canvassed by
the National Assembly and NCOP during the debates on the Gambling Matters Amendment Bill in March and April 1999.
2. The same issue will again come before the two Houses as part of the consideration of the Gambling Matters Second Amendment Bill. It is not a new issue, but simply a clarification or remedial exercise. It should therefore be seen as being akin to a mere formality.
B. CRITICAL IMPLICATIONS OF ANY DELAY
3. It is of national interest that this amendment be passed as soon as possible. Unnecessary delays will hold these implications:
- The prospect of a forced sale of the NWDC shareholding, due to nothing more than a technical inadequacy in the drafting of a statute.
- The resultant financial loss due to unrealised, or at least materially under-realised, value for those shares.
- The immeasurable prejudice that would arise from the forced closure of existing gambling operations, and the potential disqualification of prospective new gaming operations, that could come about if the NWDC's financial interest in those ventures is not withdrawn through the disposal of its shareholding.
C. SEQUENCE OF EVENTS
4. The National Gambling Act, 1996 was passed during June 1996 and came into effect on 18 April 1997.
5. Section 13(1)(f) of that Act in its original form prohibited the holding of any financial interests in gambling activities after 10 May 1999 by the State and organisations with which the State is concerned.
6. That section contemplated, among others, the disposal of the indirect shareholdings in casino resort group Sun International of these entities:
- North West Development Corporation (NWDC) - 28,40%
- Transkei Development Corporation (TDC) - 3,83%
- Ciskei Peoples Development Bank (CPDB) - 1,73%
7. Those shareholdings are a legacy of the past, in that the gambling laws of the former homelands did not prohibit their governments and government agencies from holding shares in gaming activities.
8. The North West and Eastern Cape provincial authorities approached national government early in 1999 and, on the basis that they would not be able to realise full value if they had to dispose of those shares in the remainder period through to 10 May 1999, proposed an extension of that cut-off date.
9. In consequence, the Gambling Matters Amendment Act, 1999 was passed during April 1999. It amended section 13 (1 )(f) of the National Gambling Act by providing, among others, for the prohibition of the holding of financial interests in gambling activities by the State and organisations with which the State is concerned from a date to be determined by the responsible Minister.
10. The responsible Minister, being the Minister of Trade and Industry, has since by Proclamation determined 10 May 2003 as the new cutoff date.
11. It is important to note that:
- The NWDC was placed under provisional judicial management during February 1999 and under final judicial management during August 1999.
- The NWDC was therefore already under the legal disability of judicial management by the time of the passing of the Gambling Matters Amendment Act during April 1999.
- The intention of that Amendment Act is that the NWDC is not required to dispose of the affected shareholding before 10 May 2003, in spite of that legal disability.
D. THE ISSUE
12. The national legislature intended the amendment of the National Gambling Act to cater for the extension of the date by which; among others, the NWDC, TDC and CPDB has to dispose of their shareholdings in the Sun International group.
13. That intention is clear from the explanatory memorandum that accompanied the Gambling Matters Amendment Act in its Bill form.
Attached is a copy of that Bill and its explanatory memorandum, from which the following is apparent:
- Some of the former homeland governments held shares in gambling activities through local corporations, as was permissible under their gaming dispensations.
- Circumstances that were unforeseen at the time of the drafting of the National Gambling Act in 1995 caused 10 May 1999 to become unachievable for the disposal of those State-held interests.
- As a result, that date had to be extended.
15. It is uncertain whether the drafting of the pertinent paragraph in the Gambling Matters Amendment Act, competently captures that intention.
16. Some are satisfied that the drafting correctly captures and conveys that intention of the legislature. Others are concerned that the drafting is unclear, or perhaps even technically deficient.
17. If the detractors' position should be correct, the effect would be that, through the choice of wording, the NWDC would inadvertently have been excluded from the extended date for the disposal of its shareholding in the gaming group. The same concern does not apply to the TDC and CPDB.
18. Such a confusion or oversight regarding NWDC would result in:
- The NWDC being in breach of the statutory duty to have sold the shares by 10 May 1999.
- The breach potentially leading to a disqualification under the provincial gambling legislation of all those existing casino licences and new casino licence applications in which the NWDC holds an indirect shareholding.
- The prospect of the NWDC being forced to dispose of those shares in a "fire sale", which would cause immediate and direct loss to the North West provincial government and the central government in excess of R 1 billion.
- The consequential dissolution of the NWDC and its remaining interests and assets will unavoidably lead to further job losses in those interests that will be closed, thereby also affecting extended families that are reliant on their breadwinners.
E. THE SOLUTION
19. The prospect of those unintended consequences should not be permitted, as that would conflict with the legislature's express intention with the amendment of the National Gambling Act by means of the Gambling Matters Amendment Act, 1999.
20. In order to address the issue, the Gambling Matters Second Amendment Bill has been introduced into the Parliamentary process. The passing thereof will not raise any new principle. Instead, at best it will amount to a clarification of the national legislature's intention with the Gambling Matters Amendment Act. At worst, it will amount to the correction of a technical error in the drafting of the Gambling Matters Amendment Act which failed to correctly convey the legislature's intention.
21. Therefore : nothing has changed since the debates on the Gambling Matters Amendment Bill during March and April 1999. The principle remains the same: the NWDC, then under judicial management was no longer required to dispose of that shareholding by 10 May 1999. The NWDC, still under judicial management, is still not required to dispose of that shareholding before the new cut-off date, since determined by the Minister of Trade and Industry as 10 May 2003.
22. The solution is apparent: national interest requires the restatement of the legislature's intention by means of the expeditious passing of the Gambling Matters Second Amendment Bill.