Interactive Gambling Regulations: briefing by Department of Trade and Industry

Meeting Summary

The Chief Director of the Department of Trade and Industry (dti) briefed the Committee on the proposed regulations for Interactive Gambling. Interactive Gambling had been authorised by the National Gambling Amendment Act of 2008. The nature of interactive gambling required extensive regulation in order to safeguard minors and other vulnerable sectors of society against the negative effects of gambling and to ensure that gambling operators adhered to certain conditions of Social Corporate Investment. Members of the Committee asked questions about the feasibility of gambling operators’ contribution to social development as well as technical considerations of the regulations. The dti committed to have feedback sessions to all stakeholders in July 2009 to provide clarification on the regulations.

Meeting report

Ms Nomfundo Maseti, dti Chief Director: Policy and Legislation, presented the Interactive Gambling Regulations to the Committee to obtain input from members. She was accompanied by departmental officials and members of the National Gambling Board (NGB). Ms Maseti outlined the obligation of the dti to regulate the practice of interactive gambling, which referred to the practice of gambling through the internet or cell phone. Apart from protecting members of society against the negative effects and over-stimulation of the demand for gambling, the regulations aimed to prevent gambling from being associated with criminal acts, like money laundering.

She pointed out that the regulations would furthermore impose social corporate investment regulations upon gambling operators, like obliging them to become involved with infrastructure development and facilitate individuals’ access to participation in small business enterprises.

Ms Maseti explained that the stipulations of the Financial Intelligence Centre Act (FICA), which required individuals to disclose their personal details like their ID number and proof of residential address, would also be applicable to players taking part in interactive gambling. Moreover, players would have to create an account limited to a credit card or cheque account and present a bank stamp to confirm the validity of the respective account. No cash transactions would be allowed and a maximum of R20 000 would be allowed in the player’s account. Should this amount be exceeded the amount would have to be transferred to another account.

In addition, she elaborated on the conditions under which gambling operators would have to function. These included the regular auditing of player patterns and behaviour as well as ensuring that employees were fully trained so that they could advise gambling addicts. A link to the National Responsible Gambling Programme hotline should be published on the operators’ websites and the gambling operator would be obliged to report any suspicious behaviour and illegal activities.

In order to curb the possible proliferation of interactive gambling, the NGB would issue only ten Interactive Gambling licences – all of them on a national level since such activities could take place outside the borders of South Africa. Gambling operators would be required to prove that they have a physical presence in South Africa and their financial transactions would have to be located within South African borders.

Ms Maseti further explained that corporate social investment conditions for granting interactive gambling licences also existed. These requirements included that operators would have to commit to the development of small, medium and micro enterprises (SMMEs), empower historically disadvantaged individuals and contribute towards broad based black economic empowerment (BBBEE).

Discussion
Mr B Mnguni (ANC) asked how exactly interactive gambling would contribute to infrastructure development. Gambling operators were profit-driven and it seemed elusive that they would agree to developmental conditions that could curb their profits.

Mr D Feldman (Cope) requested clarity on the structure of the NGB and asked if board members needed to be legal practitioners. More emphasis should be put on the expertise required of board members, as well as staff members employed by gambling operators.

Ms E van Lingen (DA) wanted to know the exact percentage gambling operators needed to spend on social development and asked under whose supervision corporate social investment would take place. A summary of the public comments on the proposed regulations would also be helpful.

Mr D Gamede (ANC) remarked that mention had been made of the maximum payout to players, but wanted to know what the minimum amount for payouts was. He asked which criteria would be applied when issuing licences to gambling operators. Rates for obtaining such licences were extremely high. This meant that previously disadvantaged individuals would not be able to apply for licences. Furthermore, it seemed that the high fees aimed to rather deter prospective applicants. More information was required on how black economic empowerment and that of historically disadvantaged individuals would be ensured. Clarification on how members of the NGB would be accountable for regulating interactive gambling was also needed, as well as the practicability of trained staff members employed by gambling operators.

Mr Themba Marasha, Chief Operating Officer of the NGB, responded that infrastructure development by gambling operators did take place and cited the example of Tsogo Sun’s involvement in the development of the Sandton Convention Centre. According to him, several small building contractors benefited from the construction of the Convention Centre. He explained that the NGB had the authority to specify the infrastructure development requirements to which gambling operators needed to adhere.

Mr Gamede (ANC) briefly stopped Mr Marasha, remarking that only urban development projects had been mentioned. He wanted to know if any infrastructure development in rural areas had taken place. The Committee would soon visit the dti’s offices.

Mr Marasha resumed his explanation, saying that he did not have all the details, but he was aware of gambling operators’ involvement in the establishment of computer training centres in rural areas. He undertook to provide further information with the Committee’s visit to dti’s offices. With regard to trained employees, he referred to a training centre in Kenilworth, Cape Town where employees of gambling operators received training which enabled them to give advice and counselling to gambling addicts. The training was compulsory and was a condition for granting licences to operators.

With respect to the question about the level of expertise required, Mr Marasha responded that technical experts were employed who were well-informed about information technology principles and who would be able to make informed decisions.

Ms Lingenveld (DA) briefly interrupted, requesting Mr Marasha to reply to her question regarding the minimum amount operators were required to contribute towards social corporate investment.

According to Mr Marasha, operators should pay one per cent of their winnings during a first phase. However, in the second phase other factors, such as the number of operators, as well as a percentage of return to players, also played a role. The social investment percentage would therefore also be determined according to operators’ financial reports.

With respect to the criteria for issuing licences to gambling operators, Mr Marasha responded that licences were issued based on a points system by which those applicants, who obtained the highest score after having met certain requirements, will receive licences. According to him, measures and considerations were put in place to ensure historically disadvantaged individuals and small enterprises were not merely excluded from the licensing process.

Ms Tlohiso Polaki, legal manager at the NGB, added that board members did not need to be legal practitioners as professional advice could be sought should the need arise.

In response to a request that public comments pertaining to the Interactive Gambling Regulations be shared with the Committee, Ms Mpho Mosing, director at the dti, spoke about the most frequent comments expressed. There had been concerns that the information players were required to disclose were too stringent which could result in players opting to interact with offshore gambling operators rather than South African ones. The rationale behind the stringent requirements was to protect minors from engaging in interactive gambling activities. Another concern had been the existence of an excluded persons-register that would permit a problem gambler to enter his or her name in a register. This entry excluded the gambler of any related activities for a period of one year. Operators had expressed the concern that a period of one year would be too long and that it should be limited to six months. However, considering the adverse effects of gambling, the dti deemed it necessary to sustain the exclusion period at one year. There had also been requests that the feasibility of person to person interactive gambling be investigated. Currently the regulations did not provide for such activity and the dti would seek advice as to how to deal with that request in future.

Mr F Adams (ANC) requested that a meeting be scheduled at the Interactive Gambling Centre in Kenilworth, Cape Town to which Mr Marasha agreed.

Mr Gamede asked why there were regulations and if it would not make more sense to have them included in the Act to which Ms Koleka Beja, Parliamentary Legal Advisor, responded that the Trade and Industry Minister did not have the authority to simply pass regulations.

The meeting adjourned. 

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