Interactive Gambling Regulations: further deliberations

Meeting Summary

The Committee, having previously received a briefing on the draft Regulations under the National Gambling Act, dealing with Interactive Gambling, continued to raise questions about the issues. Members asked about return to player percentages, whether the Corporate Social Investment programmes were compulsory and what form these should take, the measures to address illegal activities, fees and what mechanisms were in place to ensure that broad based black economic empowerment was complied with. The need to specifically cater for historically disadvantaged individuals was mooted. Members also questioned what cross-correlations there would be with the integrated development plans of municipalities and the relationship between the National and provincial gambling boards and their responsibilities, including monitoring compliance. Members also asked what measures were in place to protect vulnerable members of society. It was noted that there had been some objections to the regulations by various stakeholders, and although a preliminary indication was given of those objections, many of which related to the stringent requirements deliberately put in place to protect the vulnerable, the Department would provide a full schedule in due course.

Members then discussed the Committee programme, with particular emphasis on the issues that they wished to raise with the Department of Tourism, which was particularly important in the run up to the 2010 World Cup.

Meeting report

Interactive Gambling Regulations: Members’ discussion
The Chairperson opened the floor to Members’ questions following the briefing already given by the Department of Trade and Industry (dti) in relation to the Interactive Gambling Regulations in terms of the National Gambling Act

Ms E Van Lingen (DA, Eastern Cape) queried the return to player percentage, saying that she had gone through the Act and its amendments but had not seen this mentioned. She said she was told the previous week that with regard to every license and every application there as a specific amount that went to a specific project, but queried if there was not a minimum amount on the turnover that could serve as a guideline for a specific amount or percentage to go to the various types of development.

Mr F Adams (ANC, Western Cape) questioned why there was an amount for percentage return to player and asked what was the Department of Trade and Industry’s (dti) responsibility for social upliftment. He enquired why Interactive Gambling (IG) could not take the same route as the National Lottery Board’s programme of social upliftment, with a percentage of money forfeited or not claimed being put to social upliftment. If that did already apply, then he would like to know the percentage.

Mr B Mnguni (ANC, Free State) wanted input on the percentage or minimum amount for social development. He suggested a minimum amount or percentage on top of the project that the entrepreneur or gambler was going to undertake for social upliftment.

Adv Tlotliso Polaki, Legal Manager, National Gambling Board, addressed the issues around the fees. There had been criticisms that these were too high.  However, if one considered the actual fees that were being paid by comparatively few people within the gambling fraternity, such as fees by casinos and horseracing, these fees were set at what the NGB considered to be a reasonable level. The returns envisaged in this industry also meant that the fees should not be seen as too high.

She clarified that the minimum percentage return to player currently stood at 87%, which was normally found in the technical standards that were set by the South African Bureau of Standards (Standards 17 and 18 Part 1 and Part 2), and that all license holders have to comply with that specific standard.

Mr M Maine (ANC, North West) queried what mechanisms were in place for Black Economic Empowerment (BEE) to ensure that people were empowered and were not used as a front without truly benefiting when acquiring licenses.

Adv Polaki assured the Committee that there were mechanisms in place to ensure that Broad Based BEE was complied with, noting that the National Gambling Act (the Act) and Provincial Gambling Legislation made provisions for these obligations. She added that all license operators at inception made bid undertakings, and that was something that NGB would address and would adhere to. Compliance divisions within Gambling Regulator departments would monitor performance against set criteria on a month-to-month basis. This would include perusing shareholder agreements and following up on whether dividends were paid out.

Mr Adams asked what measures the National Gambling Board (NGB) had put in place to address illegal activities, such as the problems of cloning, and hackers. He also questioned whether the measures were sufficient and strong enough.

Adv Polaki replied that in terms of the National Gambling Act there were measures in place to deal with illegal activities, with Section 83 serving as an umbrella provision prohibiting such actions. She said, however, that some loopholes had been identified, specifically regarding Interactive Gambling, and that there would be a need to enhance legislation to deal with specifics, such as to address software tampering. She noted that issues such as National Credit Act fraud would be dealt with under the umbrella provision.

Mr M Mashamaite, Deputy Director, Department of Trade and Industry, noted that the NGB would be tasked to monitor all the operators and that it was developing its IT skills to handle this concern.

Mr Johan Strydom, Legal Adviser, Department of Trade and Industry, explained that in South Africa there were common law and statutory law offences. There were a number of statutory offences listed in the Act, which carried severe penalties. However, not everything had to be listed, since, for instance, fraud would be dealt with under the common law and therefore did not need to be specifically legislated for. 

The Chairperson wanted to know if the Board was utilising the Corporate Social Investment programme, and if it would consult with the local municipality and engage with the Integrated Development Plan (IDP) of that municipality. He said that he believed that could happen and did not want to find a situation where the Board did something that was not in the IDP. If the IDP was not being consulted, then he asked how this would be rectified.

Adv Polaki said that the Board did not set specific percentages with regard to Community Social Investment (CSI) and rural development, but rather that when the bids were evaluated each of the prospective licensees had to make certain undertakings, depending on the nature of their applications, and had to decide what percentages they wished to set for themselves, on the basis of the bid. She stressed that even though there was no specific percentage for CSI projects, the current Broad Based BEE commitments addressed the issue because they ensured a pay-back to society and included a specific percentage in the BEE Act.

Mr Mashamaite added that the license would address the issues of social upliftment, so that there was no need to make it similar to the Lottery Board.

Ms Polaki, speaking to the specific question on municipalities, replied that at the national level, there would be no direct engagement, but that this would happen at the provincial level.

Mr Mashamaite added that the nature of Interactive Gambling (IG) meant the contribution would depend on the nature of the license.

Ms S Chen (DA, Gauteng) noted that in a previous presentation it had been said that the National Gambling Board may delegate its enforcement and complaints power to the Provincial Gambling Boards. She asked in what circumstances this would take place and further queried what was the difference in responsibility between the National and Provincial Boards.

Adv Polaki stressed that it was critical to note that the National Gambling Board had concurrent jurisdiction with the Provincial Licensing authorities, with the latter’s obligations enunciated in Section 31 of the Act. This included having to ensure that licenses were issued and carried out as promised, that taxes, levies and fees were collected timeously, and that the provincial authorities were provided with inspection powers. By contrast, the NGB had overarching oversight, responsibility and inspection powers, including oversight over the provinces to ensure that they were carrying out their functions as required. She added that the delegation of powers was also addressed in the Act, citing the examples of administering licenses and inspectorate powers delegated to provincial authorities, with the NGB monitoring the implementation.

The Chairperson, referring to an earlier question by Mr Maine, did not explain how historically disadvantaged individuals would enter the industry. The response given to the question had dealt with fees, but did not show the benefits. He requested what assistance would be available, fearing that otherwise few people would enter the industry.

Adv Polaki responded that this was addressed in the BEE Codes as a whole, with the Board being in the process of ensuring all licensees conformed to the Codes. She stressed that there were provisions that ensure that historically disadvantaged individuals (HDIs) were catered for and benefited from any enterprises that may be established, and pointed that this would not differ from one tier of government to another. The same vehicles that had been used in the past to assist HDIs to enter into other industries and markets, or secure funding from the banks, would be used here too.

Mr Sinclair stated his belief that the legislation would not add anything to the infrastructure development in rural areas. He also believed that the Act enhanced the negative effects of gambling on the vulnerable members of society. He asked how the dti and NGB would manage the issues, ensure that vulnerable members would not become addicted to gambling, and queried how the legislation would address the problem.

Adv Polaki pointed out that there were specific provisions under the Act that sought to deal with the negative effects of gambling. She believed that the overarching effect of the Act was to protect the vulnerable. She noted that in the principal Act there were provisions that sought to ensure that minors, specifically, did not participate in gambling.  Examples of the safeguards now  imposed in respect of Interactive Gambling were that this required credit accounts or current account information, which children should not have access to, with the role of parents being emphasised.

Mr Mashamaite added that various measures were used to ensure that the vulnerable were protected. These included pop-up reminders that informed the player how long he had been playing and how much had been spent, links to responsible gambling information on the Interactive Gambling website, training employees to monitor the styles of playing for patterns that showed over-stimulation. The Act and the draft Regulations also provided that a player could register to be excluded from gambling, which would have the effect that other providers would also not provide that person with access to gambling facilities.

Adv Polaki added that a person who voluntarily registered to be excluded would not have access to any type of gambling, be it interactive, casinos or racehorse betting.

Ms Van Lingen asked for a list of the objections to the regulations from stakeholders.

Adv Polaki noted that her colleagues from the dti had indicated that comments had recently been received, and that Department was in the process of collating them so that they could be placed before the Committee.

Mr Mashamaite informed the Committee that the draft Regulations presented did not yet incorporate the objections and comments received by the dti. A number of the complaints received concerned the safeguard provisions, such as the pop-ups, which were felt to be irritating to users, and the checks that dealt with minors and jurisdictional legality.

Adv Polaki asked the Members to appreciate that the comments indicated that there were perceptions that South Africa was over-regulating. However, this clearly came from the desire to safeguard minors and to deal with irresponsible gambling. Because of the level of compliance and nature of documents required, there were some perceptions that the market would be somewhat stifled in South Africa. 

Mr Sinclair inquired whether NGB had envisaged a specific number of Interactive Gambling licenses in South Africa.

The Chairperson answered Mr Sinclair that in the previous meeting it was agreed that NGB would issue ten licenses. He added that it had to be borne in mind that IG was also a business, with the purpose of making profits. He said that it was a thin line between encouraging people to play and relying on the business to stop people playing. He believed that the Regulations should make it clear that that IDPs were to be borne in mind. The issue around historically disadvantaged people should also be clarified to address past imbalances.

Adv Polaki confirmed that the number of licenses was limited to ten, and added that if the need arose the NGB would consult with the Minister on the legislation.

Mr Sinclair noted that the payout percentage was 87% and asked how this compared with international norms.

Adv Polaki responded that the international norm was at 90%, with South Africa being between 85% and 90%, which the technical committee believed was within a reasonable range.

Consideration of Committee Programme
The Chairperson tabled the draft Committee Programme and called for comment.

He noted the grammatical correction in relation to the International Relations and Cooperation meeting.

Mr Adams noted briefings by the departments listed, but suggested also calling on the Ministers to present their strategic visions, especially because of all the changes, restructuring and divisions of departments.

The Chairperson agreed with this suggestion.

Mr Adams believed that the Department of Tourism briefings would be very important, especially in the run up to the 2010 World Cup. He noted the shortage of beds for the Confederations Cup, and that Durban had run out of beer during the Lions test. He would like the Committee to be included in workshops and other briefings by Departments.

The Chairperson responded that the fact that the Department of Tourism was first on the programme had recognised the relative importance of its work at the moment. He added that there was a shortage of flights.

Ms Van Lingen mentioned that 820 million euros were to be used in the development of the tourism industry, but believed that the Committee must ask questions as to how exactly it was to be used. She also wished to query the entry-level projects run by Department.

The Chairperson said that the meetings in June and July would address these issues. It would also be important to address transformation in tourism, which remained in the hands of only a few. Members should mention the specific challenges in their provinces as well.

Mr Adams suggested that the Committee also call in provinces to talk about 2010 and beyond, specifically sustainability of the tourism industry. Department of Trade and Industry, being one of the departments tasked with creating jobs, should also brief Members on their plans to reach the job goals.

Mr Sinclair suggested that the Committee also call the South African Local Government Association and the nine MECs of tourism.

The Chairperson said that in principle SALGA must be present when the NCOP was sitting.

Mr Sinclair pointed out that SALGA did not have sitting rights in Committee meetings, but only when the NCOP plenary sat.

The Chairperson agreed, but clarified that SALGA would be called when there were relevant matters.

The meeting was adjourned.

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