Interactive Gambling Regulations: Committee feedback & proposal, Committee's draft Strategic Plan deliberations

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Trade, Industry and Competition

11 August 2009
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Committee was briefed by the Department of Trade and Industry (dti) on its responses to questions received from the Committee at a previous meeting, substantive points raised by various stakeholders, and questions asked by the Committee now on the proposed regulations on interactive gambling, in terms of the National Gambling Act (the principal Act). Interactive gambling referred to gambling activities conducted on the internet, via a mobile phone or computer. This was currently illegal in South Africa, but the National Gambling Amendment Act of 2008 made provision for this to be legalised by way of regulations, which had now been drafted and presented to the Committee.

Members’ questions, and the Department’s response, related to issues of prevention of access to interactive gambling by minors, and verification of the age threshold,
concurrency between the Provinces and the National Gambling Board, and the considerations prior to the issuing of licences, the need to exclude mobile phones from the ambit of the regulations, and the fact that overseas interactive gambling operators were currently advertising in South Africa, as also the issue around the SABC flighting advertisements in this regard. It was noted that the regulatory regimes either fell into the high regulation category favoured by South Africa, or self-regulation that put more emphasis on revenue than accountability. It was noted that the Gambling Review Commission was investigating the entire industry and would convey its findings to the Committee.
Some Members commented that they would prefer to criminalise any linkages to an international operator, instead of putting the alternative systems in place, felt that interactive gambling should not be allowed and that there were inherent difficulties in its enforcement. Members noted that there was ambiguity between views that gambling was innocent entertainment and that it could be a good moneymaking scheme, and suggested that the current warnings about the addictive nature of gambling should be far stronger, that operators should proactively seek out addictive gambling patterns, that there were potential problems around using grant support money for gambling and questioned the success or otherwise of responsible gambling programmes. Members also addressed issues of confidentiality of user information, members of the Board applying for gambling licenses, the difficulties in enforcing banking of winnings, the links to the Financial Intelligence Centre Act, the proposed raising of the cap, and distribution of funds. Since some Members remained extremely concerned about the ethos of the legislation, the Committee resolved to make a proposal to the Minister that noted the Committee’s recognition of the fact that the Minister could table regulations, but that there was lack of clear procedure in the Rules of Parliament to approve these regulations. The Committee wished to review the gambling legislation, and would interact with the Department, to whom it expressed appreciation for the open engagement on the issues. The Committee was aware that it could not actually stop the Minister from publishing the regulations. However, it would request that the matter be held back.

The Committee tabled and made comments on its draft Strategic Plan document, noting that there was a need to make reference to job creation, to strengthen the references to economic development, and to oversight and monitoring, to merge the paragraphs on broader vision and mission, and to mention the workshop.

Meeting report

Members’ General issues around gambling
Before the presentation by the Department of Trade and Industry (dti), several Committee members addressed the Department of Trade and Industry (dti) on the issues they believed should receive focus.

Mr S Njikelana (ANC) requested elaboration on how the dti would ensure that minors could not access interactive gambling, and how convincing verification of the age threshold would be provided.

Mr A van der Westhuizen (DA) stated that the Committee was aware of the possible damage and unforeseen consequences that could result from the proposed regulations, and asked that the dti consider this when conducting its presentation. He warned that the Committee would be conservative in gambling matters. As an example, he said the Committee would favour a daily gambling cap of R20 000 rather than the R50 000 proposed by the dti.

Prof B Turok (ANC) stated that the dti was putting undue pressure on the Committee on what he regarded as essentially a moral matter, and questioned the need for extending gambling facilities.

Mr X Mabaso (ANC) requested that the dti inform the Committee on the experiences of foreign countries, especially developing nations, on this issue.

Responses by Department and general presentation

Ms Zodwa Ntuli, Director General: Consumer and Corporate Regulatory Division (CCRD), dti, led the presentation by the dti. She started by outlining the purpose of the presentation, saying that it would also address questions raised at previous meetings, outline substantial inputs received from stakeholders on interactive gambling regulations, and present possible amendments pursuant to Committee briefing and stakeholder consultations.

She noted that there were extensive measures for the protection of minors. Firstly, there were registration measures, since all potential online punters would be required to fill out Form 10, which would include bank details and which would need to be stamped by their bank. This would be submitted to the operator by the prospective players, along with certified copies of their identity document and proof of residence. The operator would then need to verify details with the bank upon receipt. Once the information was verified, a unique username and password would be issued to the prospective punter. Should a minor play online, no winnings would be payable, and the operator would face suspension of the license in addition to criminal charges, and, if found guilty, a penalty of a hefty fine or imprisonment, or both.

In respect of questions around the concurrency between the Provinces and the National Gambling Board, Ms Ntuli said that because of the borderless nature of online gambling, licenses would be issued nationally by the National Gambling Board (NGB). These would be awarded to ensure equitable spread across all provinces. A number of factors would be considered before a license was issued, including the numbers  and geographic spread of existing licenses, and Broad Based Black Economic Empowerment (BBBEE) imperatives.

Ms Ntuli argued that the regulations must exclude mobile phones from their ambit. She argued that it was impractical for either the provinces or the NGB to trace the communication tool used. Furthermore, to restrict mobile phones would lead to definition problems, especially with regard to communication tools such as Blackberry and 3G enabled implements. 

In regard to illegal advertising, Ms Ntuli stated that overseas interactive gambling operators were currently advertising in South Africa, even though they were offering illegal services. Action was being taken against these operators, and she cited the NGB’s success in court against Piggs Peak. She said this decision was currently being appealed on the grounds that since the server was based in Swaziland, the activities were also being offered in that country.

Mr Themba Marasha, Chief Operations Officer, NGB, gave a brief address on the experiences of other countries. He noted that neighbouring countries tended to ignore such activities, and in the few instances where they were regulated, the level of regulation fell far below that sought in South Africa, He continued to say that the regulatory regimes throughout the world tended to fall into either one or the other of two systems. The first was self-regulation, where the focus was on revenue, not accountability. The other system involved high regulation, where the focus was mainly on accountability. Dti sought to emulate this latter model.

In regard to international gambling, it was noted that the normal taxes, VAT and rates paid by businesses would be applied. He conceded that it would not mean mass employment, that small operators would hire 15 to 20 people, while the larger operators would only need to hire 30 to 40 people. However, greater benefits would accrue to the wider ICT environment in which they operated. Casinos were currently obliged to be involved in infrastructure development in the communities in which they operated, such as contributing to local sports and culture, and interactive gambling operators would not be excluded.

Ms Ntuli noted the importance of keeping the Committee informed of developments. She stated that the Gambling Review Commission would be looking at the entire industry. Their findings would allow the Committee to make an informed decision about gambling, what to do and whether the consequences were indeed those envisaged at the time the legislation was passed.

Prof Turok suggested that a law could be passed that would criminalise anyone in South Africa linking with an international operator, and that he would prefer this approach, instead of trying to attract people away from international sites towards local ones. In other words, he would prefer to block an undesirable activity rather than put an alternative system in place. He compared this to drug use, saying that drugs such as crystal methamphetamine (tik) were not regulated, but banned entirely due to the consequences that flowed from its use. He further raised the question of enforcement, as he foresaw the possibility that children could access interactive gambling via mobile phones provided by their parents.

Mr Njikelana asked what the intention was behind this legislation, whether it was conventional regulation or whether the dti intended to regulate gambling to extinction. He noted that once the review was complete, this might reveal certain needs not contemplated by the earlier legislation.

Mr van der Westhuizen stated that until the majority party discussed and repealed the principal National Gambling Act, the Committee was in the same position as the dti in considering how best to implement the regulatory framework.

Mr van der Westhuizen noted an ambiguity between the view of gambling as innocent entertainment and the view of gambling as a moneymaking scheme. He suggested much stronger warnings and a prohibition against advertising gambling as a means to make money, as also a prohibition against well-known personalities promoting casinos. He stated that the current warnings amounted to little more than “Addicted? Get Help here”, followed by a phone number. He said this was not the right message, and a warning along the lines that a person should gamble only for entertainment, not in the hope of making money, would be more appropriate.

Mr van der Westhuizen suggested imposing a duty on operators to identify addicted gamblers, by finding suspicious patterns in their behavior, such as a person logging on at 3:00am to gamble. He further expressed concerns that social grant recipients would use their money to gamble. He recognised, however, the difficulty around treading on human rights.

Mr Z Ntuli (ANC) wanted to know how the success or otherwise of responsible gambling programmes was measured.

Mr Marasha stated that the incidence of problematic gamblers may be increasing, but that he was not certain.

In respect of the possible use of grant money for gambling, he stated that it was an issue of concern but that the NGB would try to put in measures to ensure that the incidence was limited. For example, it was illegal for credit providers to provide money for gambling expenses. There was also the question of whether credit in gambling should be allowed.

Mr van der Westhuizen emphasised the importance of confidentiality. Similar to internet banking, the password should be known only to user, not to others.

Mr Marasha responded that the passwords would indeed be confidential and that this would be clearly stated in any operator’s terms and conditions. If a user asserted that his password was used by someone else, then the NGB would conduct an investigation.

The Chairperson raised the issue of members of the NGB as gambling license applicants. She enquired whether they were allowed to do so, and whether there was any monitoring in this regard.

Mr Tlotliso Polaki, Secretary of the Board, NGB, said that the registration requirements were very clear on the fact that NGB members were not permitted to have any interest in the gambling industry. He said that the conflict of interest provisions stated clearly that NGB members could not engage in actions that would undermine the integrity of the NGB, and were required to disclose any potential conflicts of interest on an ongoing basis.

The Chairperson referred to a problem encountered with the South African Broadcasting Corporation (SABC), where the NGB had no success in restraining the SABC from flighting advertisements for foreign interactive gambling operators. She noted that this was illegal, that both parties were aware of the illegality, and could not understand, in view of the fact that it appeared to be quite straightforward, why it was so difficult to stop such advertisements.

Mr Polaki said that Members should be aware that, in terms of legislation, public entities must engage in all reasonable measures vis-à-vis other public entities before resorting to litigation.

Mr Mpho Mosing, Director: Regulated Industries CCRD, dti, also addressed concerns raised around illegal advertising of interactive gambling. He said that research had confirmed a correlation between problem gamblers and advertising. He said that a certain percentage of people were influenced by advertising. The findings of this research would be taken to the Gambling Review Commission. However, this did not mean that more stringent measures could be enacted at this moment. In any case, all adverts must have National Gambling Board approval.

The Chairperson referred to banking of winnings, and spoke of difficulty of monitoring and enforcement. She noted that banks, in terms of the Financial Intelligence Centre Act (FICA) were required to investigate unusual deposits and withdrawals of funds. She wanted to know how the NGB could link into that process.

Mr Marasha confirmed that interactive gambling did link up with FICA and that its regulations would come into play to ensure that, for example, gambling was not used as a means to launder money.

He stated that the current estimates showed about 9% of the population involved in illegal interactive gambling activities. He further mentioned that Foreign Exchange regulations provided for winnings in foreign jurisdictions to be declared as foreign exchange when paid into a bank account, and that the dti had encountered several cases of winning monies not being deposited in full.

The Chairperson said that she failed to understand the link between a R20 000 and R50 000 cap of amount gambled.

Mr Polaki noted that if a punter’s play account could only contain a maximum of R20 000, then if he won R20 010 only the R20 000 could be deposited into the play account, and that the remaining R10 would have to be transferred to the player’s nominated account, incurring additional administration and expense. He said that a more meaningful manner would be to define the loss limit as R50 000. Once R50 000 had been lost, no more transactions would be permitted for that day.

The Chairperson lastly reminded the Committee that Parliament could repeal own legislation and would do so if necessary.

Ms B Ntuli (ANC) said that the dti understood their role and the guidance role of the Committee. The Department was guided by policy decisions made, and the regulations that flowed from such policy decisions. When the Department made proposals in policy documents, all options were considered. The dti should always know what the objectives were, and the objectives would guide them. In the case of interactive gambling regulations, the objective was to permit gambling, but with limitations, such as limiting exposure, and providing disincentives for illegal operators.

Mr Z Ntuli was concerned with the distribution of funds to community projects. He noted that National Lottery funds had been ineffectively distributed, and wanted to know how the distribution of NGB funding would be monitored and enforced.

Ms Ntuli thanked the Committee for their indulgence. She further reminded the Committee that the dti was not obliged to consider their comments or deliberations.

Committee’s proposal to the Minister
The Chairperson considered the legislation a challenge to the ethos of a people’s democracy. She stated that the Committee would not preempt any findings and could not say what the results of the review would be, but undertook to keep the dti informed of developments.

The Chairperson proposed that the Committee endorse a prepared statement to the Minister, which she then tabled.

This proposal stated that the Committee recognised that National Gambling Act empowered the Minister to table regulations in Parliament before publication in the Government Gazette The Committee recognised the lack of clear procedures in the Rules of Parliament in approving such regulations The Committee was further aware that in international countries there were provisions in the legislation for approval. Despite this, the Committee wished to confirm, in light of recent developments, its decision to review the principal Act in its entirety, and would interact with the dti in this regard. The Committee wished to convey to Ms Ntuli its appreciation for her open manner and engagement with the Committee on the matter of interactive gambling.

Mr van der Westhuizen objected to the term “entirety” saying he would prefer it to be substituted with a less powerful term.

The Chairperson reworded this slightly to read “the Committee takes the position to review gambling legislation, and during the process interact with the dti in this regard.”

Mr van der Westhuizen said that two topics seemed to be conflated; namely the principal Act and the regulations concerning interactive gambling.

Mr Njikelana responded that the Committee’s initial focus had been on the regulations, but this had been expanded to include a look at the principal Act as well.

The Chairperson reiterated that the Committee did not have the legal authority to stop regulations from being enacted, and that the dti was not obliged to bring regulations to Parliament for this purpose. She noted there were loopholes in the Parliamentary Rules but that it was unreasonable to expect them to be fixed overnight.

Prof Turok said that he thought that it was the view of the Committee to request departments to wait until the outcome of the review process before proceeding with anything. He further stated that there was no reason for the Committee not to re-examine the principal Act He further said that he was on the Committee at the time the principal Act was adopted, and that this Committee had been unhappy with the clause providing for interactive gambling.

The Chairperson said she was aware that if the Department could, if it wished, simply thank this Committee for its time and state that the regulations would be published next week, and that the Committee could do nothing to stop this.

She noted that the proposal just read out would not specify the regulations, as the Committee wished to reconsider the principal Act as well. The problem was that the idea of a review would not have been noticed had the Committee not been dealt with the clause on interactive gambling.

A Member suggested that the paragraph read “review of legislation” not “regulations”.

Mr van der Westhuizen suggested adding another paragraph requesting that the matter of the legislation be held back, and that it should take into account the inputs of the Committee and the wider public.

Amendments were made to the draft proposal in line with these comments.

Members then approved the proposal document.

Committee’s draft Strategic Plan comments
The Committee’s draft Strategic Plan document was tabled.

Prof Turok commented that there were no references to job creation.

Mr Mabaso said that he had noted a reference to BBEEE.

Mr van der Westhuizen commented that this was a very professionally drafted document. He suggested, however, merging “Broader Vision “and “Mission” unless there was an overriding reason for it not to be done, such as the drafter following a template used by all departments.

Mr S Marais (DA) suggested that there needed to be more mention of “economic development and “job creation”.

Mr Ntuli commented that there was a lack of emphasis on oversight and monitoring, and that this should be stressed, as it was the Committee’s core business.

Mr van der Westhuizen suggested that the time spent at a workshop should be mentioned.

The Chairperson responded that this was a good idea, and that a one-page report of expected outcomes, costs and similar issues should be drafted.

The meeting was adjourned.

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