Review of Gambling Legislation: National Gambling Board, DTI, National Regulator for Compulsory Specifications input; Atlantis Business Drive progress

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Trade and Industry

01 February 2010
Chairperson: Mr B Radebe (ANC) (Acting)
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Meeting Summary

The Department of Trade and Industry, the National Gambling Board and the National Regulator for Compulsory Specifications made submissions. The DTI had established a review commission which will investigate the gambling industry and make recommendations on how to effect reforms where the law is found wanting. The view was that monitoring mechanisms and law enforcement needed to be strengthened in the gambling industry. If left unchecked, the gambling industry could be a breeding ground for unscrupulous syndicates taking advantage of the gaps in our law to exploit the market. Various modes of gambling were presented and the challenges of each highlighted. Casinos were reported as being well regulated and reflecting positively on the image of South Africa internationally. The advancement in technology was identified as both a positive and a negative factor in the gambling industry, with certain forms of gambling activities improving while at the same time opening up to abuse by criminals. There was a call to establish specialised courts or tribunals to facilitate the prosecution of such crimes as they would be too complex for ordinary courts.

Licensing, as part of regulation procedures, was identified as one of the measures which needed to be revisited in order to control the growth of gambling spots in the country. The National Gambling Board was asked to explain what was the cost of governance for its board. There were also questions posed on why they continued to allow misleading advertisements. Members were concerned that gambling was a social ill that destroyed families if unchecked. They wanted to know if a study had been conducted to identify the means how to protect poor people, in particular, against excessive gambling. The Committee rejected the claims by DTI that there were socio-economic benefits which accrued from gambling. The National Gambling Board conceded that gambling could be problematic if not regulated properly. They were in the process of introducing gambling machines that would give gamblers an opportunity to select how they want to gamble. The NRCS on the other hand reported that consumers were not adequately protected. This was because of the way the current legislation was framed when giving them powers to monitor compliance with procedures. It suggested an urgent amendment of the legislation or regulations so as to cure the defect. The Acting Chairperson acknowledged that there were massive challenges including gaps in the law which needed to be addressed and urged all parties to speedily get to the bottom of the challenges identified.

A progress report was provided by the Atlantis community about business projects initiated to help people become entrepreneurs. This was a follow up to a previous interaction with the Committee. The leader of the community delegation stated that there were growing levels of frustration due to the elusiveness of funding promised to initiate their businesses. One of the reasons preventing access to funding was that most of them were blacklisted on the national credit bureaus and financial institutions considered them too much of a risk to lend them money. The Department of Trade and Industry, the Small Enterprise Development Agency and CIPRO also had the opportunity to brief the Committee on the progress made through a number of initiatives. The DTI reported that working in partnership with SEDA, a number of workshops had been conducted and well attended by the people of Atlantis. The workshops involved giving the potential emerging entrepreneurs basic business acumen skills. SEDA had helped the entrepreneurs with drawing up business plans which were a key component in sourcing funding from financial institutions.

Questioned on the slow progress, SEDA officials explained that financial institutions were not willing to lend money to entrepreneurs unless they were satisfied that the entrepreneurs possessed the necessary business skills and had sound business plans in place which was a process they were still embarking on. The DTI told the Committee that there were many capital lending institutions working in partnership with the DTI who were willing to assist but before that could happen, proper procedures needed to be followed. Other questions were whether the approach taken by DTI and its partners was addressing the real issues. One member even went to suggest that the officials were giving the community snake instead of fish. More details and clarity were requested on why co-operatives were chosen as the best business venture form and how many co-operatives had been registered with CIPRO, including the impact those co-operatives were making on the livelihoods of people. 

Meeting report

Department of Trade and Industry briefing

Ms Nomfundo Maseti – Acting DDG: Consumer and Corporate Regulation Division (CCRD), presented, focusing mainly on the overview of the Gambling Act and paying particular attention to the challenges faced. The presentation started by reflecting on the history and evolution of the gambling industry. It mentioned the fact that pre-1994, gambling was banned in South Africa. At the time, there was one common gambling activity which was horse racing. Following the Wiehahn Commission, a number of recommendations were made on how the industry could be regulated. This move saw the unbanning of certain gambling activities  such as casinos and bingo. The 1996 Gambling Act which was followed by the 2004 Gambling Act brought significant changes in the way the industry was regulated, incorporating some of the principles from the Wiehahn Commission. Those included licensing, transparency, equity in allocating licences, economic empowerment, and protection of society. Some of the recommendations dealt with animal racing such as horse racing, recommending that it should not be given any preferential treatment. Dog racing and other animal racing activities were classified as against public policy and prohibited. It was also deemed necessary to keep a close check on the gambling activities that were considered legal. Those checks included limiting payout machines and even the amount paid to winners.

The Commission recommended a limitation on the number of casinos allowed per province. The Minister was given powers to call back certain licences. Currently the gambling industry was faced with a number of changes, caused by the growth of the industry, technological advancements and the global interaction of economies. That had made gambling a much more complicated activity which had created many challenges in policing it. Global syndicates had emerged as a result of unregulated gambling activities, resulting in crimes such as money laundering. The emergence of interactive gambling, a product of technological advancement, needed to be closely guarded as it was vulnerable to being abused by international syndicates, some of whom operate from outside the borders of South Africa. There was a need for legislative reforms to make the industry comply with international norms and standards. At present, a Gambling Review Commission had been initiated, tasked with the responsibility of overhauling the entire gambling industry to see what changes and reforms could be effected to address the identified gaps. Another focus of the Review Commission would be the economic benefits set to accrue to South Africans in general.

Discussion
Prof Ben Turok (ANC) said he was not sure whether the timing of the meeting was correct. His view was that the meeting should have been scheduled after the review commission had tabled its report. He also expressed concern that the department did not seem to be sensitive enough towards the views of the Portfolio Committee especially with regard to the adverse impact of gambling on society. He warned that the department should not mislead the Committee by suggesting that there were any economic benefits to the communities from gambling activities. Instead, he suggested that there are too many social ills that are a direct consequence of gambling and hence the need to regulate.

Mr X Mabasa (ANC) was also of the view that the Committee should have awaited the report from the Gambling Review Commission before interacting with the department. He asked if the department had conducted a study to determine what the impact of gambling was to poor people and those living in rural areas, often on state subsidies.

Mr A Van Der Westhuizen (DA) asked what the cost of governance by the NGB was. His understanding was that the NGB was the most expensive board of all the boards under the DTI. He also asked why there were still misleading advertisements about gambling which were encouraging citizens to engage in gambling activities. He compared this to the tobacco industry, saying the industry had done well to clamp down on misleading advertisements.

Ms Maseti said the question of cost of governance by the NGB was being looked into by the Review Commission and they were the ones who could better answer that question.

Ms Thobi Moja, Acting CEO, National Gambling Board (NGB), attempted to answer the question on cost of governance. She said that at present the costs included office space for the board and the auditors factored those costs when compiling the financial statements. This was being looked into to try and have the costs recorded separately in future.

On misleading advertisements, Ms Moja replied that the NGB was not involved in the approval of advertisements since that was done at the provincial sphere of government. However there was a proposal to shift the approval process to the national sphere and have it managed by the NGB. 

The Acting Chairperson said they were very interested in learning about the negative impact of gambling to the country. He recalled the meeting which the Committee held with the erstwhile Reserve Bank Governor Mr Tito Mboweni who said that gambling contributed negatively to the economy and people of South Africa.

Ms Moja said the gambling machines developed nowadays had the technology to regulate the activities of gamblers; for instance one could set the machines in advance and specify how much one wanted to spend, how long they want to play and once those targets were reached, the machines would switch off. However based on the findings of the commissioned research, gamblers were not happy with those limitations in controlling their gambling.

Ms Maseti said that the DTI was not before the Committee to promote the socio-economic benefits of gambling. She conceded that at times gambling produced negative social tendencies and at times people got addicted to gambling which was not encouraged by the DTI. She said they had opened a debate to determine how gambling could be made more beneficial to communities, particularly the poor. She said no study had been taken to determine the impact of gambling especially in vulnerable communities and she promised to look into the issue.

The Acting Chairperson highlighted that there were many problems the Committee needed to deal with and it was clear that the people were already addicted to gambling. He was at pains to point out that an industry such as this which had all the sophisticated technology, had not commissioned a survey to determine the adverse impact of gambling. To him that was a sign of not caring enough about the people.

Mr N Gcwabaza (ANC) asked whether the NGB together with the owners of the gambling machines had any responsibility for counselling those who had won or lost huge sums of money through gambling. It was difficult for him to imagine the reason behind using public policy (boni mores) in justifying the unbanning of horse-racing activities while at the same time banning dog-racing.

Ms Mpho Mosing, Director: Legal Services, DTI, said the decision to ban dogs was partly influenced by the submissions from organizations such as the SPCA who were strongly opposed to the idea of allowing dogs to be used in racing. Most of the decisions taken on gambling matters were largely guided by sporting reasoning but that did not mean moral reasoning played no role. On the issue of counselling, she affirmed that there were structures in place including a toll-free number to facilitate counselling of victims of gambling. She said there were no measures to give counselling or advice to those who won large sums of money but promised to look into the issue.

Prof Ben Turok (ANC) reiterated the fact that the Committee had a keen interest in regulating the gambling industry in order to protect citizens. They wanted to make it categorically clear that gambling was bad for humankind and stronger measures in regulating it, needed to be put in place. Claims about socio-economic benefits were untested and malicious.

Mr Mabaso asked if there was any school, clinic or recreational facility that came into existence as a spin-off from gambling.

Mr Van Der Westhuizen thanked Ms Moja for answering his questions with eloquence. He expressed disappointment towards Ms Maseti saying she was unable to address some of his questions.

Ms Maseti replied that she thought some of the questions were posed as suggestions for her to take to the board for further deliberations. She also explained that the question on the cost of governance was beyond her jurisdiction but she was willing to enquire more and brief the Portfolio Committee at a later stage. Professor Turok’s concerns on the morality of gambling were noted and would be tabled in board meetings. Lastly, she said her department would compile a report on all the social amenities and structures which were acquired through the proceeds of gambling.

The Acting Chairperson concluded the discussion by saying the presentation and subsequent discussions had revealed that a lot needed to be done in the area of gambling because a society could not be sustained in a manner that seemed to promote a shortcut to riches through gambling.
National Gambling Board (NGB) submission

Ms Thebi Moja, Acting CEO: NGB, focused on the challenges facing NGB in executing its duties. She urged the Committee to take note of those challenges and factor them in when reviewing the laws that governed gambling. She began by highlighting that gambling was an activity that fell within the sphere of concurrent legislative competences of Provincial and National Governments. She said that had resulted in lack of uniformity in regulating and enforcing gambling activities and procedures. There was need to established specialised gambling courts or tribunals to deal with complex gambling cases. In addressing various modes of gambling, she said casinos were well regulated and had given the country a good reputation internationally. That being said, the development and expansion of the industry raised many challenges.

Bingo was described as very new in the gambling industry and hence not yet well regulated. It was traditionally known as a game for the elderly but today, thanks to the advancements in technology, young people were now finding an interest in playing Bingo machines. This new level of interest had created the need to re-visit the regulation procedures. Another mode of gambling touched on was the Limited Payout Machines which also needed to be looked at. Racing and batting games have no policy at all governing them and there was an urgent need to do so. Some of the regulations should address issues of batting, levies paid to administrators of the game, licensing and registering of trainers, operation of laboratories which analyze blood of the racing objects etc. The presentation also touched on the gambling mode known as Fafhee. The economic impact of this game was not known yet since no study on it had been conducted yet. This mode was also not well regulated as it was not officially recognized in the current laws. The definition of Lotto and gambling games seemed to include Fafhee but not well enough to be regulated by either.

On interactive gambling, Ms Moja handed over to Mr Themba Marasha, Chief Operating Officer, NGB, who said that this was an area which needed to be re-visited especially on proposed issues such as introducing a tax rate of 6%, imposing a maximum credit in player accounts, player registration and finding a user friendly method of using E-Wallet as an aid of gambling through reforming legislation. Interactive gambling needed to be regulated very urgently as it was fast gaining the attention of international syndicates who wanted to exploit the current lack of coherent regulative measures.

Discussion

Mr Mabaso said he was worried that poor people were the most vulnerable group in terms of gambling and that something needed to be done to protect them.

Ms Moja said indeed it was true that poor people were the most affected. That fact was revealed in the 2009 study which revealed that young males between 25-35 years old were the most addicted to gambling of which many were unemployed. There was a need to educate the public about the importance of responsible gambling and to inform them that gambling was purely a game of chance and luck. 

Mr van Der Westhuizen asked what the typical court matters were that emanated from gambling activities and how were courts generally not equipped to handle such matters.

Ms Tlotliso Polaki, legal services, NGB, said a lot of court cases they took to court involved matters such as possession of illegal gambling machines and there was need to revisit the laws regarding such offences including the penalties imposed.

The Acting Chairperson thanked the presenters for a job well-done but warned that there was a lot work that needed to be done to ensure that the industry operated within parameters of the law.

National Regulator for Compulsory Specifications (NRCS) submission
Mr Moses Moeletsi, Acting CEO: NRCS, said their main mandate was to protect consumers from possible health hazards through ensuring that service providers strictly complied with compulsory standards. Their mandate in relation to the gambling industry was provided for under section 25 of the National Gambling Act of 2004. The Act mandated the NRCS to analyse the tests reports of the gambling equipment and then issue a letter of certification in accordance with relevant compulsory specifications. Compulsory specifications covered things such as fairness, safety, reliability and auditability. The main challenge facing NRCS was that at the moment there was no provision in law which governed compulsory specifications on performance and therefore there needed to be legislative amendments to that effect.

Discussion
Mr Van Der Westhuizen asked which legislation, the National Gambling Act of 2004 or the NCRS Act of 2008 needed to be amended in order to cure the defect identified in the presentation.

Mr Moeletsi explained that it was the NCRS Act which needed amendments because the current provisions did not deal with performance which left consumers at risk. He suggested that one way of solving this process would be to insert a provision in the regulations which would address performance.

The Chairperson suggested that the DTI and NCRS needed to meet and discuss how to resolve this matter through amending regulations.

Ms Maseti said amending regulations would be much quicker than amending legislation and yet would address the problem just as well as amending legislation.

The Acting Chairperson urged the DTI to play a leading role in bringing together all the stakeholders in order to resolve the challenges identified. The Committee was ready to give any form of help within its power in order to create a better life for everyone.

Afternoon Session

Atlantis Business Drive Report-back
Mr John Arends, leader of the Atlantis delegation, spoke on what had taken place since meeting with the Portfolio Committee in 2009. So far, nothing tangible had taken place in implementing the resolutions taken at that meeting. Instead, he mentioned the closure of two community driven factories. They had attended many short courses offered by the Department of Trade and Industry (DTI) together with the Small Enterprise Development Agency (SEDA). Despite all of this, the critical issue of access to funding remained unresolved. He expressed deep concern at the slow pace at which the process was moving.

Mr Johnny Oliphant, Public Relations Officer, Atlantis Business Forum, added that there were few resources at their disposal to be able to do their work properly. They often found themselves competing for tenders against well established contractors who were often preferred by the City of Cape Town Municipality. On the challenge of access to funding, Mr Oliphant reported that most of the individuals in their co-operative scheme were blacklisted by credit bureaus and were automatically disqualified from accessing any form of loan.

Mr Sipho Zikode, Acting Deputy Director General: Enterprise and Industry Development Division (EIDD), said DTI had since conducted numerous workshops to try and empower the community of Atlantis with business skills. As a result of those interactions, which were done in collaboration with CIPRO and SEDA, he reported that a number of companies had been formed or were in the process of being formed.

Mr Jeff Ndumo, Chief Director, DTI, reported that following the meeting held with the Portfolio Committee, his department had been in constant interaction with its two main partners involved in the Atlantis project which were SEDA and CIPRO. SEDA’s task was to provide training to the entrepreneurs and them assist them in coming up with comprehensive business plans which would help them have easy access to funding. He elaborated that after SEDA had done its part, CIPRO them stepped in to help with the registering of these business entities. He had been made aware that certain individuals were blacklisted and thus prevented from accessing funding but his department was working towards finding a solution. There were specific funding organizations that were working with the DTI to assist projects such as those of Atlantis but they first needed to see a sound business plan and a registered entity which SEDA and CIPRO were help with. BEE compliance had been raised as another challenge but Mr Ndumo explained that small business entities such as those found in Atlantis were exempt from strictly complying with BEE procedures.


Mr Joseph Frank, Branch Manager: SEDA, told the Committee that SEDA had been actively involved with the community of Atlantis through various community outreach programs ranging from specialized training in particular areas to basic entrepreneurial skills. In addition to numerous co-operative training sessions, SEDA was also involved with giving one-on-one service to some of the community members. A total of 82 entrepreneurs were on the books of SEDA and many companies had since been registered after interacting with SEDA through its community outreach programmes. A total of 13 entrepreneurs had been registered under the auspices of CIPRO.

The community delegation asked the Committee to set-up a monitoring mechanism to closely monitor their pilot project so that when it succeeded it could be rolled over to other communities throughout the country.

Discussion
The Acting Chairperson asked how many business plans SEDA had developed thus far.

Mr Frank replied that the priority of SEDA, based on the assessment of the community, was to get the basics right first, which was giving training and various forms of knowledge empowerment. Business plans would follow after SEDA was satisfied that the people had the requisite knowledge of how to run a successful entrepreneurial business.

Mr X Mabaso (ANC) asked whether SEDA had done any study of the Atlantis community to identify the critical needs, job creation potential, what skills were present, population dynamics and market surveys in order to assist in developing a strategy that would be tailor made for the people of Atlantis.

Mr Njikelana (ANC) appealed for a structured approach to the discussion. People were raising issues that had not been identified at the previous meeting. He expressed concern that although progress was being made, the pace at which the process moved was slow.

The Acting Chairperson agreed with Mr Njikelana, saying it was important not to raise new issues which were not documented in the minutes of the previous meeting. Mr Mabaso had raised a very important question which needed a clear answer.

Mr A Van Der Westhuizen (DA) asked for more details on the number of entrepreneurs which were registered. He said it would be helpful to get information such as how many people secured employment and what changes were made to their livelihoods. He also expressed concern that people were being given tender training courses when they do not have businesses yet. He called this a tendency ‘to give a snake to a person who had asked for fish’.

Mr Arends said the main issue was funding. Communication between the community and the DTI was great but no help was forthcoming on how they could get access to funding and that was frustrating on their part.

Mr Njikelana asked if Mr Frank had picked up any signs that the people were frustrated during his visits to Atlantis.

Mr Frank replied that he had been to Atlantis more than seven times and not once did he have any feeling that the community was unhappy with how the project was moving. He however promised to do his level best to ensure that things moved even faster.

Mr X Mabaso (ANC) said the Atlantis representatives painted a negative input from SEDA in terms of their working relationship. He wanted to know how moving forward, those differences could be resolved in order to reach an understanding that would benefit all stakeholders concerned.

Mr Arends replied that his aim was not to make it sound like there was a fight between SEDA and themselves. He elaborated that Mr Frank was very accessible and always willing to help but most of the help they were receiving was not addressing the critical area of funding the projects they had.

Ms F Khumalo (ANC) asked what other issues besides the issue of being blacklisted were possibly an impediment to getting funding. What were the funding institutions present at the previous meeting doing to assist the community because it was her belief that not all them were blacklisted?

The Acting Chairperson asked CIPRO to give an account of the contributions they had made in Atlantis.

Mr Joey Mathekga, Acting Registrar of Close Corporations: CIPRO, said following a study which revealed that co-operatives where the best form of business to be initiated in the community of Atlantis, his department had managed to register two co-operatives: the leather manufacturing co-operative and the Cheval wholesale co-operative.

The Acting Chairperson asked the Atlantis representatives what they would love to see happening besides the funding which they made very clear needed to be addressed speedily.

Mr Arends said they would have liked the Committee to set up a monitoring mechanism that would monitor very closely the community of Atlantis so that it served as a pilot project for other communities as well.

Mr Oliphant said his parting shot was a plea to whoever had the ability to assist with communication resources and office space. He said even though they had direct access to people like Mr Frank, at times they did not even have the money to call, or a computer to send an e-mail to, the officials they need to keep talking to.

The Acting Chairperson said he was convinced that the meeting had make some significant inroads in mapping the way forward. On the request for a monitoring mechanism by Mr Arends, the Acting Chairperson said it was their job as the Committee to do just that.

The meeting was adjourned.





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