Gambling Review Commission Report: public hearings

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Trade and Industry

22 November 2011
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Committee heard further submissions during public hearings on the report of the Gaming Review Commission.

The submission from the Chairperson of the South African Groomers’ Association centered on the lack of transformation in the racing industry; the difficulties faced by grooms from disadvantaged backgrounds to progress in the industry; the failure of the National Horseracing Authority to regulate trainers; the refusal of the Authority to recognise the Groomers’ Association and incidents of the physical abuse of grooms by trainers.  The membership of the Association comprised approximately 1,000 grooms employed by the horseracing industry.

Members asked questions to gain clarity on the issues raised by the Groomers’ Association.  It was established that there were currently 3,500 grooms employed by the racing industry.  Grooms generally did not belong to labour unions.  Although the National Horseracing Authority issued licenses to trainers, owners and breeders, regulation of the industry was fragmented.  The Committee invited responses from the Department of Trade and Industry and representatives from other stakeholder organisations present at the hearings.  The Committee noted that the report of the Commission made no mention of grooms.  The Committee would be inviting further written responses from the industry and the Commission on the questions that had arisen during the hearings.

The submission from Ms Phindi Kema, Chairperson of the Africa Race Group examined whether horseracing was a hobby or a sport, outlined the historical racial composition of owners, trainers, breeders, jockeys and grooms, considered the economic perspectives and impact of the industry and summarised the current status of the industry.  A comparison was drawn with the status of the racing industry in the United Kingdom, Australia and Hong Kong.  The reasons for regulating the horseracing industry were listed.  The submission was concluded with recommendations advocating an enquiry into the South African horseracing industry; the need to resolve the prevailing monopolistic ownership structures; the need to re-constitute the horseracing authority and urging the creation of a Ministerial cluster to develop a growth strategy for the industry.

Members of the Committee queried the data included in the submission and asked if Ms Kema was considering accepting a nomination to the Board of Phumelela.  Ms Kema was asked to explain the tone of a letter to the National Horseracing Authority, which Members felt did not promote racial harmony.  Her comments concerning the benefits of the agreement on the export of horses announced by the president in Dubai and the barriers to entry affecting persons from disadvantaged communities and women were invited.

The Committee heard concluding remarks from Members and the representatives of the Thoroughbred Breeders Association of South Africa, the National Horseracing Authority, the National Gambling Board, the Racing Association, Phumelela, Gold Circle, the Africa Race Group and the Department of Trade and Industry.  All stakeholders supported an enquiry into horseracing and reaffirmed their commitment to transformation of the industry and the development of persons from disadvantaged backgrounds.

The Committee had appointed a working group to consider the submissions received during the public hearings.  The Committee’s report would focus on the report of the Gambling Review Commission but would include the other issues that had been highlighted and the matters that had been omitted from the Commission’s report.  The Committee required additional information on the issue of online gambling and would seek further expert advice.  The Committee would invite the Commissioner of the Gambling Review Commission and the Department of Trade and Industry for further engagement.  The Committee would invite stakeholders and participants in the public hearings to provide additional written responses to questions.

Meeting report

Submission by the South African Groomers’ Association
Mr Chophelikhaya Simoto, Chairperson of the South African Groomers’ Association presented a brief verbal submission to the Committee.

The major concerns of the organisation included the lack of transformation in the horseracing and breeding fraternity.  The National Horseracing Authority (NHA) was responsible for the regulation of the industry but exercised little control over jockeys, trainers and racehorse owners.  The NHA had refused to recognise the Groomer’s Association since 2004.  He had personal experience of the abuse suffered by grooms working in the industry.

Discussion
Mr J Smalle (DA) asked if the Groomers’ Association was represented in all provinces.  He asked if the Association represented a collection of entities.  He asked what process had been followed in applying for official recognition.  He wanted to know how many grooms currently employed by the racing industry were represented by the Association.

Mr X Mabaso (ANC) asked what role could be played by Government to assist the Groomers’ Association to achieve equal status of the other representative organisations in the industry.  He asked if assaults on grooms by trainers were wide-spread.  He asked for more clarity on the statement made in the submission that the industry lacked transformation.

Mr Simoto replied that written application for recognition of the Groomers’ Association was addressed to Mr Rob de Kock (Chief Executive Officer of the NHA).  The Groomers’ Association had a national presence.  Government could assist by requesting the NHA to give official recognition of the Groomers’ Association and to help with resolving the challenges currently faced by grooms.  The current membership of the Groomers’ Association was approximately 1,000.

Mr Simoto explained that he was physically assaulted by a trainer.  He had laid a charge of assault with the police.  The trainer concerned had paid an admission of guilt fine.  The matter was investigated by the NHA, which found in his favour.  The trainer had lodged an appeal against the NHA ruling but did not keep him informed.  The Star newspaper had reported that he had been ‘blacklisted’ by the racing industry.

Ms C Kotsi (COPE) asked her questions in isiXhosa.  She asked if there were any benefits from membership if the Association was not recognised by the industry.  The Committee had heard other submissions from the racing industry that claimed that new entrants into horseracing were discouraged by the lack of financial reward.

Mr Simoto disagreed that horseracing was not profitable.  He conceded that there was currently no benefit to being a member of the Association.  He had applied to become a trainer but found it difficult to pass the required examinations and to have access to training facilities.  Gold Circle was awarded funding from the National Lottery to provide assistance to previously disadvantaged persons but he had found it difficult to obtain assistance from Gold Circle in is efforts to become a trainer.  Each stable was supposed to have at least one black trainer.  His application for a trainer’s license was declined by the Western Cape Licensing Board.  It was necessary to obtain a training license before a stable license could be issued.  He felt that the process was unnecessarily onerous and should be revised.  He was of the opinion that the refusal of Gold circle to provide assistance to him was in revenge for bringing assault charges against the trainer.

Mr B Radebe (ANC) was aware of other instances of physical assault on stable workers in rural areas.  He asked what salaries were paid to grooms, if stable workers belonged to labour unions and how salary benefits were negotiated.

Mr Simoto replied that grooms were not represented by labour unions.  Salaries and benefits were determined by the employers.  The average salary of a groom was R400 per week.  Many grooms had little formal education but had many years of work experience.  He would prefer to write the trainer examinations in isiXhosa but there was no concession to allow candidates to write the examinations in languages other than English.

Mr T Harris (DA) asked how many grooms there were in South Africa.  He asked how many grooms worked in the racing industry and how many worked for breeders.  He asked if the members of the Groomers’ Association worked only in the horseracing industry.  He understood that there were five grooms’ cooperatives operating in the Western Cape, which was involved in the breeding and sale of horses.

Mr Simoto was not aware of the grooms’ cooperatives.  He was unable to advise how many grooms there were in the country as there were no data available.

Mr Smalle understood that there were two types of grooms, i.e. breeders and racing.  He asked if the Groomers’ Association represented both types of grooms.

Mr Simoto answered that the members of the Groomers’ Association all worked in the racing industry.

Mr G McIntosh (COPE) noted that the assault on Mr Simoto was reported to the police as well as to the NHA.  The trainer concerned had paid an admission of guilt fine and he presumed that the charge of assault was not proceeded with.  He asked if the NHA had conducted an internal investigation.

Mr Simoto replied that the trainer had paid an admission of guilt fine to avoid criminal prosecution.  He lodged a complaint with the NHA, which resulted in an internal enquiry.  There had been previous instances where the NHA had withdrawn the licenses of members found guilty of assaulting employees.

The Chairperson explained that it was important that the Committee understood how widespread the problem was.  She asked if Mr Simoto was aware of other instances of physical abuse.  She asked if other applicants for trainer licenses had been refused.  She asked for more details on the application process and the different trainer and stable licenses.  She asked if there was any data on the number of racing grooms employed by the industry.

Mr Simoto responded that he was aware of other cases where grooms had suffered physical assault.  Most grooms did not pursue the matter.  He was not aware of any other cases where applications for licenses were refused.

Mr Rob de Kock, Chief Executive Officer, NHA was surprised by the submission made by the Groomers’ Association.  He recalled that there had been correspondence with the Association a number of years earlier.  The NHA had requested additional information on the constitution of the organisation, the membership and the office bearers.  He did not recall receiving a response and no further application for recognition was made.  The NHA would gladly meet with the Groomers’ Association but was not in a position to negotiate salaries and employment benefits.  There was no reason for the NHA not to consider an application for recognition from the Groomers’ Association.  He would provide copies of the relevant correspondence to the Committee if required.

Mr Rian du Plessis, Chief Executive Officer, Phumelela Gaming and Leisure advised that there were currently approximately 3,500 grooms in South Africa.  The information was included in a recent study of the economic impact of the gambling industry.  Employees of Phumelela were members of labour unions.  Phumelela did not employ any grooms.  Grooms were employed by self-employed trainers.  There was no national trainer’s association.

The Chairperson wanted to know which organisation controlled the activities of trainers.

Mr Larry Wainstein, Chairperson of the Racing Association responded that the industry was fragmented.  There were trainer’s associations in the Western Cape but there was no national responsible body.  Trainers were licensed by the NHA.

Mr Radebe expected the NHA to exercise a certain measure of control as the organisation issued operating licenses.  There appeared to be a problem with onerous licensing criteria.  He asked what the educational level was of grooms and what measures were in place to assist grooms with advancing in the industry.

Ms Kotsi sympathised with the racing and breeding industry, which faced a number of challenges.  However, the political will to assist the industry needed to be in place.  She asked what recognition of prior learning was given by the authorities.  She felt that the industry could do much more to assist grooms and wanted to know what measures were in place.

Mr Harris observed that the report of the Gambling Review Commission (GRC) made no mention of the issues concerning grooms.  The purpose of the public hearings was to consider the Commission’s report.  He asked for further comment by the Department of Trade and Industry and the Commission.

The Chairperson queried the mandate of the Gambling Review Commission and what had been omitted from the report.  The legislation governing the gambling industry allowed for regulation.  It was necessary to consider the broader socio-economic development and growth scenario but all the stakeholders agreed that the industry should be regulated.

Ms Zodwa Ntuli, Deputy Director-General, Department of Trade and Industry (DTI) advised that the Department would respond to the report of the GRC.  The Commission had a wide mandate.  The report made no mention of grooms or conditions of employment and focused on other issues regarding animals and machines.  The omission did not prevent the DTI from engaging on other matters.  The report included little comment on the impact of gambling or the socio-economic issues.

The Chairperson advised that the Committee would question other stakeholders in order to clarify the issues that had arisen during the public hearings.  Mr N Gcwabaza (ANC) was the chairperson of the working group appointed by the Committee and would contact Mr Simoto to obtain further information.

Mr De Kock explained that strict criteria were applicable to the granting of trainers’ licenses.  Grooms needed to successfully complete a two-and-a-half year practical stable training programme and pass an examination in order to qualify for the assistant trainer license.  Written examinations were currently in English but provision was made for oral examinations in isiXhosa or isiZulu.  After a further two-and-a-half year practical training programme and an examination, successful candidates could apply for a trainer’s license.  The same rules applied to all candidates.  There were groom schools in most provinces, which offered basic adult education and training (ABET) programmes to grooms.

Mr Adrian Todd of the Thoroughbred Breeders Association of South Africa (TBA) was not aware of any grooms’ cooperatives.  The TBA was willing to work with the DTI in developing successful cooperatives and assist the cooperatives with acquiring racehorses.  The cooperatives needed a business model as ownership of a racehorse differed from breeding horses.  There were groom schools at most racetracks, which offered ABET programmes in addition to racing training.

The Chairperson advised that the Committee would forward a list of questions to all the delegates at the public hearings and invite detailed responses.

Mr Harris asked if the Committee was allowed to question the GRC.

The Chairperson responded in the affirmative.  The Committee would engage with the Commission and request written responses.

At a later stage during the proceedings, Mr Simoto said that he supported the establishment of a commission of enquiry into the racing industry.  He said that the Committee was not getting the whole truth from the industry.  He had a letter from the NHA acknowledging receipt of the constitution of the Groomers’ Association.  He had failed the examination on two occasions but felt that he should have passed.  The NHA had refused to provide him with a transcript of his examination results.  The study material did not include possible examination questions.  His nearest groom school had closed two years earlier.  The National Lottery had granted R17.5 million to Phumelela in 1998 for the development of grooms but he had not seen any results.

The Chairperson advised that the issue of the grooms would be addressed by the DTI, as indicated by Ms Ntuli in her response.  The Committee had noted that the GRC report had omitted mention of grooms.

Submission by Ms Phindi Kema
Ms Kema was the Chairperson of the Africa Race Group (ARG) and presented the submission to the Committee (see attached document).

The submission explored the issue of whether horseracing was a hobby or a sport; the historical racial composition of owners, trainers, breeders, jockeys and grooms and the economic perspectives and impact of the industry.  A comparison was drawn with the status of the racing industry in the United Kingdom, Australia and Hong Kong, where horseracing was a very popular sport.  The need for the regulation of the industry in South Africa was emphasised and the state of the industry was outlined.

The submission was concluded with recommendations advocating an enquiry into the South African horseracing industry; resolving the prevailing monopolistic ownership structures; the need to re-constitute the horseracing authority and urging the creation of a Ministerial cluster to develop a growth strategy for the industry.

Discussion
The Chairperson asked for further comment from Ms Kema on the GRC report.

Ms Kema responded that the industry had referred concerns over the monopolistic practices in the gaming industry to the Competition Commission.  Gold Circle and Phumelela jointly established Betting World, which operated the single betting platform available in the country.  Phumelela had challenged the granting of a gambling license to another operator in Court.  Phumelela owned Teletrack, which was utilised by the partners of the organisation.  There was no alternative betting mechanism available in the country.  The business need to share costs was understood but these matters clearly violated the Competition Act.

Mr McIntosh asked if Ms Kema was considering accepting a position on the board of directors of Phumelela.

Mr Smalle asked if the data on Australian race courses quoted in the submission included only race courses in daily use or included the so-called ‘bush races’ as well.  He asked if Ms Kema had considered the progress that had been made by the South African racing and breeding industries.  He asked if Local Government authorities or private industry provided the capital investment to develop race courses.  He referred to the graph depicting the number of horses in other countries included in the submission document.  He understood that there were only 40,000 horses in South Africa, which were far less than the number of horses in other countries.  He observed that Ms Kema’s views differed from the positions put forward by other stakeholders in the racing industry.

Mr Radebe noted that there were significant challenges in the racing industry in South Africa.  All the stakeholders supported the regulation of the industry.  He suggested that Ms Kema contacted the Portfolio Committee on Sport and Recreation to raise her concerns.  There appeared to be concerns over the shareholding of SASCOC in Phumelela.  He asked if there were any matters that prevented the Minister from establishing a commission of enquiry into the horseracing industry.  He commented on the tone of a letter written by Ms Kema to Mr De Kock, which he felt did not promote racial harmony.  He wanted to know what had motivated her to write the letter in such a way.  There needed to be a balance between promoting previously disadvantaged individuals and respecting the other stakeholders in the industry.

Ms Kotsi recalled earlier submissions expressing concerns over the export of South African horses.  The recent agreement reached with Dubai was welcomed.  She wondered how the agreement would benefit Ms Kema and other South Africans from disadvantaged backgrounds.  She asked for comment on the barriers to entry in the industry and any suggestions to increase the participation of women and persons from disadvantaged communities.

Ms Kema responded that acceptance of a position on the Phumelela board would be a conflict of interest.  She was not considering accepting the position as her priority was the success of her company (ARG).  She had established working relationships with partners in Europe and the Middle East and felt that she was not learning enough in South Africa.  She questioned the role of SASCOC in sport and its shareholding in Phumelela.  SASCOC did not own any shares in rugby, soccer or other sport organisations but was involved in horseracing.  She had met with stakeholders in the industry on a number of occasions over the previous two years.  She felt that she still lacked expertise in the horseracing industry and the information included in her submission was derived from an international study conducted by Deloitte and Touche.  She thought that the challenges faced should be considered in the context of the international experience.  South Africa had tremendous potential but much needed to be done to compete in the global arena.

Ms Kema explained that her letter to Mr De Kock was written at a time when she was extremely frustrated and emotional because she felt that she was not being heard.  She felt that the industry was not dealing effectively with the issue of African Horse Sickness (AHS) and that the NHA could be more proactive.  There was no other avenue of recourse if the NHA blocked entry into the industry by new entrants.  She was of the opinion that the Dubai agreement would benefit the country but doubted if the NHA was the most effective entity to optimise the benefits for the country.  Representatives from Phumelela and Gold Circle were on the NHA Board.  Recently, a black member of the NHA Board had been forced to resign.  The GRC report contained less focus on horseracing than on other gambling activities.  She advocated the establishment of a commission of enquiry and that the input of all the stakeholders was obtained before any regulations were contemplated.

Mr Radebe accepted the explanation concerning the letter.  He asked if Ms Kema was in favour of a Ministerial or a judicial commission of enquiry.

The Chairperson asked if Ms Kema suggested that the current plethora of organisations involved in racing were incorporated under a single umbrella body.

Ms Kema agreed that all the stakeholders (including the grooms) should be represented.  The TBA should not prescribe to the industry as not everyone wanted the responsibility and costs involved in owning a racehorse.

General Discussion
Ms S van der Merwe (ANC) observed that the Committee had received much input from the interaction with a wide range of stakeholders in the gambling sector.  The horseracing sector was accused of being a dinosaur and suffered under the impact of AHS.  It was clear that the racing industry faced many challenges but the public hearings were not the platform for finding solutions.  She suggested that the Committee recommended a review of the horseracing with the purpose to encourage the development and growth of the industry in South Africa.  It was apparent that the sport and labour sectors needed to be involved as well.  It was necessary to investigate the allegations of the abuse suffered by grooms as there was existing labour legislation in place to deal with any violations.  There appeared to be obstacles to entry to the sector.  Horseracing and racehorse breeding in South Africa needed to be seen in the global context.  She suggested that the Committee queried the omission of the grooms in the GRC report.  It was not clear whether horseracing was a sport or an industry.

Mr Harris pointed out that the GRC report concluded that horseracing was not sustainable and included the suggestion that the industry was reviewed.  He cited the example of the demise of the American buggy whip industry when horse-drawn vehicles were replaced by cars.  He was tempted to suggest that Government concentrated on the socio-economic impact of gambling rather than focusing too much on horseracing.

Mr Smalle suggested that the Committee took up the invitation to visit breeding, training and racing establishments to gain first-hand perspective on the working side of the industry.  He asked how many persons from previously disadvantaged backgrounds were currently participating in training and development initiatives and what the success rate was.  Passing legislation was a lengthy process but the DTI and the National Gambling Board (NGB) could introduce short-term measures, for example norms and standards, financial models and ascertaining what assistance were available to the industry.  He expressed the hope that the DTI and the stakeholders would engage to find solutions for the long term survival of the industry.

Mr McIntosh said that the President had raised the issue of the export of South African horses to Dubai, which was an indication of the importance of the industry.  He wished to see a well-regulated and organised gambling sector, which was self-regulated in a co-operative, legal and effective manner.  Structures should be in place to support all the stakeholders in the industry, including the grooms.

Mr Radebe expressed appreciation for the work done by the stakeholders in preparing their submissions to the Committee.  The Committee was not prevented from referring matters to the relevant responsible authorities for resolution, for example AHS, the exporting of horses and labour issues.  The industry would not thrive unless all participants were involved and working together.  He strongly condemned the assaults on workers.  Transformation of the industry needed to be accelerated, barriers to entry needed to be removed and initiatives needed to be in place to assist new entrants.

The Chairperson gave the undertaking that the Committee would engage further with the GRC and would request the response of the Commissioner to the issues that had been raised during the public hearings.  The gambling industry was governed by legislation, which included provision for transformation, social development and job creation.

Mr Todd informed the Committee that there were currently ten cooperative ventures in operation, with a further twenty in progress.  The initiative had been successful and horses of good standard had been sold.  The three-month long worker/rider programme allowed the best-performing candidates to train as jockeys.  There was a groom school at Phillippi in Cape Town.  The TBA was committed to include persons from disadvantaged backgrounds in the industry.  More sponsorship for training programmes was necessary, AHS had to be addressed and the export of horses had to be increased.

Mr Graeme Hawkins, Chief Operating Officer, Gold Circle advised that there was a groom school at Summerveld in KwaZulu Natal as well as a mentorship programme.  Trainers recognised the need for development and encouraged workers to become registered stable employees and assistant trainers.  The five-year jockey apprenticeship programme had produced encouraging results.  He assured the Committee that the organisation embraced transformation and encouraged the involvement of individuals from disadvantaged communities.

Mr Wainstein advised that the Racing Association operated a groom school and worker/rider programme in Gauteng.  The Association was proud of its achievements and the Committee was welcome to visit and observe the progress that had been made.  The Association had invested in training programmes, which had delivered positive results.

Mr Denzil Pillay, Racing Control Manager, NHA explained that the Authority regulated sport racing.  The constitution of the NHA did not include any barriers to entry and welcomed all persons who wished to apply for licenses.

Mr Du Plessis said that Phumelela supported a review of the racing sector.  He asked the Committee to recommend the measures that would provide relief in the interim.  The organisation supported an investigation into the abuse of grooms and taking disciplinary action against perpetrators.

Mr Du Plessis explained that the Arlington race course was put up for sale after an agreement was reached with owners that the same number of races would be held at the Fairview race course.  Arlington was offered for sale on the basis of its real estate value.  Ms Kema would require suitable land for a race course and apply to the Local Government authority and the local Gambling Board for approval.  He denied that Phumelela was involved in a monopoly or engaged in activities that prevented new entrants.  To date, Ms Kema had not applied for licensing by the NHA.  There was currently one national tote.  Provincial totes were not viable and Phumelela would lodge objections to tote license applications.

The Chairperson remarked that casino licenses included the proviso that the ownership profile of the operation had to reflect the demographic profile of the country.  She wondered what prevented more black owners and breeders from entering the industry.

Mr McIntosh noted that Phumelela advocated a single national tote.  Earlier submissions had expressed concern over the contribution of bookmakers.

Mr Edwin Mahlabaphala, Senior Manager: Racing, National Gambling Board advised that the Board worked closely with the DTI.  A black economic empowerment scorecard process was in place to track the progress made in transformation.  The Board was currently engaging with stakeholders in the industry to gather data to establish the status quo.

Mr Robin Bruss, Chief Executive Officer, Cape Thoroughbred Sales, TBA said that the most significant challenge facing breeders was the lack of funding.  The agricultural sector was under financial pressure.  Bookmakers benefited from the tote but made no contribution to the cost of organising events and prizes.  There was a single tote in all other countries where racing flourished.  The tote paid much more in taxes than bookmakers.  The TBA supported the initiatives suggested by Ms Kema but questioned where the necessary funding would come from.  Limited prize money did not encourage participation in horseracing.

Ms Kema said that Phumelela had applied to the Eastern Cape Gambling Board to exclude the clause concerning indigenous racing from its license provisions.  ARG had lodged an objection to the application.  Phumelela was the biggest player in the industry and was expected to invest in the development of rural areas.  She was of the opinion that the exclusion was applied for because there was little money to be made from indigenous racing.  Rural communities were interested in, enjoyed racing and were keen to make a contribution.

The Chairperson said that the hearings had provided much documentation for the Committee’s working group.  Most of the available time was devoted to the horseracing industry because of the challenges experienced by the sector.  The Committee’s report would focus on the GRC report but would include the other issues that were identified and the matters that were omitted.  The Committee would invite the Commissioner and the DTI to appear before it for further engagement.  It would be necessary to identify experts, who could provide the Committee with more information on the issue of online gambling.  She thanked all the participants for their contribution to the hearings.

The meeting was adjourned.

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