Suspension of National Gambling Board: briefing by Minister

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Trade, Industry and Competition

06 November 2014
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Minister of Trade and Industry, briefed the Committee regarding the suspension of National Gambling Board (NGB) members. The suspension of the NGB had come immediately after allegations of maladministration, wasteful expenditure and corrupt activities had been reported by the Auditor-General South Africa (AGSA) in the NGB’s recently tabled 2013/14 annual report and financial performance. It was important to emphasise that although the Board had been suspended, the forensic investigation was still pending and the purpose of suspension was purely precautionary. The suspended Board members had contravened the Public Finance Management Act (PFMA) through failing to prevent irregular, fruitless and wasteful expenditure and making overdrafts on the entity’s bank account without the approval of the Minister of Finance. Furthermore, the Board’s accounting authority, acting either individually or jointly, had allegedly contravened the National Gambling Act by allowing members whose term of office had expired to continue participating in the Board’s activities and representing the NGB.

Members commended the Minister for acting swiftly on intervening and suspending the Board members immediately after the report of the AGSA regarding irregular, fruitless and wasteful expenditure and corruption. What was the pace of the pending forensic investigation in relation to the stability of the Board? What were the challenges faced by the new interim Board? One Member remarked that the Department of Trade and Industry (DTI) had been aware of the matter of the R1.6 million spent on overseas trips by eight Board members to attend conferences in Oslo, Norway, as this had already been highlighted in the 2013/14 annual report.

One Member disagreed that the Department acted swiftly on the suspension of the NGB members, as it had acted only after the AGSA report. It was alleged that the Minister had been evading the issue of the suspension of the NGB, and this was problematic as the Committee needed to be constantly updated. Members suggested that the Department needed to eliminate illegal gambling in the country and pay particular attention to gambling at hotels, as this would contribute to the economy of the country. Was there a clause in the suspension of the NGB members that prohibited them from entering the premises while the forensic investigation was still in process? The Minister provided responses to the questions asked. 

Meeting report

Opening remarks by Chairperson

The Chairperson welcomed everyone and said the purpose of the meeting was to hear a briefing from the Minster of Trade and Industry, Dr Rob Davies, regarding the suspension of the members of National Gambling Board (NGB).

She requested the Members to adopt the agenda of 6 November 2014.

Ms P Mantashe (ANC) moved the adoption, and Mr D Macpherson (DA) seconded.

The Agenda was adopted.

Briefing by Minister

Dr Rob Davies, Minister of Trade and Industry, said that the National Gambling Board (NGB) was established as a schedule 3A public entity in terms of the repealed National Gambling Act, 1995 (Act No. 33) of 1996. The Act had been replaced by the National Gambling Act, 2004 (Act No.7) of 2004 which makes provision for the coordination of concurrent national and provincial legislative competence over matters relating to the regulation of gambling activities, and also makes provision for the establishment of uniform norms and standards applicable throughout the Republic in certain gambling activities. The Board Secretary serves as the liaison between the Board of Directors, the Authority, its advisory bodies and the public, ensuring that all matters are handled effectively.

The suspension of the NGB had come immediately after allegations of maladministration, wasteful expenditure and corrupt activities had been reported by the Auditor-General South Africa (AGSA) in the NGB’s recently tabled 2013/14 annual report and financial performance. It was important to emphasise that although the Board was suspended, the forensic investigation was still pending and the purpose of suspension was purely precautionary. The suspended Board members had contravened the Public Finance Management Act (PFMA) through failing to prevent irregular, fruitless and wasteful expenditure and making an overdraft on the entity’s bank account without the approval of the Minister of Finance. Furthermore, the Board’s accounting authority, acting either individually or jointly, had allegedly contravened the National Gambling Act, 2004, by allowing members whose term of office had expired to continue participating in the Board’s activities and representing the NGB.

Dr Davies said he had also received a disclosure, made in terms of the Protected Disclosures Act, which contained other allegations. Among these were allegations of apparent corrupt activities regarding the National Central Electronic Monitoring System (NCEM) and the unlawful appointment of staff. He added that there was alleged intimidation, bullying and disregard for the Constitution, as well as alleged theft of evidential material at the NGB. There were also allegations that the Board members had spent R2.7 million on travel for 2013/14, which included a R1.6 million overseas trip by eight Board members to attend conferences in Oslo, Norway.

According to the NGB’s annual report, gross gambling revenue for 2013/14 was R21.8 billion, more than three quarters of which came from casinos, and taxes and levies collected from gambling activities amounted to R2.2 billion over this period.

Discussion

Mr B Mkongi (ANC) commended the Minister on his swift intervention on the matter by suspending the Board members immediately after the report of the AGSA regarding irregular, fruitless and wasteful expenditure and corruption. What was the pace of the pending investigation in relation to the stability of the Board? What were the challenges faced by the new interim Board?

Dr Davies responded that the investigation was expected to be completed by the end of November 2014, and if the investigators requested additional time, this would be granted, as this process required thoroughness. The Board still faced challenges regarding filling the vacancies and recruiting the required skills for the Board to be able to execute its duties, as this had also been highlighted in the annual report. The combating of illegal gambling was still a major challenge and required modern technological intervention, and the entity still relied on other stakeholders to ensure that money laundering was curbed. The Board was also looking into what was envisioned for the NGB’s future regulatory function, as opposed to being a licencing authority.   

Mr D Macpherson (DA) remarked that it was concerning that the Minster became aware of the allegations of corruption and maladministration only after the report by the AGSA, as there had already been a clear indication of rampant destruction of corporate governance in the Board. It was also concerning that the Minister had suspended the Board on 9 September 2014, but the public announcement had been made only on 22 September 2014 and the Chairperson of the Portfolio Committee had received the reasons for the suspension only on 16 October 2014. The Committee had then been briefed by the Minister only on 6 November 2014.

He alleged that the Minister had been evading the issue of the suspension of the NGB, and this was problematic. The Committee should get a briefing from the Minster once the pending forensic report had been finalised, and assure the Members that criminal charges would be laid against those found guilty of maladministration and corruption. He sought clarification on the allegations that the Board had become personally involved in the Request for Proposal (RFP) for the issuing of the contract. He also agreed that indeed, during the oversight visit to the NGB, there were cases where evidential materials -- minutes and agendas of 40 meetings -- had been destroyed, and this was to obstruct forensic investigations and showed complete disregard for justice.

Dr Davies rejected the suggestion that he had been evading the Committee regarding the suspension of the Board members, as he had been open about the matter. The investigation was still incomplete, and there was a need to respect the rights of the people that had been suspended to go through due process. The investigations also needed to be conducted in conformity with all the relevant precepts of the Constitution and the public service laws in the country. It was unhelpful to pronounce the suspended Board members guilty while the investigation was still pending

The Department was accountable and would therefore take action against the Board members found to have contravened with PFMA through failing to prevent irregular, fruitless and wasteful expenditure. The Members would be provided with a forensic report once the investigations were concluded, as this was again part of accounting to the Parliament. It was not procedural for the Members to go on oversight visits without going through the proper channels.

Dr Z Luyenga (ANC) echoed that the Minster had acted swiftly to intervene in the matter. He appreciated the fact that the reasons for the suspension of the Board had been provided to the Members during the constituency period. He wanted to know whether the suspended Board members were adhering to the conditions of their suspension, and the time-frame for the finalisation of the forensic report.

Dr Davies responded that the conditions for the suspension of the Board were stipulated in the letters sent, and the Board members were forced to adhere to those conditions.

Mr G Hill-Lewis (DA) welcomed the report by the Minister and remarked that it was long overdue, considering the importance of the matter. The matters of maladministration, corruption and wasteful expenditure had been highlighted by the AGSA in last financial year, and it had already been clear that there was instability in the entity. The DTI was aware that R1.6 million had been spent on an overseas trip by eight Board members to attend conferences in Oslo, Norway, as this had already been highlighted in the Annual Report. He disagreed that the Department had acted swiftly on the suspension of the NGB members, as it had acted only after the AGSA report. He also echoed that the Committee had been side-lined on the matter and this was totally unacceptable, as Members needed to be up-to-date on the matters of the Department.  

Dr Davies responded that depending on whatever will be recommended by the pending investigation the Department would ensure that those found guilty would face the law. The Portfolio Committee needed to collaborate with the Department to identify the challenges that needed to be addressed, instead of criticising the individuals. It was best for the Members to wait for the completion of the investigation in order to decide whether or not the travelling expenses by the Board members were excessive.

Adv A Alberts (FF+) also felt that the report regarding the reasons for the suspension of the Board members had been delayed, as the Minister was required to brief the Committee on other relevant issues. He asked the Minister to respond to the allegations made by the suspended Chairperson of the Board, reported in Business Day, regarding the judicial process of the NGB.  

Dr Davies responded that the judicial process of the NGB had nothing to do with the suspension of the Board members, and repeated that the pending investigation was related solely to maladministration, fruitless expenditure and corruption.  

Ms P Mantashe (ANC) also admitted that report was long overdue, as this was a pressing matter involving media attention. It was highly unlikely that the Minister had been evading the matter, but there had been a busy schedule and she hoped that the Committee would be provided with the finalised forensic report and the actions to be taken by the Department against the Board members. The Department needed to eliminate illegal gambling in the country and pay particular attention to gambling at hotels, as that would contribute to the economy of the country. Was there a clause in the suspension of the members that prohibited them from entering the premises while the forensic investigation was still in process?

Dr Davies responded that the suspended Board members were not allowed to enter the premises of the NGB, as this was likely to lead to the tampering of evidential documents.

Mr N Koornhof (ANC) said the Minister had acted promptly and decisively on the matter. It was unfair to be critical, considering the complexity of the matter and the busy schedule ahead. He suggested that the Committee should not focus on the newspaper reports, but rather on the official report submitted by the Minister.

The Chairperson echoed that the criticisms levelled against the Minster were unfair, considering that Parliament had been in the constituency period when the Board was suspended, and she had only been informed by the Minister by email, although without reasons for the suspension.

Mr Macpherson wanted to find out from the Minister whether the NGB was embroiled in any litigation, and said he was disappointed that the Minster seemed not to be taking responsibility for the matter that had transpired at the NGB. The Minister was following the President’s path of avoiding Parliament. He said that the Members were allowed to make oversight visits at any given time, as this was their duty and mandate.

Dr Davies responded that it was the responsibility of the Members to conduct oversight visits, but there was a need to have an organised system of oversight, especially in cases of pending investigations, to protect the integrity of the report. The Department and the Minister were taking responsibility on the matter, as they had already appointed a forensic audit to examine the main issues and the action to be taken. 

Mr Mkongi indicated that the Minister needed to be protected as he was being unfairly attacked by the Members. It was childish politicking to claim that the Minister had been avoiding Parliament, when he was clearly overseas. The Minster should be commended for intervening in the matter at an early stage and had given terms of reference for a forensic investigation and now, as a responsible South African, was waiting for the conclusion of the investigation.

Ms Mantashe also said that it was unfair to attack the Minster, considering that he had already stated that he was waiting for the finalisation of the forensic report before taking action on the matter. The Minister had also given reasons for his absence in Parliament, as he had been overseas and attending to other urgent matters.

Mr Hill-Lewis responded that the Committee had received the report only on 17 October 2014 regarding the reasons for the suspension of the Board. This was already late, considering that this was a matter that required urgency. It was also clear during the oversight visit to the NGB that there were security problems, as it had been stated that there were evidential materials (paperwork) that had gone missing. He would not apologise for reaching the conclusion that clearly eight overseas trips in one financial year was absolutely excessive and painted a picture of Board that had abused power and taxpayers’ money.

It was unnecessary to seek to ban online gambling, which could be perfectly regulated with modern technology and software to protect the consumers of the gambling product. The Department had been silent for more than six years on how it had allowed the unrestrained rollout of Electronic Bingo Terminals (EBTs), which offered no protection, were often incredibly hard to regulate, and directly cannibalised from casinos.

Dr Davies responded that it was almost impossible to make any opinion regarding the eight overseas trips taken by the Board members, as there was still an investigation pending on the matter. The Department was planning to look at removing only illegal gambling, as this was not contributing to the economy of the country. Electronic gambling was not authorised in South Africa, and people who were doing it were contravening the National Gambling Act, 2004.

Dr Luyenga said it was clear that the debate about the suspension of the NGB had been turned into politicking. This was hardly surprising, considering that the 2016 local election were around the corner. This was extremely dangerous for the operation of the Committee, which was part of Parliament.

Dr Davies echoed that matter was indeed turned into political grandstanding, instead of discussing a way forward on how to avoid this kind of situation in the future. The accusation of evading Parliament was unfounded, considering that he was overseas engaging with the Chinese Ministry of Commerce and there had been an Acting Minister who was prepared to answer the questions regarding the NGB.

The Chairperson thanked everyone present at the meeting, and particularly the Minister for the briefing regarding the suspension of NGB members. It was clear that the Minister had responded swiftly on the matter and this needed to be commended, despite unfair criticism from other Members.

The meeting was adjourned. 

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