National Gambling Policy; National Gambling Board 2016 Plans & 3rd Quarter 2015 performance; National Credit Act regulations

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Trade and Industry

09 March 2016
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

Missing Doc: National Gambling Policy: Final (November 2015) [emai info@pmg.org.za]

The Chairperson noted that the Committee is unhappy with the caps put in place on interest rates in the National Credit Act regulations due to become active on 13 March, plus it lacks policy on old debt. The clause that includes the formula for the maximum interest rate calculation is not exactly as the Committee would like, and it is preferable to get it correct at this stage, before the regulations come into effect. The Democratic Alliance was against the delay as this would affect consumers. It suggested a review after implementation to see if it is true that banks are making profits off the backs of the poor. The Committee agreed to write to the Minister requesting a moratorium to stall the implementation of the regulations but to expedite all proceedings in order that the new regulations are passed as soon as possible.

The DTI presented its National Gambling Policy. Important among the various points raised are the following: The NGB will be repositioned to operate under the auspices of the DTI and it will be known as the National Gambling Regulator (NGR), headed by a Chief Executive Officer. The NGB has struggled with creating policy alignment between national and provincial legislation. There has been a challenge in combating illegal forms of gambling, particularly online gambling, which remains illegal. Provincial licensing authorities can determine payable rates owed by bookmakers, in addition to the national 3% uniform tax that they must pay. A new revenue-creating tool of the NGB will be to take a percentage of the gross gambling revenue earned from Limited Payout Machines. The NGB will also be allowed to confiscate certain illegal winning without a court order.

Members stressed that the NGB should have a greater oversight role of the provinces, and that discussion should exist to avoid the provincial creation of policies that are inconsistent with national regulations. They raised concern over a conflict of interest, if the regulator is receiving revenue from the Limited Payout Machines that it is obliged to regulate. They questioned the legality of confiscating winnings that declared illegal without a court order.

The National Gambling Board presented its third quarter performance report and strategic plan for the 2016/2021 period. Statistics about gambling in South Africa were presented. In terms of performance, NGB achieved 100% of its milestone indicators for the 3rd quarter. The audit action plan for FY2015 reflected that of the 34 findings raised, 25 were resolved and nine are in progress. From the six findings carried forward from FY2014, four were resolved and two in progress. The NGB has spent 48% of its annual budget as at the end of Q3. The presentation also detailed its roles of monitoring and research within the sector.

Members noted that the NGB had spent a very low proportion of its budget, and blamed this on a lack of capacity and unfilled vacancies. Members flagged NGB’s large revenue increases (of around 200%) projected for the 2017/2018 period and onwards, which are expected to arise from the NGB’s new revenue generating systems. They again flagged concerns about a conflict of interest. Members inquired into the ability of the NGB to deliver on its mandate and its ability to prosecute illegal gambling. NGB noted that currently there are no criminal trials underway for illegal gambling. However, the Chairperson noted that there had been significant progress in the NGB over the last few years.

Meeting report

National Credit Act regulations
The Chairperson noted the issues the Committee had with the proposed National Credit Act regulations. In particular, the Committee is unhappy with some of the caps put in place on interest rates. We will request some form of moratorium from the Minister to stall the implementation of the regulations. If this is unsuccessful, the regulations will be in place as of the 13 March. 

Mr G Hill-Lewis (DA) disagreed with the proposal for a moratorium. He explained that currently caps are much higher than the regulations, which means that the new regulations will lower the rates, which is generally the goal of the Committee. On this basis alone, a moratorium will be harmful to consumers in the short-run. Recalling the history that the Committee has had with these regulations, he said it has for a long time been calling on the National Credit Regulator (NCR) to adjust the formula for the maximum interest rate charged on a debt. Eventually we succeed in getting the department to review the caps [limits]. When they published the revised regulations, around June 2015, they offered extensive opportunity for input from the Committee. The Committee was briefed on the changes, and every member had an opportunity to make detailed input if they wanted. Mr Hill-Lewis did make such an input to the department. When the regulations were finally published in the gazette for public consideration, they substantially reflected the concerns of the Committee – it seemed as though the process had worked and that the department had done an excellent job. In particular, there appeared a more sensible formula for the maximum interest rate, one that the consumer, especially a poor consumer, could understand. It is therefore unclear why the caps need to be rewritten or further discussion is immediately necessary.

Chairperson Fubbs stated that the moratorium will be to review a specific technicality in the clause about the interest rate limitation. We would like Mr Netshitenzhe to review that the cap is pegged to the repo-rate, as this is now going to have the effect of increasing the cost of credit [as South Africa enters rate normalisation). The Committee also calls for the writing off of certain debt. In the past amnesty did not function effectively to reduce debt – in fact it sometimes made it worse. Given the harsh economic climate, there is a frustration among the indebted that their debt is unbearable. So we are also asking for some space in the area of that particular clause.

Mr Hill-Lewis requested that the Chairperson clarify to which specific clause she was referring.

Chairperson Fubbs responded that she did not know off hand, but that it is understood to be the clause where the repo-rate is used to set a particular cap for maximum lending rates.

Mr MacDonald Netshitenzhe, Chief Director of Policy and Legislation, Department of Trade and Industry (DTI), made clear that there is more than one clause which determines maximum interest rates, and that in all of these, the cap is tied to the repo rate. The DTI will discuss with the National Credit Regulator (NCR) about the moratorium. The moratorium should only address the matters raised in previous meetings in order to move faster. There have been delays with the regulations previously.

Mr B Mkongi (ANC) stressed that the Committee remember that loans affect the working class. We are talking about the costs to ordinary people who pay these debts with their salaries. We need to discuss targeted issues that have a negative impact on our people. However, we do not want to rush these deliberations. Therefore, it is agreed that a moratorium is the correct way to approach the situation.

Chairperson Fubbs stated that the Committee had received legal opinion in the previous meeting. The Committee had asked what its powers were to amend the regulations as gazetted. In terms of Section 101(4) of the Constitution there is no enabling provision within the National Credit Act that allows Parliament to consider and approve the regulations. We do not have a power to amend – this power rests with the Minister. We can’t change these rates ourselves. However, our input is still relevant to the process of refinement. Years ago many people lost their homes [during the sub-prime crisis]. It is good to be thorough and that is the reason for the moratorium proposal.

Mr Hill-Lewis repeated his concern that delaying the new regulations will leave higher caps in place under the existing regulations. The maximum legal interest rates in South Africa are set according to a formula based on the repo rate. Each percentage point hike in the repo rate means that all the legal maximum interest rates in the country rise by 2.2 percentage points. This is way higher than the caps proposed in the new regulations. So long as it is delayed these caps are harmful to consumers.

The Committee pressured the department to reduce the 2.2% down to 1.7%, and eventually to zero. It is without doubt that consumers would now have a much better deal under the new regulations. He thus remained strongly against a moratorium that delays the regulations. If it is true that banks are making profits off the backs of the poor, then we should move now to address this. Let us have a review as soon as the new regulations are put in place.

Chairperson Fubbs responded that no one was rebuking the overall good work of the Committee with respect to the regulations over the last three to five years. But despite this good work, the proposed regulations are still not where we want them to be. We want to review the wording via a moratorium. The National Credit Act needs to balance the interest of business versus the consumer. There are legitimate small-lenders that need to survive, whose margins are already quite small. We want a lower cost on mortgages and a lower cost on development finance.

Chairperson Fubbs suggested dividing the Committee into two groups. Group A represents those in favour of implementation as soon as possible with an immediate review following. Group B is in favour of asking the Minister for moratorium to review the regulations, which will include the policy on old debt.

Mr A Williams (ANC) clarified that the moratorium will of course include a review of the caps. He added that if the regulations are passed sooner without moratorium, the Committee will not want to want to review them later. Thus if we do not apply for moratorium, we need to ask the Minister to review the caps immediately. They are still far too high.

Chairperson Fubbs stated that in either case the Committee will impress the need to expedite the regulations, and to reconsider the old debt as it affects lower income groups. We want to be briefed expeditiously on this matter. This will be sent in a letter sent to Minister in addition to the letter requesting a moratorium on the caps.

Mr Netshitenzhe stated that dti is happy to receive the letter and will move on from that point. He added that micro-lenders are interdicting the regulations, saying that the caps are very low.

Mr Hill-Lewis asked if the micro-lenders’ interdict had already been granted.

Mr Netshitenzhe responded that the interdict has been applied for, but not granted as yet.

Hill-Lewis asserted that the department must fight the interdict as far as possible.

Chairperson Fubbs stated that the Committee’s aim is to create a balance between all parties’ interests.

National Gambling Policy by the DTI
Mr MacDonald Netshitenzhe, Chief Director of Policy and Legislation, said gambling was originally banned in South Africa. However, it became allowed in the homelands, but not in ‘white’ South Africa. After the democratic government took power, the National Gambling Act was passed and the National Gambling Board was created. In 2004 the Act was amended to introduce the National Gambling Policy Council to ensure policy alignment at the national and provincial level. In 2008, an Act was passed to allow interactive gambling, but it was not promulgated. The Gambling Review Commission Report recommended policy reforms in 2010, which were finally approved by Cabinet in February 2016.

Mr Nkoatse Mashamaite, Director: Gambling Policy and Law, dti, then went into detail on the policy amendments suggested by the National Gambling Board (NGB).

There is a lack of effectiveness of the National Gambling Policy Council on account of a lack of quorum. The solution is that if there is no quorum in two subsequent meetings, the Minister and the MECs in attendance are empowered to make binding resolutions regardless of the quorum. Policy alignment at national and provincial government is not achieved as provinces continue to implement policies contrary to resolutions. There is now a provision to ensure these bodies consult to prevent misalignment.

The NGB will be repositioned to operate under the auspices of the DTI. It will be changed into the National Gambling Regulator (NGR), headed by a Chief Executive Officer. The NGR will strengthen control mechanisms to minimise the abuse of gambling and control the issuing of licences by provincial licensing authorities (PLAs). The money collected from unlawful winnings will be declared forfeited without a court order and paid to the NGR to be used to address the national issue of problem gambling.

The next amendment is made to emphasise the authority of the NGB in approving up to 40 Limited Payout Machine (LPM) sites, approval which be granted to PLAs. In general, the NGB needs to increase its success in implementing its mandate. The strategic direction and mandate of the NGB must be thus be reviewed to focus on the following aspects: Implementing education and awareness, implementing measures to combat illegal gambling, offering treatment to problem gamblers by appointing service providers with such expertise, and manage the operation of the Central Monitoring System without outsourcing to private operators.

The policy proposes enhancing regulation of casinos to ensure the destination approach for location of casinos is maintained. In this regard, the policy proposes that there be a requirement for different entrances for gambling venues in cases were there have been building developments around them. Further, the policy proposes that provinces should assess policy implications when considering the request to relocate a casino venue from one area to another.

The main challenge of Electronic Bingo Terminals (EBTs) is that they have been introduced outside of the national policy framework. It was ruled in court that they are not meant to be exposed for play outside of casinos.

The policy proposed the construction of a framework for the regulation of EBTs. The policy recommends that the electronic form of bingo be allowed given the following:
1) The number of licences for bingo, including EBTs and bingo seats must be limited nationally; the Minister must be empowered to review this number.
2) Both types of bingo activities must be allocated together per licence and venue by the provinces.

Horseracing will still be self-regulated, while the National Gambling Act 7 of 2004 will only regulate betting thereon (tote betting or bookmakers betting). For horseracing, the policy proposes the continued recognition of self-regulation in the industry, including the recognition of activities like bush racing, trotting and harness racing. However, the self-regulation body will be placed under the oversight of the National Gambling Regulator through the standards approved by the National Gambling Policy Council (NGPC).

Discussion
Mr D Macpherson (DA) agreed that there is a problem with policy alignment, and asserted that this is often because the provincial boards by and large do things at their own discretion, and often in contradiction to National policy and Acts. He asked if there was any way that the NGB could have greater oversight of the provinces. We need to engage provincial boards before they implement irregular regulations.

The real issue with Electronic Betting Machines (EBMs) lies in the unregulated expansion of these units in establishments. They currently exist in eating establishments and recreation areas. This is very problematic. The policy needs to be clearer in determining how these machines will be rolled out to avoid illegal placement.

With regard to bookmakers and the Provincial Licensing Authority (PLA) determining the rate, Mr Macpherson thought it is a mistake for provincial authorities to determine that rate. For example, some provinces have no horse racing. So it is not an equitable solution. The NGB should determine this rate. Otherwise there is an opportunity for PLAs to try to crowd out bookmakers.

Mr N Koornhof (ANC) wanted to know where the Committee stands on the provinces on this gambling matter. Have they been brought into discussions? He noted in slide 4 that new forms of gambling can occur without authorisation from the NGB, but it does not specifically refer to online gambling. However, in slide 13 dti does refer to online gambling. It is unclear whether the presentation means to address online gambling specifically as a separate issue to other new forms of gambling. It is unclear how the NGB will be able to collect illegal winnings – if the gambling is illegal, we want to stop the gambling so that there is no payout. And the illegal gambling that we cannot stop – well, we will not have access to that money. The presentation also mentions problem gambling – do we have any information on the extent of the problem in South Africa?

Mr Hill-Lewis added that it will be difficult to collect “illegal winnings”. He doubted that the NGB will be able enforce the forfeit of unlawful winnings and collect them without a court order. This is because the winnings cannot be proven to be illegal without a court order.

The presentation makes two points about fees owed by bookmakers that are confusing or contradictory. On slide 10, it states that the PLAs must determine payable rates. Later it says that the payable rate is to be 3%.This seems to suggest two different rates. Is it correct to interpret that the PLAs can thus introduce an additional fee/tax that bookmakers must pay in addition to the 3%? Also, how are you going ensure that the 3% is paid over to horseracing operators, and that it is used for the intended purpose as stipulated?

For tote operators, why is the approach different than that for bookmakers offering a bet on a lottery? On one hand you are saying they must pay a reasonable contribution. Why is the same reasonable payable rate not the same then for tote operators offering the same bet?

He added that he thinks the policy on making online gambling illegal, is wrong.

Mr Williams responded saying the policy on online gambling is correct. Greyhound racing should remain illegal – it is exploitative to animals, and we have animal protection laws. It is Mr Williams’ personal view that gambling should never have been legalised. Gambling causes serious issues in our communities. Most gamblers lose and many lose a lot. Our outlook should be far more negative towards gambling. He mentions a personal experience of seeing children sleeping in cars in the middle of the night while parents gamble and lose money. We need to remember at all times that gambling is a problem.

Chairperson Fubbs noted that the presentation makes reference to new mechanisms for regulatory authority. This would require regular inspection and monitoring. The Committee will need far greater detail on the new ideas for funding mentioned in slide 27.

There is a challenge in the creating of concurrent legislation at the national and provincial levels. We have seen provinces skirting or even ignoring their own Executive Council Member (MECs) decisions on the matter. We need a system to prevent the cavalier attitude of the provincial gambling boards.

Mr A Williams (ANC) commented that is correct that gambling can be destructive. The reality is that our policies need to be aimed at contributing to society. We need to create policy and direct funding in a way that encourages positive effects to society. That is the role of policy.

Mr Netshitenzhe elaborated on concurrent legislation, explaining that it is the national department that is forced to pass all policy through the NGPC. When provinces create legislation, they are not forced to do so. He believes that everything [all policy decisions] must be put to the Council for debate, to avoid irregular decisions. If they are not, they should not be considered to be binding. During consultations, we spoke with stakeholders on the ground.

Mr Koornhof inquired if these consultations had included discussions with provincial departments.

Mr Netshitenzhe responded that the NGB has been to the provincial boards who participated in our road shows. So we are not expecting a contradiction from them.

On unlawful winnings, Mr Netshitenzhe said we will deal with this problem in detail in the Act. It is mentioned here in order to make sure that it is included. Lastly, in terms of the National Gambling Act, online gambling will remain illegal.

Mr Mashamaite responded to Mr Macpherson’s question about oversight of the provinces. He explained that in 2004, when the 1996 Act was overruled, it introduced the National Gambling Policy Council, which was supposed to be an inter-governmental forum to entertain many issues. We are now noticing a breakdown, which is why we are saying provinces seem to make their legislation without consultation with the Council. This is exactly how the location of EBTs came about – provinces were not consulting with the Council and national legislation.

He responded to Mr Koornhof on the question of illegal winnings, explaining that the Board is currently only able to collect illegal winnings that are declared by court order. The costs of going to the High Court are far too high to make it feasible to collect small amounts, which are a large proportion of illegal winnings. There are instances, however, where it seems that the court order process may be excessive to prove guilt. For example, gambling by someone banned from gambling or gambling at illegal sites – it seems there is no need here to go to court to establish that the winnings are illegal. It is in these instances that the money should be automatically forfeited.

In response to Mr Hill-Lewis, he stated that it is correct that two different tax rates are implied. PLAs will be able to charge payable rates on bookmakers when licensing, in addition to the 3% tax. However, licencers should be obliged to indicate what the money is used for.

Mr Netshitenzhe mentioned that it is not the role of the NGB to define what is and what is not intellectual property (IP). The policy is merely saying that we have an advanced form of IP in RSA, and this policy recognises a regulatory framework in terms of the WTO that organises IP in the gambling industry.

Mr M Kalako (ANC) asked what would happen if there is an engagement by the province with the Council, but the province ends up disagreeing with the Council. Is there any deadlock-breaking mechanism in place?

Mr Macpherson wanted clarity on point 4.4.4.5 of the policy, page 28. The point includes statements about the unconstitutionality of totalisator or pool betting on certain other sporting activities. Have you got a legal determination to say as such – has it been legally determined as unconstitutional?

Page 29 [point 4.4.6] requires horseracing operators who offer sports pools to pay a percentage of their profits to the National Lotteries Distribution Trust Fund (NLDTF). Does this percentage apply to all gambling revenues or only those to do with lotteries?

Mr Hill-Lewis supported the proposal about the fees owed by lotteries on horse-racing. He requested more detail on this new proposal. He again sought clarity on whether there is a new tax on bookmakers which will be set by the PLA, and, if so, will it be different in every province and will it go directly from tote operators to the PLA? If so, do the bookmakers need to get a separate licence for offering this bet? Again, why is there a different approach for offering the exact same bet? It seems that this policy will encourage PLAs to compete with one another – is that the intention? They will compete to offer the lowest additional fee.

Mr Koornhof asked if the DTI had received a legal opinion on the matter of unlawful winnings being forfeited.

Mr Netshitenzhe clarified for Mr Macpherson that the percentage mentioned on page 29 only applies to revenue from lotteries. He added that some of the licences for sports pool betting offered by PLAs were out of line with the Constitution. The uniform tax of 3% has been confirmed with National Treasury.

Mr Hill-Lewis replied that he understands that there is a new licence for lotteries – but what remained unclear is why the same better bets offered by a totalisator betting tote also do not require a new licence.

Mr Netshitenzhe replied that these licences on tote betting are currently issued by the provinces.

Mr Hill–Lewis added that unlawful winnings cannot be proven without a court order - no one is a criminal until they have been tried and found to be so in a court of law. He did not believe that this policy would be successfully implemented. He also sought clarity on where or not the levy would be an additional condition to be added to existing licences.

Mr Netshitenzhe confirmed this saying that there will be altogether new forms of licencing conditions.

Chairperson Fubbs requested clarification on the legality of the Committee’s role in regulating lotteries.

National Gambling Board Third Quarter Performance
Ms Caroline Kongwa-Hankanga, NGB Accounting Authority, noted the NGB’s performance over the year. There were 17 targets to be reported against in its Annual Performance Plan 2015/16 in Quarter 3 and 100% of these targets were achieved. The electronic Illegal Gambling Operative Register (IGOR) has been established and rolled out in Quarter 4. The NGB in collaboration with law enforcement agencies, have identified online gambling syndicates in Gauteng and are in the process of securing arrests. The NGB has successfully performed evaluations and compliance monitoring of nine PLAs. The NGB gathered national gambling statistics and information about the performance of the South African legalised gambling industry from all PLAs. The NGB has commissioned research to determine the socio-economic impact of illegal gambling, with a focus on online gambling. The NGB is currently involved in gathering data from various stakeholders and gamblers participating in illegal gambling, especially those gambling online.

Ms Kongwa-Hankanga provided statistics about gambling in South Africa. Casinos account for the highest percentage contribution of total Gross Gambling Revenue (GGR) at 69.7%, with Betting at 17.8% followed by LPMs at 9.0%.and Bingo at 3.4%. Gauteng is the highest contributor to GGR at 40.8%, followed by KZN at 19.0% and Western Cape at 16.5%. As of 31 December 2015, KZN accounted for the highest distribution at 21.8%, followed by Gauteng at 20.0% and Western Cape at 16.3%. Limpopo has rolled out the largest percentage of its provincial allocation with 71% of LPMs allocated by province for phase 1 installed. It is followed by Eastern Cape with just over 59% LPMs installed. Free State has installed the lowest number of about 14% of LPMs allocated for phase 1. It is superseded by Northern Cape that has rolled out about 19% of LPMs allocated for phase 1.

Key challenges for the NGB are capacity constraints and the underspending of the budget. The NGB will collaborate with the DTI in order to increase capacity. The NGB has revised its performance plan to ensure that priorities are realigned and that funding is spent effectively.

The 17 performance indicators that were successfully achieved for the period were listed. These included: creating nine consolidated three-tier compliance evaluation assessment reports; reporting on intervention and support provided to regulators and law enforcement agencies; reporting on unlawful winnings and related matters; producing analysis and reporting data in accordance with the prescribed requirements; reporting on the accessibility and functionality of national registers; developing and rolling out an illegal operator register; creating an advisory report on the feasibility of regulating forms of gambling tabled with the Accounting Authority; reporting on continuous legal advisory services provided to the entity; conducting research on the impact of gambling and presenting the report to the Accounting Authority; completing an audited gambling sector performance report; presenting a B-BBEE concept document at intergovernmental forums; submitting quarterly reports reflecting the status of the audit action plan; reporting on progress made against the implementation of the human capital strategy and plan; and maintaining 98% uptime of NGB servers.

At 3rd quarter, certain performance indicators where on track being at least 75% complete, including: implementation of the communication strategy and plan,           implementation of the stakeholder management strategy and planning, implementation and assessment of the framework.         

The NGB identified three strategic risks to the implementation of their mandate, being:
1) A lack of cooperation by PLAs, lack of participation in the fora, lack of response when inputs are sought for consolidation purposes, lack of coherence on policy positions.
2) The proliferation of illegal forms of gambling and loss of revenue to the fiscus.
3) The unavailability of reliable data from external stakeholders.

The NGB reported on its audit findings and the financial situation of the board. The Audit Action Plan (FY2015) reflects that of the 34 audit findings raised, 25 were resolved and nine are in progress. From the six findings carried forward from FY2014, four were resolved and two in progress. The NGB has spent 48%of its annual budget as at the end of Q3. It has a cash balance of R30.5 million on hand. This balance includes confiscated winnings amounting to R4.8 million.

The presentation ended with a brief overview of the compliance of the NGB in implementing its mandate according to regulations and the National Gambling Act.

National Gambling Board Strategic Plan 2016-2021
Ms Kongwa-Hankanga noted the mandate of the NGB according to the National Gambling Act as the following: to provide leadership and ensure that the regulation of gambling sustains a high level of integrity, to sustain and grow the NGB’s regulatory capability to position South Africa as a pre-eminent jurisdiction with an exemplary and effectively regulated gambling industry, and to be a tactical strategy-driven and action oriented focused organisation. The NGB has three primary strategic outcome oriented goals (SOOGs), which are to: enhance stakeholder liaison and statutory advisory services, enforce compliance, and optimise organisational excellence. The presented explained how each programme implemented by the NGB is aligned to achieve these goals in line with the National Medium-Term Strategic Framework (MTSF) outcomes. The priorities of the NGB have also been reviewed in line with the National Development Plan.

The ongoing operational environment of the NGB involves the following tasks: suppression of illegal gambling (including online gambling); combating unlicenced gambling activities; revenue generation that will be aligned to a self-funding model; ongoing research on the socio economic impact of gambling; developing norms and standards applicable to national and provincial regulation; developing stronger regulation models; exercising oversight on all provincial gambling activities; demonstrating the benefits derived from the returns from the current regulated modes of gambling; and the provision of reliable information through the establishment and maintenance of national systems.

The NGB noted that Gross Gambling Revenues have risen most sharply in Bingo revenues between 2013 and 2015. Casinos remain the highest-paying mode of gambling revenue in the sector, at 72.1% of GGR. Gauteng is the largest revenue-generating province, at 42.4% of national revenues, with the Western Cape following at 15.8%.

The NGB envisages the following outputs in the future: amendments to the National Gambling Act, a review of the National Gambling Policy, contribution to the combating of gambling crime, the provision of statistics on job creation and the gambling industry, the provision of educational awareness, building capacity within the NGB and sharing the ministry’s vision through sectoral dialogue.

There are several key risks to the envisaged outcomes, but that the Board has mitigation measures in place. Key challenges to the NGB include: addressing policy and legislative reform amendments which will impact on NGB outputs; continuously balancing the economic gains of gambling against the negative impacts thereof; creating a balance between revenue generation and protection of the public while taking cognisance of governmental developmental priorities; and the proliferation of illegal forms of gambling and the need to improve prosecution of illegal gambling activities.

Cost drivers anticipated for the year ahead include: implementing ICT infrastructure to automate the information portal and to monitor the LPM industry; research on socio economic impact of gambling and problem gambling in the country; public awareness and education campaigns; and the combating of illegal gambling activities through law enforcement and oversight working with cybercrime units.

The presentation ended with a table of revenue and expenditure for the 2016 to 2021 period. There is a large increase expected in revenue and expenditure from 2016/17 to 2017/18.

Discussion
Chairperson Fubbs drew attention to the fact that the NGB had only spent 34% of its budget by third quarter, yet it also indicated that there are seven vacant funded posts at the board. She asked which posts were vacant.

Mr Williams stated that NGB’s mandate is to regulate gambling and illegal activities. He asked what the NGB’s stance is on illegal activities taking place inside legal casinos. He was surprised at the anticipated increase in revenue from 2016/17 to 2017/18, which appears to be as much as 200%. He questioned whether there was perhaps a conflict of interest in this large increase. If this is due to increased earnings from EBTs, is it not a conflict of interest, as these earnings affect the NGB staff’s payroll?

Mr Koornhof asked exactly when the research on the socio-economic impact of gambling will be completed. He agreed with Mr Williams that the increase in revenue is unreasonably great. He asked if it is the case that expenditure has to jump up by a concurrent factor.

Mr Hill-Lewis asked for an honest opinion from the NGB on the functionality and capacity of the NGB in delivering on its mandate. When we spoke last year, the NGB had only one staff member actively working on enforcement. What is the situation today?

Mr Macpherson asked for an update on what action has been taken after the audit report of the NGB. In particular, how close are they to criminal prosecutions?

Ms Kongwa-Hankanga stated that the Board is definitely empowered in terms of the Act to conduct inspections of legal casinos, however, it is necessary to conduct these inspections with the PLA also present at the venue.

She admitted that there is a perceivable conflict of interest if the regulator [NGB] receives revenues from the LPMs. It is important to note however, that the provinces are similarly reliant on revenue from GGR. It is a done thing for a regulator to collect revenue from the sector it is regulating. She added that the conflict of interest “does not go very far” because the NGB does not licence the casinos. According to the latest policy, as long as we are providing the monitoring as a service to the industry, it is indicated that we are entitled to this revenue.

She responded to Mr Koornhof saying that the research is planned for this current financial year ending 31 March 2016. It may go into the new financial year however as there have been delays. We have completed phase 1, and are working towards completing the project.

She responded to Mr Hill-Lewis stating that so far, in terms of strategy, the NGB is definitely able to deliver on its mandate. The mandate is not impossible to achieve. However, the NGB is impacted by a lack of capacity, and we therefore need to expand capacity to meet the mandate. The division currently has nine individuals who have varying expertise – all positions are currently filled. Specialties include: legal, systems engineering, technology, technical standards, inspectors, and so on.

She answered Mr Macpherson saying that the audit report is nearly finished and will be published soon.

Mr Williams asked how many cases does the NGB currently have against illegal casinos? He expressed concern that the NGB funding is coming from the Limited Payout Machines. Individuals can avoid inspecting those areas as it will affect your revenue.

Chairperson Fubbs asked if the provincial gambling boards would also receive the new fees as a benefit.

Mr Hill-Lewis requested a breakdown of the NGB staff by category. In particular, he asked how many are actively involved in stopping illegal activity. Are there any cases that the NGB is working on which will result in court trials?

Chairperson Fubbs pointed out that the conflict of interest will also exist in the provincial boards if they gain from the benefit of the additional rate and the revenue from it.

Ms Kongwa-Hankanga replied that the NGB currently has no trials or cases with regard to casinos. In terms of the Act, the NGB is empowered to investigate the provinces and make sure that they are complaint.

Chairperson Fubbs closed the meeting on a more positive note, saying that there has been significant progress over the last few years in the NGB, and that there is good work being done.

The meeting is adjourned.

 

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