The Committee was briefed by the National Credit Regulator (NCR), with members of the National Gambling Board (NGB) and the Department of Trade and Industry also present in the meeting. The NGB noted that it would be requesting support for new legislation to extend its powers to operate more effectively in South Africa. The briefing summarised the current investigative powers of the NCR and the way in which they fell short, because of the challenges that had been made, firstly by Capitec, but subsequently by other entities, on whether “reasonable suspicion” could be established before the NCR undertook any proactive investigations. It pointed out that many cases were dependent on complaints being lodged by the public. It had managed to uncover irregularities in the industry, but only after several years; for instance credit insurance was a problem dating back for ten years or more, although only uncovered recently, and the Capitec issues had also been ongoing for three to four years before discovered. Other challenges included the substantial time that it currently took to get a case to, and heard by the Tribunal. The current process was lengthy even without requests for postponement and interlocutory applications. In the meantime the activities continued to the detriment of the public. The NCR itself could not make a determination that entities had to give redress to consumers within a specified time, or on any fine they must pay.
NCR thus appealed to the Committee to support it in extending its powers. Firstly, on the investigation side, it needed more intrusive investigation powers, so that it could investigate entities without consumer complaints and without having “reasonable suspicion” of any wrong-doing. NCR would like the power to conduct audits and it also needed the power to conduct compliance audits, and specific power to conduct unannounced raids on companies to prevent documentation being hidden, as had happened in the past. All of these would enhance its level of supervision. More importantly, the NCR also would like to have judicial administrative powers, which would enable the NCR to enforce the findings from its investigations, and to give it the authority to give redress to consumers within a certain time. For example, it might be able to order a retailer who was wrongly charging retrenchment cover to refund those amounts within 30 days. It also wanted to be able to impose administrative fines or to instruct entities to do audits at their own cost where there were breaches of legislation. All actions would be properly covered in terms of fair administrative practice and there would be the full right of reply, and of review or appeal. This kind of power was not unique to the NCR, and Nigerian authorities had similar powers which they had used on MTN, whilst SARS also had similar powers in South Africa.
Members asked for more information on the credit insurance and the caps, and asked the NCR to assure the Committee that there would be sufficient protection against abuse of power, and that it would have the correct constitutional backing for such actions. Most Members fully supported the proposals, but a DA Member suggested (and was supported by other Members) that the NCR also needed greater powers to operate and sanction in the illegal sector and here it needed to have good relationships with South African Police Services. Members asked whether there was already cooperation with the Financial Services Board and that relationship was further explained. They wanted to know the financial implications of the legislation and what this extension of powers would mean for the budget, since it would surely suggest a restructuring of the NCR and more staff. Even after hearing about joint operations with SAPS, the Committee still expressed concern that perhaps not enough attention was paid to getting the cases prosecuted strongly, and securing convictions. The Committee was pleased that the credit insurance and the capping was finally being addressed, and pointed out that there would be more debate on this in the following week's session and in public hearings.
The Committee then discussed the Private Members' Remote Gambling Bill, since the Department of Trade and Industry had been asked to speak to whether the Bill matched the policy approved by Cabinet in 2016, to the effect that there would have to be coordination between national and provincial levels of government, each of whom had certain competencies, in relation to gambling. The policy stated that online gambling was not in general desirable but recognised that this was happening to some extent with matters like horse racing, which was legal gambling. However, it was not willing to extent that principle to forms of betting that were currently illegal in South Africa, such as dog racing, pigeon racing or cockerel fights, because the intention was not to over-stimulate the industry, and to protect citizens. The proposer of the Bill said that his position on the matter had not changed, and he did not think it a wise or correct approach for government to seek to ban online remote gambling, which many South Africans already did legally. The public did not distinguish between the various forms of gambling. On a practical level, he suggested that it was wiser for government to regulate properly instead of banning outright, and the personal choices of individuals should not be interfered with. Instead, the vulnerable should be protected by the National Gambling Board putting effective measures in place and making sure that they were implemented. Members had a discussion on whether gambling was desirable, but many recognised that it was something that would not readily cease. The point that it made it possible to launder money was raised, and the position of limited payout machines in malls and taverns, where they were accessed by under-18s, and licensing of bookmakers betting on lotto results, was discussed. Some Members said it was a historical responsibility of all South Africans to try to counter the evils introduced by the former governments in the former TBVC states, and the Department clarified that the point was that South Africa was trying to curb over-stimulation of gambling at provincial and national level. The country derives financial benefit from gambling, but also recognised the harm that needed to be controlled. The Department noted that it had spent some time with the Premier of KwaZulu Natal and thirty three licences had been revoked. The position of Eastern Cape was also explained.
Chairperson's opening remarks
The Chairperson spoke again to apologies by Members. She noted that Adv A Alberts (FF+) had tendered his “political apology” because as representative of other smaller parties, he needed to attend other meetings. She noted that the apologies from EFF, ANC and DA Members should ideally have been received, even via email, from the party whips. Another personal apology for lateness caused by traffic problems was accepted.
The Chairperson reminded Members that the principal legislation related to the National Credit Regulator was on its way, if not already with them, and she had asked Members to look out the material they had received on the status of debt in the country from the previous year, and to inform the Committee Secretary if copies were required.
National Credit Regulator briefing
Ms Nomsa Motshegare, Chief Executive Officer, National Credit Regulator, said that the purpose of this meeting was to discuss any legislative requirements that would enable the National Credit regulator (NCR or the Regulator) to effectively deal with debt relief measures that had been presented on the previous day and the debt forgiveness programmes that the NCR had also proposed. The NCR understood that the Committee had approved the extensions of NCR powers to effectively implement these recommendations. However, it must be noted that the population in South Africa is highly and over indebted. Out of the 23 million credit active consumers in the country, 42% are considered to be impaired, in the sense that they are three or more months in arrears, or have judgments against them. It was therefore important that the NCR was able to assist these consumers. In certain instances this might be because of reckless loans that had been extended to them, but in others it could be despite borrowing and being lent money in a responsible way, they were simply stretched by rising costs of fuel, food and electricity. This was why it was important to come up with relief measures to assist.
Mr Lesiba Mashapa, Company Secretary, NCR, stated that there were two ways NCR had powers to conduct investigations. It could consider complaints received from consumers or from persons who lodged complaints on behalf of consumers, in terms of section 136(1). This type of investigation was generally reactive because it was based on information received at any one time, and it was also limited to issues actually raised in the complaint. The second type of investigation was under section 136(2), which was a complaint initiated by NCR in its own name. More importantly, the section did not define the specific criteria for the initiation of the investigation, and it did allow the NCR to be proactive and to respond to any new trends and developments relating to compliance with the legislation.
However, NCR had encountered issues in the Tribunal with this type of investigation. NCR had brought a case against Capitec Bank in 2013, relating to its multi-loan product, based on the initiation fees that were being charged. The Tribunal felt that NCR did not have sufficient “reasonable suspicion” to initiate the complaint, and dismissed the investigation as invalid.
Since then, many entities had refused to be investigated and raised questions as to what “suspicion” there was that the entity was breaking the law. Several investigations that could have been conducted had to be stopped whilst NCR actually formulated the “reasonable suspicion”, and it had found that the Capitec judgment was limiting its ability to be proactive in investigating entities and responding to any new threats or developments that were seen in the industry, and thus a severe limitation on it ability to regulate the industry.
He explained the current process. Once the NCR has completed its investigation, it is transferred to the Tribunal by way of an application. The entity responds to the application, and the NCR will file a reply to the response. This process could take about 60 days, just for the pleadings to be closed by the Tribunal. Usually a pre-hearing meeting is arranged between the parties to discuss which issues would be agreed upon and which would be contested. Thereafter there would be a formal hearing where arguments would be presented before the Tribunal. After that the Tribunal would issue its judgment. In NCR's experience, this process took more than nine months.
The main shortcoming with this approach was that the NCR referred its investigations to the Tribunal, and so the NCR itself could not make a determination that entities had to give redress to consumers within a specified time, or on any fine they must pay. The NCR usually makes recommendations based on their findings from investigations, but does not have the power to impose the sanction. Since the Capitec case, most entities were raising technical points on procedure, even where the NCR had strong evidence, saying that the NCR did not have any reasonable suspicion prior to getting that evidence. Another issue faced by NCR related to interlocutory hearings, which were applications to postpone hearings, applications to request further documents and applications requesting NCR to substantiate their complaints. An interlocutory application can take four to five months, for exchange of documents and the hearing. Postponements were another bone of contention, for sometimes entities file papers late and apply for condonation. This could be a hearing on its own, before the matter was even heard on the merits.
NCR thus appealed to the Committee to assist it by extending its powers. Firstly, on the investigation side, it needed more intrusive investigation powers, so that it could investigate entities without consumer complaints and without having “reasonable suspicion” of any wrong-doing. NCR should be able to go into any entity, and ask it for a sample of the accounts that had been opened in the last 30 minutes, to check whether the correct fees had been charged, whether loans were granted correctly, and not recklessly. In other words, it would like the power to conduct audits.
He explained that “reasonable suspicion” could be founded on complaints from consumers. However, the initiation fees that were charged incorrectly in 2014 only in fact came to light in 2016 because NCR lacked powers to investigate proactively. Another example was the refunds of the retrenchment covers to pensioners, where the scheme started in 2007 but was only uncovered by the NCR in 2015. Proactive investigative powers would enable the NCR to speedily identify problems with entities and give redress to consumers quickly.
NCR also needed the power to conduct compliance audits, which are different to investigations. NCR sent in auditors to audit, but not itself have the power. The NCR also did not have specific power to conduct unannounced raids on companies. If NCR had to inform the companies that they were coming for a raid, the evidence would be hidden. Raids in the past had uncovered thousands of South African Social Security Agency (SASSA) cards, ID cards and bank cards that were kept by micro lenders. Power to conduct raids would certainly enhance the NCR’s level of supervision.
More importantly, the NCR also requested the Committee to consider giving the NCR judicial administrative powers, which would enable the NCR to enforce the findings from its investigations, and to give it the authority to give redress to consumers within a certain amount of time. So, for example, it might be able to order a retailer who was wrongly charging retrenchment cover to refund those amounts within 30 days, for example. The entity would be able to appeal such an order through the Tribunal or Court. .
The NCR also requested the power to impose administrative fines, within the confines of breaches of the National Credit Act (NCA), and also to instruct entities to conduct audits at their own cost once NCR had identified breaches of the legislation.
Mr Mashapa pointed out that the powers requested by the NCR were not unique. The typical example is Nigerian Communications Authority’s fine on MTN, which was imposed by the regulator. The Reserve Bank, two years ago, fined banks for breaches of the Financial Intelligence Centre Act. SARS could also impose administrative fines. NCR believed it would serve the consumers better and bring certainty to companies if NCR could have these kinds of powers, with the Tribunal only serving as an appeal board.
The Chairperson stated that this process had been started the day before, but that the Committee had mainly focused on the critical issues around the study that had been requested, and some of the areas that could more speedily be addressed in terms of debt forgiveness. Today, the Committee wanted to focus on the current powers and the challenges with NCR being able to fully implement the mandate.
Adv A Alberts (FF+) apologised for not having been in the meeting the previous days. He had queried the credit insurance and the caps. This discussion was more about debt forgiveness, which did have a place in the South African economy, because of the restrictions that were in place at the moment. He wanted to know what the extent of NCR powers would be, and asked the NCR to motivate why those powers should sit with the NCR, how it would assess sanctions and what possible protection there would be against abuse if this did happen.
Mr G Hill-Lewis (DA) agreed with everything the NCR had said and would support such legislation if it were drafted. However, he suggested that NCR should go even further , and that it needed even greater powers in the illegal sector as well. There were many irregularities happening in the regulated legal space, but they were probably dwarfed by the size of the crimes and the abuses that took place in the illegal space. The NCR’s hands were tied because it had to rely on SAPS, which might not regard this as a particularly serious crime, despite the fact that it was very serious and destroyed the financial livelihoods of so many people. He wanted to see NCR getting powers to search and seizure units, for it to have greatly expanded investigation powers and the ability to raid illegal operations and shut them down. That would allow for a regulator with real teeth.
Mr N Koornhof (ANC) asked whether it was not possible to sit down with National Treasury or the Financial Services Board (FSB), especially since NCR would be acting against banks, to take the necessary action that NCR would be seeking in new legislation. He also wanted to know if NCR had an estimate of the cost of the legislation.
Ms P Mantashe (ANC) supported the recommendations. She check whether the NCR had the legal capacity it needed, particularly when challenged on procedure. She wanted to ensure that the changes allowing it to impose sanctions would not similarly be disputed, and whether it would be able to regulate the time frames of cases better. She would also support the power to do unannounced raids because there were a lot of illegal steps being taken by companies. An extension of the NCR powers would help the country to go forward.
Mr M Kalako (ANC) also expressed his support, but said that he thought that the implications of the legislation would mean that the structure would have to be strengthened, with additional personnel needed, and thus additional budget. This was something that the Director General and Committee would have to discuss. Debt problems in the country crossed class and colour lines, and the NCR was a vital institution and had the power to change lives. The Committee would like to hear guidance from the Department of Trade and Industry (dti) on the process.
The Chairperson sought clarification on the FSB. In an earlier meeting, there were certain issues raised, and it was found that if the FSB had been effectively implementing its own monitoring, then these issues may not have transpired, and the same related to the Capitec judgment.
Ms Motshegare stated that the power should lie with NCR, as it believed it could act more speedily if it did not have to refer matters to the Tribunal all the time. When matters were referred to the Tribunal, there may be delays because of documents that needed to be exchanged and postponements. Meantime, consumers continued to be exploited. If the powers did lie with the NCR, consumers would be able to get redress more quickly. The probability of abuse would be reduced, and it must be remembered that the entities could still appeal. In terms of the costs involved, NCR had already submitted a proposal to the dti. It was possible to look at other avenues, because NCR recognised that National Treasury or dti may not have the necessary resources to assist NCR exactly as it had proposed.
Mr Mashapa responded on the matter of credit insurance, and said that in November 2015, dti had published a credit life insurance regulatory document, which introduced caps, generally being R4.50 per thousand of credit. It was busy finalising that regulation for implementation. There were instances of abuse where consumers were being charged R50 per thousand of credit, with the most extreme example being R130 per thousand of credit. This regulation should be finalised and implemented quickly. That regulation also included a clause that prevented insurance companies from selling retrenchment cover to unemployed people, and this was an important principle.
Mr Mashapa responded to the fears of a possible abuse of power by saying that the NCR would of course have to follow the processes of administrative law, and once investigations were completed, it would communicate the findings, request responses and hopefully conduct a few meetings before deciding to impose sanctions. That process should be able to pass constitutional muster.
On the issue of insurance, Mr Mashapa noted that the NCR had worked with FSB on insurance regulation, and recently started sharing notes and information. They issued information sharing requests to insurance companies, and they shared their own information. He reminded the Committee that NCR only started regulating credit in 2007, and shared a mandate with the FSB on credit insurance. In 2007 it had uncovered the abuses being perpetrated by furniture retailers for retrenchment cover, which was being sold to pensioners. Ideally, NCR would like refunds to go back as far as 1994, not 2007. Even before the National Credit Act (NCA) came into force, this should have been illegal. The FSB applied principles around fair treatment of consumers, one of which looked to whether consumers were getting a fair deal, and those principles should achieve the same outcomes as the NCA.
Mr MacDonald Netshitenzhe, Deputy Director General, dti, stated that the NCR and FSB were moving very fast on the credit life insurance. Consultations would be needed with the Minister of Finance, and the dti had also requested the Minister to approach Parliament on the credit life insurance. It would like to see things converging and moving fast. The costing process would be somewhat tedious and the Department would be taking guidance from the Committee. Some regulatory fees were being increased to bolster the resources of the dti, but this might not be enough. The regulatory impact assessment process would generally cost some money. .There may be a need for increased funding for the NCR.
Mr Lionel October, Director General, dti, confirmed that the availability of financial resources was a global phenomenon and National Treasury was well aware of the need to have well-regulated credit, and the drain the over indebtedness was causing. Dti was satisfied that it would be able to find the funding to bolster the NCR from the Department's funds and National Treasury. The twin peaks was up for debate and there was recognition that NCR was vital to the new Twin Peaks architecture.
The Chairperson stated that there had been two briefings on the Twin Peaks, and it would be important to refresh everyone on this in August.
Mr Netshitenzhe said that he took Mr Hill Lewis' point on covering the illegal sector as a comment. The NCR would like to take comments from the Committee and push ahead with the amendments. NCR would obviously work within the law, and would follow processes properly in regard to any intrusive powers, search without warrants or with warrants, and the Parliamentary Legal Advisers would also give their input. Coupled with the NCR's request to have powers to impose sanctions would be all the correct constitutional rights to ,appeal and review, and it was also necessary that it must have the power to deal with unnecessary requests for postponements. There would be joint work between the NCR and the FSB, and the two sets of legislation would be read together. It was found, during the credit insurance investigation, that NCR could be doing much more, but its success had to be linked to positive movement also by the FSB.
The Chairperson stated that during previous meetings on liquor regulation, it had been reported that the entity responsible had, when doing oversight and monitoring of illegal supply of liquor, conducted a joint investigation with South African Police Services (SAPS). Given the success of that, it might be worth considering conducting more joint exercises between the NCR and SAPS on the illegal sector.
Ms Motshegare stated that NCR already did conduct raids jointly with SAPS, having consulted with it in advance. In all instances where raids were conducted, it had been possible to arrest the credit providers and criminal cases were opened.
Mr Hill-Lewis was still concerned about the conviction rate for these cases, which were not considered as priority crimes by SAPS, by the Special Investigations Unit or the National Prosecuting Authority, despite the fact that the perpetrators were taking bank cards, intimidating people, acting violently towards people who did not pay on time and charging 1000% interest.
Ms Motshegare fully agreed with Honourable Hill-Lewis. She was referring to current practice, but clearly there were weaknesses in that approach.
Mr Netshitenzhe noted that the Minister had approved the threshold regulation and that would be published soon, which spoke to the illegal persons. He agreed on the need for joint raids. NCR would request that certain penalties might be considered appropriate. The classification of commercial crimes were something that may need to be addressed by government as a whole, to say that certain crimes fall under certain schedules. NCR may need to work with the Department of Justice and Constitutional Development, but it would still help to give NCR even smaller powers to impose some penalties.
Mr Alberts followed up on his previous comments, commenting that if powers were vested with the NCR, it would save a lot of time. He asked whether the credit insurance regulations had been finalised or whether they were still being debated. He asked whether the cap of R4.50 per R1000 was an escalating or reducing cap. A report was handed to the Committee, on the question of credit insurance and the appropriate credit caps., and he suggested that the Committee would have to consider seriously how to address this to find a balance between stopping abuse but not killing the business itself.
Mr Mashapa stated that the report had been published in November 2015 for public comment. Input was given by all affected stakeholders and entities. NCR had consolidated those comments and made further changes to the regulations. NCR still had to have a meeting with FSB and finalise the regulations, and it could then submit them to the Ministers of Trade and Industry and of Finance, to be approved and published. The proposal was for a reducing premium cap, to decline as the balance declined.
The Chairperson stated that Mr Alberts had been raising this matter for some time, and she was glad that it was now officially being addressed. When various entities were to engage on the matter in May and August, the Committee would be able to more fully address this issue. She had been concerned that in 2015, the restrictions on NCR precluded it from dealing with the Capitec issues. There would be more debate during the “long Friday” session on 13 May.
Remote Gambling Bill (Private Members Bill) deliberations and reconsideration
The Chairperson noted that it was important that the Remote Gambling Bill was brought back to the main Committee for consideration. A report had been prepared on the status of the Bill, and the dti would brief the Committee on the policy. She noted the presence of members of the National Gambling Board (NGB) at the meeting.
Mr Netshitenzhe stated that he did not want to touch on substantive issues, but would address the questions raised at the last meeting whether the Remote Gambling Bill (the Bill) was informed by the policy that was approved in Cabinet in February 2016. That policy said that there must be coordination between government departments. Gambling fell within the national and provincial competency, and there had to be harmonisation between the two. Whatever NGB needs to do, it must now put it to the Policy Council for gambling. Equally, when provinces want to change their laws, they must be discussed at the Policy Council before being gazetted or published in newspaper and that would be an important change for the provinces.
The policy had stated that online gambling was not desirable. Whilst it was true that horse betting was part and parcel of online gambling, it would be retained in its traditional form of gambling, but online gambling was not approved in terms of this policy. Other issues related to remote gambling. Betting that was currently illegal in South Africa could still be done in a remote way – for instance, dog racing or cockerel fights or pigeon racing. If this continued, then they would be regarded as over-stimulating gambling, but the policy still said that since they were regarded as harmful, they should be limited. The Constitution allows for certain rights to be limited because they are harmful. It was not enough to allow them simply because they brought in revenue. Government has a duty to protect citizens. Now that policy had been completed, the NGB was approaching Cabinet to approve the Bill for wider consultation, as well as in the DG Forum.
The Chairperson stated that she just wanted to hear on the policy, since the Committee would be hearing about the Bill again. She asked Mr Hill Lewis, the proposer of the Bill, to comment now that he had had an opportunity to look at the policy.
Mr Hill-Lewis did not think it was necessary to restate his position on the matter, since this had not changed. He did not think it was the wise or correct approach for government to seek to ban online remote gambling, which many South Africans already did legally. As a matter of principle, there was, to his mind, no legitimate or rational distinction between betting on a soccer game online, or betting on a roulette wheel online; it makes no difference in the mind of the public and should not make a difference in the mind of the law.
On a practical level, he though it was wiser for the government to regulate properly, instead of banning completely, and this was especially true of gambling. Whatever view one had on gambling personally, it was not the government’s job to tell people what they can and cannot do with their private money. He thought that it would not be possible for the government to effectively enforce the kind of ban that the Department now envisioned. This was not going to fail because the dti was less effective than any other corresponding department in the world, but rather because, by definition, the world of internet, technology and gambling was so fast moving that it was better to enforce stringent conditions than to simply outlaw it.
Perhaps the most important point related to protecting the vulnerable persons In society. He has argued, with evidence from the National Gambling Foundation, that it would offer far better protection to the vulnerable, if the dti were to use all the vast technological capacity at their disposal to protect vulnerable gamblers specifically.
He noted that the Commission had not actually said that online gambling should be banned, but rather that it should be further investigated. He agreed with this, and reiterated that a proper regulatory regime should be implemented.
The Chairperson asked for comment on the point of money laundering. Gambling was considered harmful by some and not by others. This was regarded as a leisure pursuit and persons should be allowed to handle their money and decide what to do with it. That may be so, but there were a number of studies presented to the Committee that showed the increased risk of money laundering through remote gambling.
Mr Hill-Lewis stated that there was already a significant amount of online and legal gambling that was going on in the country. The point he was making was that it was an artificial distinction to say that some online gambling was legal but other online gambling was not. He reiterated that the public did not see the distinction between one and the other forms of gambling. He did not think it was a real distinction. Good gambling legislation relied on excellent regulation and a regime that was properly enforced.
Mr J Esterhuizen (IFP) held the personal view that gambling was an evil to the South African society. People cannot meet credit obligations any more, and this is because many South Africans were turning to gambling and digging themselves into an even deeper hole. In terms of money laundering, it was also an evil in that illegal monies were being dumped into the system. A responsible and caring government needed to find ways to curb this.
Mr Koornhof made the point that online gambling was legal if done through a licensed book maker. He asked whether, if no national legislation was being sought, it would then be possible for provinces to raise the status of the book makers.
Ms Mantashe drew the corollary of people using their own money to buy and use drugs, and said that there was essentially no distinction if he was saying that people should be allowed to use their money as they wanted.
Mr Hill Lewis said that he did not understand her point. He had not said that because people were gambling already, they should be allowed to gamble.
The Chairperson stated that Ms Mantashe was referring to his point about people having the right to spend their money the way they want.
Mr Mkongi stated that generally, South Africans needed to be honest. He had made reference before to the fundamental principles of the Constitution which set out what kind of society was wanted. It was clear that it was not seeking to build a society of gamblers. South African needed to build a society of workers, who would contribute constructively to society using their skill and mental capacity. A policy process adopted by Cabinet spoke about the National Gambling Policy, and made it clear that government needed to discourage remote gambling. South Africa inherited “a useless government in Transkei” that encouraged this problem, and although it was not one that was an inherently South African problem, it was transported through apartheid into areas and, such as in Transkei, encouraged the poor black South Africans into its net.
He believed that it was a historical responsibility of every South African to discourage gambling. Generally, the question was what the ethical motivation was, for promoting gambling in South Africa. A stance that held that because people were already gambling they should be left to do so was problematic; and that begged the question whether the same thought process applied to drug abuse. If people were told to stop abusing substances, then surely the Constitution was imposing a moral obligation on society to ensure that taxpayer’s money should strengthen others. It was not just an ideological matter, but touched on ethics as well.
Mr Netshitenzhe clarified that this policy was confirming the traditional gambling already in place in South Africa. It was true that there was online gambling for traditional legal gambling. The point was that South Africa should not allow for over-stimulation of gambling. The Constitution allowed for the restriction of rights, which it was not an absolute right, but rather a relative right. The NGB was within the Constitution.
He noted that the provinces were allowed to issue liquor licenses, and to collect online bets. The national role was is to monitor and conduct oversight, and to ensure there was no over-stimulation of gambling on a provincial and national level. The Commission gave the guideline, for gambling to be strictly regulated with limitations. The country derives financial benefit from gambling, but also recognised the harm that needed to be controlled.
Mr Hill-Lewis agreed with Honourable Esterhuizen that it was unwise use of money to gamble. However, one might also argue that buying a car on a six year payment plan with a balloon payment and 14% interest was also an unwise use of money, but that was legal. Borrowing money to buy a pair of jeans was also unwise use of one’s money. That came to the question by Ms Mantashe, whether the government’s role should to be to educate people on wiser ways of spending their money and protect them, instead of banning them totally from making their own decisions.
He pointed out that gambling happened widely, whether in the legal sector or illegal sector. He would like to see the government aiming to protect those who engaged in gambling, similar to the way in which the credit consumers were protected. They would have a choice, but the role of the government is to act as a protector and defender of their rights and interests when they make that decision. There was a regulator, and strict rules and the National Credit Act to protect consumers of credit. He believed that in principle, the best way to have good controls was to regulate, not to ban. He agreed completely that it was not desirable to have a society which gambled, and agreed also that in the past, the gambling had mainly targeted poor black South Africans.
In most taverns around the country, one could find a limited payout machine, which was legal, licensed by the government and the provinces. There were about 40 000 or 50 000 in existence, with more rolling out everyday. Electronic bingo machines targeted mainly poor South Africans, but these were taking the money of adults and minors, without any protection and without any FICA controls.
The Chairperson asked whether there was proof that minors were not protected in this regard.
Mr Hill-Lewis stated that in taverns, children under the age of 18 could be found playing on limited payout machines, although it was also illegal for them to actually drink at the tavern. There was no way to trace what was done with the money, because the payouts were not subject to FICA. There was still proliferation of .unhealthy gambling in South Africa, which did mainly target poor black South Africans. He thought that regulation which provided strict control of online gambling would help a great deal, and would not exacerbate the problems.
He contested the view that there is only a small amount of legal online gambling. The industry had told the Committee that online soccer betting was the biggest form of betting in South Africa. Much of that happened with online book makers. Some book makers were operating under a license from Mpumalanga, who were giving bets on the outcome of casino games happening in Europe, and had a camera over the roulette wheels in European casinos. They were advertising on radio and on TV, and were offering national bets, doing very well for themselves. Government had been unable to act against them in any way, because what they are doing was on paper legal. There was therefore, no rational distinction between what that company in Mpumalanga was doing and what someone would be doing by going into the Emperors Palace website and doing it himself. He would argue that the latter would at least be preferable because South Africa would be able to tax, and set the license conditions and hold them accountable.
Mr Esterhuizen thought that gambling was only available to those over 18.
Mr Hill-Lewis agreed that it was, in theory.
The Chairperson stated that the issues of Limited Payout Machines was discussed last year. Some of the provinces would take these out of hand, raising questions on how legally they were operating. KwaZulu Natal had serious issues, and a number of those licenses were not legally given. The Committee certainly did not express a position that this was going to continue, but had always envisioned some sort of limit on these machines. There was a need for another update.
The other issue related to bingo machines. Bingo was once considered the kind of game played in old age homes, but had become a massive gambling operation. The Committee expressed concern at the time when it learned that such machines and operations were going on in malls. She had thought this would have been looked into by the previous National Gambling Board, but appreciated that it was still in its early days, although it was an issue that would need to be tackled. She noted that the Committee was agreed that the country should not promote gambling. If it was identified as a form of leisure pursuit, if handled responsibly, then it needed to be regulated. The question that arose in 1999 was whether allowing remote gambling would actually promote it.
Mr Hill Lewis stated that the idea of having a Bill was to exercise strict control over the industry. The best way to protect consumers was to have a strict set of written rules and regulations that limit the scope of what operators can do, who they report to, and who can inspect them. This could be done in the same way that South African had legislation governing land based casinos; his view was that the best way to achieve good regulation was to roll out legislation that sets out what should be expected and the penalties when that does not happen. The worst way to achieve control would be to impose an outright ban, since this would encourage the industry to proliferate without any control or protection from the government.
Mr October noted that the dti had spent some time last week with the Premier of KwaZulu Natal (KZN) on the issue. Thirty three licences were revoked. On the last day of the gambling board sitting, it was said that some payout machines were in shopping malls, and others were in areas with high social problems, like Chatsworth and where there were serious issues of addiction. Everyone agreed that this must stop and the national guidelines on gambling would be followed, by regulation and limiting the impact of the machines. KZN would only be allowed certain number of licenses and these would be limited to certain areas, thus limiting the negative impact. It was a policy choice, whether to allow a new form of gambling. If the decision was to go that route, it needed to be properly limited and regulated. Eastern Cape was very instructive, for that province had also rolled out many bingo licenses. However, when open trade was introduced, the big casinos, and the jobs they created, were under threat. The province thought it was getting extra revenue, but it was an important warning about proliferation
Mr Netshitenzhe concluded that in Mpumalanga there was an agreement that the inspectorate should do its work, and current legalisation allowed that. Lotto was a national competence, not provincial. If an operator had been licensed by someone who does not have the right standing to license, it should be dealt with legally. The policy is calling for bookmakers outside the lotto premises to be licensed by the lotto regulator, so that the money would go to a good cause.
Mr Hill-Lewis stated that it was the right approach to say that if book makers were making bets on the lotto outcomes, then they should be licensed, strictly controlled and should contribute to financial pool.
The Chairperson summarised the Committee programme; the Committee meeting on 10 May was postponed and the meeting on 13 May would go ahead. She was approaching the Minister in writing to facilitate engagement.
The meeting was adjourned.