National Gambling Policy; SADC-EU Economic Partnership Agreement (EPA): DTI briefing

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Meeting Summary

Briefing by Department of Trade and Industry (DTI) on National Gambling Policy

The Committee was provided with background on the process which eventually led to the final policy on gambling regulation being approved by cabinet on 17 February 2016. Thereafter, the process on the National Gambling Amendment Bill commenced. Members were also given an overview of the policy position on gambling.

The briefing spoke to policy problems on various aspects of gambling and what solutions had been developed with to deal with them. For example, the effectiveness of the National Gambling Policy Council was hindered by the constant lack of quorums during meetings. The policy solution to the problem was that if there was no quorum in two ordinary consecutive meetings, the Minister and the Members of Executive Councils (MECs) in attendance were empowered to make binding resolutions, regardless of the quorum on the third meeting. Another problem was that the National Gambling Board was marred with inefficiencies. The solution was to reposition and change the National Gambling Board into the National Gambling Regulator, which would be headed by a Chief Executive Officer. A further problem was that money collected as unlawful earnings was eventually declared forfeited to the state through court processes at huge cost. The policy solution was to have unlawful winnings automatically forfeited without court order, and paid over into the National Responsible Gambling Programme to fund activities relating to problem gambling.

Online gambling continued to be a challenge for SA, given that it was difficult to regulate. Regulators did not have the capacity to take enforcement action against illegal operations of online gambling. The policy solution confirmed that online gambling remained illegal. Enforcement measures would be improved to include banks closing accounts, local internet service providers not hosting illegal sites, and putting in place measures to ensure that the illegal activities did not thrive. The National Gambling Regulator would be required to notify banks and internet service providers to close down accounts associated with illegal operators. Failure to comply could lead to prosecution. 

The DTI said the gambling policy would enhance the regulation of gambling in SA. Technical amendments clarifying certain provisions in the Act would be developed during the processing of the Bill, which would be coming before the Committee in time to come.

The Committee strongly felt that gambling needed to be properly regulated, as it impacted upon the lives of both the rich and the poor. Some Members felt that making internet gambling illegal was not the best option, as people would always find ways to get around it, and that the best option would be to regulate internet gambling. On the functionality of the Gambling Board, Members questioned the policy decision to give powers to the Minister and MECs to make decisions where quorums for meetings were lacking. Was this policy decision not negatively impacting upon the functionality of the Gambling Board? They agreed that the new phenomenon of bookmaking needed to be regulated and that bookmakers should have a social responsibility in terms of legislation.

Members were surprised that the concept of “unlawful winners” in gambling even existed, as it was accepted that certain categories of persons, such as those who were under age, should not be allowed to gamble. Was there perhaps a lack of monitoring taking place? Members were disappointed that gambling licences were granted to establishments in areas where schools and churches were located. The DTI was asked to look into the matter and to take appropriate action. The Committee agreed that gambling regulation was needed, but that vigorous engagement was needed over the issue.

The Committee was also briefed by the DTI on the Economic Partnership Agreement (EPA) between the Southern African Development Community (SADC) EPA states and the European Union. At the outset, it was stated that the approach to trade negotiations was informed by support for the national development objectives set out in the National Development Plan, the New Growth Path and the Industrial Policy Action Plan. The aim was also to support regional integration. The EU remained SA’s main trading partner. Total trade increased from R374bn in 2011, to R536bn in 2015 -- an increase of 43%.

The EPA negotiations between the EU and various groupings of the African, Caribbean and Pacific (ACP) countries had started on 27 November 2002. SA was excluded from the unilateral trade regime provided by the EU to ACP countries. Angola, Botswana, Lesotho, Mozambique, Namibia, SA and Swaziland negotiated the EPAs under the EU-Southern African Development Community (SADC) EPA configuration. SA’s active participation in the SADC-EU EPA configuration negotiations were endorsed in 2007. SA’s core interest had been to harmonise the trading regime between the Southern African Customs Union (SACU) and the EU, to secure further market access in agriculture and to claw back some policy space that had been lost before.

One of the major implications of the EPA would be to ensure that the SACU common external tariffs were maintained throughout the uniformed trade regime agreed under the EPA. The EPA also covered new generation issues, like intellectual property rights. Implementation of the EPA would take place after ratification. The EU could provisionally apply the EPA whilst it was being ratified by all EU countries, subject to approval by the EU Parliament. SADC EPA countries would have to ratify the EPA before it entered into force. The aim was for the EPA to enter into force before the expiry of the EC Duty Free Quota Free Market Access Regulation on 1 October 2016, to guarantee continued preferential market access into the EU for Botswana, Namibia and Swaziland.

Members understood the need for the EPA to be assented to by the Committee as a matter of urgency. Of concern was the fact that SA’s EU partners were trying to separate SACU members by entering into individual agreements with member states. This was contrary to the SACU Agreement with the EU. The DTI was asked what the implications of Brexit and the WTO on the EPA were. Could the United Kingdom enter into its own agreement with SA and be part of the EPA?

The Committee unanimously approved the EPA and recommended that the NCOP in terms of section 231(2) of the constitution also approve it.

 

Meeting report

Briefing on the National Gambling Policy
Mr MacDonald Netshitenzhe, Acting Deputy Director-General: Consumer and Corporate Regulation Division, DTI, provided background on the process which eventually led to the final policy on gambling regulation being approved by cabinet on 17 February 2016. Thereafter, the process on the National Gambling Amendment Bill had commenced.

Mr Nkoatse Mashamaite, Director: Gambling Policy and Law, DTI, undertook the actual briefing which provided an overview of the policy position on gambling. He did so by speaking to policy problems on various aspects of gambling, and what solutions had been developed to deal with the policy problems. For example, the effectiveness of the National Gambling Policy Council was hindered by the constant lack of quorums during meetings. The policy solution to the problem was that if there was no quorum in two ordinary consecutive meetings, the Minister and the Members of Executive Councils (MECs) in attendance were empowered to make binding resolutions regardless of the quorum on the third meeting. Another problem was that the National Gambling Board was marred with inefficiencies. The solution was to reposition and change the National Gambling Board into the National Gambling Regulator, which would be headed by a Chief Executive Officer. A further problem was that money collected as unlawful earnings was eventually declared forfeited to the state through court processes at a huge cost. The policy solution was to have unlawful winnings automatically forfeited without a court order, and paid over into the National Responsible Gambling Programme to fund activities relating to problem gambling.

Online gambling continued to be a challenge for SA, given that it was difficult to regulate. Regulators did not have the capacity to take enforcement action against illegal operations of online gambling. The policy solution confirmed that online gambling remained illegal. Enforcement measures would be improved to include banks closing accounts, local internet service providers not hosting illegal sites, and putting in place measures to ensure that the illegal activities did not thrive. The National Gambling Regulator would be required to notify banks and internet service providers to close down accounts associated with illegal operators. Failure to comply could lead to prosecution.
 
Mr Netshitenzhe concluded that the gambling policy would enhance the regulation of gambling in SA. Technical amendments clarifying certain provisions in the Act would be developed during the processing of the Bill which would be coming before the Committee in time to come.
  
Discussion
The Chairperson stressed the importance of the policy, as gambling was an issue which impacted upon the lives of both the rich and the poor.

Mr W Faber (DA, Northern Cape) referred to page 5 of the briefing document, and asked what was meant by “unlawful winnings”. He asked for a definition. If it was considered something unlawful, then was that not a determination that should have been made by the courts? How did one determine what “unlawful winnings” were? On the issue of internet gambling and international lotteries, he felt that there was no way of getting around it. The best thing to do was to regulate internet gambling.

Mr Netshitenzhe emphasised that a decision had been taken that gambling should be restricted, and that there should be no new forms. He said that the Act spoke to underage gambling, and the unlawfulness thereof. It also depended on the interpretation of the courts. For example, it would be unlawful to employ a minor in a gambling venue, or where liquor was sold. Other forms of internet gambling were not allowed. The banks, the Financial Intelligence Centre Act (FICA), the South African Revenue Service (SARS) and internet service providers would be used to locate and deal with internet gambling. France and Malaysia were heavy handed in dealing with internet gambling. It was best to restrict it, as it would be too difficult to regulate it. Other forms of gambling had been allowed.

Mr Mashamaite added that where a person under the age of 18 had gambled and had won, then a court of law would be approached to have the winnings declared unlawful. He noted that all gambling venues would have a register containing photos of people who were not allowed to gamble. If such individuals did gamble and won, then their winnings would be forfeited. 

Mr B Nthebe (ANC, North West) referred to the functionality of the Gambling Board and the powers of MECs and the Minister, and said he did not see the tangibility of the solutions that the DTI was suggesting. If the responsibility of the Gambling Board was handed over to MECs and the Minister, was the judicial responsibility of the Gambling Board not being taken away? He asked what the implications of doing so were. Was there not a negative impact on the functionality of the Gambling Board? He also asked how the functionality of the Gambling Board was being improved. He felt that on gambling regulation, there needed to be alignment between provinces and the national government. On the forfeiting of dividends, it went without saying that underage persons were not allowed to gamble. Even though there were economic spin-offs from gambling, it had to be done responsibly. He noted that SA was developing very fast. In the face of development, what was the practicality of looking at the entrances of casinos? The suggestion made, that entrances of casinos had to change, was not practical. The Carousel had only one entrance. He was deeply concerned about the functionality of the Gambling Board. In SA, bookmakers were a new phenomenon and there were always long queues. He felt that bookmakers too needed to have a social responsibility in terms of legislation. It was understandable that there was no intention to criminalise bookmaking.

Mr Netshitenzhe responded that the National Gambling Policy Council was there to make business decisions. The problem was how decisions could be made if members of the Council were not present. It was against this background that a policy decision had been made that if by a third meeting no quorum existed, then a decision could be made, just as it was done in company law.

Mr Mashamaite added that on the third meeting of the National Gambling Council, if a quorum still did not exist, then a decision could be taken. He pointed out that at the Carousel Casino, there should be a gate and structure. He emphasised that there was a need for enforcement over bookmakers. Bookmakers needed to toe the line. Licence conditions did speak to social responsibility. Bookmakers were not exempted from social responsibility.

Ms Z Ncitha (ANC, Eastern Cape) asked what type of gambling “bingo” was. She could not fathom how there could be unlawful winners like underage gamblers, when there were age restrictions. Was there no monitoring taking place? Some people were even banned from gambling at certain casinos. There was also a need to protect persons who were not supposed to be gambling from gambling activities. She asked what the Gambling Commission, together with the Department of Labour, was doing about preventing the abuse of workers at gambling places. Why had nothing been said about Triple-M gambling? It was upsetting that gambling licences were issued in areas where schools were situated. She felt that the DTI needed to be more aggressive on municipalities who granted such licenses. Many schools and churches were complaining about it. Policy on this needed to be put in place. Licences should be revoked where wrongdoing, like the illegal sale of liquor, was taking place.

Mr Mashamaite explained that bingo was a game of cards. However, Electronic Bingo Terminals (EBTs) was a challenge. EBTs required two or more players, which was the only thing which differentiated it from slot machines. The DTI felt that EBTs was just like a slot machine. He said that it was a requirement for gambling venues to have age monitoring systems. Abuse of workers at casinos had not been considered initially. With the development of the gambling sector, the issue of workers was dealt with by other government departments. The Department of Labour dealt with issues of labour. He clarified that Triple-M fell within the domain of the National Credit Regulator and the Financial Services Board, and was not considered gambling.

The Chairperson felt that it was unfair for the Committee to ask the presenters to speak to the issue of liquor. There was new policy in the pipeline on the issue of liquor.

Mr Netshitenzhe said that the issue of liquor would be dealt with. 

Mr Faber said that public hearings on gambling policy were needed. Provincial consultation should take place. The public needed to give inputs.

The Chairperson responded that public hearings had been conducted by the National Assembly. From the issues raised by Members, there seemed to be serious concerns about gambling. Vigorous engagement was needed. 

Mr Netshitenzhe, on public hearings, said that it was time to draft gambling policy and to engage with stakeholders. Finally, it was cabinet that would make policy. Consultation with all provinces and all communities in provinces needed to take place. At present, the process was at the policy stage. When it reached the bill stage, then public participation would take place.  

The Chairperson said that the idea was to regulate gambling, and not to ban it. The process was at the policy stage, but a section 76 Bill would be referred to the Committee in due course. 

Briefing by DTI on Economic Partnership Agreement (EPA) between SADC EPA states and European Union
Ms Niki Kruger, Chief Director: Trade Negotiations, DTI, said the approach to trade negotiations was informed by support to the national development objectives set out in the National Development Plan, the New Growth Path and the Industrial Policy Action Plan. The aim was also to support regional integration.

Some background on SA-European Union (EU) relations was that the EU remained SA’s main trading partner. Total trade had increased from R374bn in 2011, to R536bn in 2015 -- an increase of 43%. SA‘s exports to the EU had been concentrated mainly on primary products. Natural or cultured pearls, mineral products and base metals were among the top five SA exports to the EU. On a more positive note, some manufactured goods were also counted among the top five SA exports.

The EPA negotiations between the EU and various groupings of the African, Caribbean and Pacific (ACP) countries had started on 27 November 2002. SA was excluded from the unilateral trade regime provided by the EU to ACP countries. Angola, Botswana, Lesotho, Mozambique, Namibia, SA and Swaziland negotiated the EPAs under the EU-Southern African Development Community (SADC) EPA configuration. SA’s active participation in the SADC-EU EPA configuration negotiations had been endorsed in 2007. SA’s core interest had been to harmonise the trading regime between the Southern African Customs Union (SACU) and the EU, to secure further market access in agriculture and to claw back some policy space that had been lost before.

One of the major implications of the EPA would be to ensure that the SACU common external tariffs were maintained throughout the uniformed trade regime agreed under the EPA. The EPA also covered new generation issues, like intellectual property rights. EPA Milestones were that it was initialled on 15 May 2014, legal scrubbing was concluded on 23 October 2015, and it was signed on 10 June 2016. Implementation of the EPA would take place after ratification.

On the way forward, the EU could provisionally apply the EPA whilst it was being ratified by all EU countries, subject to approval by the EU Parliament. SADC EPA countries would have to ratify the EPA before it entered into force. The aim was for the EPA to enter into force before the expiry of the EC Duty Free Quota Free Market Access Regulation on 1 October 2016 to guarantee continued preferential market access into the EU for Botswana, Namibia and Swaziland.

Discussion
The Chairperson stated that in terms of section 231(2) of the constitution, the EPA had to be assented to by the Committee and thereafter be presented to the House.

Mr Nthebe agreed, and said he understood that the EPA had to be assented to as a matter of urgency. The European Union might be SA’s biggest trading partner, but this was not because it was SA’s biggest consumer of primary products. It was, however, SA’s biggest consumer of raw products. SA’s EU partners were trying to separate Southern African Customs Union (SACU) members by entering into individual agreements with members, which was pulling them away from the SACU Agreement. Regional development could not take place if market penetration was not done. SA protected only 6% of its agricultural products, whereas the EU protected 106 products. The idea was to elevate SA and SADC as a whole. The EPA was a good agreement to try and keep unity. He said that there was no scientific proof that there was anything wrong with SA’s citrus which was exported to the EU. What was the basis for complaints on Citrus Black Spot (CBS)?

Ms Kruger agreed that the EPA was developmental. It would make SA more competitive. She said that the EPA did deal with sanitary and phytosanitary (SPS) issues, but not with CBS issues. Engagement with the EU was taking place on CBS issues. An attempt to resolve the matter was in progress.

Mr Faber asked what the implications of Brexit on the EPA were.

Ms Kruger explained that when the EPA was negotiated, Britain had formed part of it. There was no need for concern, as SA would still have access to the United Kingdom. It all depended on when the United Kingdom gave an Article 51 notification to the EU regarding its exit. She expected the notification to be done in 2017. When this happened, it would then shed more light on what would happen regarding the EPA. At present, nothing was known. Either the United Kingdom could decide to stick to the EPA or could have its own agreement with SA. The impact of Brexit at this point in time on the EPA was thus unknown. Engagements with the United Kingdom over the matter were already taking place.

Mr Faber understood that at present the United Kingdom was still part of the EU. He asked whether the United Kingdom could enter into a new agreement with SA, and whether they could still be part of the EPA. The United Kingdom had stated that they would engage with countries bilaterally.

Ms Kruger responded that the EPA would apply to the United Kingdom, as well as with other EU members. The United Kingdom could decide itself when it wished to ratify it. 

The Chairperson, in the same vein, asked what the implications of the World Trade Organisation (WTO) on the EPA were.

Ms Kruger explained that the WTO did allow countries to enter into regional and free trade agreements. The WTO at present was dealing with new issues, like intellectual property and investment. What was happening at the WTO would not compromise the EPA.

The Chairperson placed the EPA before the Committee for approval. The Committee would recommend that the National Council of Provinces (NCOP), in terms of section 231(2) of the constitution, approve the EPA.

The Committee unanimously approved the EPA.

Committee matters
The minutes dated 18 May 2016 were adopted unamended.

The third term Committee programme was adopted unamended.

The draft programme for joint oversight by the Select Committee on Trade and International Relations and the Select Committee on Economic and Business Development to Gauteng, from 24 August to 2 September, was agreed to as amended.

The meeting was adjourned.
 

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