Western Cape Gambling and Racing Board 2016/17 performance; CapeNature & Western Cape Nature Conservation Board conflict of interest

Meeting report

The Chairperson reminded Members that the Committee had previously passed certain resolutions and it was on the basis of those resolutions that the Western Cape Gambling and Racing Board (WCGRB) will be making its presentations.

Mr David Lakay, Chairperson, WCGRB, requested if the Committee could in future address the letters of invitation directly to the WCGRB since it received the invitation only two days before.

The Chairperson responded that the Committee’s practice is to send the invitations directly to the Department, notifying the Minister and that the letter inviting WCGRB was sent to the Department three weeks before.

Dr Ndodana Nleya, Senior Manager: Fiscal Policy, WC Provincial Treasury apologised and assured the Committee that the Department will follow up to ensure that the delay does not happen again. He advised the Committee to send letters simultaneously to the Department and to the entity.

The Chairperson agreed that the letters will in future be sent to the Department and at the same time copied to WCGRB.

Briefing by Western Cape Gambling and Racing Board (WCGRB)
Mr Lakay stated that the presentation will cover 5 topics:
-Board meetings for 2016/2017 and Value derived
-Resources allocated to license holders to assist in poorer communities,
-Establishment of Western Cape Responsible forum
- The loss of funds that the Western Cape experienced due to illegal gambling during the 2016/17 financial year
-- Business model used to motivate for the allocation of R 18 million for the financial year under review

Board meetings for 2016/2017 and Value derived
Mr Robin Bennett, HOD: Compliance, WCGRB, reported that the planned target of meetings for the 2016/17 financial year was 35.
The Board held 14 additional meetings than its set target for the 2016/17 year being 4 more than the actual for the 2015/16 financial year. The value derived from these additional meetings were:
-A more efficient and effective service to the industry
-A more informed and transparent process in setting of BBBEE targets for the industry
-The appointment of a CFO who complied with the rigorous knowledge requirements set by the Board.
-A well debated APP and budget.

Discussion
Ms C Beerwinkel (ANC) commented that the WCGRB was presenting on things that were to be done and not reporting to the Committee on the value derived from the additional meetings.

Mr D Mitchell (DA) was concerned that one of the values derived from the additional meeting was having a well debated APP and budget yet it is expected that when the WCGRB prepared an APP and a budget, it was already well debated.

Mr S Tyatyam (ANC) asked what the turn-around time currently is and what changes have been done to deal with the turn-around time based on the additional meetings. On BBBEE he wanted to know what was different in comparison to other normal BBBEE seen in the past. He agreed with Mr Mitchell on the APP and the budget and he too wanted information on what was the necessity of having the additional meetings.

The Chairperson commented that the Committee was concerned that R 831,000 was spent on board meetings in the previous year .He noted that members understand that committees are small and cannot make decisions. He however asked the WCGRB to explain why it had 14 additional meetings and concurred with other members that what is being presented is not the outcome. He also asked for a breakdown of the costs of the 14 additional meetings.

Ms Beerwinkel reiterated that she wanted a report on the value that came from the discussions. The Committee is not concerned with the technicalities, it wanted to know for example how much of the budget was allocated to women and what difference the discussions made.

Mr Lakay responded that the WCGRB will have to go to the technical aspects particularly on the BBBEE, because there are more aspects that had to be complied with which necessitated the additional meetings.

Mr Primo Abrahams, CEO, WCGRB stated that when  licenses are applied for, it takes about 6 months, and that additional licensing meetings had to be held for the WCGRB to be able to issue licenses within 2 months and to  also provide licenses under 1 roof.

Ms  Yvonne Skepu, Manager: Legal Services, WCGRB, added that the BBBEE codes were amended and it became necessary for the board to apply its mind to decisions made. Hearings also had to be convened for licensees to make submissions to the board and for the Board to engage specifically with the licensees. The board reviewed the current status of BBBEE and as a consequent of the meetings there is better reporting and conditions. She said that could not have been done 2 years ago when the APP was formed. On the CFO, interviews were held and the WCGRB could not find anyone suitable and the process of getting a CFO took more than a year.

Mr Tyatyam commented that the BBBEE code was introduced to change the economic landscape; he asked if it has made an impact and who the new entrants in the business are.

Ms M Maseko (DA) sought an explanation on what impact the meetings have had since what was being reported is what the Board is expected to be doing.

Mr D Joseph (DA) reiterated that the Committee wanted examples of the value derived, for example what the output of the BBBEE was.

Mr Tyatyam added that the WCGRB must present on the benefits for the province as a whole.

Mr Lakay responded that on the value added, there was a quick turn around on applications for licences because bringing in the licensing committee enabled the process to speed up.  On BBBEE, preferential procurement processes were reviewed. He said that there was also internal value since a CFO was acquired who prescribed to the board’s requirement. New board members also benefitted because the Board had to have a strategy meeting to have all members on board with the strategy.

Ms Maseko noted that there were 35 meetings; she wanted to know when the new board members came in, what was being discussed in the strategy meetings and if there was a shift in the APP.

Mr Lakay responded that new members of the Board go through induction. Some new members are not aware of the board’s mandate and the regulations of gaming industry and it takes a while for them to add value. The APP assists them understand the board’s mandate and that the strategy sessions was one of the reasons for having the additional meetings.

The Chairperson requested the WCGRB to write to the Committee and provide details of who sat in those additional meetings and the additional costs incurred as a result of the meetings. He also noted that the total number of meetings for the year when included with the 14 additional meetings was 49.

Mr Mitchell asked whether there was a board meeting every single week.

Mr Lakay responded that a Board meeting was not held every single week and that there are several Committees: a casino committee, human capital committee, horse racing Committee and an audit committee. The Committees meet on a quarterly basis. Immediately after the committee meeting if an issue arises, the chair will ask for a sitting of the Board to deliberate on a matter before the next committee meeting sits.

Ms Zoé Siwa, CFO, WCGRB, added that the additional meetings were not budgeted for in the APP and that the board overspent by R240 000 on the board meetings. She confirmed that there is a difference in the rate of payment for meetings and that members attending committee meetings are paid on an hourly basis whereas Board members are paid per meeting.

Mr Tyatyam commented that overspending is critical in terms of how resources are utilised.

Ms Beerwinkel was concerned that the WCGRB was taking money from another area to cover the overspending; she asked what was lost and where the money was taken from.

Mr Joseph requested that in the report to be provided to the Committee, the WCGRB should specify which meetings discussed the appointment of the CFO and which ones discussed the BBBEE code.

The Chairperson confirmed that the Committee’s concern is about the high spending on Board meetings.

Mr Tyatyam added that in the report, the WCGRB should differentiate between committee meetings and Board meetings. He also sought clarification on whether a Committee meeting becomes a board meeting when a board member sits in the committee meeting.

Ms Siwa clarified that the R240 000 is for the 2018 year and promised to provide the exact figures of the costs incurred on the additional meetings.

Resources allocated to license holders to assist in poorer communities
Mr Bennett reported that the Board does not allocate resources to licence holders to assist in poorer communities. The licence holders, with their initial application for a licence, make a bid commitment to fund a certain amount on CSI initiatives. The Board receives quarterly reports on the CSI spend which is audited by the Boards personnel. In addition to the audits, the board Members who sit on the various committees together with officials visit the CSI projects and directly interact with the recipients of these funds to evaluate the effectiveness of these projects and witness the actual work being done. He gave an example of an organisation that funds children who have Aids, there is one licence holder who pays for the building and who bought school uniform for the children. There is also another licence holder who donated R240 000 for a school hall in another area, the hall is being used by the community and can be used to generate income.

Discussion
The Chairperson recalled that the WCGRB in the previous year boasted that it had forced licensees to take up CSI initiatives.

Mr Tyatyam said that he expected WCGRB to give licence holders conditions on CSI but that he did not expect the WCGRB to itself have a CSI programme. He indicated that he had not seen any programme in the North Coast. He not know what happens with other licence holders and asked WCGRB to provide the total number of CSI initiatives in the province and what the total budget that comes from the process is.

Mr Joseph asked what the total budget allocated for CSI initiatives is and if each license holder has their own project.

The Chairperson agreed that WCGRB should have given the Committee the examples of the licence holders.

Ms Beerwinkel stated that she felt that the WCGRB should be doing something on its own as part of CSI. She asked who monitors the projects to ensure that it happens and agreed with other members that the value of the programmes should have been given to Members.

The Chairperson stated that the Committee will write a letter asking WCGRB to give details of the CSI initiatives per casino and per licence holder.

Mr Joseph added that during the oversight visit, the Committee invited beneficiaries to talk to members at the venue but that it is necessary to still visit the sites.

Mr Lakay confirmed that the WCGRB will give a detailed response per licensee, and give the value per licensee. He however advised that there is additional value that can’t be quantified. He added that when the WCGRB will have its quarterly visit, it will invite members of the Committee along so as to ensure that things actually happen.

Establishment of Western Cape Responsible forum
Mr Bennett reported that the forum was established in 2002 and it is fully representative of government, the National Responsible Gambling Programme (NGRP) and the gambling industry. There is a code of conduct signed by all members which includes rules on the displaying of responsible gambling material and advertising standards. Three meetings were held in 2016/2017 where the operators reported on responsible gambling measures. The South Africa Responsible Gambling Foundation (SARGF) also presents the quarterly financial reports in the meeting. Research, treatment and counseling are also reported on at these meeting. The biggest challenge remains the in operation of the relevant legislative provisions.

Discussion
The Chairperson wanted to know how the forum addresses potential ills of gambling and not the post counseling.

Mr Tyatyam asked what the success rate of the forum is. He knew of someone who had lost his house as a result of gambling. He also knew of a public representative who lost their job because of gambling. He asked if WCGRB could provide details on the monetary value that goes to the programme.

Mr Bennett responded that SARGF has awareness programmes and that the board also promotes awareness on gambling, sometimes in conjunction with SARGF. He stated that the potential ills are more dangerous in places where there is no gambling. He answered that it is not possible to give the success rate because by the time problem gambling is detected, it is usually already late.
Ms Beerwinkel asked whether the meetings on awareness are separate from the Board meetings.

Mr Bennet responded that the meetings are separate and that the minutes of the meetings are usually presented to the Board.

Mr Lakay added that the industry is taking long to deal with problem gambling since there isn’t much research and that the industry may have to go into further research in this area.

The loss of funds that the Western Cape experienced due to illegal gambling during the 2016/17 financial year
Mr Bennett stated that the Western Cape has not done a study of the extent of illegal gambling in the province. The Western Cape is however doing better than other provinces; he attributed this to the WCGRB taking illegal gambling very seriously and a requirement that all investigations of illegal gambling be investigated within 30 days. In 2016/17, the Board investigated 29 cases resulting in 20 arrests and 61 devices seized. The last statistics which date back to 2013/14 identified 324 illegal establishments with 5 900 illegal devices. The calculated gambling revenue from one illegal slot machine could be R 602 878. He reported that as at  August 2018 correspondence received from SAPS Head Office indicate that Legal gambling contributed almost R 26 Billion to SA tax base and that the tax base eroded through illegal gambling is estimated to be R110 million. He assured members that the Board has a good working relationship with the relevant law officers and that illegal gambling is considered very seriously due to the socio economic challenges it creates.

Discussion
The Chairperson sought clarity whether the public is aware that chances of winning using illegal machines is almost impossible in comparison to legal gambling. In addition, he asked for information about the winning percentages.

Mr Joseph asked whether the figures given comprise illegal gambling done from homes, for example where it is done online from a computer. He also asked whether the figure of R26 billion tax base was a national or provincial figure. He asked whether law enforcers are given special training on illegal gambling.

Mr Tyatyam noted that the presentation had indicated that the Western Cape is better than other provinces and wanted to know what the conviction rate is.

Ms Beerwinkel asked whether the figures presented relate to 2016/17 financial year because the figures given indicate August 2018.

Mr Bennett responded that the information given as at August 2018 was just additional information on where the WCGRB is on illegal gambling. On the percentages, he informed members that the regulations require that the return to play percentage on each machine be set at not less than 85%, casinos put it at 91% because it encourages gambling. He stated that recent findings noted the lowest percentage set has been at 45%. He added that people prefer the illegal gambling places because of the no smoking legislation, refreshments including liquor being provided and the homely environment as opposed to casinos. He advised that a lot has to be done to create awareness and educate people on illegal gambling. On Mr Josephs question on whether the figures are national, he confirmed that this is the case. He added that gambling takes place in the homes and that securing search warrants for home residences is not easy. Conviction is not easy and the WCGRB is called only as an expert witness. He added that people are using small businesses to promote illegal gambling and that the WCGRB is working to get the machines out of the streets.

The Chairperson asked if the WCGRB follows up on the problematic cases to find out if convictions are made.

Mr Tyatyam noted that the tourism industry is the jewel of the Western Cape and that the issue of gambling is huge for the entertainment industry. He advised the WCGRB to treat gambling very seriously because it is capable of drowning the tourism industry.

Mr Joseph added that there should be specialised courts that deal with specialised economic industries and that the prosecutors need to receive specialised training.

Ms Beerwinkle sought more clarification on the working of the illegal machines and how the shop owners make money.

Mr Bennett responded that the money received is usually split between the supplier of the machines and the shop owner. He added that the WCGRB is in discussions with the National Prosecuting Authority (NPA) and with the Specialised Commercial Crimes Unit (SCCU) on establishment of specialised courts. On the initial meeting held on 24 August 2018, SAPS officials indicated that plans are underway to establish a special prosecuting unit to prosecute illegal gambling, the unit is not yet on the ground. The WCGRB will work to provide training for the specialised task team. He added that the WCGRB takes illegal gambling seriously and puts onerous requirements on licence holders and that a lot of information on illegal gambling comes from licence holders.

Business model used to motivate for the allocation of R 18 million for the financial year under review
Mr Bennett reported that the R 18million was not based on a specific business model and that in 2002 there were various reports on the flagging performance of the horse racing industry. The totalisator at the time was Western Province Racing Club which was in dire financial straits. The sector was at the time responsible for employment of 28 000 people who were the grooms and jockeys. The sector also contributed to indirect employment. Discussions were held between the two Provincial Finance Ministers of KZN and Western Cape. In principle it was agreed to reinstate the previous arrangement of half taxes being paid to the club. It was decided that the tax provision for the totalisator in two Provinces be aligned. KZN reduced the totalisator tax from 14% to 6% in attempt to salvage the horse racing industry and the MEC of Agriculture and Tourism requested the same consideration in the Province in order to salvage the horseracing Industry in both Provinces. It was said that the channeling of 50% of the taxes to the Club was in the interest of all role players
Discussion
The Chairperson stated that the members actually wanted to know why money was given to Kenilworth Racecourse.

Mr Tyamtam commented that it is a corruption scheme and that it does not indicate how the community will benefit.

Mr Joseph wanted to know if Kenilworth Racecourse is a business or an NGO.

Mr Lakay responded that it is a registered business, pty which reports to the horse racing committee of the WCGRB.

Briefing by CapeNature on the legislative prescripts that enables Audit Committee members to be part of the Western Cape Nature Conservation Board

Dr Razeena Omar, CEO, CapeNature took Members through various legislations beginning with the PFMA. She stated that sec 77 PFMA requirements for an audit Committee are requirements for Departments only and not for all public entities. Section 9 of the Western Cape Nature Conservation Board Act 15 of 198 in provides that the majority of the members of the subcommittees shall be members of the Board. She reported that the Audit Committee functions as a sub Committee of the board and that it operates in terms of the Audit Committee Charter. The current composition has 3 board members and 2 external members. She confirmed that the Board comprises non-executive members and operates in line with the King IV code of corporate governance and that it is legitimate to have board members as part of the Audit committee.

Discussion
Mr Joseph noted that there is an imbalance in the audit Committee and advised that there will be more peace of mind if majority of the members were external.

The Chairperson asked whether there could be a bias and wanted CapeNature to explain the thinking behind the arrangement, why it works and whether there is a need to change the law.

Dr Omar responded that CapeNature has internal controls. The arrangement works because board members are non-executives with an oversight role. She stated that because of treasury regulations external members are paid more and having less external members in the Audit Committee assists CapeNature to contain the costs. She added that having Board members is useful for continuity and that it is a good suggestion from the PAC to have more external members in the Audit Committee.

Mr Mohamed Bhayat, CFO, CapeNature, added that in SA there is the King IV code which defines the role of the Board and that in line with corporate governance, executives are not board members. The board members have more of an oversight role.

Ms Beerwinkel wanted to know whether the decision to have Board members in the audit committee was a financial or oversight decision.

Mr Joseph wanted to know whether Board members have decision making powers or only sit in an advisory capacity in the audit committee. He noted that there could be challenges affecting the democratic structures. He added that it will be better to have more external members and wanted to know whether the proposal for amendment will come from the Committee or from CapeNature.

Dr Omar responded that the decision was not financially motivated and that since CapeNature was not contravening any law it was thought prudent to have more independent non-executive members but going forward CapeNature will work to tilt the balance and have more external members.

Ms Beerwinkel commented that since the Audit committee makes recommendations and not decisions, then all are covered.

Committee Minutes dated 29 August 2018
Mr Mitchell noted that the Chairperson congratulating the Department on the win on the award for human settlement was not captured in the resolution.

Mr Joseph wanted to get clarity on resolution 5.2.1, and asked whether the briefing by the AG was on the 2018/19 year.

The Chairperson confirmed that it had been captured correctly since that was what was agreed.

Ms Maseko moved that the Minutes be approved with the amendments noted. The rest of the members concurred.

The minutes were approved.

Other Matters
The Chairperson informed members that he had received an email the previous week to ask how far SCOPA is with the story of R 9million office refurbishment at the Western Cape Liquor Office irregular expenditure. The Department appointed forensic services, they gave us a report but the investigation is not complete. He added that the Committee is still waiting to hear from the Minister on the investigation and that he will respond back to the email letting the person know the position.
Mr Mitchell wanted to know how to add something to the agenda; he added that the following day he will have a question replied in the House concerning the Department of Human Settlements and depending on how the session will go he will want to have the matter discussed in the Committee.

Mr Tyatyam added that members must be direct, specific, detailed and properly motivate when bringing a matter for discussion.

The Chairperson confirmed that if the matter involves finances, then the Committee will get involved.

Ms Beerwinkel stated that she too wanted to have a discussion on the Tourism jobs fund allocation.

The Chairperson advised Ms Beerwinkel to send the details to the Committee secretary for discussion in the next meeting

The meeting was adjourned.