National Gambling Amendment Bill: public hearings

Finance, Economic Opportunities and Tourism (WCPP)

22 February 2019
Chairperson: Mr D Joseph (DA)
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Meeting Summary

The Committee met to discuss the National Gambling Amendment Bill. Matters that featured prominently during the meeting included the proposed reconfiguration of the National Gambling Board to the National Gambling Regulator, run by a single functionary in the person of a chief executive officer (CEO); decision-making at second meetings by the majority of Council members that were present, even if the first meeting was inquorate; and the extension of the National Central Electronic Monitoring System (NCEMS) to other gambling modes.

Stakeholders, including the Casino Association of South Africa, the South Africa Bookmakers' Association, the Bingo Association of South Africa, the Western Cape Gambling and Racing Board and the Provincial Treasury, commented that the imposition of the NCEMS on operators was not justifiable and the proposal lacked research and consultation. Operators had the notion that the gambling industry in South Africa was over regulated and the introduction of the NCEMS would be another burden that would be hard on them. Extension of the NCEMS to different gambling modes would constitute a mammoth challenge that would be impossible to resolve, as each gambling mode operated with a unique set of parameters. The introduction of the system to other gambling modes would have the greatest impact on the poor in rural areas, where there would be a loss of jobs, capital and social investment, and gambling levies would be the most severe where they could be least afforded.

Stakeholders also frowned at the insertion of Clause 63 (A) in the Bill, which would empower the majority of the members of Council present at a second meeting to take binding decisions on gambling matters, even if a quorum was not achieved at the first and second meetings. Members and stakeholders considered this process undemocratic. The clause undermined the importance of the principle of provincial majority. The National Gambling Policy Council should explore technical and technological interventions, like a round-robin decision model and Skype, to reach consensus in case a meeting was inquorate. 

Similarly, stakeholders condemned the proposed reconfiguration of the National Gambling Board (NGB) to a National Gambling Regulator led by a CEO. The gambling industry was complex and required diverse expertise, which was characteristic of a board system. No single functionary could run the gambling industry successfully, unless the individual was a superhuman CEO. 

The Committee cautioned the Department of Trade and Industry, as well as the National Gambling Board, to desist from hasty finalisation of the Bill. It condemned the lack of adequate consultation before the insertion of proposed amendments. The NGB should avoid duplication of functions already performed by provincial authorities, as this could lead to multiple punishments for offenders. Moreover, confusion would be inevitable, as operators would struggle to interpret different information given by national and provincial regulators on the same matter. The National Gambling Board should not take undue advantage of the gambling industry to raise additional revenues. 

Meeting report

The Chairperson said March 4 2019 was the cut-off date for all written submissions, after which the Committee would formulate a negotiating mandate. This would be followed by the final mandate to the National Council of Provinces (NCOP).

Presentation by Department of Trade and Industry (DTI)

Mr Nkoatse Mashamaite, Director: Gambling Policy and Law, Department of Trade and Industry (DTI) spoke about the Preamble that produced the Bill. According to the Preamble, the Bill seeks to establish the National Gambling Regulator, led by the chief executive officer (CEO) as the Accounting Authority. The Bill also seeks to provide procedure for the forfeiture of unlawful winnings. It will empower the National Gambling Policy Council (NGPC) to make a final decision at a second sitting with the majority of members present at that meeting, even if a quorum was not achieved in the previous and second meetings. The Bill aims to extend the National Central Electronic Monitoring System (NCEMS) to other gambling modes. The Bill will enhance the powers of the national inspectorate to curb illegal gambling activities. It will amend and delete certain definitions and provide for transitional arrangements.

Listing of illegal gambling operations and prohibition of advertising to self-excluded persons

According to Clause 3 of Section 10A, the National Gambling Regulator (NGR) is empowered to keep a register of unlawful gambling operators, who will be disqualified for five years from applying for a licence to operate. This is in addition to the criminal fines and sanctions envisaged under the Act. However, the operator can approach the NGR if he wishes to remove his/ her name from the register, provided he fulfills certain conditions. An operator can be considered illegal only if the court declares him to be an illegal operator.

Clause 4 inserts amendment of Section 14 by inserting sub-Section 13, which requires operators to remove excluded persons from their mailing list. This means that the excluded people will not get promoted by a gambling operator during the period of exclusion.

Clause 5 amends section 16(4) to provide that unlawful winnings be forfeited to the NGR subject to compliance with the Promotional of Administrative Justice Act (PAJA). The winnings will no longer be forfeited to the state after a High Court order, as the provision requires in the current Act. It further strengthens the conditions to verify the unlawful winnings. The onerous burden of applying to the High Court is being removed, making the process easier and saving taxpayers’ money.

Clause 12 amends Section 27 to provide that the NCEMS will be extended to apply to casino, bingo and betting activities under the auspices of the NGR. This will allow effective monitoring of how much operators generate, as well as other information relating to gambling activities. Clause 12 further provides for the national licence, the implementation date for the NCEMS and gives powers to the Minister to determine the extent of the operation of the NCEMS. The intention is to consolidate information throughout the country from all legal modes of gambling. This is a great step towards the government’s effort to implement the 4th industrial revolution and have enhanced regulatory oversight over the PLAs and gambling industry. Existing monitoring systems at various gambling venues will continue to function as normal.

The NCEMS is a national register as set out in the National Gambling Act (NGA) 2004, and this function will ensure that the NGR continues to work as a central repository of gambling information, in addition to that which is already required in terms of the national registers. NCEMS’ outputs will supply provincial licensing authorities (PLAs), manufacturers and operators with valuable intelligence in terms of the gambling sector performance at both provincial and national levels. The information can also be used for reporting of national statistics, as well as for the determination of taxes and levies.

He said that there is a lot of confusion in terms of regulatory policy due to the lack of quorum. The National Gambling Act formulated in 1996 did not make any provision for quorum. The Act was overhauled in 2004 and provision was made for a quorum. The need for a quorum has been discussed in a number of meetings of the National Gambling Policy Council (NGPC). Currently, a minimum of five members of the executive council are required to form a quorum and must support a resolution for it to be binding. It was therefore decided that the majority of members present at a second sitting with a Minister can support a policy that is binding if no quorum was achieved at the first sitting. According to Mr Mashamaite, the NGPC is established in terms of section 61(1) of the National Gambling Act of 2004 to ensure policy alignment at national and provincial levels.

Schedule 4 of the Constitution of the Republic of South Africa lists casinos, racing, gambling and wagering (excluding lotteries and sports pools) as a functional area of national and provincial concurrent legislative competence, granting both provincial and national government the power to legislate and regulate gambling. The NGPC is critical for collaboration and co-operation between national and provincial governments and to ensure there would not be a conflict of policy. This is intended to address the delays caused by lack of quorum, which affects the policy decisions to be made and other coordination efforts of the NGPC. This amendment is intended to address the delays caused by the lack of quorum, which affects the policy decisions to be made and other coordination efforts of the NGPC. The provision was regarded by the Office of the Chief State Law Advisors as being ‘in order,’ as it was not discussed specifically in their certification report. The approach was supported by the members of the NGPC during their meetings, including the meeting of 5 September  2014. This was tabled in the NGPC meeting of 12 March 2018, and the matter was noted.

Clause 28 amends Section 64 to provide for the establishment of the National Gambling Regulator as a public entity which is a juristic person led by the CEO.

Clause 29 amends Section 65(1) by inserting sub-paragraph 65(1)(eB) to empower the NGR to collect and retain monitoring fees from all modes of gambling for the NCEMS.

Clause 30 inserts Sections 65A and 65B, which provide that the CEO is eligible for appointment for a period of five years, and which can be renewed for another five years. The CEO will be responsible for the appointment of staff and management of NGR resources. He is accountable to the Minister. The Bill seeks to remove the concept of a Board comprising various external members, and replacing this concept with governance led by a CEO, with the assistance of a Deputy CEO. This is a strategy adopted by the DTI and other agencies to avoid unnecessary bureaucracy caused the Board system. He also said that a Commissioner may function in the capacity of the CEO.

Clause 32 inserts Section 66A to empower the NGR to work collaboratively with other government departments or institutions responsible for gambling-related matters, and may enter into working agreements with such institutions, which includes establishing forums for such purposes.

Clause 40 inserts Section 76A to provide for additional powers of the national gambling inspectors, so that they may act with or without provincial inspectors to investigate illegal gambling activities. This is for those cases when the provincial inspectors are not available to accompany the national inspectors.  ‘With or without provincial inspectors,’ as an approach, aims to ensure in instances where action has to be taken to combat an illegal activity and upon consultation, the PLA is unable to assist, the NGR can intervene. The Bill further empowers the national inspectorate to serve the illegal operator with a notice to stop operating pending investigation, litigation and prosecution. The gambling inspectors will also advise landlords to lawfully evict the illegal operators from the premises. The national inspectors may notify financial institutions, including banks, to stop gambling-related financial transactions with any proven illegal gambling operator, in compliance with the Financial Intelligence Centre Act (FICA), by not processing payments in relation to illegal operations.

The Minister is empowered under Section 87(1) to make regulations that set out the criteria the NGR will use to observe when considering the applications for additional Limited Payout Machines (LPMs) from provinces. This will complement the work of the Provincial Licensing Authority (PLA) and ensure fairness in the application process.

Clause 44 provides for the transitional arrangements, which allow for the employees of the NGB to be deemed to be employees of the NGR. The immovable and movable assets, financial, administrative and other records, contractual rights and obligations and liabilities of the Board, will be those of the NGR going forward.

Discussion

The Chairperson said that the Committee has a number of concerns about the Bill. He questioned the rationale behind changing the Board system with a CEO-led system. What will be the cost of such a change? He also questioned the part of the Bill that states in the event that a quorum cannot be achieved at the first sitting, the majority of members, at a second sitting, can form a quorum and make a regulation that is binding. A quorum must be achieved to make a decision that is binding. A Minister should not be empowered to take decisions without consultation in a democratic state. It is a serious concern if a quorum cannot be achieved at a given meeting.

Mr P Uys (ANC) wanted to know if the Bill is built on legislation approved by the National Assembly in 2008 and signed by the President. It will be unconstitutional for two Members of Executive Councils (MECs) and a Minister, for example, to make a regulation that is binding on people. A quorum is needed before a decision is taken. He suggested that technical interventions should be explored if there is a problem in achieving a quorum. The Board can be placed under administration. The NGPC may also be consulted in order to raise a quorum. The Chief State Law Adviser can also help with some technical issues faced by regulators.

Mr R McKenzie (DA) expressed concern about the cost implications of moving from a Board system to a system led by a CEO. He also spoke about a previous report submitted to the Committee regarding the proposed Bill. When was the report initiated and when was it concluded? He noted that the Bill was designed in haste and that the Committee should investigate the Bill carefully to know the real intent. He requested the DTI to give a legitimate reason why the Committee should support the Bill.

Mr Mashamaite said that the decision to absorb the NGB was not contained in the report. The DTI always ensures the independence of the agency. The Department does not automatically accept all contents of the report, but analyses the data before it makes a conclusion. He said that the report associated with this study is yet to be adopted. The constitution confers a concurrent competence on gambling, which excludes lottery and sport codes. Trying to combine state-owned and privately-owned entities can create confusion. Thus, the government decided to separate the two. However, there might be links between state-owned and privately-owned entities in the future.

The DTI did not proceed with the National Gambling Amendment Act of 2008 that dealt with the regulation of online gambling. One of the reasons was that the Act was passed in 2008 at the end of the Parliament. The new Parliament could not adopt the Act because they were not sure of the impact of interactive/ internet-based gambling on children if it were to be approved immediately. The DTI therefore conducted a gambling review commission study in 2009, and the study was concluded in 2010. This study led to the regulations that informed the proposed National Gambling Amendment Act. The DTI and other authorities aim to strengthen the inspectorate in order to deal with enforcement in the event that the National Gambling Amendment Act comes into operation.

The DTI and relevant authorities dealt only with governance matters associated with the Bill due to time constraints. Cabinet issues, the NGR, NGPC, inspectorate and the introduction of NCEMS to other gambling modes were addressed at the meeting held in July/ August 2018. These are the only parts of the Bill currently addressed. He noted that the Bill was introduced to the Parliament in December 2018. He said the discussion on the Bill was delayed due to the tight Parliamentary schedule.

Mr Mashamaite said that the DTI consulted the Office of the State Law Adviser, which agreed that a binding decision can be made at a second sitting with the majority of the members that are present if a quorum was not achieved at the first sitting. The Office considered the Bill and found the clause acceptable. It was an in-order provision, because it can deal with a legitimate government function.

Mr McKenzie expressed further concern about the urgency associated with the Bill, as well as the timeline between the initialisation and finalisation of the research upon which the Bill was drafted. He questioned the DTI on why the consultant was not availed of all the documents needed for the research. The research cannot be taken seriously if the DTI claims that the consultant did not have all necessary materials needed for the research. He also expressed concern about the cloak of secrecy that surround public institutions.

Mr Uys cautioned that the Committee should focus on the agenda of the meeting, which dealt with the consideration of the provisions of the proposed Bill.

Ms Caroline Kongwa, Senior Manager, NGB, said that in terms of section 63 of the NGA and the question on quorum, the Minister and members are empowered to establish their rules of procedure to conduct their proceedings. The NGB does not attempt to force its rule on anyone. There was a quorum in a meeting held in March 2018. The members discussed the Bill and how meetings are conducted. The members agreed that binding decision can be taken by a majority of members at a second sitting, even though a quorum was not achieved in the first sitting. The MECs indicated agreement to this decision when the NGB visited the various provinces. This was how the provision finds its way to the Bill. Therefore, the decision was not taken by the NGB but by the MECs themselves. This is how the provision finds itself in the Bill. 


The work that NGB does is usually presented at the NGPC. Ineffective operation of the Council has a negative effect on the mandate of the NGB. As a national regulatory body, the NGB ensures consistency and uniformity in gambling activities throughout the various provinces of the country. The provision regarding the quorum can be rejected only if legal advice stipulates that it is illegitimate or unconstitutional.

The DTI has a legislative programme for each year, which is sent to the President after approval. The NGB is on the programme in 2019. She came into the NGB in 2014 and was able to transform the entity within a year. The entity had a clean audit opinion for three consecutive years. The DTI aims to maximise efficiency in the NGB. Therefore, it proposed a change from the Board system to a system run by the CEO, to effectively implement the mandate of the NGB. The Minister determines the maximum number of licences. Also, the Minister can, through legislation and consultation, decide the gambling mode that is most effective for the country. Therefore, the conversion from a Board system to a regulator stems from the aforementioned provisions.

She said the amendments were proposed to empower national regulators to operate efficiently without inference from provincial entities. She spoke about differences in opinion that exist between national and provincial regulators. She cited an example of a court case involving national and provincial regulators. An administrator cannot take a decision regarding the function of the NGB. No single administrator or future CEO can overturn the decision of a Board. The NGB and DTI consider the Bill urgent because the technical amendments and governance matters should be addressed before the end of the Fifth Parliament. Other substantive issues can be handled by the Sixth Parliament.

Ms Kongwa said she reports directly to the Minister. A module that considers the most effective external and internal modes will perform best for gambling and other related activities. The extension of NCEMS to other gambling modes will enable the national regulator to link to the provincial system as well as individual operators for monitoring and evaluation. This helps to achieve adequate confirmation and completeness of information available on every system run by an operator.

The NGB tries to strengthen regulations and must comply with FICA directives when executing its mandates. All provincial gambling boards should be listed as accountable institutions, in terms of the Financial Intelligence Centre Act (FICA) directives. They must report financial transactions, especially unscrupulous ones to the national regulator. It is difficult to monitor financial transactions at the moment due to lack of a verification system. The National Gambling Amendment Bill seeks to empower the inspectorate. The current system run by the provincial gambling boards really limits the operation of a national inspector.

Mr McKenzie sought clarity on why the NGB thought its proposed module is better than the one currently operated in different provinces.

The Chairperson noted that there is a National Council of Provinces (NCOP) rule that states that a minimum of five provinces is needed to take a democratic decision. He commented it is undemocratic for a Minister or an MEC to decide for nine provinces.

Ms Kongwa said the NGB has not deviated from the National Gambling Policy of 2016. Regarding the cost implication of the proposed change in structure of the Board, she said that the NGB sent a written communication to the DTI and requested the CFO to estimate the cost of the proposed change. She indicated that the NGB will still work within the same budget. The NGB currently receives a grant of R31m from the DTI. The NGB does not raise revenue from any other sources. Its total expenditure to date is R41m. There is a surplus of R14 m, which goes back to the revenue fund.  She said that the proposed new system led by the CEO will have to work with other entities, but this will not result in any significant cost implications.

Presentation by Provincial Treasury

Ms Claire Horton, Deputy Director: Provincial Treasury, said that the role of gambling taxes cannot be ignored in provincial funding. Gambling is a functional area of concurrent national and legislative competence. The Western Cape government has submitted comments on the proposed amendment Bill. Provincial funding is heavily dependent on national transfers. Other sources of revenue include sales of goods and services other than capital assets, liquor licence fees and gambling taxes, amongst others.

She said gambling activities in the Western Cape are well-regulated, and the Minister is empowered to place a restriction on the number of gambling devices on a given site.

Certain operations -- casinos, racing, gambling and wagering, excluding lotteries and sports pools -- are explicitly listed in Schedule 4 of the Constitution. Regarding Clause 5, Amendment of the Principal Act, proposed Section 16(4)(b), she said that provinces play an important investigative role in terms of the forfeiture of unlawful gambling. It is recommended that the proceeds of illegal gambling should be forfeited to the province, not to the NGR. PLAs impose and enforce conditions on licencees to fund and treat gambling addiction. Section 77 of the Western Cape Gambling and Racing Act (WCGRA) provides for a court to order the forfeiture of monies to the province.

It is recommended that the Bill be amended to provide clarity regarding whether the incidental use prescripts are applicable to type B and C limited payout machine (LPM) sites and if so, how these may vary. The Provincial Treasury (PT) proposed a revision to Clause 11, amendment of Section 26 of the Principal Act, and proposed Section 26(2)(e). The national Minister must consult with both the NGR and the provincial Minister.

Clause 15, Amendment of Section 33 of the Principal Act, proposed Section 33(l) empower the NGR to consider applications and motivations from PLAs for the acquisition of LPMs for the purpose of compliance with the approved criteria. Current provincial legislation empowers the provincial Minister to regulate the number of LPMs on a site. In response to the NCEMS, she said the introduction of such a system will create inefficiencies because provinces have working systems in place. This might have significant cost implications for industry due to incompatibility issues.

Ms Horton said that efforts to address illegal operations are supported. However, the NGR and PLAs may duplicate functions, and insertion of the proposed Section 76A may require amendments to other parts of the legislation, especially Sections 30, 31 and 33 of the Principal Act. She noted that the success of any national inspectorate is dependent on a successful cooperation with PLAs and the provincial inspectorate, but the Bill is silent on the skill and experience that the CEO must possess to be able to hold this important position. The PT recommended that the minimum qualification and experience should be specified in the Bill.

Policy formulation around gambling matters is complex and multifaceted. Therefore, a decision binding on operators cannot be taken if there is no quorum. Other mechanisms should be explored to address the lack of quorum.

Presentation by Western Cape Gambling and Racing Board

Ms Yvonne Skepu, Manager: Legal Services, WCGRB, summarised the scope of the 2018 draft National Gambling Amendment Bill, 2015 into four parts -- the reconfiguration of the National Gambling Board; governance issues affecting the NGPC; extension of the NCEMS to other gambling modes; and the establishment of the national inspectorate as envisaged by the insertion of Section 76A into the NGA.

Certain insertions in the Bill were made post public comments. These include Section 27D, which deals with the extension of the NCEMS to other gambling modes, as well as the power of the CEO that will be appointed as a regulator. The WCGRB expressed concern that opinions of the public and industry were not sought before the insertion of the provisions. The proposed amendment to Section 27 deals with the stipulation of the start date of the NCEMS by the NGR. The Western Cape already has a system which can link into various LPMs, as well as collect useful data such as tax payments. She also said that there is no need for a third-party verification system, since the province has a workable system in place.

She spoke about the proposed insertion of sub-section (l) into Section 33. It confers competence on the NGR to consider applications and motivations from the PLAs for the acquisition of additional LPMs for purposes of compliance with approved criteria. This provision is similar to the provision that empowers the NGR to consider new applications. The law already specifies the roles of national and provincial regulators in terms of regulating gambling activities. According to Sections 30 and 31 of the principal Act, provincial regulators issue both national and provincial licences and ensure that licencees comply with regulations, whereas the national regulator exercises oversight, sets norms and standards, and must maintain certain national regulatory registers.

The WCGRB expressed concern about the ambit of the powers conferred on the NGB in relation to Type B and C LPMs. Who at the NGB will consider applications for licences? Is it the CEO or the executive committee (Exco)? Further, Regulation 3(2) is an anomaly because the NGB does not consider applications for licences. Sections 32 to 35 of the NGA actually codify the powers of the NGB, which deals with oversight and monitoring.

The WCGRB agreed with the proposed insertion of subsection (fA) in Section 87 of the Principal Act, which empowers the Minister to determine the criteria to be observed by the NGR to approve pay-out machines in excess of five.

The WCGRB proposed that Section 87 (fA) should be retained. Ms Skepu noted that applications for LPMs are usually advertised in order to get public comments. The PLAs adjudicate the applications in terms of probity conducted on the applicants, as well as those associated with the business operations. The NGB does not need to interfere in the application process as PLAs already perform this function and have first-hand knowledge and experience of operator systems. The PLAs also have knowledge of the socio-economic atmosphere surrounding gambling in each province. Considering that the NGB may not be governed by a Board and it is also a trading entity of the DTI, conflict between the national and provincial regulators may be inevitable. Further, all applications for LPM sites in the province go through a public participation process.

On the matter of quorum, Ms Skepu said that the proposed insertion of 63A intends to find a solution to the rolling out of a decision to be made when quorum could not be achieved. Section 63(4) of the NGA clearly envisages that all Council decisions are reached by consensus. If not, the matter can be put to a vote. The proposed amendment (S63A) to this provision is undemocratic and possibly unlawful, as decisions on gambling are complex and there may be grave implications if the decision is made without consensus or vote. The WCGRB proposed a provision based on round-robin decision-making, where members of the Council vote in writing, as this helps to deal with the rolling over of decisions due to a lack of quorum. This is similar to Section 60 of the Companies Act, 2008.

Ms Skepu questioned the rationale behind the proposed insertion of Section 76A, which states that an inspector may, with or without an inspector, be appointed in terms of a provincial law and together with other enforcement agencies. Section 76 does not include the words 'with or without'. It states that the national inspectorate must be accompanied by a provincial inspectorate. She proposed the removal of the words 'with or without' (insertion 76A).

Discussion

Mr McKenzie sought clarity on the proposed insertion of Section 76A.

Ms Skepu said that the proposed insertion conflicts with current provincial law, which stipulates that there is joint cooperation between PLAs and the national inspectorate in the enforcement of law.
She proposed that Section 76 should remain in the current form, as no amendment is needed.

Mr McKenzie wanted to know when the WCGRB had made its presentation before the national committee. How does the system make decisions in cases where quorum could not be achieved?


Ms Skepu said that the WCGRB made a written submission some time in 2016/ 2017. Members of the Council can vote in writing (round-robin) as opposed to when decisions are made without participation or consensus.

Mr Mashamaite said there were areas of cooperation between the DTI and other stakeholders in the gambling industry. For example, various stakeholders agreed that the NGR should handle matters related to addiction. However, consensus could not be reached on quorum. Round-robin was sometimes explored, but it did not work. He cited an example of an urgent meeting that was arranged to address illegal gambling in the Northern Cape. Eight MECs were contacted, but none of them sent anything in writing. He discouraged voting in writing, as this is not a true reflection of all members of the Council. Best decisions are taken when members are physically present to convince one another.

The Chairperson said that the DTI and NGB should explore alternative means to get members of the Council to communicate. Technological interventions, especially Skype, will be useful in this regard. The situation whereby a person or two make decisions for others is undemocratic.


Mr Mashamaite said that the minutes of the meeting that was held in March, which dealt with the Council meeting, were not adopted yet. The best option to reach a decision on the meeting is round-robin because the conveners could not get the required majority to convene the meeting that should take place in the first week of March 2019. The minutes of the previous meeting were not adopted yet. However, the resolutions taken during the meeting are active. The minutes of the previous meeting are drafted already. The minutes will be tabled for adoption by the members of the Council who were present. He observed that gambling is controlled by different authorities in different provinces. This is one of the reasons for non-achievement of quorum in most cases. Therefore, the DTI and other stakeholders decided to base decisions on the majority of members present in the meeting.

Mr McKenzie expressed concern on how the Council conducts its meetings, particularly in terms of the adoption and documentation of minutes.

The Chairperson sought clarity about the concurrent competence of the national regulator and provincial regulator in terms of oversight and monitoring.

Ms Kongwa said that the NGB is legally empowered to monitor and investigate illegal gambling in provinces with or without the consent of the Provincial Gambling Board. The NGB is also empowered to visit the Provincial Gambling Board without prior notice. The WCGRB should respect the principles of the intergovernmental relations framework. Each year, the NGB conducts a compliance schedule in terms of engagement, with a specific focus on checking illegal gambling. The NGB tries to evaluate the efforts of Provincial Gambling Board to tackle illegal gambling. This is linked to the powers of the inspectorate. She sought clarity about the efforts of the Provincial Gambling Board to control challenges associated with online gambling.

She said that the NGB does not seek to interfere unnecessarily in the affairs of Provincial Gambling Board. She said the rule of engagement is clearly spelt out by the Office of High Commission. The Office established a special Priority Crime Committee, chaired by the NGB. The NGB shares information with Provincial entities.  She said that the Minister is empowered to set the maximum number of licenses. The NGB has the mandate to ensure that licensees comply with set regulations, whereas the Provincial Gambling Board has the duty to ensure implementation of regulations. In response to the concern on quorum, Ms Pagiwa said that the original provision that require at least five members to form a quorum still exists and takes precedence over the proposed Amendment that majority of members at a second meeting can take a binding decision.

Ms Skepu said that the WCGRB has system to effectively monitor and investigate illegal gambling activities including illegal online gambling. According to her, the powers of the NGB are circumscribed in the NGA under Sections 32-35 and the powers of the PLAs are circumscribed in Sections 30 and 31. The powers of the Minister are also circumscribed in the Act. This helps to avoid confusion during the execution of mandates.

Ms Kongwa said it is the only the NGA that has the legal authority to establish LPMs in given premises. The Provincial Gambling Board does not have such powers. She gave an example of a court order that restricted KwaZulu-Natal province from establishing LPMs. She also said that the NCEMS will allow the NGB to monitor the activities of operators throughout the country.

The Chairperson sought clarity about the cost implications of the NCEMS.

Ms Skepu said the WCGRB cannot quantity the cost for now. However, the cost to implement NCEMS will be huge, given the rollout of LPMs across the various provinces of the country.

The NGA states that a monitoring fee is applicable, and 6% of gross gaming revenue (GGR) of the LPM industry. The Act also makes provision for consultation with stakeholders on administration and regulatory matters.

Regarding cost implications, Ms Kongwa said that the Provinces will not have any additional cost. She said the 6% has been effective since 2001. The amount was not increased because it was envisaged that the number of operators will increase.

Presentation by South African Bookmakers' Association (SABA)

Mr Sean Coleman, CEO, SABA, said the Association was founded in 1951 as a voluntary body. It currently represents the collective interests of 112 licensed bookmakers. SABA's members include some of South Africa's biggest betting shop operators, along with other medium, small and stand-alone operators. There are both on-course and off-course operators.

Regarding the registration of unlawful gambling operators, Mr Coleman said that the proposed Section 10 of the Amendment Bill seeks to empower the NGR to keep a register of unlawful gambling operators. Unlawful operators will be disqualified for five years. He said that the register does not serve any regulatory purpose. Moreover, there are no guidelines governing the implementation and practical aspects of the register. The register will increase regulatory burdens, with no additional benefits. Therefore, SABA supports the position of the WCGRB on dealing with illegal operators.

He spoke about the national central electronic monitoring system (NCEMS), which was proposed in Section 27 of the Amendment Bill. The provision requires that a single central electronic monitoring system (CEMS) will monitor all aspects of the gambling industry, including the casinos, bingo and bookmakers, with each sector being required to pay monitoring fees to the NGR. He expressed concern about the fact that the SABA was not consulted about the NCEMS. He commented that the purpose of the provision is to monitor all transactions in the LPM environment and to ensure the calculation and payment of all revenues. There is no justification for this provision, as the provincial regulators already have a functional system to perform these activities. In addition, there are no fewer than nine published standards developed by the South African Bureau of Standards (SABS), which ensures the integrity of gambling and betting activities. It also determines the accuracy, reliability and credibility of the data generated in each transaction. The deployment of NCEMS will serve no regulatory purposes. It will also come at a considerable cost to licencees. The deployment of a single NCEMS will be an exercise in futility, as each gambling sector operates on significantly different parameters.

He said that the extended mandate of the NGR is too complex to be effectively executed by a single functionary, in the person of the CEO. The proposed structure of the NGR as a trading entity of the DTI, to operate under the leadership of a CEO, will impede its effectiveness and its ability to execute the extensive legislative and regulatory mandates conferred on it by the Bill. No single human can execute these tasks effectively. He said that Section 65C was included in the previous version to recognise the problem associated with entrusting extensive powers in a single person.

He lamented the failure of the NGB to deliver on its statutory mandate, and advised the entity to formulate measures to address and mitigate underlying causes.

Mr Coleman said that there is lack of transparency in the DTI's agency rationalisation report. The outcomes and recommendations of the DTI report are inconsistent with the proposed structure in the current Bill. The comparisons made by the DTI between the national credit regulator (NCR) and the new structure of the NGR are uninformed and fail to acknowledge that gambling, unlike credit regulation, is a concurrent competence. He said none of the entities in DTI's presentation (page 16) has concurrent competence.

The final gambling policy recognises the historic failure of the Council to achieve a quorum in respect of numerous meetings. It is unlikely to achieve its goals, due to lack of quorum. The proposed insertion of Section 63A is expected to entrench, rather than alleviate, non-compliance with quorum-related requirements. Corporate governance requirements, in respect of any enterprise body, should likewise be in place and enforced in relation to the Council. The SABA expressed concern about the possibility of a handful of Council members making decisions for complex matters like gambling and betting. The SABA recommended the disbandment of the Council. Lack of consultation means the different operators -- casinos, bingo and bookmarkers -- do not know how much the proposed change will cost.

Discussion

Mr Mashamaite said illegal operators do not have licences and do not deserve any protection. The NGA stipulates that unlawful operators can be sentenced to imprisonment not exceeding ten years, or a fine not exceeding R10m.

Mr Uys sought clarity on the justice process. Is an illegal operator declared guilty by the court, by SAPS or the DTI?

Mr Mashamaite said that a person is declared an illegal operator only after a court process. Anyone caught operating without a licence is taken to court and the court is allowed to rule on the matter. The person is de-listed for a period of five years, during which he/ she cannot apply for a legitimate licence.

Presentation by Casino Association of South Africa (CASA)

Ms S Qhinaphi, General Manager, CASA, said the Association was a voluntary organization that represented the interests of about 90% of South African casino operators. These operators had over R53 billion invested in world-class entertainment infrastructure as at March 2018. Its operators prided themselves in the employment opportunities, both direct and indirect, which they provide. In exact terms, 38 000 direct jobs have been created so far, the majority of which involve people with no prior job experience. Members contributed R143 million in 2017-18, and R739 million in the past five years, to corporate social investment (CSI).

In 2017/18 alone, members contributed R6.1 billion in tax revenue, made up of provincial gambling taxes/levies (R1.9 billion), VAT (R2 billion), corporate tax (R1 billion) and other rates and taxes (R1.2 billion). The casino industry contributed almost 40% to the ‘value-added’ economy, making the South African Government the biggest beneficiary in the industry. Members had established the National Responsible Gambling Programme, and funded about 64% of its budget.

CASA expressed concern about the lack of consultation before the Bill was drafted. It knew about the NCEMS only in the Bill that was gazetted in 2019. The NGB talked about consultation only after the provision was inserted into the Bill. There is no means to determine the financial implications of NCEMS.

Ms Qhinaphi condemned the proposal to convert the NGB to the NGR, which will be led by a single functionary in the person of a CEO. The possibility and reality is that a decision made by a collection of people is vetted by a single person, who then makes the final decision on the matter. This is not good governance. What happens to the NGR if an undesirable event occurs to the CEO or Deputy CEO. There will be a change in personnel, who may affect decision-making significantly.

Instead of proposing restructuring, the NGB should ensure that people with appropriate expertise are employed on the Board. The difficulties with regard to the effective operation of the NGB should rather be addressed by ensuring that persons with the appropriate expertise are appointed to the board of the NGB, and that it is adequately staffed and resourced. She noted flaws in the DTI’s attempt to compare the proposed NGR’s structure to other DTI-led entities like the Public Protector, the Companies and Intellectual Property Commission (CIPC), and the National Lotteries Commission (NLC) amongst others, which are led by a CEO. The reason for this comparison is flawed because these entities do not have the same structure as the gambling industry, and do not have concurrent legislative competence.

She noted that the Central Electronic Monitoring Systems in provinces are optimal. Therefore, there is no need for NCEMS, as there is no reasonable justification for the system, especially in terms of cost and regulatory burdens on operators. The PLAs are adequately empowered to monitor and regulate activities in the provinces. Also, PLAs take taxes and gambling levies in their respective provinces.

CASA battles to understand the manner the NCEMS would be used to “identify trends with regard to early warning signs of addictive and compulsive gambling.”  This important issue is addressed through mechanisms such as the South African Responsible Gambling Foundation (SARGF) which is is globally recognised for its flagship programme, the National Responsible Gambling Programme (NRGP) and the excluded persons regime, and it is most unclear how the NCEMS might further this objective under the auspices of the NGR or NGB. The deletion of the word “that” in section 27(1)(b) is problematic, as it contemplates that the NCEMS must be capable of analysing and reporting on a wide range of data.  It would no longer be limited to “significant events”.  This would significantly increase the cost of establishing and operating the NCEMS in these circumstances.  It is also at odds with the DTI’s response, which states that the “sole purpose” of the NCEMS is to detect and monitor “significant events of gambling machines”. CASA also expressed concern about the contents of Section 27(2) of the amended Bill. CASA proposed that the quoted phrase should be inserted as a proviso at the end of section 27(2); and the Act should be amended to specify the process and requirements for the licensing of such an operator.

CASA also condemned the failure of the Council to achieve quorum during meetings. A decision that is binding on as complex an industry as gambling cannot be taken without a quorum, and it is undemocratic for such a decision to be taken by one or two people.

Ms Qhinaphi said that there is no clarity on how the NGR will execute its mandate in terms of monitoring illegal gambling. Also, Section 76A(1)(e) would conflict with Section 30(1) of the Act, which provides that each PLA “has exclusive jurisdiction within its province” to, amongst others, conduct inspections to ensure compliance with the National Gambling Act as well as applicable provincial law.

CASA proposed the deletion of 76(1)(e) to avoid duplication of functions and unnecessary costs as well as regulatory burdens on licensed operators.

Discussion

Mr Uys sought clarity on the concurrent competence of the CEO and Deputy CEO. He expressed concern that the NCEMS will be costly and will affect operations within the gambling and betting industries.

The objective behind the establishment of the NCEMS is not clear. He sought clarity on the provinces that will be covered by the NCEMS. Do all provinces have functional monitoring mechanisms? How will the national and provincial regulators cooperate during inspections? There is a high risk of duplication of function as well as confusion that may arise from different instructions being given to an operator by both national and provincial regulators.

Ms Quinaphi said that the comparison between the NGB and other entities under the control of the DTI is inappropriate because no public protector is involved in gambling operations. However, she said that the national legislation is concurrent with provincial legislation.

Mr Uys said that CASA did not give a valid reason for rejecting the DTI’s restructuring from the NGB to the NGR.

Ms Kongwa said that there are no justifiable reasons to compare the NGB with other entities under the control of the DTI. It is undemocratic that a single functionary, in the person of the CEO, is empowered to approve or overturn a decision made by a collection of provinces.

She said the NGB aims to strengthen its capability in terms of its oversight role. The NCEMS is a regulatory tool that allows the national inspectorate to monitor the activities of LPMs in various provinces. This helps to ensure the integrity of the monitoring system, since it is directly controlled by the national inspectorate.

She mentioned some areas of concern with provincial gambling authorities. One area of concern is financial transaction and reporting. The national inspectorate and the provincial gambling authorities can work together to prevent illegal financial transactions like money laundering. The national inspectorate can also make up for any deficiencies in monitoring that may occur. The NGB works with licensed operators to discourage illegal gambling activities across the provinces. The NGB does not interfere in the mandate of the Provincial Gambling Board (PGB). The licencee makes an application to the PGB, which in turn consults with the NGB to determine if the licencee meets certain criteria, particularly in terms of the number of LPMs at a given site. The NGB also considers the number of operators in the vicinity of the intended location in order to avoid overcrowding of such a location with LPMs. She said that the activities or regulations of the PGB should not conflict with those of the NGB.

Presentation by Bingo Association of South Africa (BASA)

Mr Lawrence Smith, Chairperson, BASA, condemned the splitting up of the Bill into separate amendments of the Act. The draft National Gambling Amendment Bill is a very important amendment. The development of the Bill was started, almost ten years ago, with the establishment of the Gambling Review Commission in 2009. Almost 10 years later, it seemed there was an intention to rush through a small sub-section of the Bill. This makes absolutely no sense and one cannot help but wonder as to the motivation behind this late development. The initial Bill was almost 50 pages, but its current version is 16 pages. The Bingo Association would therefore like to know the real motivation behind the Bill. He questioned the DTI’s and NGB’s hasty determination to change the NGB to the NGR if the NGB is 100% functional, and it achieved a clean audit outcome for the past three years.

In response to NCEMS, Mr Smith said that the Gambling Review Commission report did not recommend the extension of the NCEMS to other gambling modes. Furthermore, there is no justification for NCEMS, because PLAs and other provincial mechanisms function optimally. It is important to note that bingo and casino operators already use state of the art monitoring systems at each site. These systems are tested to South African National Standard 1718, exactly the same technical standard to which the current CEMS is tested. He also condemned lack of consultation in the process leading to the finalisation of the Bill.

He said that the implementation of NCEMS will come at a significant cost to operators, who are already burdened by provincial regulations. The NGB can work with PLAs to get statistics needed to fulfil their mandate. The 6% monitoring fee is split between the NGB and the third party that provides and manages the system, although they are unaware as to the exact split or what the NGB actually do for their share of this income. He alleged the NGB is adequately funded by the Treasury.

The NGB do not regulate or police the actual LPM gambling sites and play no role in the collecting of provincial gambling levies. The imposition of a NCEMS on the entire industry is irrational and has been incorporated into the Bill without the most basic research, consideration or consultation. Licensees throughout the country generally regard the South African gambling industry as over-regulated and the imposition of an NCEMS will add yet another regulatory layer. In terms of the extension of the NCEMS to other modes of gambling, this clearly will have a significant negative impact on the viability of a great number of gambling operations. This will be particularly hard on the more rural operations, where the loss of jobs, capital and social investment and gambling levies will be the most severe and can be least afforded. It is sad to see government so keen to take advantage of legal operators and impose an additional and very costly additional national tax.

In opposition to the NGB and the DTI’s view that gambling operations in South Africa are under-taxed, Mr Smith said that the operators are taxed between 25-26% of their revenue, which is among the highest in the world. It is disappointing that the DTI hopes to use this mechanism as a means to raise revenue. On the other hand, tackling illegal operators that continue to operate with impunity is tough, and the DTI’s proposal to combat illegal operators is a step in a positive direction. However, the provisions to tackle illegal operators as contained in the Bill are ineffective and will cost the industry and government dearly.

Regarding the quorum for the meetings of the NGPC, BASA is of the view that this Clause 63(A) is not appropriate in its current format. As drafted, the clause undermines the important principle of a provincial majority established by these sections of the Act. If a meeting is inquorate, rather than leave the decisions to those who attend, it proposes that decisions are taken on a round robin basis so that all provinces are included in the decision-making process.

Discussion

The Chairperson commented that lack of consultation with stakeholders presented a major challenge to the Bill. He sought to know if additional taxes will be imposed on operators following the implementation of NCEMS. In current practice, proceeds of illegal gambling go to the provincial authorities. Do the DTI and NGB intend to collect such proceeds? Will the elimination of the NGB result in the elimination of provincial gambling boards?

Mr McKenzie asked the DTI to explain why stakeholders were not consulted.

Mr Uys asked why there is no bingo in the Western Cape. Will there be bingo in the Western Cape in the future?

Ms Kongwa said that the Bill does not state that additional taxes will be collected from operators. It does state that operators will pay monitoring fees to the national regulatory authority. All proceeds of illegal gambling should be remitted to the NGB. She cautioned the provincial gambling boards to desist from any practice that conflicts with the NGB. The Bill does not intend to eradicate provincial gambling boards.

She said the NGB and the national Minister can support the establishment of bingo in the Western Cape only if their electronic bingo terminals are functional and there is an appropriate monitoring system that the NGB can use to verify financial transactions.

Mr Mashamaite said the Bill is progressive and there are opportunities to amend the provisions before the Bill is finalised and sent to the President for approval.

Mr McKenzie reiterated the lack of appropriate consultation as far as the Bill is concerned.

Mr Mashamaite said that the DTI consulted on the Bill and the policy. Stakeholders raised concern about the extension of NCEMS to other gambling modes. He agreed that there was no consultation with stakeholders about NCEMS, which was in the final draft that was approved by the Cabinet. However, there was consultation on other provisions of the Bill.

Ms Alicia Gibson, Partner: AG Consulting, said that the NGB is trying to fix something that is not broken and at the same time, it does nothing to fix what is broken. She said that there is no rational justification for the extension of NCEMS to other gambling modes as the existing system is adequate to capture all the necessary information. Moreover, it will be difficult for a single system to handle different gambling modes because each mode operates on different parameters. The imposition of NCEMS on operators will result in hardship on the operators, especially in terms of cost and the regulations they will have to comply with.

She said that the National Gambling Policy Council was created by the NGA. The failure of members to attend Council meetings is a clear sign of a lack in policy co-ordination within the Council. She suggested that the NGB should try to fix the problems the Council faces. Also, Section 61, 62 and 63 of the Bill should be deleted completely. She said that policy formulation by any Council cannot override existing law and it is important to maintain the separation between the executive and the legislature. She urged the national regulatory authority to avoid duplication of functions that already exist at the provincial level.

Mr Mashamaite maintained that there is a need to extend NCEMS to other gambling modes. This gives national regulators independence and direct access to operators’ systems in different parts of the country. This will strengthen the fight against illegal operators and increase the capability to monitor financial transactions. He said that policy alignment on a national scale is a challenge. Successful policy coordination and implementation are possible only if the national and provincial regulators know their mandates and are ready to cooperate. He urged provincial regulators to consider what happens nationally instead of restricting their focus to individual provinces. He said that the National Gambling Policy Council plays a vital role in policy formulation and coordination. Removing such a body will result in worse problems than what are currently encountered.

Mr McKenzie said that there were flaws in the consultation process. He urged the DTI and NGB to ensure appropriate consultation with stakeholders in the future.

The Chairperson said that written submissions are welcome until March 4 2019, and the final negotiating mandate to the National Council of Provinces will be on March 20. He encouraged all provinces to submit their inputs. The Committee will arrange a meeting where Members will discuss the negotiating mandate with the national Department.

The meeting was adjourned.

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