National Gambling Bill: hearings

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE

National Gambling Bill [B48-2003]
Gamblers Anonymous Gauteng Intergroup submission Part 1
Gamblers Anonymous Gauteng Intergroup submission Part 2
Phumelela Gaming and Leisure submission
Phumelela Gaming and Leisure presentation
National and Provincial Gambling Boards comments
National and Provincial Gambling Boards presentation
Jockey Club of Southern Africa submission
Cape CMS (PTY) LTD presentation
Cape CMS (PTY) LTD comment

Other documents handed out:
South African Council of Churches submission
Zonwabise Resort Holdings submission
National Council on Problem Gambling (Gamhelp)

SUMMARY
Oral submissions were made by representatives of Gamblers Anonymous Gauteng Intergroup, Phumelela Gaming and Leisure (on behalf of the horse racing and betting section of the gambling industry), provincial gambling boards, the Jockey Club of Southern Africa and Cape CMS. Written submissions were received from the SA Council of Churches, Zonwabise Resort Holdings and the National Council on Problem Gambling. Key issues that were raised included access control to casinos, the negative impact the Bill on job losses and decreased revenue, and the state of black empowerment in the gambling industry. Committee members expressed grave concern about the social impact of gambling, particularly in relation to the proposed rollout of Limited Payout Machines (LPMs).

MINUTES
GAMBLERS ANONYMOUS GAUTENG INTERGROUP (GAGI)
Mr D Baylis, Executive Member of GAGI, said the current debate was the result of the gambling industry's failure to effectively self-regulate. He referred to GAGI's earlier submission (see document "Submission to the public debate on the National Gambling Bill 2003 - From Gamblers Anonymous Gauteng Intergroup, 6 September 2003") and said some of the recommendations have been included in the Bill. For the purpose of the public hearings, Mr Baylis addressed three areas: the social impact of gambling, socio-political aspects of gambling and the regulation and control of gambling (see document "Gamblers Anonymous Gauteng Intergroup: Submission on the National Gambling Bill, 18 September 2003"). He urged the Committee to restrict the granting of credit or discount to gamblers and suggested the introduction of a smart card access control system (linked to a national register) to prevent excluded persons from entering casinos. Regarding the Bill's clauses pertaining to Limited Payout Machines (LPMs), Mr Baylis said it was Gamblers Anonymous' opinion that LPMs should be rolled back where already set up and prevented from being rolled out further.

Discussion
The Chair asked how the smart card for access to casinos would work.

Mr Baylis replied that most casinos had at some stage charged entrance fees and that this infrastructure could be brought back and adapted for a smart card access system.

Ms M Ntuli (ANC) asked Mr Baylis whether he thought casinos did enough to combat problem gambling and if not, what measures were needed. She added that the placement of LPMs in taverns would lead to inebriated people gambling away money they should have spent on food for their children.

Mr Baylis replied that in some cases, casinos were doing more about problem gambling than other sectors of the industry. Although casino's actively endorsed self-banning, it was often not enforced - hence the need for a smart card system. He said he believed that South Africa had absolutely no need for LPMs.

PHUMELELA GAMING AND LEISURE LIMITED
Mr Brian Mehl, Chief Executive Officer of Phumelela, said his presentation was made on behalf of the horse racing and betting section of the gambling industry (see document "Betting business is the sole pillar of the horse racing industry - Phumelela"). According to Mr Mehl, the Bill's intended measures would result in major job losses in that industry. The industry was particularly alarmed by the Bill's restrictions on telephone betting, since this amounted to 18% of its business and hundreds of jobs were at stake. Telephone betting was conducted as a convenience for punters at the top end of the market. Similarly, ATMs were placed on premises as a convenience to punters and their removal would not limit punters' desire to engage in betting. Mr Mehl said it was not clear about the Bill's definition of "open bet". He was concerned that the "open bet" definition could create a loophole. The inclusion of "totalisator machine" in the definition of a gambling machine could also create confusion, because there was no such thing - a totalisator was the entire betting system, not a machine.

Discussion
Ms Ntuli (ANC) said people from rural areas travelled long distances to bet on horses, often abandoning their children in the process. She wanted to know how the industry would help the severely addicted.

Mr Mehl replied that his sector participated in the National Responsible Gambling Programme (NRGP). The only way of helping people like those mentioned by Ms Ntuli, would be by stopping gambling entirely. No matter how responsible the industry was behaving, there would always be those who are beyond help.

NATIONAL AND PROVINCIAL GAMING BOARDS
Ms A Gibson, Manager of Legal Services of the Western Cape Gambling and Racing Board, presented the meeting with comments drawn up by a consultative forum of representatives of the National Gambling Board from the Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga and Western Cape Gambling Boards. The comments addressed the major issues of principle deemed to require a response in the Bill in its current form and offered redrafting suggestions for various clauses (see document "Comments on National Gambling Bill, 2003 - National and Provincial Gambling Boards").

Discussion
Mr D Lockey (ANC) asked whether the Bill would provide enough work for the cumbersome range of gambling structures Government had set up. He said these boards were so well resourced that they had more money than they could spend. In Limpopo, 22 employees were looking after two casinos and received R9 million per year from Government to perform this task. In the Northern Cape, two employees were looking after two casino's, costing R2.2 million per year. He said the gaming industry had been sold to Government on the back of black economic empowerment (BEE). Yet black groups were often passive partners in consortiums and did not earn sufficient revenue from their investments. Mr Lockey wanted to know what the gambling boards were doing to ensure that empowerment groups genuinely benefited.

Mr R Lubbe, CEO of the Western Cape Gambling and Racing Board, replied that the gambling boards were not only responsible for the casino industry, but also for horse racing. They had to ensure fair play and facilitate annual relicensing. The Bill was bound to generate even more work for the boards, because it extended the requirement to be licensed to gambling industry staff in general. Mr Lubbe said his board cost Government about R2 million per year, but brought in revenue of R130 million per year.

Mr E Lulambe, Manager of Legal Services of the Gauteng Gambling Board, pointed out that BEE in the gambling industry often occurred in terms of overseas companies entering into agreements and funding local black companies.

Mr J Booysen, CEO of the Gauteng Gambling Board, said it was insulting to refer to BEE companies in the gambling industry as "passive". Many were not passive at all.

Mr Lockey (ANC) stressed that he did not say all empowerment companies were passive. However, if they did not get dividends from shares, they were merely fronting. If a black company was indebted to its partner and was not getting dividends, it was being disempowered.

JOCKEY CLUB OF SOUTHERN AFRICA
Mr A Mitchell, Attorney of the Jockey Club of Southern Africa, submitted that the Bill should not include any specific provision regarding the control of the sport of thoroughbred horse racing, but should confine itself only to associated gambling and wagering. (See document "Submission by the Jockey Club of Southern Africa…regarding the National Gambling Bill"). He said the complexities of the control and regulation of horse racing should be dealt with in a stand-alone Act, similar to the South African Boxing Act. That should provide for the establishment of a horse racing authority and a horse racing board, with the power to make and administer rules for the control and regulation of the sport. Mr Mitchell said the implications of the National Gambling Bill on the horse racing industry might not been thoroughly considered and debated. As such, it could undermine the existing administration and regulation of the sport and have a detrimental impact on employment in the industry, as well as on revenue and tax generated from horse racing.

DiscussionMr Lockey (ANC) said horse races were not held just for fun. They were mostly about gambling and the Jockey Club was a beneficiary of the gambling industry.

Mr Mitchell conceded that the Jockey Club would not have existed if it was not for betting, but stressed that the Jockey Club did not concern itself with the gambling side of the industry. He said gambling occurred at operator level.

Mr Lockey (ANC) retorted that according to Mr Mitchell's argument, the makers of roulette tables could also say they had nothing to do with gambling, they simply manufactured the machines. There was an inextricable link between the Jockey Club, bookmakers and gambling. The Committee had to ensure the protection of consumers.

CAPE CMS (PTY) LTD
Mr J Miller, Technical Advisor to Cape CMS, briefed the Committee on how the South African limited payout machine (LPM) industry functioned and on its financial characteristics. (See document "Presentation…by Cape CMS"). He said the draft bill defined the method of LPM cash collection as the responsibility of the Route Operator. This function could be more effectively and safely handled by security firms, or having each Site Operator deposit into a predefined central banking facility for reconciliation and distribution.

Secondly, Cape CMS suggested that instead of each LPM being connected to a single National Central Electronic Monitoring System (CEMS), there should be multiple provincial CEMS systems connected to one national system. This was because a single CEMS operator could, through delayed rollout of LPMs countrywide, fail to meet earnings expectations and as a result be liquidated, which would set the LPM industry back at least a year. The CEMS infrastructure that was distributed countrywide was not owned or managed by the National CEMS operator, but this was where critical monitoring took place. The CEMS operator had little if any direct influence over the owner of the assets shared by a large number of other clients. A computer virus could moreover put a single central system out of commission for many weeks. This could cripple the industry as all LPMs were forced to shut down after 72 hours of non-connectivity to the CEMS.

Mr Miller said LPMs would benefit BEE and would also create jobs in the tourism industry. A total of 50 000 LPMs were envisaged for South Africa and each machine could yield a weekly gross take of between R1 200 and R1 500.

Discussion
 

Mr Lockey (ANC) said LPMs would benefit a few people in terms of BEE, but this would be at the expense of broader society. He said he could not imagine a tourist going to a tavern to gamble. LPMs in taverns would enable the poor to gamble away much-needed money that should have been spent on raising their children. There was no limit on how much money one could put into an LPM, therefore it should rather be called an Unlimited Pay-in Machine. It was ANC policy to push back the frontiers of poverty, but LPMs would enhance poverty. They would take hundreds of millions out of the townships that could have been spent on food and school fees.

The Chair calculated that if the country had 50 000 LPMs, between R60 million and R70 million could go into these machines per week. On a yearly basis, it meant that between R6 and R8 billion would be going from the public's pockets into LPMs. He doubted whether the South Africa public could afford such expenditure. It was bound to have a negative impact on social welfare in the country.

Mr B Johnstone, Chairperson of Cape CMS, pointed out that Government had invested in research on LPMs and indicated that it wanted to establish an LPM industry. He said he totally disagreed about the potential BEE benefits of LPMs. They were amusement machines, not gambling machines. Additional income from LPMs would strengthen the income of taverns and draw more tourists into the townships.

Mr J Miller said people would not be spending their week's salary on LPMs, but their loose change after having bought a beer. The LPM industry would create a range of employment - including control centre staff, installation staff and pub/tavern staff (because LPMs would lead to an increase in the number of people visiting pubs/taverns).

Mr Lockey (ANC) said LPMs would be extremely harmful because they would create a breeding ground for more compulsive gamblers - almost like a "pre-school for casinos". He said it seemed unlikely that a prosperous society could be built if the public (and mostly the poor) was going to spend R8 billion per year on LPMs.

The meeting was adjourned.