National Gambling Bill: hearings

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Trade and Industry

18 September 2003
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Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
19 September 2003
NATIONAL GAMBLING BILL: HEARINGS
 


Chairperson: Dr R Davies (ANC)

Relevant documents:

Gold Circle (Proprietary) Limited submission
SACOB comments
National Gambling Board submission
National Responsible Gambling Programme submission
Remarks by William R. Eadington
Remarks by Professor Joseph Kelly
Paul Bellringer submission
Limited Payout Machine Association of South Africa (LPMASA) submission
Foundation for African Business and Consumer Services ("FABCOS") submission
SAGMA - South African Gaming Manufacturers Association: National Registration System Specification
CASA (Casino Association of South Africa presentation
COSATU: submission
National Gambling Bill [B48-2003]

Other documents handed out:
Peter Collins comments
Peter Collins submission
CASA (Casino Association of South Africa) submission

SUMMARY

 


Submissions were made by Gold Circle (Proprietary) Limited, the SA Chamber of Business, National Responsible Gaming Programme, National Centre for the Study of Gambling, Limited Payout Machine Association of SA, Foundation for African Business and Consumer Services, SA Gaming Manufacturers Association, Casino Association of SA, and COSATU. The key debates were around Clause 13 (restrictions on granting credits and discounts), Clause 14 (voluntary exclusion of the addicted), Clause 26 (Limited Payout Machines - LPMs) and Clause 53 (regarding addictive gambling versus broader social economic inequalities). Members expressed grave concern about the social impact of gambling, particularly in relation to the proposed rollout of LPMs.

MINUTES
GOLD CIRCLE (PROPRIETARY) LIMITED
Mr I Evans, Attorney of Gold Circle, briefed the Committee on behalf of racing operators and totalisator operators in KZN and the Western Cape (see document "Representations made by Gold Circle (Proprietary) Limited on the Final Draft National Gambling Bill"). Redrafting suggestions were made regarding definitions and the role of bookmakers. Gold Circle was concerned about the Bill's restrictions on the granting of credit, because such restrictions would eliminate telephone betting and thus severely impact on business. The Bill facilitated the forced relocation of horse racing premises in specified cases, but did not take account of the cost implications of moving. The requirement that all people engaged within the gambling industry be licensed, was extremely broad. Mr Evans said it was hard to imagine every person working in the industry, including janitors and gardeners, being licensed. He said an existing business should not be placed in jeopardy by the arbitrary imposition of conditions based upon undefined concepts such as "black economic empowerment" and "combating the social consequences of compulsive gambling". It was Gold Circle's view that the effective control of racing and betting had to remain with the provinces.

Discussion
Mr D Lockey (ANC) asked what percentage of Gold Circle's industry was owned/controlled by black people.

Mr Evans could not supply a percentage, but said a process was unfolding in which all totalisation outlets were being transformed into BEE units. Physically challenged personnel ran the telebetting side. He said that the industry created a huge amount of jobs and was working hard to transform.

SOUTH AFRICAN CHAMBER OF BUSINESS (SACOB)
Mr K Warren, SACOB's Policy Executive in Parliament, discussed several definitions in the Bill and argued that the occupant of leased or rented premises (and not the property owner) should be held responsible for illegal gambling. He raised concerns about the legal position of unlicensed machines, the effect that prohibition on the location of ATMs could have on tourism, limits on the number of LPMs and the financing of the proposed central electronic monitoring system. (See document "SACOB: Comments on the National Gambling Bill"). Regarding restricted persons, Mr Warren said it would be costly to employ additional staff to check every person entering premises against a register. SACOB also questioned the need for all gambling industry employees to be licensed. SACOB believed reasons should be furnished to applicants for the refusal of gambling licenses and that timeframes should be set for the adjudication of licenses. In considering economic and social development issues, SACOB requested that the license holder be consulted before amendments to the programmes submitted by the licence were required.

Discussion
The Chair said the Committee had heard that LPMs would generate between R12 000 and R15 000 per machine per week. This translated into the public spending between R3.1 and R3.8 billion per year on LPMs if 50 000 were rolled out. Would SACOB's members welcome such spending?

Ms M Ntuli (ANC) said it seemed SACOB felt it would be too costly and difficult to bar gambling addicts through access control. However, was there not a social responsibility to prevent such persons causing hardship to themselves and their communities? She said SACOB approached the issue of ATMs at gambling sites in terms of tourism, but local pensioners and working class people where using the same ATMs to withdraw money for gambling, instead of spending the money on food or schooling for children.

Mr Warren said he was sure most business people would welcome the additional income that LPMs could generate. Regarding addictive gambling, he said it could affect anyone, not just the poor. He conceded that it was a major social problem, as was alcoholism. Since South Africa had lifted its taboo on gambling, it had become difficult to deal with the social impact of gambling. As far as ATMs were concerned, Mr Warren argued that restaurant owners and other non-gambling businesses at casino centres would be upset if there were no cash facilities available for their clients.

NATIONAL RESPONSIBLE GAMING PROGRAMME
Adv T Majeke, Chief Executive Officer: National Gambling Board, provided background on how South Africa dealt with problem gambling. (See document "Dealing with problem gambling in a developing country: the South African approach"). In 2000, as required by license conditions and provincial legislation, the industry initiated a national responsible gambling programme. In 2002, the National Responsible Gambling Trust was created as a joint initiative of government regulators and industry. It set out to develop a social agenda and was founded on four pillars: research, public education, training and treatment/counselling. Mr Majeke provided reasons why this model was adopted and said the programme's format was recognised internationally. It received R10 million per year in funding from the industry - horse racing, the casino sector, Bingo and LPMs. The Lotto was hopefully joining soon.

Prof P Collins, Executive Director of the SA National Responsible Gambling Programme, questioned the rushed processing of the Bill and said some substantial new proposals have been made without adequate discussion or consultation. He differentiated between addicted gamblers and problem gamblers and explained the system whereby the extent of a person's gambling problem could be measured. (See document "Presentation to Portfolio Committee - Peter Collins - National Responsible Gambling Programme, Sept 2003"). According to Prof Collins, problem gambling was not rising at an alarming rate and the small growth that did occur, was attributable to the Lotto. It was very patronising to see the poor as particularly vulnerable to problem gambling. He suggested "targeted" instead of "scattershot" measures to deal with problem gambling. Targeted measures would include a gambler's "driver's license", and easier access to counselling and education programmes.

Discussion
Mr Lockey (ANC) disagreed with Prof Collins' view that gambling figures in the country were not excessive. Of the country's unemployed people, about 27% played the Lotto and 22% went to casinos. South Africa had the 8th largest casino yield in the world, but only the 91st largest economy. How could Prof Collins conclude that this was not problematic?

Dr T Rhoda (NNP) said the propensity of South Africans to gamble was three times higher than in the rest of the world, yet South Africans earned eleven times less. Why did South Africans gamble so much?

The Chair wanted to know how Prof Collins' gambling "driver's license" would work. Where would one register for it?

Ms Ntuli (ANC) asked whether there was data or studies to verify the claim that most poor people gambled responsibly. Referring to education drives to promote responsible gambling, Ms Ntuli wanted to know who would be responsible for it, how it would be funded and what the industry was doing in this regard.

Prof Collins said the statistic of 22% of the unemployed visiting casinos, included the retired and homemakers - people who were not typically job seekers. Unemployment and poverty was not necessarily the same thing. Figures like those indicating that South Africa had the 8th largest casino yield in the world, needed further interrogation before one could make straightforward deductions. Regarding the gambling "driver's license", he said the suppliers of gambling facilities would issue it. Nearly half the budget of the National Responsible Gambling Programme was spent on education (including the training of other organisations). Most of the money was supplied by the industry. He said there were not studies available regarding the level of responsible gambling among the poor. Research could be undertaken in this regard in rural areas, but it would be a very expensive process.

NATIONAL CENTRE FOR THE STUDY OF GAMBLING
Prof William R. Eadington, an American expert on problem gambling, explained two general approaches that could be taken for promoting responsible gambling. (See document "Remarks to the Parliamentary Portfolio Committee on the South African National Gambling Bill - William R. Eadington"). He also pointed out how strategies proposed in the Bill were ill-advised and suggested more reasonable strategies. Prof Eadington addressed the issue of identifying and isolating problem gamblers and proposed that regulators establish a system of gamblers' licenses. The casino industry had made substantial investments under the 1996 Act with an implicit understanding that those rules would apply to future projects. Government should not change the rules midstream.

Prof Joseph Kelly, another American expert on problem gambling, argued that gambling legislation should delegate much discretion to a regulatory agency. (See document "Remarks concerning the National Gambling Bill, 2003 - Professor Joseph Kelly"). He said six-hour casino closures as intended by the Bill did not work elsewhere. The intended prohibition of credit facilities would simply lead to loansharking. He also raised concerns regarding the protection of minors, interactive gaming and excluded persons.

Mr Paul Bellringer, Chief Executive of the British organisation GamCare, explained the new UK Gambling Bill and its requirements. (See document "Presentation to the Portfolio Committee on Trade and Industry, South Africa - Paul Bellringer"). The UK Bill required financial contributions from the industry for treatment, education and research. The Bill was based on the principle that the responsibility for an individual's gambling was their own, while the operators were responsible to exercise a duty of care. Prof Bellringer listed the key elements of the social responsibility code contained in the UK Bill: non-exploitation of the gambler, encouragement to stay in control, the provision of access to help, provisions for self-exclusion and the training of staff.

Discussion
Prof B Turok (ANC) wanted to know whether the American and British experts were addressing the Committee in an independent capacity or whether they had been invited by an organisation. He also pointed out that most countries had limits on drinking by controlling the hours of alcohol consumption. What was the difference between governing gambling hours and drinking hours?

Mr Lockey (ANC) said ultimately the only sustainable solution was education. The public had to be taught about the staggered odds of gambling and the potential harm thereof.

Prof Eadington said they had been invited by the National Centre for the Study of Gambling. He said in a South African context, one had to ask about the alternative to shorter gambling hours. It was likely to cause an illegal industry to blossom, since some people preferred to gamble at unusual hours. He agreed about the importance of education. People needed to understand that gambling was meant to be a form of entertainment, not something to control your life.

LIMITED PAYOUT MACHINE ASSOCIATION OF SOUTH AFRICA (LPMASA)
Mr S Gold, Chairperson: LPMASA, said that the LPM sector enabled historically disadvantaged entrepreneurs a direct and measurable opportunity, more so than any other form of regulated gaming in the country. A regulated LPM industry would deter the resurgence of illegal gaming and was likely to have a comparatively lower negative social impact than other forms of gambling. He countered some misconceptions about LPMs, including the views that LPMs would target the poor, would be located in cafés and corner shops, would be accessible to children, would be difficult to control, would suck up people's disposable income and would only enrich a few. He reminded the Committee that with the 1996 Act, Government created countrywide expectations about the establishment of an LPM industry.

Discussion
Mr Lockey (ANC) said the prospect of a burgeoning illegal industry was an empty threat. Regulation did affect behaviour. He wanted to know how the LPM industry was going to prevent poor people from gambling away their children's food money. LPMs should rather be called Unlimited Pay-in Machines, because you could only win up to R500, but you were able to put thousands of rands into the machine. LPMs were a bigger rip-off than casinos.

Ms Ntuli (ANC) said Mr Gold claimed that LPMs would not be installed in poor areas. LPMs had already been installed in the Nelspruit region of Mpumalanga. Did Mr Gold believe Nelspruit people were rich enough to afford LPMs? She also raised the issue of LPMs being installed in places where alcohol was consumed. Consuming alcohol makes people less responsible and could lead to people emptying their pockets into LPMs while the women and children at home suffered.

Mr Gold said if the Department of Trade and Industry reneged on its undertakings regarding the rollout LPMs, it would send a negative message to people who got rid of illegal gambling machines in anticipation of a regulated LPM industry. Regarding the poor, he said the LPM industry wanted to enter more affluent areas. LPMs would actually benefit the poor because Government would be receiving levies and the industry have empowerment structures in place. A lengthy screening process was followed in Mpumalanga and judging from the current patrons of LPMs in the province, the industry was not milking the poor. In terms of the Bill, unlicensed shebeens/taverns were not illegible for LPMs.

FOUNDATION FOR AFRICAN BUSINESS AND CONSUMER SERVICES (FABCOS)
Mr S Buthelezi, National President of FABCOS, reminded the Committee that Government had introduced a regulatory environment within which the gambling industry would operate, and simultaneously created legitimate expectations of business opportunities within the industry, in particular for broad-based black business as represented by FABCOS and NAFCOC. Mr Buthelezi said the rollout of LPMs in combination with the liquor licensing process presented FABCOS with an excellent opportunity. With the SA Taverners Association (SATA), FABCOS went on a drive to remove illegal machines from members' premises to pave the way for liquor and LPM site licensing. FABCOS members owed Nedcor Bank more than R30 million for the funding of FABCOS' role as Route Operator for the supply of LPMs to licensed taverns. While the rollout of LPMs was already being delayed, section 26 of the new Bill would create further uncertainties in the LPM industry. More restrictive amendments to it could severely damage the LPM industry and could also be unconstitutional. In such a case, FABCOS might be left with no option but legal action. The Bill would also impede on the future profitability of land-based casinos.

Discussion
Mr Lockey (ANC) said FABCOS should feel free to take the matter to court. As Members of Parliament, the Committee had to look at the collective interest of society in the broadest possible sense. People would not use LPMs for entertainment, but with the aim of winning money. The Committee had to ask itself whether there were not better ways for members of the public to spend their money.

Ms Ntuli (ANC) said the Committee needed to consider broader issues than just Mr Buthelezi and his associates making a profit. It had to look at the social impact of LPMs on the entire community.

Mr A Swartz, Corporate Advisor to FABCOS, said his organisation had a duty to take the matter to court if a law was going to be implemented that would prevent FABCOS from realising its goals and objectives. The crux of the problem was that non-problem gamblers and industry owners and workers were all being punished in terms of the norms of a defiant minority.

SOUTH AFRICAN GAMING MANUFACTURERS ASSOCIATION (SAGMA)
Mr H Kruger, Attorney for SAGMA, said the Bill's definitions of "gambling device" and "gambling machine" needed more careful consideration. He provided a detailed explanation of the functional requirements of the National Registration System that needed to be created in terms of the Bill. (See document "SAGMA - SA Gaming Manufacturers Association: National Registration System Specification"). Regarding the LPM industry, Mr Kruger said that huge amounts of money had been invested after Government created expectations of business opportunities in this sector. He suggested that warning notices in advertising could provide useful information to problem gamblers, but stressed that warnings should not be so radical and intrusive that they would negatively impact on the underlying entertainment activity. SAGMA believed that the enforced closing of casino's for certain hours would affect profitability and negatively impact on staff, especially shift workers.

Discussion
Prof Turok (ANC) wanted to know how many illegal machines were currently operating in South Africa. He said the Committee did not want to harm investment, but it had to strike a balance between different interests. The gambling industry was not a normal industry. A broad view had to be taken of what would be conducive to the social good of the country.

Mr Lockey (ANC) pointed out that business was about risk and reward. One deliberately chooses to invest in something and then embarked without certainty. The industry could not expect Parliament to rule in its favour on the basis of its investments.

Ms Ntuli (ANC) said it had to be assessed how many LPMs would be allowed per province. The country could not be flooded with LPMs.

Mr Kruger said there were about 50 000 illegal machines in the country. These machines were not paying out money, did not provide tax income and were not SABS approved. People kept the machines to pay their electricity bills and rent. The licensing of machines would be the best way to curb the number of illegal machines, because licensed establishments would start pointing out the illegal machines at their neighbours. He admitted that gambling could be nefarious to society, but said it could be controlled and simultaneously provide an income for Government by means of levies and taxes.

WESTERN CAPE LIQUOR TRADING ASSOCIATION (WECALTA)
Mr S Williams, Chief Executive Officer of WECALTA, said his organisation saw LPMs as an empowerment opportunity for the historically disadvantaged to enter the gambling industry, which was currently owned by white people and some of the 'black elite'. The number of LPMs to be rolled out in the country should not be determined by Government, but should be left entirely to the market. LPMs would create opportunities for people to socialise in disadvantaged areas which traditionally lacked entertainment facilities. WECALTA said the national monitoring system should be run at provincial level, where it could be outsourced to the private sector and thereby offer more opportunities for black empowerment.

Discussion
Mr Lockey (ANC) said there had to be more productive, less harmful ways of providing entertainment. The Committee wanted to protect poor people and WECALTA was trading in very poor areas.

The Chair said that since WECALTA represented the shebeen/tavern sector, could they please comment on the fact that the Bill would only allow LPMs to be installed in legally registered taverns?

Mr Williams said the Committee seemed to think that the poor were completely illiterate and could not think for themselves. It was not the item on the platform that caused problems, but people's inability to handle it - similarly liquor did not create alcoholics. Regarding the licensing of taverns, he said WECALTA did want to see its members getting licensed and was keen to be involved in finding solutions for community problems.

CASINO ASSOCIATION OF SOUTH AFRICA (CASA)
Mr J Mabuza, Chairperson of CASA, said there had been insufficient consultation regarding the new Bill (which contained unacceptable new provisions) and that the timeframe for responses to the Bill was unfairly brief. He described the urban gambling industry prior to the introduction of the National Gambling Bill in 1996, and explained the subsequent new dispensation which included a comprehensive regulatory framework, a new licensing process, public benefit projects, social investment, stability and accountability, and the creation of CASA. Mr Mabuza listed key issues in the new Bill that could lead to thousands of job losses, closure of marginal casinos and loss of revenue for Government. (See document: "The New National Bill: What does it mean for empowerment and other government priorities in the casino sector?"). He said the Bill could be legally challenged on Constitutional grounds. The poor did not partake in casino gambling in meaningful numbers, since it was a predominantly middle-class activity. Government would have to bear responsibility for any negative consequences of the dramatic policy changes contained in the new Bill, be these political, economic or social.

Discussion
Prof Turok (ANC) said the Committee did not want to do something that would lead to massive job losses. Yet he was appalled when he recently visited a casino and witnessed poor people desperately gambling late into the night.

The Chair said it was unacceptable that casinos offered discounted accommodation and meals to entice people to gamble. He was opposed to the practice of complimentary gambling vouchers being offered to people when they paid to see music shows at a casino complex. It was also a problem that transport was being provided from poor areas for people to go gamble at casinos. Research was currently being conducted in the Western Cape to ascertain the level to which social welfare grants were being used for gambling.

Mr Lockey (ANC) said it seemed to him that the net profit of casinos in South Africa should be much higher than the figure reflected in CASA's submission.

Mr Madiba (ANC) wanted to know what CASA was doing for the addicted and about the removal of ATMs from gambling sites.

Mr Mabuza said the hearing was the first opportunity CASA had had to interact with the Department of Trade and Industry on the points raised. He was glad to hear that the Committee's intention was not to damage the industry. CASA was willing to sit non-stop with the DTI and engage on points of concern. Mr Mabuza did not see complimentary gambling vouchers as a problem. It was a legitimate business practice. He did believe that it was wrong to bus people straight from pensioners' queues to casinos. The small percentage of problem gamblers in the country was less of an issue for him than the upliftment of the poor. If one ship spilled oil in the ocean, one could not simply ban all ships from the sea. He agreed that ATMs should be removed from gambling floors, but insisted that they should not be entirely removed from casino centres, because such a step would unfairly penalise shops, restaurants and cinemas in the vicinity of casinos.

CONGRESS OF SOUTH AFRICAN TRADE UNIONS (COSATU)
Mr E Paulus, Research Co-ordinator of COSATU's Parliamentary Office, said socio-economic impact assessments had provided a clear warning of the devastating consequences of gambling on the quality of life of the poor. COSATU believed that gambling caused a sizeable displacement of household expenditure and that the industry was exploiting the desperation of the unemployed. Therefore the proliferation of gambling should be limited. (See document "COSATU: Submission on the National Gambling Bill"). Mr Paulus also raised concerns about the rationale that the Department of Trade and Industry was applying with the promulgation of the Bill. It seemed the Department was concurring with the gambling industry's view that gambling was not that harmful and that it was a viable and legitimate source of income. COSATU could not endorse the Bill because it did more to promote the industry than regulate it. The Bill's black economic empowerment objectives would not lead to broad-based benefits. The job creation that could occur in terms of the Bill would come at too great a social cost.

Discussion
The Chair wanted to know what COSATU saw as the appropriate approach to gambling in a country with skewed income levels and extensive poverty. Should there be a rollback of the gambling industry?

Mr Paulus replied that COSATU was indeed asking for a rollback of gambling. They wanted the expansion process to be halted, including the advancement of LPMs.

Prof Turok (ANC) said while casinos where mostly white-owned, the LPM sector would provide a unique opportunity for smaller black businesses to enter the gambling industry via the townships. What were COSATU's views on this?

Mr Paulus said any form of gambling - whether it promoted black small businesses or not - could not be supported because of the social cost involved. The benefits would go to a small number of people at a large social cost.

The Chair concluded the meeting with a summary of the key issues that transpired during the proceedings. He said although there had been complaints about the process of consultation, the Bill had been available for comment for some weeks. Many submissions were very technical in nature and the Committee would have to seek legal advice.

The meeting was adjourned.

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