The Western Cape Provincial Treasury presented on the Western Cape Nineteenth Gambling and Racing Amendment Bill. The presentation address the funding shortfall of the Western Cape Gambling and Racing Board – the Board historically got revenue from exclusivity fees. Casino operator licences were allocated to each of the regions for a period of ten years, for which an exclusivity fee was payable. This period of exclusivity expired. It also got revenue from Limited Gambling Machine Operator Fees. The Act is being amended and provides for these fees to be paid for a ten-year period. This period of exclusivity has expired.
As a result of the loss of these two revenue streams the Board became increasingly reliant on transfer payments from the Provincial Treasury.
Enabling financial self-sufficiency is a necessary requirement for Board Independence. The Nineteenth amendment to the Western Cape Gambling and Racing Bill deals with efforts to make the Board self-sustainable. There are two other amendments due to come to the Committee. These are the twentieth and twenty-first amendments. The nineteenth amendment introduces a casino operator fee as well as a limited pay-out machine operator fee. It provides for the accruing offset in fees to the Board so the Board can become self-sustainable.
The Committee suggested putting an advertisement into the following newspapers: the Cape Times in English, the Cape Argus in English, Die Burger in Afrikaans, the Vukani in Xhosa and, the Mail & Guardian in English.
It is proposed for the period of submission for comments by interested parties to run from 16 June to 31 July. This will allow stakeholders and community members a month and a half to comment. Public hearings can take place around the second or third week of August, pending the availability from programming and the input of Members.
Members were reminded the presentation was live on YouTube and all points of order are to be raised using the chat function.
Ms Zaheedah Adams, Procedural Officer for the Committee said the Nineteenth gambling amendment was introduced in the ATC (Announcements, Tablings and Committee Reports) on 30 January 2020. Thereafter, the relevant role-players began the proofreading stage of the Bill. Once all the changes were made and approved by the role-players, the Bill was sent to senior management who gazetted the Bill. The stage was completed on the 23 March 2020 and the Bill was gazetted on 24 April 2020. Comments were requested before 29 May. There were two submissions, and requests for information from Edward Nathan Sonnenbergs (ENS) on behalf of Tsongo Sun and Vukani Gaming. Provincial Treasury is committed to respond to those stakeholders.
The Chairperson told Members all comments received on the process, before it was referred to the Committee, was forwarded to Members. There is a commitment from Treasury to reply to those.
Mr Anthony Philips, Acting DDG: Fiscal and Economic Services, Western Cape Provincial Treasury, said the Nineteenth amendment to the Western Cape Gambling and Racing Bill deals with efforts to make the Board self-sustainable. There are two other amendments due to come to the Committee, the twentieth and twenty first amendments. The Nineteenth amendment introduces a casino operator fee as well as a limited pay-out machine operator fee. It also provides for accruing offset in fees to the Western Cape Gambling and Racing Board (the Board). This is so the Board can become self-sustainable.
Western Cape Government: Provincial Treasury Presentation on the Western Cape Nineteenth Gambling and Racing Amendment Bill.
Part 1: Problem Statement: Funding Shortfall for the Board
Ms Claire Horton, Economist , Western Cape Provincial Treasury, said in 1997, the Western Cape Provincial Cabinet issued Policy Determinations dealing with licensed gambling in the province. According to the Policy Determinations, the Western Cape Gambling and Racing Board (the Board) must as soon as possible become financially self-sufficient. Section 20 of the Western Cape Gambling and Racing Act, 1996 (Act 4 of 1996), and the Western Cape Gambling and Racing Regulations (Fees and Costs), 2016, deals with matters such as funding the Board. The Board gets its funding through various prescribed fees regulated in the Western Cape Gambling and Racing Regulations (Fees and Costs), 2016. These fees include new and annual licence fees, investigation fees and deposits.
The Board historically got revenue from:
- Exclusivity Fees: Casino operator licences allocated to each of the regions for a period of ten years, for which an exclusivity fee was payable. This period of exclusivity has expired.
- Limited Gambling Machine Operator Fees: The Act is being amended and provides for these fees to be paid for a ten-year period. This period of exclusivity has expired.
As a result of the loss of these two revenue streams, the Board became increasingly reliant on transfer payments from the Provincial Treasury.
Enabling financial self-sufficiency is a necessary requirement for Board Independence
- Creating an independent agency is no easy task and requires among others, providing a reliable source of funding, usually earmarked levies on regulated firms or consumers.
Basis of calculation
- Some of the Board’s activities can be directly apportioned to gambling license holders, while other activities are cross cutting.
Part 2: Aim of the Nineteenth Amendment Bill
- Increased revenue will assist with efforts to ensure the Board stays self-sufficient, the gambling industry stays appropriately regulated, and to compensate for revenue loss due to expiry of exclusivity periods.
Process to Date
The Western Cape Nineteenth Gambling and Racing Amendment Bill (the Nineteenth Amendment Bill) seeks to support the move to financial self-sufficiency by levying various statutory fees to partially defray costs incurred by the Board in regulating the industry by:
- Re-introducing the limited gambling machine operator fee
- Introducing a casino operator fee
Recommendation and Questions
- Provincial Treasury recommends the Standing Committee facilitate the passage of the Nineteenth Amendment Bill, aimed to promote the self-sufficiency for the Board.
- A well-regulated gambling industry has benefits which accrues to citizens of the Western Cape, the industry, and the provincial fiscus. It helps to protect punters from unscrupulous illegal gambling sites. It also protects the market share of legal gambling sites, supports innovation at the Board, and protects the gambling tax revenue for the Province.
Ms N Nkondlo (ANC) asked if the Board was financially sustainable since its establishment. She wanted to understand how the Bill dealt with creating a sustainable financial model.
The Chairperson asked:
- if the gambling operator fee and the casino fee both had to be paid, or if it was two different fees meant to be paid by the different types of institutions.
- She asked if expiring of exclusivity fees essentially meant one was just moving the fund. So instead of fees being paid to the province, it was paid to the Board.
- She asked for all the research relied on, to be supplied to the Committee.
- Regarding bookmakers and totalisation, she wanted to understand what was meant to be possible reallocation to other provinces and different structures. She asked how the calculation based on the value of the casino development was decided on.
- Lastly, she what was meant by the Bill assisting with innovation at the Board.
Ms Nkondlo asked if illegal gambling was a consideration when looking at the capital outflow of the industry. She also asked how to respond to this from a financial sustainability perspective - places where money was lost due to illegal activities had to be closed.
Mr Phillips replied that five casino licenses were issued and according to the policy determination was assigned to different districts within the province. The biggest was located in the Metro. Before actual licenses were given, there was something called exclusivity. The exclusivity fee was for operators who actually wanted to locate to a specific geographic space given the economic environment in which the space operated exclusively. This made sure the Board was sustainable, but only for a period of ten years. The industry went back after ten years and said it contested the signing code. There was an almost easy cessation of the exclusivity fees. Those elements made the Board a sustainable model in the past.
Benchmarking relies on the income and location. In essence, it actually deals with the issue around exclusivity or at least the privilege to trade from a certain geographic space. The biggest advantage is to locate the casino in the Metro, because 72% of the population goes there. Regarding oversight, the Board made sure the industry was accountable and accessible while making sure not to over-stimulate gambling. This is because, within a Province, it can actually run into problems. The issue around the relocation of a second Casino to the Metro was actually dealt with in the twentieth and twenty first amendments of the Bill.
Ms Horton said the international goal is for the industry to pay for the regulation of gambling. Australia and the United Kingdom are used as references for self-regulation. The other resource references are sources used at an intensive international literature level. She said it is restricted in the sense it has limited power machines. Most bookmakers who take books receive their revenue from sports. The horse racing industry is governed by or run by the totalisators. The Bill aims to address the two fees which it looks at regarding casinos and limited power machines. The latter is where the majority of gambling activity in the Province takes place.
The Board gets its revenue from the current custom fee regulations. It imposes various fees and administrative fees on the entire industry which is inflated on an annual basis amendment to the Regulations. It will largely cover most of the operational activities of the Gambling Board. The Board is largely responsible for licensing, licensing applicants, and undergoing certain property investigations related to the suitability of staff involved in the industry. The Gambling Board is responsible for ensuring operators who have licenses adhere to the various rules and regulations governing gambling.
Another function of oversight of the industry is for the Board to provide education to the broader society regarding responsible gambling. It is also responsible for identifying areas of innovation as the industry is very technologically driven. The Board must keep pace with those technological developments. It is looking at ways innovation can be used to regulate or provide consumer protection. The Board has a function of liaising and being up to date with innovation. It does this by speaking to other Gambling Boards about what it is doing about innovation regarding international freight.
Basically, there are certain expenses the Board incurs by doing its functions. These expenses must be covered by the industry or through regulating gambling. It aims to prevent illegal gambling, to protect consumers, as well as the fiscus.
Mr David Savage, Head of Department, Western Cape Provincial Treasury, said the Board was never unsustainable. The financing model used had defectors which emerged over time. It showed the Board was not sufficiently independent as a regulator. Introducing the self-financing dimension was a direct payment to the Board. It creates a transparent mechanism. Regarding affordability, it is not only affordable but in fact desirable for it to pay costs of its own regulation in a transparent manner.
It is too early to tell what the full economic impact of Covid-19 and legislation was on the sector. It will fundamentally alter the importance of the amendments as proposed, but in fact will address the question of illegal gambling. A strong independent regulator, adequately financed, is obviously critically important for tracking down and responding to compliance issues in the sector. He said he was more than happy to share all reference materials.
Ms Horton said, about hosting sports and horse racing, a collection from the punters will be paid over to the totalisators to assist with covering the costs of hosting horse racing events.
The Chairperson thanked the Department for its contributions and answering the questions posed by the Committee Members. The Department was excused.
The Chairperson suggested an advertisement be put into newspapers. The following newspapers were suggested for advertisement:
- The Cape Times in English
- The Cape Argus in English
- Die Burger in Afrikaans
- The Vukani in Xhosa
- The Mail & Guardian in English
It was proposed the advert asks interested stakeholders to submit comments through email to the Procedural Officer. This can be forwarded to the Procedural Officer for the Committee to consider. The Committee can then consider it and send voice notes through WhatsApp. The advert is to say anyone who wishes to make oral submissions must say it wishes to do so, because at the moment there was no real indication how many people want to part of the public hearings.
It was suggested once comments are received through email or WhatsApp, the Committee can go through it and discuss possible dates on when public hearings can happen. If anyone indicates it wishes to make oral submissions, the Procedural Officers can reach out to them and indicate the possible dates available.
It was further suggested a voice note be submitted to the radio as well. The period of submission will be from 16 June to 31 July. This will allow stakeholders and community members a month and a half to comment. It is proposed the public hearings take place around the second or third week of August pending the availability from programming and the input of Members.
Mr A van der Westhuizen (DA) asked if he was correct in presuming the Western Cape Provincial Parliament (WCPP) website will also alert website visitors, and the social media presence of the WCPP will be fully utilised to alert stakeholders and the community.
The Chairperson said utilising social media and the WCPP website is a splendid idea.
Mr D Mitchell (DA) said he agreed fully with the proposals mentioned. To avoid anyone challenging the processing code and in light of the way the public participation will be conducted, the Committee needs to make sure it ticks all the boxes regarding compliance and following procedures correctly.
Mr van der Westhuizen wanted to know why the submission period was six weeks, and if it was the normal period or not, as it seemed longer than usual.
The Chairperson said the submission period did not need to be six weeks. However, the reason for the long period was due to the Constituency period coming up. This will last until mid-July. The first week after the return was a human settlements lot. The next week was the Committee’s turn. The Procedural Officers will need enough time to compile all comments and administrative tasks.
Mr Mitchell said the Committee keeps to the initial six weeks as it will not only allow for the input and compilation of administration, but also allow the legal department to advise the Committee.
Mr van der Westhuizen said he was just concerned a lot of pressure was put on the administration, but he agreed it could stick to the originally proposed six weeks.
The Chairperson said the Committee needs to remember it was not just about receiving the information and voice notes, but also transcribing and compiling the information received.
Adv Romeo Maasdorp, Legal Advisor for the Western Cape Provincial Parliament, said there seems to be rationality issues and therefore legality issues regarding the stated purpose which Treasury articulated, and asked if the Bill is the appropriate legal means to achieve it. After returning to the public consultation process, it is useful for the Committee to examine the extent to which the comments still hold weight.
The Chairperson is aware of letters received and informed Members the Committee, it was forwarded to Members. Treasury said it will reply to the respective comments. Treasury was explicitly asked to forward its responses to the Committee.
The Chairperson thanked all Members for their contributions.
The meeting was adjourned.
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