Gambling: Input by Minister and Provinces

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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

8 May 2001

Chairperson: Mr M Moosa

Documents handed out:
Provincial inputs from all provinces except Western Cape (See Appendix)

The committee came together to discuss problems experienced since the change in the South African gambling legislation. A wide array of issues were raised. These ranged from the socio-economic impact of gambling to actual mechanisms of controlling and regulating the gambling industry. Two issues which rang particularly loudly were those of the limited payout machines and the socio-economic impact - it appeared there is a new sense of cold sobriety with which the provinces approach the subject of gambling.

Mr Moosa said that the purpose of the meeting was to discuss the problems experienced within the gambling industry since the change in South African legislation. He stated that numerous welfare organisations had raised issues around the subject of gambling. Gambling being a provincial form of revenue, would mean that the provinces need to be included in discussions. Mr Moosa alluded to further meetings on the subject to discuss matters such as security, advertising, regulation and research into the gambling industry.

Minister of Trade and Industry
The Minister discussed the issue of gambling under three main headings: its socio-economic impact, illegal gambling and limited payout machines.

The Minister kicked off by reminding that gambling was a matter of concurrent jurisdiction and therefore was governed by both the provincial and national spheres of government. This situation naturally demands a higher degree of coherence between the two spheres of government, as was called for by the Minister.

The Minister reasoned that gambling had been around for a very long time, and it was better to regulate the industry rather than to leave it unchecked or outlawed as to do so provides room for criminal activities. He said the legislation that came about after 1994 was the result of extensive comparative research.

The Minister went on to list the various forms of gambling currently permitted in South Africa. These were the national lottery, horse racing, limited payout machines, bingo, slot machines and casino style games. The Minister stated that although a form of gambling, the National Lottery was purely the concern of National government and would thus not be discussed at the meeting.

Under present gambling legislation there are total of forty licences which can be awarded. These forty licences are further divided amongst the provinces, with a maximum number of licences that can be awarded in any one province. The Minister admitted that the total number of forty licences might be too great in light of constraints such as the size and income level of the population.

Limited Payout Machines
The Minister stated that limited payout machines had been identified as a serious form of gambling and that research in Australia had revealed it as a major source of problem gambling. The Minister proposed to control this area of gambling by limiting the number of these machines to 50 000 units. This number was to be divided amongst the provinces, with provincial quotas not being transferable. The Minister proposed a change to legislation, saying that it might be favourable to limit the number to five machines per site, which could furthermore only be located at that site, if certain requirements were met. Also, he advised that there should be no jackpots allowed, and that an upper limit of five rand bet and five hundred rand maximum payout be set. It was proposed that all these machines should be linked to a central point with a common database in an attempt to have a more centralized form of control over these machines.

Illegal Gambling
The Minister said there is a need to establish more effective control over time and eradicate illegal casinos altogether. He went on to say that there was still a considerable problem with illegal gambling and that this fight was characterized by protracted legal battles against skilled legal representatives. The problem, he said, is that the police and public prosecutors, and even judges, lacked the knowledge and experience to effectively perform in this area of law. The Minister did however commend Kwazulu-Natal for their great advances in the fight against illegal gambling.

Socio-Economic Impact
The Minister stated that there was a need for programmes to be established to alleviate the plight of children, the problems of regressive gamblers, and the broader socio-economic impact of gambling. He said that these programmes should be established by the casinos themselves.

In addition he stated that research by the HSRC showed that 60% to 80% of the South African population gambles. The Minister stated that most gamblers are from the lower middle class white population, followed by the Indian population, then the coloured population, finally followed by the black population. Furthermore he averred that most gamblers were both married and employed.

The discussion by the Minister then raised matters such as advertising and access to casinos by children. Many have complained about the manner in which advertising has been done by casinos, promising wealth and promoting the 'get rich quick' ethic. The Minister felt that standards should be set to control the manner in which advertising could be done. On access by children, the Minister expressed concern about the degree to which the casino activities were freely visible to children. In relation to children there was also a matter of daycare.

The Minister noted that in the past it had been proposed that the level of monitoring should be increased and be done on a wider scale. However it could only be properly done if certain categories of monitoring spanned all the provinces. He mentioned specifically matters of shareholding and that changes in shareholding should be closely monitored. This inter-provincial monitoring would result in the application of equal standards of monitoring and control throughout all the provinces. He suggested that this be achieved by placing government representatives on the National Gambling Board. He further suggested certain technical amendments to the Act to improve the standards of control.

The Minister admitted that there was a great need to establish ways to ensure responsible gambling and that the government was straining in its capacity to control problem gambling.

Mr D Mohapi (ANC, Gauteng) spoke of his personal experience of visiting a local casino located near Soweto. His statement was an attempt to dispel the weight attached to the statistics cited by the Minister which outlined the demographic profile of South African gamblers. He contended that his own experience revealed that it was actually those who could least afford it that were gambling the most. He concluded saying that much more research into the socio-economic impact of gambling is required.

The Minister replied that research into this area was indeed required. He asked whether the target market of casinos had in fact changed. In researching this matter one would have to look at how the location of a casino would affect its customer profile. The two examples given by the minister were, the casino adjacent to a shopping mall and a resort type casino. At this point, South Africa was once again compared to Australia. Australian experience has shown that a casino in a mall-type situation is highly undesirable in its socio-economic impact. Australian experience has also shown that a resort type casino attracts a very different customer profile.

The Minister pointed out that gambling is a huge source of revenue, and that it also constitutes a considerable investment by private individuals. Upsetting this delicate situation would have negative impacts on present and future investment as investors require certainty. It is for this reason that the minister proposed a five year cycle of reexamining and reevaluating the commercial and licencing situation.

Provincial input
The provinces outlined their experiences with gambling. Below are summaries of the presentations made by all the provincial representatives.

Ms G Sindani (ANC) spoke on behalf of the province. The province had not conducted a public hearing as was advised due to a break down in communication.

This province based its presentation on an economic impact study conducted in 1998. This study showed that there was a sizable displacement of household expenditure which was felt to be attributable to the three licenced casinos. Despite this the province is in the process of granting a fourth licence.

The representative claimed that the province has no problem with illegal casinos.

On the limited payout machines, it was stated that allocation of these machines would not take place in a "once-off roll-off" process but would instead be done in a more controlled manner.

Northern Cape
MEC Mkweya (ANC) stated that their experience was a painful one wrought with legal battles. The casinos in the area were allowed to operate subject to the condition that they close by the end of 1998. When this date elapsed, instead of closing the casinos initiated legal battles.

Problems in the area include pensioners who gamble with what little money they have, illegal casinos and numerous complaints from welfare organisations.

The distraught Mr Mkweya said that in the province, police fail to take any action against illegal casinos unless the order comes from politicians.

On limited payout machines, the Northern Cape have been allocated 2000 of the 50 000 national quota. However the province only wants 500 of these to start with.

This province also recently disqualified one application for a casino licence in the Colesburg area and has subsequently re-advertised this licence.

North West
The North West Province had a Standing Committee meeting with the National Gambling Board in attendance.

Ms M. Khunwana (ANC) said the problems experienced here were a result of seven inherited licences. All of these were allocate to Sun International. To come into line with present policy this situation had to be changed. To comply with the Act two of those licences had to be revoked. The Act also limits the number of licences which can be held by one organisation to three. This is done to promote competition. To bring the province into sync with the new policy, another player, Tusk Resort Group, was brought into the picture. As a result feasibility studies into the best location for the new casinos have been done.

Sun International also recently revealed its policy on treatment and education. The representative noted the importance of counseling programmes being made known to gamblers and alluded to the possible connection between crime and gambling.

On limited payout machines the representative referred to the manual issued by the National Gambling Board that outlines matters such as crime prevention and best location. This manual is to be followed in the issuing of limited payout machines.

Between the years 1994 and 1999 there was a flood of illegal casinos in the province. Prosecutors were largely unsuccessful due to loopholes, and when they were successful, judges inexperienced in this area would impose meagre fines. SANAB ( South African Narcotics Bureau ) was responsible for controlling the illegal gambling problem but this part of their job suffered as other matters took precedence.

Northern Province
Representations for this province were made by Mr R Tooly (ANC). Mr Tooly's presentation consisted largely of statistical information which detailed a sizeable displacement of household expenditure.

Mr Tooly said that a number of illegal machines had been confiscated and destroyed. The province now has two licences issued within the province. The province had experienced no problems with illegal gambling but has embarked on certain related crime prevention programmes.

Eastern Cape Province
Mr de Wet, chairperson of the Eastern Cape Standing Committee on Economic Affairs, Environment and Tourism, said that the province had conducted public hearings and submissions were being received on an ongoing basis from stakeholders. Academic institutions such as the University of Port Elizabeth were currently conducting research on the social effects of gambling in that province.

The Eastern Cape Gambling Board held the view that the South African Police Service in the Eastern Cape needed to create a task team to concentrate on rooting out persistent illegal gambling.

Score-a-Lot still operated video lottery terminals on behalf of the Transkei and Ciskei Lotteries Board. The Board believed that the Minister should issue notices for these operations to be terminated, which would be consistent with Section 64 of the National Lotteries Act.

The Board was considering extending licences for bookmakers from the present two years to five years. This would end the huge burden involved in re-licencing every two years.

The SA Tavern Association was concerned about the restrictions on the number of Limited Payout Machines that were to be made available to the Eastern Cape and that these licences would be awarded to big companies. It believed that the big casinos would benefit as they would get these machines and this would further their monopoly in the gambling industry. The Tavern Association saw the Limited Payout Machines as bringing economic growth to the townships. Some of these tavern owners have spent a huge amount of money in developing their infrastructure in order to qualify for licences. He said they believed that this would bring them into the mainstream of the economy because they would have to register their business and this would be positive for the economy.

The submission by SANCA Alcohol and Drug Abuse Centre predicted a rise in gambling addiction. It pointed out that there were only two gambling addiction experts in the whole province to deal with this.

The general view in the province is that the gambling industry reduced the spending power of consumers and had a negative impact on retail business in areas were casinos have been established in the province. Further the view was that the number of casinos in the province should not be increased and that casinos should be located far from rural areas and instead micro business ventures should be encouraged in these areas.

Free State
Mr Mnguni said the province had issued no licences thus far. However the province had inherited two Sun International casinos which were operating in the former homelands.

On the socio-economics effects of gambling on the province, he acknowledged the fact that the Free State suffers socially and economically because these casinos just outside its borders are draining its financial resources. However as the province does not have casinos, it is unable to give precise data on the effects of gambling within its borders. The casinos were not involved in community outreach programmes.

This province is in a process of considering new casino applications. Licences for Limited Payout Machines would only be considered after the impact that the four new casinos will have on the province is assessed. The Board took this position because it feared over-saturating the gambling market, which could have a disastrous effect on the society and the economy of the province.

On crime control in the province he said the provincial gambling board has cultivated good relations with the SAPS and the Justice Department. The board met with other provincial boards to exchange information on how they deal with crime and gambling.

His province was experiencing problems with illegal gambling which has proved difficult to root out. The SAPS is under-resourced to fight this battle and hence they believe that the gambling industry should protect itself by using legal methods to eradicate this problem.

Gauteng Province
Mr Mohapi, representing the Gauteng Gambling Board said that gambling in the province is making significant contribution to employment and tax revenues in the province.

All the six licences granted to the province by the government were awarded to various companies in 1998. Gauteng believed that there was greater co-ordination needed amongst provinces to deal with the many challenges this industry poses to the country. He also acknowledged that Gauteng had a huge share of the unregulated gambling that is taking place in South Africa.

He said the question of advertising and informing people of the effects of gambling needs addressing. The SAPS is discouraged about dealing with illegal gambling because they lacked both the capacity and resources to effectively deal with this problem.

The province is currently formulating policies on Limited Payout Machines and will issue limited licences. The national government should make Internet gambling a concern and measures should be put in place to regulate it.

There is currently no data available in the province on the effects of gambling on society. They have found that some of the casinos had ATM machines on their premises, and there was concern as to the negative effects this had. They believe that the industry should provide support to those communities suffering as a result of the negative effects of gambling.

KwaZulu Natal
Mr Aulsebrooke (DP, Kwazulu-Natal) said they had been unable to conduct hearings because the notice about provincial inputs on the state of gambling had been received late. However they have worked on the some of the issues highlighted by the notice. The province has experienced problem gamblers, which were mainly people who had bet on horse racing in the past. Betting had not been seen as a major problem in the past as there is a belief that this type of gambling is less addictive than gambling in casinos and thus it had received little focus from policy makers. He cautioned against the popular view that casinos were the sole culprits in negatively affecting the people in his province. He said funerals as a result of the AIDS epidemic, cell phone costs and the National Lottery were key factors in determining how people spent money.

Mr Aulsebrooke referred to regressive gambling where people who can least afford to, gamble. These people use money that would otherwise have been used for subsistence in the vain hope that the win would deliver riches that would alleviate the gambler from poverty.

The gambling industry stimulated demand by focussing on advertising and the extension of credit. Social values such as a work ethic are undermined and instead get-rich-quick philosophies are promoted.

KwaZulu Natal has been allocated 9000 Limited Payout Machines. However licencing of these machines will commence after the issue of the Central Monitoring System has been resolved.

Their provincial gambling board has appointed inspectors to police the licenced industry in the province. Casinos had been all licenced out by August 2000. The licencing of bingo will start after the central monitoring system has been dealt with.

Until ten months previously, the record of the province in dealing with illegal casinos had been very poor because of corruption within the police services. This problem has however been resolved and a gambling task team had been appointed to deal with the problem. The gambling board and the industry had met with the MEC for Safety and Security and the police commissioner in the province to deal with the persistent problem of illegal gambling.

The Minister was first to raise an issue here. He said that he had spoken to the Police Commissioner who had informed him that in the context of crime prevention having a specialized unit is not always favourable as these units overlook other criminal activities. It is therefore better to have a task force which spans different forms of criminality to better combat the organized crime organisation which itself has its claws in different areas of crime.

The Minister told the committee that he had been assured by industry players that the various methods of monitoring the gaming industry would be able to interface with each other smoothly. Experience has shown otherwise and the Minister thus called for a centralised and standardised monitoring system. He added that this centralised form of control would enable smaller operators or individuals to take advantage of the new legislation, where up till present they have been unable to do so.

Mr Erwin then referred briefly to Internet Gambling and said that the National Government feels strongly that this should be a National matter. He had difficulty seeing how it would be possible for provinces to govern this area.

The Minister touched on the matters of the proliferation of the loan shark business around casinos and the issue of automatic bank-teller machines located within casinos. These issues were noted as concerns to be discussed further in meetings to come.

Mr Davies made the point that some people have incomes so small that the increased expenditure on gambling might not show when one looks at gross expenditure within a specific area.

Mr J. Aulsebrooke (DP, Kwazulu-Natal) raised the issue of access and whether what was taking place was the providing of access to gambling to people who really could not afford it, particularly those in rural areas.

In response to the debate on whether there was a marked increase in the expenditure on gambling, and whether the slump experienced by retailers was attributable to gambling, Mr Moosa brought to light the patterns experienced in relation to gambling. Elsewhere it has been the experience that in its initial phase, gambling grows very fast with a large part of the population gambling for the first time. This can be contributed to what has been referred to as the novelty aspect. However, soon the population of gamblers slowly decreases until you have what Mr Moosa termed the 'resilient market', those members of society who are serious gamblers and do so on a regular basis. He said that only once this resilient market emerges will research into the gaming industry be more meaningful.

Mr Vlisma, chairperson of the National Gambling Board, believed that the country is indeed moving towards an equilibrium as described by Mr Moosa. He noted an early investigation that had been conducted by the National Gambling Board. The Board had consulted the gambling industry asking how many machines they would need. The number of machines totalled 150 000. The Board then consulted the provincial governments and asked the same question. The number of machines that the provinces felt they would need totalled 107 000. These numbers are far greater than the amount of 50 000 actually provided for by the Act. He then expressed his opinion that if asked this question again the total number of machines that would be requested by the provinces would not exceed 30 000 units. In saying this Mr Vlisma was alluding to the new sense of cold sobriety with which the provinces approach the subject of gambling.

Mr Vlisma noted that there was no limit on the number of bingo halls that could exist, which he felt needed immediate remedying. He also called for national statistics as to date there had only been statistics obtained on a provincial scale.

Ms Hajaji (ANC) suggested that considering the problems faced by provinces with regard to proper data that needed to be collected on the state of gambling in provinces, was it not in the best interest of provinces to suspend issuing the Limited Payout Machines licences to operators?

Mr Vlisma replied that many of the provinces would await the establishment of the Central Monitoring System before issuing these licences. Legislation to freeze the issuing of Limited Payout Machines licences would impact negatively on certain provinces which need more machines. He said provinces could instead make use of a half of the machines allocated to it, or give some of these machines to other provinces that needed them.

The Chair encouraged provinces to compile comprehensive data on the state of gambling their respective areas. He said such information would show were the short falls are in the industry and how government should deal with such problems. Mr Moosa summarised the issues that had been raised for discussion as well as those raised for future discussion. He requested that the Provincial Portfolio Committees apply their minds to the matters at hand. He reminded that results could only be obtained if the Committees were committed to see overseeing the whole process. He went on to mention that the industry needed to be analysed, with the principal question being whether or not the industry was healthy. Possible problems were whether or not too many licences had been awarded and if a minimum performance criteria should be added to the legislation.

He expressed his concern about the automatic bank-teller machines found inside the casino. This would be a matter for future discussion as well as the manner and form in which advertising is done by casinos, illegal gambling, internet gambling and general policy around the internet in relation to gambling.

In closing the Minister said that the above matters would have to be resolved through cooperation between the provincial and national spheres of government. He said he shared the view of Mr Vlisma, namely that the gambling industry is a source of revenue with its own strengths and weaknesses. There was a feeling throughout the proceedings that 40 licences nationally, which had been provided for by the Act, was in excess of what the national market could accommodate. In dispelling this concern, the Minister said that the provinces were under no obligation to grant the full quota of their licences. He said that each province should only issue any one licence if it is both feasible and in the best interest of that province.

The Minister raised a final issue. He said it was important to watch the consortia. Shareholding should be closely watched for experience has shown that in the event of collapse, battles inevitably ensue over where and with whom liability falls. He said it was particularly important to watch shareholding to protect empowerment group interests and to ensure that these parties do not get left with disproportionate measures of liability.

The meeting was adjourned.


The incidence of gambling in our province hitherto has been characterised by protracted legal battles to quash the so-called legitimate expectation on the part of the illegal operators to get new special licences or extensions to those which lapsed in August 1998.

This legal tug of war continued until 2000, where the high court in our province ordered that the illegal operators be allowed to stay operational until the finalisation of a review application that arose from a decision of our Local Board to refuse their applications for new special licences. The review application has not been settled up to date and in the meantime the National Gambling Board has applied to join and request the High Court to set aside the order of court referred to earlier. The National Gambling Board's application has been heard after the Supreme Court of Appeal ruled that there is no species of licences called "Special" in terms of the Free State Gambling Act which judgement also applies to the Northern Cape.

The illegal operators have been operating in the whole of the Northern Cape. The impact of the gambling in our province has been assessed by NGO's like the National Responsible Gambling Programme, but no figures particular to our province exist yet and it is hoped that the promise by that NGO that same will be released mid year, this year will help us make some informed comments in this area.

It is accepted that the third quarterly report dated February 2001 that has been published by the National Responsible Gambling Programme is a composite research finding based on the following provinces:

Northern Cape
Eastern Cape
Kwazulu-Natal and
Free State

Let it be noted that the Western Cape, Mpumalanga, North West and Northern Province have not been included.

The Northern Cape Gambling and Racing has been getting complaints from members of the public, mainly shopkeepers and local government political leaders about the illegal gambling operations and the general refrain is that people are sinking their hard-earned money into those machines in the hope that they will win. Unfortunately the Board has not been able to do anything to these operators, as they are protected by a court order that I mentioned earlier.

The February report of the National Responsible Gambling Programme has some interesting statistics that reflect the incidence of "reported" cases.
The programme received 5000 calls since it started and 42% of those calls were from the greater Johannesburg area.

Clearly the Northern Cape constitutes a tiny minority of callers who reached the programme as the remaining 58% is divided among us and other four provinces. The level of sophistication of the gambling public in the Northern Cape cannot fairly be compared to the Gauteng one, hence the assertion that ours must constitute a tiny minority. Another reason could be that the information about responsible gambling is not distributed/available in our province because Sun International is yet to establish these casinos in our province.

In line with concerns that gambling contributes negatively socio-economically, we in our province have found consensus with our Local Board that limited payout machines should not be licenced in all towns irrespective of their economic standing. In light with this position the Board has published a list of towns that will be included which excluded a big number of towns that do not qualify on the test of economic viability. We believe that our actions will contribute to a greater extent limiting the impact of irresponsible gambling. The Board has also resolved to licence only R500 of the 2000 LPM's allocated to our province.

We are pleased 'to learn that Kimberley will be one of the centres where treatment can be accessed by problem gamblers.

The question of accessibility of gambling outlets has been our concern, hence our refusal to allow any casino licensee who wanted to set up shop in the centre of town. It is hoped that the fact that casino's are located outside of easy walking distance must help to prevent impulse gambling by those who go to town to buy household necessities. Unfortunately, the same cannot be said of the National Lottery whose service points are in the corner shops everywhere.

The only redeeming feature of the Limited Payout Machines is that the maximum prize is R500,00 only. Clearly, very few people will spend their wages in the hope of winning the R500,00, most would rather go to casino's where they can hope for millions or rands worth of winnings.

The Northern Cape Gambling and Racing Board has not been able to do work as inspectors as we did not have them. The services of the SAPS have left a lot be desired at all times. Not a single case of illegal gambling was prosecuted in our province as the police have issued spot fined and left the people to go with their illegal machines to cause havoc elsewhere.

We believe that our inspectors will work closely with the Police to ensure that all illegal gambling activity is done away with. Our view is that illegal gambling must be prosecuted with vigour.

The Northern Cape Gambling and Racing Board only issues licences to natural and corporate personality only after a through probity investigation have showed them to be beyond reproach. Up to recently, the services of KPMG have been used to do this work and we believe that in-house work in this area will be at nationality accepted standards. It is most helpful that the National Gambling Board will create a data base of probity investigative results to forge consistency and obviate the need for duplicated probity checks.

It may be worth notify that Gambling is consumer problem, and therefore consumer education by government must include warning about the dangers of the abuse alcohol and uncontrolled/irresponsible gambling. We trust that DTI will consider this new "mandate" favourably.




The Standing Committee on Economic Affairs, Environment and Tourism of the Legislature of the Eastern Cape conducted public hearings on the socio-economic impact of the gambling industry on economy of the Province.

Stakeholders eg. Tavern Associations, NGO's, community organizations, religious communities, and members of the public attended the hearings at Port Elizabeth, Bisho,Graaff-Reinet and Umtata.

(I) Submissions. The Eastern Cape Gambling Board

(a) The Board believes that the creation of a small and specialized task team within the South African Police Services similar to the one operating in the Gauteng Province would be effective to stamp Out the little illegal gambling that remains.

(b) The Score-A-Lot (Pty) Limited continues to operate "video lottery' terminals" on behalf of the Transkei and Ciskei Lotteries Board. These "video lottery machines" are the same as gambling machines. The Minister must issue a notice to terminate such operations, in terms of Section 64 of the National Lotteries (Act No.57 of 1997). The Eastern Cape Gambling Board has made numerous representations on this issue since February

(c) The Board is currently considering whether the Bookmakers licences should be for 5 years, rather than the present 2 years. This will require legislative amendments. The reason for this is that there is a huge administrative burden on both the Board and the Bookmakers to go through the whole licencing process every 2 years. Every other licence lasts for a minimum of 5 years.

(3) Submissions: The Southern African Taverners' Association

(a) Taverners look to the LPM for economic growth in the Townships. The awarding of site licences will greatly contribute to their feasibility and sustainability, and it will also contribute to further development of the Townships. Some have spent at least R 50,000 on infrastructural improvement to qualify for a licence.

(b) LPM's are amusement-driven devices and are not intended as substitutes or alternatives to casino operations. LPM's carry nowhere near the type of gaming enticement to be found in casino's, the national lotteries or at horse racing. Instead, taverners provide a safe environment for entertainment in the form of affordable meals, DSTV so that clients can view and enjoy sports programmes, pool tables, darts and jukeboxes. LPM's will complement this.

(c) Site operators owning the premises in which the machines will be placed will now be required to become licenced as liquor vendors, and will be required to pay vat and tax, bringing many of them into the formal economy for the first time. All this must surely be regarded as a very positive step for the country.

(d) Big casino operators want to entrench their monopoly of gaming in South Africa.

Submissions: SANCA Alcohol and Drug Centre

(a) Gambling addiction can be viewed in the same nature as a (4) General submissions substance addiction.

b) SANCA foresees an increase in the number of gambling addicts in our Province. At present there are only two gambling addict experts to provide interventions for such addicts in the Province.

(a) The Gambing industry have a negative impact on retail businesses where casino's have been established. This is also evident since the introduction of the national lotteries, as less money is spent in buying clothing and other commodities. Although there is an increase in dept collection and cash loan companies, no other statistics are available to measure the effects of gambling alone.

(b) Although the general perception is that lotteries and gambling have an adverse effect on the spending power of consumers, a complete analysis should be done by taking into consideration the impact of cell phone Costs, rising food prices, spiralling fuel Costs and other economic factors.

(c) The number of casino's in the province should not be increased. The issuing of more casino licences to complete the Province's quota will lead to over gambling, especially when the Lotto is taken into consideration.

(d) The taxes collected from the gambling industry contribute very little to the economic development of the Province.

(e) The profits made from the national lottery must be ploughed back to benefit disadvantaged communities.

(f) The location of casino's should be situated far from the rural areas.

Mr A E de Wet
Chairperson Standing Committee on Economic Affairs,
Environment and Tounsm
Province of the Eastern Cape


The Northern Province currently has only one functional casino based at Thohoyandou in the far north area of the province. The second casino licence for the Pietersburg area was issued on the 2nd March 2001 and the casino is scheduled to start operating on 2 April 2002.

Based on the current situation, the Venda Sun is the only fucntional casino which has over the years, made an impact on the socio-economic development of the Far North area.

In the last financial year, the Venda Sun generated Gross Gaming Revenues of R28 million that were primarily sourced from the lcoal market surrounding Thohoyandou and to a lesser extent from Louis Trichardt and Pietersburg.

Based on the Burea of Market Research's allocation of disposable income across the country, less than 1% or R2605 million of the national disposable income lies within Venda Sun's primary catchment area of Thohoyandou and Luis Trichardt. Retail trade statistics released in the first quarter of 1999 by the Central Statistical Services has confirmed the currency of the Burea of Market Research's allocation of disposable income.

Based on the Venda Sun's actual performance of R28 million in the period July 1999 to June 2000, the propensity to gamble of the residents in the primnary catchment area can be estimated at 1.07% even after the poor trading conditions following the floods in February 2000. (N.B.: Figures will be verified by the Committee in the Public Hearing.)

With regard tot he procurement of foods and services from the previously disadvantaged individuals in the area, the total procurement of foods and services during the last financial year amounted to R5.52 million. Of this amount R1.1million or 20% was specifically directed to small medium enterprises such as local poultry projects, Thohoyandou Beer Distributors, R Phiriga vegetables and fruits, etc.

In total, twelve SME's benefited directly from the casino industry. Despite ongoing efforts by the Venda Sun to direct more business opportunities to black empowerment groups in the region. The lack of such suppliers of other foods and services in the area have made the pursuit of this principle difficult. The fruit and vegetable vendors in and around Thohoyandou are the indirect beneficiaries of the casino industry in the area.

The Northern Province has been allocated a total of 3000 limted payout machines. However, the Board has not as yet issued any licences for these machines. It is hoped that the process of licensing these machines will start in the second part of the year. The Committee will monitor this process to ensure that regulations as indicated by the minister are adhered to. In licensing the Limited Payout Machiens, key issues such as the following will be considered:

Socio-economic benefits to be derived from the introduction of these machiens and the protection of the Provincial Governement's current gambling tax base.

There have not been any serious criminal activities flowing from the Venda Sun as the only operational casino industry in the province. However, the Community Policing Forum in the Thohoyandou area has embarked on a number of Crime Prevention Programmes such as the Youth Against Crime and these have managed to bring down the levels of crime in the area such as rape and child abuse, which were prevalent in the area but not directly attributable to the presence of the caisno.

The province experienced some problems with regard to licensing in the past. However, with the appointment of the new Board, the process of licensing for the Pietersburg Casino Licence went smoothly. A total of three applicants applied for the Pietersburg casino licence and these were:
Meropa Leisure and Entertainment (Pty) Ltd trading as Meropa Entertainment World,
Quantum Leap Investments 299 (Pty) Ltd trading as Thobela Casino Resorts and
Tsogo Sun Northern Province (Pty) Ltd

After thorough evaluations of the thre applications were done, the Board awarded the licence to the Meropa Entertainment World.

Though on a relatively limited scale compared to other provinces, the Northern Province continues to experience the presence of illegal casino operations in remote rural areas. These are mainly spearheaded by some Chinese syndicates that operate in the province and in Mpumalanga.

A total of 46 cases were registered by the inspectors of the Board in the province for the year ending March 2001. Machines confiscated from shopts and taverns are stored by the Board and destroyed after the finalization of the cases.


I am in the position to assist the committee with the information required as per item no. 1 of the annexed letter from the chairperson of Economic Affairs (NCOP). In as far as item no.2 is concerned, I will refer the matter to the office of the DDG to deal with it.



The province inherited seven licences of Casinos which were awarded to Sun International South Africa (SISA) by the then Bophuthatswana government.

In order to comply with the National Gambling Act 33 of 1996, section 13(1)(j) thereof, which authorised only five casino licences for the province, two casino licences of SISA were discarded.

A further compliance with Section 13(3) of the said Act is to the effect that SISA is required to hold no more than three casino licences. This provision regulates the maintenance and promotion of competition and monopoly situations in the gambling industry. As a result, another competitor, Tusk Resorts Group was brought into the picture.

The outlined scenario clearly indicates that the locations of the casinos in the Province are within the areas which previously fell under Bophuthatswana. As a province, a proper feasibility study for the best location of these casinos could not have, under the circumstances been possible. For instance, the whole KOSH Area including the Hartebeespoort area do not have casinos simply because all the casinos were inherited by the province. This aspect in itself might have a negative bearing on the maximisation of economic development and tourism in the province.

Since SISA had to close down two casinos in order to comply with the National Gambling Act, this resulted negatively on the livelihood of the people as most people were left without jobs.

Most of the gambling companies and the casinos affiliated to them do not have a formal policy on problem gambling. Sun International has just released its policy in May 2000. The programme includes education, counselling and treatment.

"Pathological" gambling is viewed as a chronic condition in a similar cateto alcoholism or manic depression and in view of its short history as a legalised industry, minimal research on gambling has emerged in South Africa. Of course a research has been conducted by Sun International after the establishment of Sun City and some of its casinos, but because of the lack of a central data in the province it is difficult to say with clarity the impact that problem gambling may have in the province.

It is important that percentages must be kept, it is also important that the counselling programmes must be made known to gamblers. As soon as the Board is well structured, the establishment of a data base through research will be prioritised. It is, however, a well-known fact that people who visit casinos lose money which could be used to buy food for their families especially the previously disadvantaged people who saw a greater participation through the liberalisation of gambling.

Problem and pathological gamblers are often involved in criminal activities such as embezzlement, fraud and default on their financial obligations. Because of the increase in the number of legal casinos in South Africa, probably this would also lead to an increase in the number of compulsive gamblers.

With the processes of launching the Limited Payout Machines (LPMs), it is important for the province to audit their capacity to deal with the associated challenges.

The Department has so far provided for the regulation of the LPMs in the new legislation. The National Gambling Board have issued a manual which outlines the principles and standards to be followed by provinces in licensing LPMs.

The Central monitoring Systems for LPMs remains a project to be completed at national level for the proper monitoring of all provincial LPMs.

The major assignment for the Gambling Board would be therefore to deal with the number of machines allocated for the province, e.g. their best location and beneficiaries in that regard.

There are preconceptions that gambling results in an increase in crime and this relates to the increase in the use of dagga, prostitution, theft, rape, robbery and assault Unfortunately because of lack of data in the province or in South Africa generally, these preconceptions cannot be verified.

This topic has been covered under (a) (i).

As at 1994 there were already illegal gambling operations In the province. The period between 1996 to 1999 saw a flood of these operations. The government had been subjected to a spree of high Court litigations by the owners of these illegals. Prosecutions for illegal gambling have been largely unsuccesful owing to legal loopholes in the legislation and even where the suspects have been found guilty the magistrates courts ordered minimal fines which the illegal operators were able to pay with ease.

Until the resolution that was taken to remove South African Narcotics Bureau (SANAB) in 1999, illegal gambling fell under the jurisdiction of SANAB which was already overstreched in dealing with enforcement of narcotic offences and other drug-related crimes which were of a priority to this unit.

Currently there is no dedicated unit within the South African Police Service dealing with illegal gambling matters except of course for the task team that is sometimes arranged between Safety and Liason and the Department to assist in terms of urgency.

In as far as prosecutions are concerned, most prosecutors and magistrates do not have an in-depth understanding of the gambling legislation. This leads to the imposition of lenient sentences and very low admission of guilty fines on the accused which do not serve as a deterrent. Legal representatives of the accused also obtain acquittals as a result of technicalities arising from the existing loopholes from the legislation.

Our legislation now provide for appointment of inspectors whose primary duty would be to perform law enforcement functions We hope to establish the law enforcement unit this year although sufficient numbers of inspectors to match the number of illegals will always be a problem.


The economic impact of the casino industry can be determined by two separate economic injections into the Mpumalanga economy and the economy of South Africa as a whole. The first injection occurs during the construction phase and consequently mainly benefits the construction sector and related industries. The second is during the operational phase of the complexes and stimulates various service industries notably, those related to the accommodation and other services sectors. Multiregional input-output tables were employed to calculate the economic impact of casinos on the Mpumalanga and South African economies. The initial injections or first round effects of the casino developments can be summarised as follows:

Construction phase
The expected total capital expenditure by the three casino complexes and the Mpumalanga Gaming Board (MGB) (at 1998 prices) is estimated to be just over R520 million. A sizeable proportion of just more than a third of capital expenditure (RI89 million) is imported mainly in the form of casino tables and machines as well as computer equipment.

Almost half of the salaries and wages paid out during the construction phase are received by employees residing outside the Mpumalanga province. Remuneration paid for lower level labour largely accrues to local (provincial) workers while remuneration for medium and highly skilled labour is largely paid out to workers that reside outside the province. A total of 12027 persons are expected to be employed during the construction phase that commenced in 1997 and is expected to be finalised towards the end of 1999.

Materials used during the construction phase have a relatively low provincial content. Almost 57% of the materials used are produced outside Mpumalanga and are therefore produced in the rest of South Africa. This implies that the economic impact of the construction of casinos is largely exported' to the other provinces.

The sectors within Mpumalanga that benefited most during the construction phase are nonmetallic mineral products, fabricated metals, wood and miscellaneous manufacturers.

Operational phase
The total injection to the South African economy from operational activities of the three casinos and the MGB amounted to R252 million in 1998. This spending is expected to have a negligible international import content of only R73 000.

Unlike during the capital expenditure phase, most labour is drawn from the province for the operations of the casinos. R65 million of the R71 million paid out as labour remuneration offers a flirther provincial household expenditure loop. The operational phase also tends to employ much more medium - and highly skilled personnel compared to the construction phase. A total of 1047 persons were employed in the casino industry in 1998. Of these 931 resided in Mpumalanga and 116 in the rest of South Africa.

The economic sectors that benefited most from the operations of casinos are businesses and financial services such as banks and insurance and security companies, food and beverages, paper and electricity.

The displacement of household expenditure to the amount of approximatejy R119 million lobs almost 47% off the injection provided by the casino operations. The total initial injection, afier accounting for displacement, amounts to only R137 million. The positive injection on certain sectors provided by the operational expenditure of casinos is wiped out completely. This means that the amount spent by the casino companies on food, for example, is less than the amount diverted away from food to gambling by Mpumalanga households.

The net injection from tourists who visited Mpumalanga for the sole purpose of visiting the casinos amounted to between R11 and R15 million in 1998.

The initial injections provided by the capital and operational expenditure of the casino industry as mentioned above resulted in upstream regional spillover and feedback effects. These multiplier effects for the capital expenditure and operational expenditure phases are discussed below.

The impact of the capital expenditure phase on the South African economy as a whole can be summarised as follows:

Construction phase
The impact on GDP at (factor cost) of the initial capital expenditure of R520 million will be an estimated R427 million. The GDP multiplier can therefore be calculated at 0,82. This means that for every R100 invested in the Mpumalanga casinos (including the MGB), GDP for South Africa as a whole will increase by R82, as long as capital expenditure lasts.

The reason for the relatively low GDP multiplier (compared to average GDP multipliers which are usually around 1,2 to 1,3) can be found in the high import content of the capital expenditure phase. A large proportion of the initial injection leaks out of the South African Economy to the rest of the world. It is expected that direct, indirect and induced imports will amount to R240 million. This also represents the impact on the trade balance of the balance of payments since there are no exports associated with the capital expenditure phase.

The sectors that will benefit most from the capital expenditure phase in South Africa are the trade sector (R111 million), financial and business services (R98 million), fabricated metals (R71 million), chemical and plastic products (R53 million) and food and beverages (R52 million).

Total government income is estimated to be around R32 million for the capital phase.

Total direct, indirect and induced employment associated with the capital expenditure phase is estimated to be around 21 000 persons year equivalents. With 12 000 direct jobs, the employment multiplier can be estimated at 1,77. This means for ten persons employed directly on the construction sites, another eight persons are expected to be employed elsewhere in the South African economy.

The following summarises the impact of the construction phase on the Mpumalanga provincial economy.

The impact on GGP (at factor cost) is estimated to be R138 million, meaning that for every R100 invested in the Mpumalanga casinos, the provincial GGP will increase by R26, but only as long as the capital expenditure phase lasts. This relatively low GGP multiplier of only 0,26 can be attributed tot he high international import content (as mentioned above) but also specifically to the low self-sufficiency of Mpumalanga and hence the high regional import content from the rest of the country. From the total direct, indirect and induced stimuli originating from the capital programme of the casinos, less than 20% accrues to the Mpumalanga economy. As a result of a large portion of the initial injection will leak out of the provincial economy and value added embedded in the economic activity that is created in the province will be relatively low compared to the initial injection.

The sectors in Mpumalanga that benefited most from the capital programme are chemical and plastic products (R19 million - due to Sasol's presence in the province), trade (R15 million), electricity (R12 million), financial and business services (R11 million) and nonmetallic mineral products (R10 million).

The relatively low self-sufficiency of the Mpumalanga economy also resulted in a relatively low employment multiplier of 0,76 for Mpumalanga. With 12 000 jobs created directly on site during the construction phase, total (ie direct, indirect and induced) employment in the province (measured at the place of residence) will temporarily increase by about 9000, while about 12 000 jobs are estimated to be generated in the rest of the country.

Operational phase
The economic impact of the operational phase of the casinos can be considered as sustainable in that they will be maintained for as long as the casino companies are in operation. The impact is based on the 1908 operational expenditure of the three casinos and the MGB1 The impact on the South African economy as a whole can be summarised as follows:

The total impact of the operational expenditure on GDP is estimated at R255 million. Given an initial injection of the same amount (R255 million) the GDP multiplier is estimated to be around I. This means that for every R100 operational expenditure by the three casinos (including the MGB) South Africa's GDP will increase by about the same amount. This is slightly higher than the GDP multiplier of the capital expenditure phase. in spite of a much lower, in fact almost negligible, import content but still much lower than the average economy-wide multipliers of around 1,2 to 1,3. The reason for this is that about 50% of total expenditure leaks out of the demand-side input-output model as gross operating surplus (R86 million) and government taxes (R40 million). (In reality, part of this leakage could come back as investment via retained earnings, household expmditure via distributed earnings or government expenditure via government programmes in Mpumalanga.)

The most important sectors in the south African economy that are expected to benefit directly and indirectly from the casino operations are food and beverage producers, trade and the financial and business services sectors. The increase in total output of these sectors is R3 I million, R4 I million and ~45 million respectively.

It is estimated that the government (provincial as well as central) can expect additional revenues to the ammount of R69 million, associated directly and indirectly with the operational expenditure of the casinos.

lmports are estimated to amount to approximately R14 million, which also represents the negative impact on the trade balance of the payments since the revenue from foreign visitors is negligible.

In spite of the high leakages referred to, the employment multipliers are relatively high. On aveuge, the multiplier is around 9, meaning that for every person employed in the casinos (including the MGB) a further eight persons are employed in the rest of the country.

The impact of the 1998 operational expenditure on the Mpumalanga provincial economy is summarised below:

Compared with total operational expenditure of R255 million, provincial GGP is estimated to be almost R98 million which imp lies a GGP multiplier of 0,4. This means that for every R100 operational expenditure by the casinos (including the MGB), provincial income will increase by R40 As mentioned, the level of the multiplier is somewhat lower than expected due to the high operating surplus and tax leakage and the low self-sufficiency of the Mpumalanga economy.

Provincial government revenues amount to about R17 million. The provincial government does not collect any taxes in addition to those appropriated from casinos by the MGB.

Direct and indirect provincial employment associated with the total operational expenditure is estimated to be just under 4 000 sustainable jobs compared with a direct employment of 1047 by the casinos and the MGB. This implies an employment multiplier of about 4, meaning that for every person employed in the casinos (including the MGB). a further four persons will be employed elsewhere in the province.

A certain proportion of gaming expenditure is displaced from other household expenditure items. Although the decline in household expenditure will to some degree be compensated by the expenditure programme of the casino companies, the large leakages might have a negative economic impact. This impact can be summarised as follows:

At the economy-wide level the sectors that will be affected most are food and beverages (displaced expenditure of R65 million), textiles and clothing (R14 million) and transport (R10 million). On a provincial level, the largest portion of gaming expenditure is diverted from food and beverages (R43 million), transport (R12 million), financial and business services (R10 million) and textiles and clothing (R7 million).

It is estimated that for South Africa as a whole GDP will decline by R100 million, while government income will decrease by R9 million and imports by R14 million. Total employment is expected to decrease by about 4 700 persons. On a provincial level, GGP is expected to be down by almost R50 million and provincial employment by just over 2000 persons. (Note: The declining figures projected with regard to GDP, employment et cetera referred to in this paragraph do not constitute a real decline in the relevant variables. Instead they express the reduced economic impact of operational expenditure of the casinos in view of household expenditure displacement.)

The opening of casinos has lead to additional visitor expenditure in the Mpumalanga province. The impact thereof on the provincial economv is:

An addition of R6,8 million to provincial GGP

The creation of an additional 742 provincial employment opportunities.

In summary, the displacement effect waters down the anticipated sustainable impact of casino spending in Mpumalanga considerably. On the other hand, it is argued that the multiplier effects of the operational phase of casinos are probably slightly underestimated since part of the household income-expenditure loop is not taken into account. It can further be concluded that since two casinos are still in their temporary phase. the impact as calculated in this report can be regarded as the absolute minimum. The economic impact can be enhanced considerably with greater provincial selfsufficiency and/or even a 'buy Mpumalanga campaign.'

In conclusion. with specific reference to household expenditure and displacement, the main features of visiting and expenditure patterns of patrons of Mpumalanga casinos can be summarised as follows:

The majority (91.2 %) of patrons to Mpumalanga casinos stayed within the province, implying a limijed inflow of patrons and hence income from outside. Casinos sourced the majority of their patrons from the town within which the casino is located (79,3 %).

Residents of foreign countries form an insignificant percentage of casino patrons (0,3 %), which is not likely to increase in the future.

The frequency of visits to casinos correlates closely with other international jurisdictions.

Questioning of non-Mpumalanga patrons confirms that casinos are not regarded as a major tourist destination. Only Graceland is frequented by a sizeable number of close-by residents in Gauteng, ptnnarily on day visits. (A large promotion with attractive prizes at Graceland coincided with the survey period.)

The average amount that patrons are prepared to spend per visit amounted to R552. This amount does not take any winnings into account, implying that the real average amount spent by patrons could be less. It was estimated during the 1998 study that on average more than a third of the gambling amount was received back as winnings.

Gambling money is displaced mainly from household budgets destined for household necessities and from dissavings.

Casino winnings are used mainly to pay debt and accumulate household savings.

A comparison between the 1998 and 2000 patron surveys at the Mpumalanga casinos reveals largely the same socio-demographic profile of patrons as well as spending and visiting behaviour. The only marked difference is the larger number of households indicating money for household necessities as a source of gambling money (26,9 % in 1998 and 41,6 % in 2000) and the larger allocation of possible winnings to household debt relief (22,5 % in 199g and 38.4 % in 2000). This may be indicative of more difficult economic circumstances for households.

Gambling in Gauteng: A research brief on the state
and impact of the industry
Research Unit
Gauteng Legislature May, 2001

Until the promulgation of the National Gambling Act (Act No.33 of 1996) horse racing and "betting" were the only gambling activities permitted in the province. Today gambling is a growing industry in the province with a significant contribution in terms of provincial employment and tax revenues.

Nevertheless, concerns have been raised about the social impacts of gambling. There has even been a call for a review of the gambling laws because of "their numerous social problems". In general, there appears to be agreement amongst stakeholders that a balance needs to be achieved between the positive and negative impacts of the industry.

The aim of this research brief is to outline the available information on the state of the industry and its impact on the province. As a relatively "new" industry, it is hardly surprising that there is a lack of quality information on gambling, especially information that could allow us to make detailed comparative analysis between the provinces. We have relied upon information provided by the provincial Department of Finance and Economic Affairs, and other stakeholders in the industry.

The gambling industry in the province is primarily the responsibility of the Department of Finance and Economic Aftairs. However, the implementation of the various policies on gambling and its general regulations falls under the Gauteng Gambling Board, which is a statutory body established in terms of section 3 of the Gauteng Gambling Act, (Act No.4 of 1995). Gambling includes the following activities; casinos, bingo operations, horseracing and betting.

1. Casinos
The National Gambling Act (1996) limited the total number of casino licenses to be awarded countrywide to 40. In November 2000 there were 22 casinos in operation across the country with a total of 13 741 gambling machines and 471 gambling tables (National Gambling Board presentation to the Portfolio Committee of Trade and Industry, 21 Febraury 2001).

In terms of the National Gambling Act, the casino licenses were to be divided among the provinces in the following manner.'
Province No. of casino licenses
Gauteng 6
Eastern Cape 5
Free State 4
kwaZulu-Natal 5
Mpumalanga 4
Northern Province 3
Northern Cape 3
North-West 5
Western C 5

Gauteng granted its 6 licenses to various companies in 1998 but one of the licenses became the subject of a legal dispute. According to the Department of Finance and Economic Affairs, the contending parties have withdrawn their legal actions and are attempting to reach an amicable settlement. The table below outlines the licensees and their progress, as of March 2001.

License Holder Name of Casino/Location Date for No. of
commencement "registered"
of permanent employees

Afrisun Carnival City/Brakpan October, 1999 780

Akani Egoll Gold Reef

City/Johannesburg March, 2000 896

Emerald Safari Emfuleni/Vanderbijl Temporary 238
Resorts park operations began
in November
1998 (projection
for completion of
casino-phase 1
by May 2001)

Tsogo Sun Montecasino/Fourways November, 1998 1039

Global Resorts Caesar's/Kempton Park September, 1998 1547

2. Bingo operations
Bingo is a numbers game where each player has one or more cards with differently printed number on which to place "markers". The odds of winning and prize money vary with the number of cards sold to players. More recent information from the Department of Finance and Economic Affairs suggests that there are 17 licensed and operational bingo centres in the province, employing a total of 178 people.

3. Horse racing and betting
This is a familiar form of gambling in the province with a relatively longer history. As of March this year there were 120 bookmakers, 141 TAB ("totalisator") branches and agencies, and 3 racecourses licensed and operational. It is estimated that some 3870 people were employed in this industry.

It has been argued that the introduction of the National Lottery has had a negative impact on this aspect of the gambling industry.

4. Limited Payout Machine (LPM's)
LPM's or "one-armed bandits," as they are referred to in the United States, can be described as gaming machines that can be located in a wide range of venues and tend to have smaller returns for the gambler.

The province is expected to formulate a policy on these and to begin issuing licences on a limited scale. At the national level the National Gambling Board has indicated that some 50 000 LPM's are likely to be distributed countrywide, eventually. There is also currently some controversy around licensing and monitoring process powers over this industry. It appears that the National Gambling Board and the DTI want these functions to be centralized.

5. The national lottery
The discussion of gambling in the province has to also consider the impact 'of the national lottery, which came to being in March 2000. Uthingo are the operators and plan to introduce various "games" for the gambling consumers, such as the recently launched scratch cards, "Iza Fast". Unfortunately, there is still no readily available province -specific information on the lotto's appeal and share of the gambling expenditure by consumers.

6. Internet Gambling
The growing use of the Internet in the country, and internationally, has also seen the emergence of "Internet gambling". According to a report prepared for the National Gambling Board, gambling on the Internet is growing at a high rate. It is expected that Internet gambling will grow exponentially in a few years because of the "convergence" of the Internet and television mediums so that "Internet gaming will no longer be restricted to the computer screen but will reach a much larger audience through television distribution".

Whilst the relevant statistics are not readily available (i.e. internet usage and internet gambling in the province) we can expect that Gauteng, as a province with a relatively higher income per capita, is already experiencing some of these new developments which pose a number of challenges to the regulatory authorities.

7. Illegal Gambling
Despite the introduction of a new regulatory framework there is still a substantial amount of gambling that remains "unregulated". In their presentation to the Trade and Industry Portfolio committee and Economic Affairs Select committee joint meeting, earlier this year, the National Gambling Board indicated that "there may be 80 000 to 100 000 machines outside of casinos at this time". Whilst the information is not readily available, it is possible that a substantial share of these are in the Gauteng province.

In his budget speech, the MEC for Finance and Economic Affairs indicated that "the
(gambling) industry is growing and revenue streams are improving". The contribution of
the five casinos to provincial revenues since the 1998/1999 financial year is measured at
R 441 488 000. Other information on the contribution of the gambling industry to the
Gauteng economy include:

Over R1.2 m in provincial taxes collected from bingo operations

· An average of R4.5m collected from horse-racing and betting operations, on a monthly basis

A significant contribution in terms of employment, as outlined earlier. For example, the five casinos employ some 4500 people.

downstream impacts on manufacturers and suppliers of gambling equipment, with 122 and 46 registered employees respectively, as of March 2001

entertainment value for consumers, for example the 5 casinos have paid an estimated 81 individuals in over R1m jackpots.

A more comprehensive assessment of the contribution of gambling to the provincial economy would also look at the industry's impact on other sectors of the economy e.g. the restaurant/hotelling industry, transport (e.g. taxis and shuttle services), the retail sector, and the tourism industry.

According to officials from the Department of Finance and Economic Affairs, there is no available information, as yet, on the social impact of gambling in the province. However, the negative impacts of gambling around the country have received much attention in the media during the last few months:

The Minister for Social Development, Dr. Zola Skweyiya, has warned that "gambling is gobbling up the money of the poor and eroding family life." He has also attacked the practice in some of the casino's "to pick up people from their residential areas in the evening, especially pensioners, and transport them to casinos so that they can gamble away their meagre savings."

A journalist from the Star newspaper has also reported that "the advent of legal casinos in the Western Cape is having a devastating impact on gambling addicts who cannot control their habits". She also indicated that "those people have lost their homes, others have had to sell their cars, fridges, furniture etc., in order to feed their addictions".

The KwaZulu-Natal MEC for Finance was also reported as stating that the gambling industry "was of absolutely no economic benefit and a cause of great harm".

The calls for the review of gambling policy in order to address its negative social impacts have also received support from elements of civil society, such as the churches. It is argued that the negative impact of gambling is far more serious than was initially thought.

Problem gambling
The concerns about the negative impact of the gambling industry arise from the perceived emergence of a phenomenon known as "problem gambling". Problem gambling has been defined as "the situation when a persons gambling activity rise to cause harm to the individual player and/or to his or her family, that may even extend to the community".

In Australia it has been estimated that about 1% of the adult population (or 130000 people) had severe problems with their gambling, leading the Australian prime Minister at the time, John Howard, to describe problem gambling as a "major social concern". The Australian studies also suggested that the prevalence of problem gambling varies by the mode of gambling, with problem gambling likely to be more prevalent for regular players of gaming machines, (horse) racing, and casino table games. (So no need to worry too much about the lotto!)

In the absence of comprehensive studies of the gambling population and gambling habits, we do not yet have information on the extent and severity of problem gambling in South Africa, let alone Gauteng. However, statistics from the National Responsible Gambling Helpline suggest that Gauteng is the most affected province.11 Between May 2000 and February 2001, the National Responsible Gambling Helpline received a total of
4781 calls. 414 or 8.7% of these calls we classified as being from individuals "needing help". Amongst the calls that were of people needing help, 41.8% were from the Johannesburg area.

National Responsible Gambling Heipline & Treatment Statistics: Referrals
Area Percentage
Johannesburg 41.79
Cape Town 14.49
Durban 11.11
Bkoemfontein 1.69
Port Elizabeth 6.52
Other 15.94
Unknown 8.45

Source: National Responsible Gambling Programme: Third Quarterly Report (February, 2001)

Initial Responses to "problem" gambling

The National Gambling Act provides the mandate for regulatory bodies, and the state, to address the issue of problem gambling. More specifically, section 13(1) band c states that

· "members of the public who participate in any licensed gambling activity shall be protected"

· "society and the economy shall be protected against the over-stimulation of the latent demand for gambling"

The National Gambling Board has set up the South African Advisory Council on
Responsible Gambling (SAACREG). At the same time various private sector players
(especially the gambling industry) have come together to set up the National
Responsible Gambling Programme (NGRP) which is presently based at the University of
Cape Town's National Centre for the Study of Gambling. Among its various initiatives the
NRGP is commissioning a major study on gambling, the gambling population, and the
impact of gambling.

According to the Gambling Board's presentation to parliament on 21 February, the DTI's Directorate for Gambling, Lotteries, and Liquor Regulating office is also conducting a study that will focus on the economic impact of gambling and lotteries.

It is unclear what steps are being taken at the provincial level to address the negative impacts of gambling. Nevertheless, in his budget speech the MEC indicated that his department took cognisance of "the social impact of gambling and continue(s) to be vigilant to practices within the industry".

The need to ensure a balance between regulation of a legitimate economic activity (in order to limit possible negative societal impacts) and allowing space for entrepreneurial activity that contributes to consumer welfare and a thriving provincial and national economy.

II. Promoting greater co-ordination (and transparency) between the various programmes aimed at promoting responsible gambling (e.g. activities of the private sector, the National Gambling Board, and the provincial gambling boards)

Ill. Monitoring the conduct of the casinos. Need to ensure that there is a regulation of aggressive advertising (e.g. provision of transport to pensioners )~and the targeting of vulnerable groups such as the elderly and the young.

IV. Discouraging/eliminating illegal gambling. How to ensure that the SAPS have adequate capacity. Gambling that takes place outside the regulated framework pose a potential harm to society and so far the co-operation between the SAPS and the Directors of Public Prosecutions have contributed to the confiscation of 2349 slot machines and prosecution of 318 suspects, as of March 2001, in Gauteng.

V. Policy framework for LPM's

VI. Policy framework for Internet Gambling

VII. Promoting regular research on the gambling industry and its impact on communities

VI II. Addressing the possible adverse distributional impacts of gambling-where people on lower incomes spend a proportionately greater amount on gambling than people on higher income gamble.

Lessons from Australian and US studies. Are these relevant to our situation?
E.g. The importance of consumer education. Especially to alert gamblers about the dangers and risks of gambling
· Controlling access to gambling facilities, e.g. youth or under-age individuals should not be allowed to loiter in areas where gambling activity occurs
· The need for dedicated support for victims of problem-gambling (e.g. social welfare facilities).


Your letter of 29 March 2001 requesting us to provide you with input on the socio-economic impact of gambling in the Free State, limited payout machines, crime control measures, licensing and illegal casinos has reference..

In response to your request, the following is the contribution from this Province (Free State) on each of the topics mentioned in your letter:

2.1.1 The FREE STATE GAMBLING AND RACING BOARD which is the regulatory body for gambling in this Province, completed its first term of office.

The appointment of members of the new Board is expected soon. Despite the lack of experience and knowledge of the members of the previous Board, at the time of their appointment, they very soon learned and became acquainted with the complexities and dynamics of the industry. The gambling industry was new to the province and the Board which made the Board cautious from the beginning with the result that it was aware and could guard against the negative impacts of gambling in the Province.

2.1.2 The Board quickly learned from the mistakes and lessons experienced by other provincial Boards who perhaps took off too quickly with the process of other gambling facilities. Together with a very cooperative and sympathetic MEC, who is the responsible Member for Gambling the Board planned well and considered carefully before acting. This is not denying that it also faulted with regard to, for example, the issue of Special Licences which, very fortunately, was resolved with a decision of the Appeal Court which vindicated the Board's stand on the issue of temporary or special licences.

2.1.3 The approach of caution of the Board has resulted in clear formulation of policy on a number of important issues one of which is, first, to abide by central and provincial governments' policy to have an equal and fair distribution of the four casinos which the National Gambling Act allows the Free State to have. This distribution will lead to a situation where one casino per one of the four zones will serve the people of that zone. Second, that the avoidance of providing too many gambling facilities in the Provinces will automatically protect the people of the Free State against negative socio-economic impact of gambling. Therefore following this policy the Board will only allow four casinos of appropriate size in the whole of the Free State. Other gambling facilities will be licensed only when the Board is convinced that there is reason for them and that they will contribute to the overall welfare and advantage of the people of the Province. Thus, licences for Bingo Games, Route Operators and Wagering will be well and carefully considered before they will be issued.

2.1.4 It is against this background of caution and the fact that the Board is only now in the process of considering applications for the issue of the three casino licences in the three zones to the North and East of Bloemfontein that no real negative socio-economic impact on the economy or social structure of the Province has and will be experienced. This is also due to the fact that the Board, through its inspectorate and complaints division, have closed down illegal casinos and their illegal gambling operations and a close watch is being kept on such operations.

2.1.5 The Free State, at this juncture, is very fortunate with regard to the negative effect of gambling, in that it is surrounded by casinos in neighbouring provinces and Lesotho all of which are situated virtually on the provincial borders with the Free State: Emerald Casino at Vanderbijl Park in Gauteng; Monte Vista Casino at Newcastle in KwaZulu-Natal; Sun International Casino to be erected at Kimberly in Northern Cape; a casino at Colesburg in the South; two casinos at Maseru in Lesotho; and a casino to come in the Klerksdorp/Potchefstroom area in the North West Province. This means that any socio-economic impact relevant to the people of the Free State would be felt in those provinces rather than the Free State. It does mean however that the Free State suffers severely, socially and economically, because of being surrounded by these casinos who drain heavily on the Free State financial resources.

2.2.1 It is clear from the approach of the Free State that licences for limited payout machines can and will only be considered once the impact of the four casinos in the Province has been determined. To issue these licences too soon will have a disastrous effect on the economy of the Province. Therefore the Board has decided that prioritisation is of utmost importance particularly in the light of what an over-saturation of the gambling market can do to the social and economic structure of a society-too much too quickly means death to such a society.
At this stage the Board has not given consideration to the issue of licences for limited payout machines. It will do so at a later stage after the four casinos have become embedded in their socio-economic environments.

The Free State regulatory authority is only too aware of the vulnerability of gambling to crime. Hence it has introduced the following measures:

2.3.1 The appointment of qualified and experienced persons as inspectors in terms of the Free State Gambling and Racing Act, 6 of 1996 which Act spells out the powers, functions and duties of such inspectors.

2.3.2 The establishment of qualified and competent persons in the legal and compliance divisions of the Board who work in close operation with the relevant division of the South African Police Services to bring offenders to book and to prevent crime related to gambling.

2.3.3 The cultivation of good relations with the South African Police Service and in particular with the relevant division dealing with gambling. These relations also extend to the prosecuting and justice administration sections of the Department of Justice.

2.3.4 Regular contact with other provincial regulatory bodies so as to exchange information and experiences on crime prevention in gambling and to update relevant records on criminals in the industry.

2.3.5 The regular attendance of seminars, workshops, conferences and other types of meetings at which information and data on developments in this field is conveyed and discussed.

2.3.6 The reading and studying of national and international publications on the subjects of gambling crime and thus updating the knowledge on topics such as money laundering, crime in technology gambling, computer hacking, etc. The Board is fully aware of the great potential for people to constantly discover new means of dishonesty and fraud in gambling.

2.4.1 The Free State has gained much knowledge and experience from the litigation process it has gone through with regard to the issue of Special Licences which the Free State Gambling and Racing Act, 6 of 1996, allows it to award. Perhaps the most important lesson learnt was to analyse the legal implications of the provisions of any law in gambling very carefully before a decision is taken. Legal terms are more often than not very "pregnant" with a variety of meanings. The value of a gambling licence to a holder makes that person or party fanatic about the rights attached to the licence. Once granted he will not part with it without a vicious battle in all courts of law.

2.4.2 Apart from issuing a number of manufacturers, maintenance and suppliers' licences the Free State Board has issued no other gambling licence so far. With regard to casino-licences, it needs to be mentioned that the Board was made "foster-parents" to two Sun International casinos which the Board inherited from the erstwhile TBVC-regime. These two licences are "deemed" to have been issued by the Board in terms of the Free State Gambling and Racing Act, 6 of 1996.

2.4.3 The Free State regulatory authorities are aware of the notion of depriving provincial boards of some of their statutory powers and centralising them in a central authority. The Free State does not support this notion and would certainly oppose any attempts in that direction.

2.5.1 Illegal casinos and other illegal gambling activities are a fact of life and very difficult to eliminate. Hence the strict control over illegal gambling. Much has been said and written about this subject and many proposals made. Suffice it to state that the Free State regulatory authorities are convinced that the recommendation contained in the Report of the erstwhile Lotteries and Gambling Board, namely that the gambling industry should be strongly encouraged to establish and develop an effective code of discipline for itself, needs to be stressed to the industry. The South African Police Services do not have enough manpower to eradicate illegal casinos-the industry itself should help more by all legal methods and means to protect itself. This could be achieved by way of eg. A gambling police force and a gambling contribution can be of assistance to the selected committee.


(Former Chairperson of Free State Gambling Board)

8TH MAY 2001

We take this opportunity to present a brief synopsis of the five highlighted issues related to gaming as experienced in KwaZulu-Natal.

Socio-economic impact of gambling
We firstly need to contextualize this - before the illegal gaming machines flooded the Province and Natal lotto was set up, we had "problem gamblers" who bet on horse racing. Traditionally no interest from any quarter was shown in these unfortunate people, their families, or their employers. As a result, there are no known statistics on problem gambling, or on the wider socio economic affects of gambling, for our Province.

There is some evidence in literature that gambling forms, such as horse racing and lotteries are less addictive than casino style games. Further anecdotal evidence supports the notion that the introduction of this style of gambling into the Province has created more problem gamblers than there were before, and the economic displacement effects are being felt. This negative economic effect cannot entirely be attributed to casinos, but also spending on cell phones, funerals and the National lottery. While we are aware that the National Gambling Board has set up a body to deal with "problem gambling" as it sees it. We have certain concerns regarding the scope of this body, which we believe to be too narrow. In KZN we favour the definition of "problem gambling" as follows:

Problem gambling is any gambling behaviour or gambling related behaviour that is damaging to the individual, the family, society, or to a workplace or business, as well as any negative social consequences of the introduction of legal gambling and therefore problem gambling includes:

As gambling behaviour:
a) Regressive gambling - which is gambling by those who can least afford to gamble, money that would otherwise be used for subsistence is spent on gambling, this is usually not for entertainment, but in the vain hope that a gambling win will deliver the player from his/her poverty stricken circumstances

b) Increased indebtedness of individuals due to irresponsible gambling leads to other social problems

As Gambling related behaviour,
a) Undesirable methods for stimulating demand for gambling, focusing mainly upon advertising methods and the extension of credit

b) Unattended minors at gaming venues

As negative social consequences on the introduction of legal gambling:
a) Undermining of social values such as work ethic, by promoting the get rich quick philosophy

b) Economic displacement effects

c) Increased crime due to gambling related personal indebtedness

What needs to be monitored, is the impact of legal gambling forms on our Province and its people. It will take sometime before such measurement and monitoring can be meaningful, however, as the illegal gambling industry is not yet completely eradicated and not all forms of legal gambling are up and running in the Province.

Limited pay out machines
We are aware that the National Gambling Board has awarded a contract for a central monitoring system. We in KwaZulu-Natal, are considering calling for tenders for our Provincial central monitoring system. While we have been allocated 9,000 limited payout machines for the Province, licensing of route and site operators will not commence, until
the issue of the monitoring system is resolved.

Crime control measures
The KwaZulu-Natal Gambling Board has appointed its staff and inspectors have been employed. The Board is currently in a position to police the licensed industry, particularly in the light of the fact that only two of the licensed casinos are operating.

The licensing of casinos was completed in August 2000 when all five licenses, allocated to the Province were awarded. Two of the casino licenses, one on the Village Green site and the other in Richards Bay, are on review before the Supreme Court. Two licensed casinos, one in Newcastle and the other in Durban, are operating from their temporary premises.

The licensing of Bingo and LPM's will start once the license for the central monitoring system has been awarded. Manufacturers, maintenance providers and suppliers are being certified regularly, and currently more than thirty certificates of suitability have been issued.

Illegal Casinos
KwaZulu-Natals' record of dealing with illegal gambling operators was poor up until approximately 10 months ago. This appears to have been the result of corruption in SAPS and perhaps in some cases, court officials and prosecution staff.

However, with certain persons now removed from the stage, and a small but very effective "gambling task team", headed by Supt. G.P.J. Grobbelaar, in place, great strides have been made after years of complete inaction by the SAPS to close the illegals.

While initially concentrating their efforts in and around Durban, other areas with considerable problems, such as Pietermaritzberg, have been effectively dealt with, and towns such as Newcastle, Ladysmith, and Dundee are being cleaned up at present. The courts are also beginning to play their role, with substantial bail amounts being set, as well as admission of guilt fines reaching as much as R450,000.00, along with forfeiture of equipment, now becoming commonplace, whereas previously cases were thrown out of court.

Recently, the asset forfeiture unit became involved in our Province, in the case of some of the larger illegal operators. Unfortunately the problem of illegal casinos still exists and scaling back of these closure operations will only result in illegal operators re-entering the fray.

Recently, the police, the KZN Gambling Board and the industry met with the MEC for Safety and Security, and the Commissioner of Police to deal with this issue. Pursuant to that meeting, the shutting down of illegal operators has gained further momentum. Suffice to say every kind of vigilance is currently exercised on this issue.



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