National Gambling Board & SA Bureau of Standards: Budget and Strategic Plans 2007/8 briefing

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Trade and Industry

06 March 2007
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Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
7 March 2007
NATIONAL GAMBLING BOARD & SA BUREAU OF STANDARDS: BUDGET AND STRATEGIC PLANS 2007/8 BRIEFING

Chairperson:
Mr B Martins (ANC)

Documents handed out
National Gambling Board Strategic Objectives and Budget of the National Gambling Board F2006/7 to 2009/10
SABS Strategic Plan and Budget 2007/08

SUMMARY
The National Gambling Board (NGB) briefed the Committee on the budget and strategic plans for the forthcoming years. It described its vision as aiming to be a world-class organisation that allowed for a national regulatory framework for gambling in South Africa. It ensured compliance with the National Gambling Act of 2004 and, developed norms and standards, enforced rules and executed oversight functions. The objectives encompassed the development of interactive or online gambling; providing reliable information; conducting research; and protecting the public through education. It focused also on Broad-Based Black Economic Empowerment and would develop and implement an Industry Charter. It was pursuing economic growth and development in Africa. South Africa would act as the permanent secretariat for Gambling Regulators Africa Forum (GRAF). It was striving to implement the aims of the government, enhance gambling databases and eliminate illegal gambling. The Board presented the budget, which showed decreases in various areas, due to funding constraints, but a large increase in communications and education costs.  The planning risks were outlined. Many Members took issue with the fact that the Board should strive to be “world class” as they regarded gambling as a vice. The Board explained that it was attempting to fulfil the mandate given by government and assist globally with regulation. Members asked about implementation of the shared growth initiative, public education, regulation of activities in the township, the nature of the relationship with the Competition Commission, the possibility of eliminating illegal gambling, and pool boards. 

The South African Bureau of Standards indicated that the Bureau was the premier African group and supported objectives of the Department of Trade and Industry. He set out the core functions and noted that the Bureau had a new online webstore. It supported regional initiatives. The regulatory function was described, and the range of products and categories was detailed. It also performed conformity assessment and assured quality and safety. There was research into biodiesel and solar panel technology. The Design Institute was a key driver of innovation, which tied in with accelerated shared growth initiatives, and produced African solutions specific to African problems. Regional interaction was important. The Bureau ranked amongst the top ten international bodies. It would be focusing on creating a revitalised brand, by way of a five year programme. The facilities would be upgraded at a cost of R140 million. The budget was presented. Members asked questions on the budget, the infrastructure problems, the ISO standards, and whether the Bureau undertook independent research. Further questions related to quality of cement in new houses, poisoned spices recently reported on in the media, consumer protection, and internship and development programmes.

MINUTES
National Gambling Board Briefing
Mr Thibedi Majake, CEO,  National Gambling Board (NGB) briefed the Committee on the budget and strategic plans for the forthcoming years. The vision of the NGB was to be a world-class organisation that allowed for a national regulatory framework for gambling in South Africa. The NGB ensured compliance with the National Gambling Act of 2004 and, among other tasks, developed norms and standards, enforced rules and executed oversight functions.

Mr Majake described the NGB strategic objectives as encompassing areas such as the development of interactive or online gambling; providing reliable information; conducting research; and protecting the public through education. Another key component of the strategic objectives was ensuring the progress of Broad-Based Black Economic Empowerment (BBBEE). To this end NGB would develop and implement an Industry Charter, although no time-frame was given for this.

Another issue that was to be more vigorously pursued in the future was the NGB’s contribution to economic growth and development in Africa. Mr Majake said that this would be done within the New Partnership for Africa’s Development (NEPAD) framework as well the Southern African Development Community (SADC). It had already been decided that South Africa would act as the permanent secretariat for Gambling Regulators Africa Forum (GRAF). South Africa would also train those who wanted to work in GRAF.

Mr Majake concluded that the various stakeholders in the NGB  included Parliament, the Department of Trade and Industry (dti), Provincial Licensing Authorities and operators. He said that the NGB would endeavour to implement the aims of the Accelerated Shared Growth Initiative for South Africa (ASGISA), work towards enhancing gambling databases across the country and strive to eliminate all forms of illegal gambling.

Ms Emily Ntsowe, CFO, NGB described the budget for 2006-07 and 2009-10. She demonstrated the changes to the budget for 2007-08, which included a 3% increase in the cost of staff employment, in line with general inflation. The increases also included a 12% increase in for once-off bonuses on the performance management systems, and a 25% increase for subsistence and travel category. There was a 9% decrease in professional fees, down to R680, 000 because of a shortage of money. Communications rose by 117%, due to the cost of connecting databases and registers, as well as the planned Gambling Week, and for education and in-house publications. Gambling Week’s would cost R800, 000 and the cost of connectivity with Telkom was R222  000. Administrative costs had decreased, having fallen 32% mostly due to inadequate funds.

Ms Ntsowe concluded by describing the NGB’s planning risks, which might have an effect on the planned budget. NGB had tried to identify as many as they could. Potential obstacles might exist in the planned activities. The strategic objective thrust could run into problems if dti did not provide all the budgeted funds. There might be cause for over-expenditure if uncontrollable costs, such as litigation, rose. Moreover, the budget could be put under strain if projects such as the start-up of databases ran into unexpected problems. In addition, unique projects such as the work related to Interactive Gambling might also call for more funding, since licensing and regulation might soon be needed in the sector. Lastly, there was uncertainty whether National Treasury (NT) would allow the NGB to hold on to its budget surplus.

Discussion
Mr P Nefolovhodwe (AZAPO) said that it was of concern to him to that South Africa was taking the lead in Africa with respect to gambling. He spoke specifically of South Africa’s position as permanent secretary within GRAF. Gambling was never an African concept, and he was concerned that South Africa was striving to be “world-class” in an area that he considered to be a vice.

Mr Majake responded that the NGB did not create itself. Government had created the NGB and provided it with a mandate. He was aware of the unintended problems of legalising gambling. NGB had used the phrase “world-class” for want of a better phrase. The NGB existed to combat criminal activity and to protect the very poor, children and the elderly. Its role in Africa was positive as it helped protect the public in South Africa, and would do the same in African countries in partnership with their respective governments.

Mr Themba Marashna, COO, NGB, gave an example of the NGB’s assistance on the global scene. He said that the Russian government had also moved to legalise gambling, but had no effective way of doing the accounting and proper receipting of the taxes from the industry. NGB had helped and currently Russia was using a system modelled upon South Africa’s design and experience. African countries had also approached the NGB with the aim of providing better education on the problems related to gambling. South Africa had been playing a leading role in regulating and preventing gambling-related problems.

Mr Nefolovhodwe asked what was being done about implementation of ASGISA and BBBEE and its implementation.

Mr Majake said that the NGB was mindful of ASGISA. The Codes of Practice for the BBBEE were not yet fully understood nor had been made available in final form. He mentioned that the NGB was working very hard to increase representation of black women and had so far done good work in that field. He also added that certain casinos have to give at least 1% of profits to socio-economic projects and that currently many schools are funded by local casinos. Some of the procurement targets had to be met with small, medium and micro enterprises (SMMEs), which had an impact on ASGISA initiatives. .

Mr D Oliphant (ANC) asked what was being done about public education. He emphasised that there were now slot machines in township taverns and pubs and wanted to know if the education programme would reach there.

Mr Majake said that certain gambling activities in the townships were not being regulated. It was difficult to be knowledgeable of all activity. The intended focus of the forthcoming Gambling Week was to increase awareness of gambling problems. With this effort, NGB hoped to be able to reach all of society. He added that he did not have any specific data or figures available about gambling in townships, but offered to make it available if the Committee wished to have it.

Ms M Ntuli (ANC) asked how the Competition Commission and the NGB would go about mediating gambling disputes and monitoring market share. She is asked if that was sole responsibility of the Commission.

Mr Majake replied that the NGB did not perform the same function as the Competition Commission. The NGB in fact worked closely with the Commission to ensure that competition remained fair. It often shared information when the Commission was carrying out an investigation. Its role was essentially limited to assistance rather than fulfilling a definite role.

Ms Ntuli also asked the NGB to define what they meant as the “general public” in its presentation.

Mr Majake said NGB believed this to be the people that comprised the South African society and the importance of educating all people was part of their mission.

Dr P Rabie (DA) wanted to know if illegal gambling could really be eliminated.

Mr Majake said that he knew that it was impossible to eradicate all forms of illegal gambling, and that he was aware that regulation of gambling created some unintended consequences, such as certain activities being harder to track and find. However, he said that there was increased public protection given by the regulation and a better public understanding about the perils of compulsive gambling.

Dr Rabie added that he, like many other members of the Committee,  was not in favour of gambling. He saw it as a negative factor in South African society and it further worried him because the Minister of Finance said that South Africa was not a nation of savers.

Prof B Turok (ANC) said that he saw only two positive benefits in the legalisation of gambling, being increased revenue for the state and a decrease in criminal activities such as money laundering. However, he was also concerned that the NGB stated that it was striving to be “world-class” with respect to gambling activities.

The Chairperson agreed with Prof Turok that most Members did not see gambling as a virtue.

Mr Nefolovhodwe said that the NGB should do more for BEE as well as SMMEs.

Ms Ntuli stated that in the rural areas there was limited access to gambler education and awareness. She enquired if there were any plans to improve on the current situation.

Mr Majake responded that it was very difficult to get the Provincial Licensing Authorities to comply with the NGB’s national decisions. However, NGB had taken steps towards solving this problem and therefore would be able to provide education better and faster. It was one of the continuing goals to increase presence in all areas, and to improve visibility of the programmes in rural areas. This was an area that NGB were working on.

Mr Oliphant asked about pool boards, as pool was not just a leisure game, but also a form of gambling. This was problematic because it attracted youth as well. He said that he would like the NGB to investigate it and do research, if it was at all possible.

Ms Thebi Moja, Deputy Chairperson, NGB, said that most of the time the youth were not aware that pool boards were a gambling activity. She and the CEO agreed that it was worth investigating and researching to help build a better understanding.

South African Bureau of Standards (SABS) Presentation
Mr Martin Kuscus, CEO, SABS presented the strategic plan and budget for 2007/08. The SABS was the premier standardisation group on the African continent and it supported the objectives of the Department of Trade and Industry (dti) such as regional integration, equity and redress in the economy. This was all done within the respective frameworks of NEPAD and SADC, and by using the structures of BEE and SMMEs. It was important for SABS to ensure that South Africa’s exports continued to rise and that South Africa worked towards a more equitable system of global trade.

Mr Kuscus stated that core functions such as standards, regulation, conformity assessment and their design institute would remain as vital components of the strategic plan. The standards function allowed for a higher quality product and harmonisation of international products. The SABS also had a new online web store of all standards which could be easily accessed by the public. The SABS were also part of SADC and the African Organisation for Standardization (ARSO) which showed its support for regional standard initiatives.

The regulatory function was based on health, safety, environment and consumer protection, which all had to fall within parameters determined by inspections and studies. The SABS covered a range of products and categories, such as food, electrochemical and automotive. Another key function was the Legal Metrology services.

Conformity assessment was also done by the SABS to support the international business community. Mr Kuscus said that South Africa was now becoming ISO 9000 compliant and the first area to receive this grade was in the Eastern Cape. Another vital feature in the service area was assaying, which provided international buyers with the exact composition of South African metals to ensure product safety and quality. He gave the Saldhana Bay office of the SABS office as an example of an assaying site, and noted that South African metal was primarily shipped from there.

Mr Kuscus noted that a useful aspect to conformity assessment was  the research into bio-diesel and solar panel technology. This research would benefit everyone since South Africa was encountering problems in energy delivery. The solar panel project was being worked on in partnership with the United Nations Development Programme (UNDP). The dti had already heard from 16 companies in South Africa with solar panel projects and it would be the SABS’s task to test the panels. This test would be a comprehensive and rigorous investigation of the operational capabilities of the panels in all conditions over 36 days. Another segment was the continual testing of the high-voltage carriers that provided electricity to major areas in South Africa.

The Design Institute of the SABS was another key driver of innovation for the country, which tied in closely to the objectives of ASGISA. The Institute was the sponsor of the SA Youth Design Competition held each year on 16 June. Some of the design concepts were of a very high quality, and showed the creativity and intellect of South Africa’s youth. SABS also sponsored the Pan-African Design day. He maintained that there were African solutions for African problems and this initiative showed what Africa was capable of producing. He noted by way of example the work of two Cape Town students on a machine to melt platinum down with less wastage. It took seven years of research, but now eight machines had already been sold to local and foreign companies, and the project was doing well and continuing to make sales.

Mr Kuscus said that regional interaction was very important. SABS wanted to address shortcomings in African standards since this might contribute to lower exports of products. Speaking of the economic relationship between South Africa and Africa, he said that it was not right to have an island of prosperity in an ocean of poverty. Rectifying the currently low import ratio of African goods to South Africa would go a long way to a better socio-economic future for Africa.
  
South Africa could be proud of the SABS’s ranking in the top ten of standardisations bodies. Furthermore, the SABS had worked long and diligently to attain good positions on global bodies such as the World Trade Organisation, in order to have greater leverage in trade matters for itself and other developing countries. South Africa was now a Council Member, a Finance Committee Member and a member of the Technological Board at the International Standards Organisation (ISO). South Africa was also the current Vice-President at the International Organisation for Legal Metrology (IOML).

SABS had identified the area of brand expression as a focus area for improvement. It felt that it had to “revitalise” the brand. This included a 5-year programme known as “The SABS Roadmap,” which was created to coincide with the 2010 World Cup. Using the World Cup, Mr Kuscus, explained would allow the SABS to gain maximum exposure and benefits.

Mr Kuscus then went on to explain the upgrading of facilities at the SABS. Technical infrastructure needed to be improved because maintenance and service work on arbitrary equipment was putting vital research and testing work behind. The projected expenditure for the total upgrade would be R140 million.

Ms T Cooper, CFO, SABS, gave a brief presentation of the current budget expenditure and that for 2007/08. Total income from revenue, core funding and government grants, was budgeted for R580 million, with expenditure totalling R538 million.  It was noted that the costs of training technicians for standardization would initially be high, but after the year of training then SABS would see profits from the work of the trained technicians. Ms Cooper added too that levies were increased each year, but the growth in levies was also because of economic growth.

Discussion
Prof. E Chang (IFP) asked when the SABS was established.

Mr Kuscus said that it had been established in 1945 under the old Act, but they now operated under the current Act of 1993.

Prof. Chang also wanted to know if there was a difference in the SABS briefing between budget and forecast.

Ms Cooper said that there was not. and that these words were used interchangeably within the organisation.

Mr Oliphant asked when ARSO was established.

Mr Kuscus believed that it had been established in 1977. He added that South Africa was not part of the original Organization of African Unity so never joined ARSO, but it had been a member for the last 15 years.

Mr Oliphant was concerned that the SABS had the goal of achieving international success and other lofty aspirations, but that its infrastructure was falling apart. He added that funds should be given by dti or the government because standards were not negotiable. He then asked what ISO 9000 was and why so many standards applied, rather than one that was easily understandable

Mr Kuscus responded that every country had different products. He gave examples of mining equipment that was developed in South Africa, kasava products grown only in East Africa, and ginseng products in Korea, which were used mainly in Asia. He said too that ISO 9000 was a high level of standardization that was recognised the world over. Makana in the Eastern Cape was the first area in South Africa to have this certification. It was not a once-off issue of the award, but rather a yearly process of renewal in order to meet high international standards or manufacturing and service.

Mr Oliphant asked if the SABS did any research and development of its own into new products.

Mr Kuscus said that it was not SABS’s responsibility to do such things. For example, the SABS would begin testing the solar panels soon, but if they failed to pass the test, SABS could only inform the manufacturer about the panel’s performance, and it was then up to the manufacturer to develop a better product. SABS existed to assess product performance.

Mr Oliphant also noted his concern that there was a decrease in the spending in maintenance. This was unfortunate since it cost many times more to replace equipment than it did to maintain it.

Ms Ntuli wanted to know more about the quality of the cement used in the new low-cost houses.

Mr Kuscus replied that the houses were not falling apart as people had been led to believe. SABS issued a warning that this could happen if inferior building materials were used. He stressed that there were no problems right now, just that there should be a recapitalisation of the monies in order to ensure that good products were used consistently. He added that SABS did ensure quality cement, but if one bag was used instead of two, then that was not the fault of the SABS system. Some builders might be using shortcuts in order to save money. SABS could not be available to check the entire process.

Ms Ntuli also asked what was being done about the poisonous spices that had recently been reported in the media.

Mr Kuscus responded that the SABS did not deal with food. This would be the responsibility of the Department of Health.

Mr S Njikelana (ANC) said that consumer protection and rights were very important considering the economic cycle and consumer demand. He asked if the SABS provided a service for consumer protection.

Mr Kuscus stated that there had been establishment of a consumer safety board, but it dissolved into two factions over certain problems. The biggest problem was the idea of a consumer forum but it was so contentious that it led to the break-up. He said that he himself had tried to get the two sides back together but both remained apart.

Mr Oliphant also wanted to know more about the SABS internships and the in-house development programmes. He specifically asked about the length of the internships and what they would entail.

Mr Kuscus replied that SABS usually got interns from the fields of science and technology. The internships lasted about 6 months and the demand often exceeded the number of posts available. He said that SABS was also working closely with the Sector Education and Training Authority. 

The meeting was adjourned.

 

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