Gambling Amendment Bill: public hearings

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Trade and Industry

21 August 2007
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
22 AUGUST 2007
GAMBLING AMENDMENT BILL: PUBLIC HEARINGS


Chairperson: Mr B Martins (ANC)

Documents handed out:
National Gambling Amendment Bill [B31-2007]
Casino Association of South Africa (CASA) submission
Casino Association of South Africa (CASA) presentation
Betfair submission
Oral submission by Betfair
Betfair presentation
Financial Intelligence Centre: National Treasury submission
Financial Intelligence Centre: National Treasury presentation
Congress of South African Trade Unions presentation
SA Jewish Board of Deputies presentation
Western Cape Racing and Gambling Board memorandum
Western Cape Racing and Gambling Board presentation
Mpumalanga Gambling Board Annexure A and Annexure B
Mpumalanga Gambling Board submission
Gauteng Gambling Board
Submission by Professor Joe Kelly
National Responsible Gambling Programme
Civil Society representative for SA Advisory Council on Responsible Gambling
Justice Alliance of SA

Audio recording of meeting Part1&Part2

SUMMARY
T
he Casino Association of South Africa supported in principle the legalisation and proper regulation of interactive gambling but felt that there had been insufficient research and consultation and that these amendments did not do the job adequately. CASA would have preferred the legislation not to have been an amendment bill but a separate bill.

Questions from the Committee focused on the
areas of improvement proposed by CASA, why CASA said that the Bill should be a separate piece of legislation, concerns regarding consultation with the Department, the need for more research, the gains that would be lost by the fiscus and deficiencies in the current Bill where it did not contribute to the economy, social development and communities.

Betfair, a major internet-based sports betting and gaming company based and licensed in the UK, was actively seeking to become licensed and to work proactively alongside government. Betfair noted that their systems and procedures for the exclusion of minors and combating corruption had recently been adopted as the regulatory standard for the entire online gambling industry in the UK. Betfair supported South Africa’s socio-economic and BEE objectives, and was in advanced discussions with a prospective black economic empowerment partner. Betfair proposed the following: avoiding any form of exclusion or prohibition, applying the player protections and regulatory requirements uniformly, removing obstacles to customer retention so as to protect those who participate and applying measures to enable offshore providers to submit to South African jurisdiction. Betfair proposed that the Bill be rejected in its current form to enable its shortcomings and inadequacies to be resolved.

Committee questions focused on how Betfair would contribute to B-BBEE, the exclusion of peer-to-peer gambling, underage gambling and employment creation and infrastructure investments by Betfair.

The Financial Intelligence Centre explained how interactive gambling might be used for money laundering purposes and which measures could be built into the legislation to prevent money laundering. The principle objective of the FIC was to identify the proceeds of unlawful activities, and to combat money laundering activities and the financing of terrorist and related activities. Interactive gambling provided an avenue for money laundering through the ability to transfer funds from one person and/or location to another. Areas of concern for the FIC included the identification and verification of clients because conventional methods of identifying clients could not be applied where interaction takes place in a non-face-to-face environment. Recommended measures included strict application of probity checks to ensure that criminals did not acquire a controlling interest in on-line casinos. Methods preventing rogue or unlicensed on-line casinos from making their services available in South Africa were proposed. It was desirable to ensure that transaction related information be held in South Africa where it could be accessed by South African law enforcement agencies.

Questions from the Committee focused on taxation, adequate provision for litigation, interaction with the Department and capacity to regulate interactive gambling.

Cosatu was
opposed to any form of legalisation of gambling because it was a self destructive vice which did a lot of harm to society. Cosatu identified five major negative impacts of gambling on the economy: the cannibalisation impact, additional public expenditure, debt, savings, and money laundering. It said that the Department needed to provide information on how performance of the interactive gambling sector would be measured such as the number of jobs created versus turnover. It was also proposed that strict regulation for the promotion of interactive gambling through advertising be imposed, similar to tobacco advertising. Cosatu urged the Committee to reject the Bill.

The Committee’s questions focused on reality of gambling which South Africans engaged in and asked Cosatu for alternatives given their proposed rejection of the Bill. Cosatu indicated that sustainable job creation was justifiable but that interactive gambling would not provide sustainable jobs.

The South African Jewish Board of Deputies indicated that gambling did nothing to promote the benefit of society and was often seen as counter productive to society’s welfare. Realistically it was however understood that gambling was a major growth industry. It was recommended that the Income Tax authorities carefully scrutinise gambling and consider a special tax. Those who received licences should be judged on how much outreach work they did in order to ensure that society benefited from its profits.

Committee questions focussed on advertising for interactive gambling, its potential as a growth sector, the outreach work required of operators and taxation of interactive gambling.

The Western Cape Gambling and Racing Board viewed regulation as preferable to prohibition provided that a
proper legal framework had been created and that the regulatory relationship between the regulator and licensee were taken up with sufficient detail and clarity. It that the degree of and timeframes set for consultation processes were inadequate. The WCGRB preferred approach was that provincial rather than national licensing and regulation, remain unchanged with existing land-based casinos as the preferred interactive gambling licensees. The Bill’s shortcoming was the piecemeal treatment of subject matter with no coherent licensing and regulatory regime. Anomalies in the Bill included inconsistencies in procedural requirements for issue of national licences by the National Gambling Board and provincial Boards.

Questions from the Committee focused on the demarcation between the National Gambling Board and the Provincial gambling boards and the prohibition of interactive gambling in the USA.

The Gauteng Gambling Board
felt that the Bill left out a number of issues that needed addressing. It agreed with the WSRGB that unacceptably wide powers would be conferred on the Minister. The Bill radically departed from the current scheme and gave the National Gambling Board the powers of a licensing authority. This would create inconsistencies given that the National Licensing Board would have an oversight role whilst they were not subject to oversight themselves. Some definitions were limited. Suppliers of interactive devices for gambling should also be licensed or regulated.

The National Responsible Gambling Programme indicated that remote gambling was already widely available to South Africans and accounted for about 2% of gambling undertaken by South Africans. Its popularity was likely to grow substantially as increasingly user-friendly and cheaper technology became available. The main challenge facing SA was the development of appropriate legislation to protect SA consumers. The NRGP favoured legislation and regulation of remote gambling.

Questions focused on an effective tax rate and what was lacking in the Bill or what should be taken out.

Mr Baylis, a former gambling addict, spoke as a civil society representative of the SA Advisory Council on Responsible Gambling. He said that gambling was counter productive within society and led to lying, stealing, borrowing, chasing wins, withdrawing from society, pawning and selling of household goods and attempted suicide. He felt that the Bill should be returned for further research and that the scope of advice and opinion on this subject be put to a far wider audience.

The
Justice Alliance, a coalition of churches and individuals committed to upholding Judeo-Christian values in South African society, indicated that it would be impossible to ensure children did not participate in online gambling given the wide usage of credit cards by their parents. JASA felt that gambling was a moral issue and had been seen to destroy lives.

The Committee asked for specific recommendations from Mr Baylis and JASA on how to decrease gambling.

MINUTES
Casino Association of South Africa (CASA) submission
Mr Jabu Mabuza presented the CASA input on the Gambling Amendment Bill. CASA supported the legalisation and proper regulation of interactive gambling in principle but felt that there has been insufficient research and consultation and that these amendments did not do the job adequately. CASA would have preferred the legislation not to have been an amendment but a separate bill.

Prior to 1996, gambling represented a substantial illegal industry with up to 150 000 illegal machines in all urban centres. The industry was not regulated and the public was not protected with payout percentages also being manipulated. The gambling industry in the past was almost totally controlled by whites with no empowerment in equity, management, and procurement. The gambling industry went through a thorough legislative process which was acknowledged to be among the best in the world. The industry also spent about R60 million per annum in community social investment with sufficient stability and accountability.

There were a number of issues which needed further debate including the lack of sufficient international and domestic consultation and research. Taxation levels would determine the ultimate success or failure of the interactive industry.  High levels of tax compared to other jurisdictions would discourage new operators, while low taxation would prejudice other gambling sectors in SA. Either way the fiscus would lose. A return to the drawing board was proposed.

Interactive gambling operators should be subject to no less stringent requirements with regard to empowerment, probity, financial strength, skills development, job creation, regulation, taxation, under-age gambling prevention and responsible gambling promotion than those applied to land-based casinos. It was essential that SA interactive gambling legislation complied with international treaties such as the World Trade Organisation (GATS). CASA proposed that every holder of a casino licence should be authorised to conduct interactive gambling by virtue of its casino licence without the need for an additional licence.

An authorisation process should be put in place for any external operators who wish to conduct interactive gambling with persons in South Africa. CASA was strongly of the view that the Bill should go back to the drawing board for improvement. If it were approved in its current form, it would seriously undermine the excellent regulatory framework that currently existed. CASA also submitted a
submission by Professor Joe Kelly, a leading authority on gambling legislation.

Discussion
Mr S Rasmeni (ANC) asked what specific areas of improvement were proposed by CASA given their view that the amendments in its present form were not acceptable.

Mr Mabuza said that a lot of work was done to develop the 2004 Gambling Act. Industry learnt a few lessons during the process given the concerns of society and parliamentarians. It developed into a responsible operator who ensured that there were benefits and not only negatives. In the amendment it seemed as if some issues regarding taxation, underage gambling and issues of B-BBEE were not adequately dealt with. Mr Mabuza also said that the casino industry invested over R 50 billion rand but that one did not know who were behind the interactive operators.

Mr Rasmeni wanted to know why CASA said that the Bill should not be an amendment but a separate piece of legislation.

Mr Mabuza said that he was part of the process that led to the 2004 Act which was lauded international as an outstanding piece of legislation. Current gambling legislation ensured that society benefited through black economic empowerment, operators who had acceptable profiles and investments which brought socio-economic benefits like tourism. He asked what interactive gambling would do for tourism. Any negative effects would be suffered by the people from South Africa. Currently the land based gambling industry was accountable and would stand up and answer questions, while others who benefited from gambling, did not do. CASA agreed with the need for legislation but felt that amendments could undermine what has been achieved by the current Act. It would be better to look at interactive gambling separately in its purest form.

Mr Mabuza indicated that the lottery was in the gambling space but that there was a separate law which governed the lottery.

Mr L Labuschagne (DA) raised his concerns regarding consultation with the Department of Trade and Industry (DTI) given that CASA said they only had one meeting with the DTI. He asked if CASA made any further attempts at consultation with the DTI.

Mr Mabuza said that CASA were promised further meetings with the DTI which did not take place. CASA made attempts to have more meetings.

Dr P Rabie (DA) referred to Mr Mabuza concluding statements which dealt with research into commercial viability and socio-economic implications. He asked for more information on this issue.

Mr Mabuza said that more research was required. He said that at best the interactive gambling industry was worth R 700 million in SA. The casino industry in Gauteng was worth R 6 billion. He did not think that the commercial viability of interactive gambling warranted the socio-economic price that the SA nation would have to pay.

Mr Martins asked for clarification from CASA on the gains that would be lost by the fiscus.

Mr Mabuza said that he did not mention a specific figure in terms of losses suffered by the fiscus. He referred to taxation which was not covered in the amendments. Higher taxes would make interactive gambling less attractive and lower taxes would be a disincentive for people currently in the gambling industry. The current people in the gambling industry could migrate to interactive gambling if taxes were low and as a consequence there would be a loss to the fiscus.

Mr Labuschagne said that CASA highlighted the contribution that the current industry made to the economy. He wanted to know where the deficiencies were in the current Bill where it did not contribute to the economy, social development and communities.
 
Mr Mabuza said that there was no provision which dealt with the second economy in the amendments. Information and Technology to the larger community in South Africa was still inaccessible. People have to be plugged in, in order to participate. There were no requirements for interactive operators to include B-BBEE like the land-based operators had to.         
                                                   
Betfair submission
The Betfair representatives, Mr Elliot Kernohan and Mr Lungile Mazwai, explained their submission to the committee. Betfair was a major internet-based sports betting and gaming company, based and licensed in the United Kingdom which actively sought to become licensed and to work proactively alongside government. Betfair claimed that their systems and procedures for the exclusion of minors and combating corruption had recently been adopted as the regulatory standard for the entire online gambling industry in the UK.

In early 2006 Betfair initiated, designed and helped to fund a life skills strategy for the National Gambling Responsible Programme to address the serious problem of underage gambling in South Africa. Betfair supported South Africa’s socio-economic and BEE objectives, and was in advanced discussions with a prospective black economic empowerment partner.

Interactive gambling activities taking place between two or more persons that were facilitated by a third party was referred to as peer-to-peer gambling, or “P2P”. The Gambling Amendment Bill sought to exclude P2P from the proposed regulation. The more one restricts the range of permitted online gambling opportunities, the greater the illegal market. The proposed exclusion of certain forms of interactive gambling in the Bill seriously undermined regulatory objectives. 

Betfair operated the largest betting exchange, and was the only offshore exchange seeking to be regulated in South Africa. Betfair has not been afforded adequate opportunity to comment on the Bill nor to consult with the DTI on the Bill. They said that there was no mechanism in the Bill through which the excluded player-to-player interactive gambling would be resolved or determined once the investigation being undertaken was completed. A mechanism needed to be provided for in the Bill to deal with the outcome of the investigation of player-to-player interactive gambling.

Section 37(4) of the Bill imposed the obligation on the licensed provider to locate all its interactive gambling equipment in the Republic.  Unlike the UK, which was the most recent leading jurisdiction to have regulated, there was no discretion afforded to the licensing authority in the Bill to waive or partially waive this requirement should the operator by some other means satisfy the requisite equipment monitoring and security requirements.

Betfair proposed the following: avoiding any form of exclusion or prohibition, applying the player protections and regulatory requirements uniformly, removing obstacles to customer retention
so as to protect those who participate and applying measures to enable offshore providers to submit to South African jurisdiction. Betfair proposed that the Bill be rejected in its current form to enable its shortcomings and inadequacies to be resolved.

Discussion
Ms D Ramodibe (ANC) noted that Betfair did not have adequate opportunity to comment on the Bill. She did not however agree with the comparison made in terms of consultation because it was a new phenomenon which has been introduced. Both Ms Ramodibe and Mr Rasmeni asked Betfair how they saw themselves contributing to B-BBEE.

Mr Kernohan said that the principal Act in its current form already provided licensing authorities to take into account the measures applicants have to take with regards to B-BBEEE. The new DTI codes also provided more detail regarding what requirements applicants should meet. Betfair has since 2004 sought to understand and subscribe to the objectives and initiatives of B-BBEEE. They initiated discussions with a wide range of potential partners.  Compared to the land based operators a different range of skills (computer science and technical) were required which were not specific to the gambling industry but were transferable to other industries.

Mr Rasmeni wanted more information on page 7 of the Betfair’s presentation where they state that there was an exclusion that sought to prevent Betfair alone from participating in South African interactive gambling.

Mr Mazwai said that there was confusion in the way the bill was read. If exclusion wording meant all P2P, it would also include totes but there was a clarification afterwards which indicated that not all P2P was excluded. If exclusion only meant betting exchanges, then in terms of the definition of an interactive provider, P2P were excluded unless you were a bookmaker. In terms of this understanding however bookmakers would not have to comply with regulations, like having player registration. If you were not a bookmaker than you would not be able to provide P2P services.

Mr Rasmeni asked Betfair for more information given CASA’s concerns regarding underage interactive gambling. It seemed as if Betfair felt they could prevent underage gambling. Mr Rasmeni wanted more information on this issue.

Mr Kernohan said that age verification and the exclusion of minors were very important. Many of the measures applied by Betfair, had been adopted by UK regulators.

Mr Labuschagne asked Betfair how many people were employed by Betfair in the UK and what their investment in infrastructure would be. He wanted to know what the spin offs would there be in terms of employment.

Mr Kernohan said that they employed between 900 to 1000 people within the UK and an additional 200 – 300 people in Australia and Europe. Betfair also employed 200 software engineers in Romania to do software development and indicated that SA would be the next opportunity to source computer science graduates. Betfair spent about R 700 million in developing their global software technology. Regulation would help to ensure that reputable operators established a base in SA which would make regulation and protection easier.

Ms M Ntuli (ANC) asked how Betfair would ensure that people were not underage when they gambled online. Children were very computer literate and asked how one would exclude them from interactive gambling.

Mr Kernohan said that there were technical standards which would impose specific requirements to ensure age verifications.

Financial Intelligence Centre (FIC) submission
Mr Peter Smit provided a background on the FIC, how interactive gambling may be used for money laundering purposes and measures could be built in legislation to prevent money laundering.

The principle objective of the FIC was to identify the proceeds of unlawful activities, and to combat money laundering activities and the financing of terrorist and related activities. Money laundering was the process through which the proceeds of crime were made to appear as legitimately acquired funds or assets. It was done through a series of steps with the combined effect of concealing or disguising the true nature, source, location, disposition or movement of the proceeds. Measures to combat money laundering included the identification of customers, reporting of suspicious and unusual transactions and instituting internal controls. Interactive gambling provided an avenue for money laundering through the ability to transfer funds from one person to another and/or from one location to another.

Areas of concern for the FIC included the identification
and verification of clients because conventional methods of identifying clients cannot be applied where interaction takes place in a non-face-to-face environment. There were impediments to ongoing money laundering investigations if records of electronic transfers and other South African financial transactions were located in foreign jurisdictions. With regards to the reporting of suspicious and unusual transactions, the absence of human intervention meant less or no possibility to detect suspicious or unusual activity through on-line casino’s facilities. Interactive gambling might also allow operators based outside South Africa where South African laws did not apply. It was not always possible to determine where operator was based or which country had jurisdiction over its activities. Supervision and enforcement would be difficult.

Recommended mitigation measures included strict application of probity checks to ensure that criminals did not acquire a controlling interest in on-line casinos. Methods preventing rogue or unlicensed on-line casinos from making their services available in South Africa were proposed. Methods were required to prevent money flow to rogue or unlicensed on-line casinos. Licensed operators should subject their operations to the jurisdiction of all South African laws. Operators should establish a presence in South Africa which included a locally based gateway to provide services to South African based gamblers. Methods were required to ensure that compliance by on-line casinos with legal obligations such as customer identification would be supervised. It was desirable to have methods to ensure that transaction related information would be held in South Africa where it could be accessed by South African law enforcement agencies.

Discussion
Ms Ntuli asked how possible it was to have the same kind of tax regarding interactive gambling that governed other countries. She got the impression from Betfair’s presentation that it was easy to chase the wrongdoing from other countries.

Mr Labuschagne asked if the Bill in its current form provided adequately for litigation measures as required by the FIC.

Mr Smit said that land base casinos held their information in SA compared to legitimate foreign operators who would hold their information in the country that it operates from. Even if transaction could be traced it would be difficult to obtain information. The FIC proposed that operators should also bring information to SA in order to assist with bringing information to the courts if necessary.

The FIC felt that there were measures which could be further strengthened in the Bill like the requirement for a physical presence in SA. Operators should have a facility in SA through which the regulator could interact with the operators. Technological solutions like making Internet Service Providers, who facilitate business on behalf of the operator, accountable, should also be further explored.

Mr Rasmeni asked whether the FIC was satisfied that the Bill would be able to deal with criminals and whether the FIC had discussion regarding this with DTI.

Mr Smit said that the FIC had discussions with the DTI and they advised the DTI to have further consultation. The FIC had not objections to the Bill but felt there were still issues which should be further explored in order to make the life of the regulator easier.

Ms Ramodibe said that the FIC raised a number of concerns regarding the tax rate of internet gambling vis-à-vis land based gambling. She asked if there would be capacity to deal with interactive gambling and also what the consequences would be in the case of non compliance.

Mr Smit said tax policy was not the responsibility of the FIC but said that research suggested that countries used tax to either make themselves attractive or unattractive for interactive gambling operators.

Mr Smith said that the FIC would not be the regulator for interactive gambling. The National Gambling Board was the regulator for land-based gambling and would also be the regulator for interactive gambling. The FIC would play a role in assisting the National Gambling Board
 
Council of South African Trade Unions (COSATU) submission
Ms Prakashnee Govender (Co-ordinator of the COSATU Parliamentary Office) and Mr Mfanafuthi Tsela (Research Coordinator) of COSATU presented their submission to the Portfolio Committee.

COSATU felt that government should undertake proper research to investigate the impact of gambling on the poor before amending the National Gambling Act. They were opposed to any form of legalisation of gambling because it was a self destructive vice which did a lot of harm to society.

COSATU identified five major negative impacts of gambling on the economy, the cannibalisation impact, additional public expenditure, debt, savings, and money laundering.

The cannibalisation effect referred to the reduction in the economic activity of other activities when a new activity came into a community, resulting in shits in resident’s expenditure. Expanding gambling activities would lead to a reduction in consumption of some goods and services which would result in job losses. Poor people redirected their consumption away from other areas, including food, clothing and health because of gambling.

Regulating interactive gambling would require additional public expenditure. The additional public expenditure would counter the tax revenue that may be generated from legalising gambling. Regulating and supervising interactive gambling would be costly.

Chronic gamblers tend to fund their addition through borrowing or savings. Crippling debt was one of the most common outcomes of a gambling problem. The usage of credits cards in online gambling made it more difficult to curb severe debt. Debt and bankruptcy resulting from gambling increased the cost of credit throughout the economy.

Gambling accounts for an ever-increasing share of household expenditure. Increased expenditure on gambling was funded by a run-down in household savings. Problem gambling amongst the elderly could also erode their retirement savings.

Money laundering was one of the negative externalities that could result from legalised interactive gambling.

The social impact of gambling ranged from productivity loss, bankruptcy, crime, suicide, illness, abuse, divorce and separation, social services and treatment costs. Pathological gambling was a disease and studies found a strong correlation between the greater availability of gambling and pathological gambling.

COSATU felt that the DTI needed to provide information on how performance of the interactive gambling sector would be measured, e.g. the number of jobs created versus turnover. It was also proposed that strict regulation for the promotion of interactive gambling through advertising be imposed, similar to tobacco advertising.

COSATU urged the Committee to reject the Bill.

Discussion
Mr Martins said that there were a huge number of South Africans who engaged in gambling. The Bill presupposed that there was already a principal Act which regulated gambling. The issues raised by COSATU were considered by the Committee but it was also important to determine how to deal with the current reality presented by gambling.

Mr Rasmeni said that although gambling was sore on the social fabric it was necessary to legislate and regulate as oppose to leave things, and allow gambling to happen illegally. He asked COSATU for more information in order to help the country as a whole and to suggest alternatives.

Mr Tsela said that currently interactive gambling was illegal and that the law should be implemented. COSATU suggested that advertising for interactive gambling should not be allowed but penalised. People should be banned or restricted from using credit cards to do interactive gambling.

Ms Govender said that the Bill would decriminalise gambling and effectively promote gambling because of its availability. Given the proliferation of cell phones it would be difficult to regulate gambling. Verification of age would be difficult and children might not be adequately protected.

Mr Rasmeni also referred to CASA who indicated that there were a lot spin offs to gambling like B-BBEE and employment. He wanted COSATU’s response to the claim of benefits as indicated by CASA.

Mr Tsela said that if things were not acceptable organisations would use B-BBEE to justify their proposals.

Ms Govender said that job creation by interactive gambling was highly questionable.

She said that sustainable job creation was justifiable but that interactive gambling would not provide sustainable jobs. She challenged supporters of interactive gambling to come up with substantial figures.

SA Jewish Board of Deputies submission
Mr Michael Bagraim (SA Jewish Board of Deputies) gave a presentation on the SA Jewish Board of Deputies submission. The Jewish community supported the amendments to the National Gambling legislation. Protection for children and other vulnerable persons was of specific importance to the Jewish community as well as ensuring that gambling exposure and addition to gambling were avoided. Gambling was not forbidden by the Rabbinical authorities was frowned upon. Gambling did nothing to promote the benefit of society and was often seen as counter productive to society’s welfare. Realistically it was however understood that gambling was a major growth industry. It was recommended that the Income Tax authorities carefully scrutinised gambling and considered a special tax. Those who received licences should be judged on how much outreach work they did in order to ensure that society benefited from its profits. Income tax received from this industry should be used for setting up a more efficient and manned inspectorate.

Discussion
Dr Rabie asked if advertising for interactive gambling should be allowed. He felt that advertising for gambling should be treated similar to tobacco advertising.

Mr Bagraim said that from the Jewish viewpoint gambling should not take place but that it would take place anyway. It could be curtailed by not having advertising.

Mr Rasmeni referred to interactive gambling being seen as a growth sector. He asked the SA Jewish Board of Deputies for clarification on their view of the growth potential for interactive gambling.

Mr Bagraim said that interactive gambling was a growth sector for the providers but not for the economy and that interactive gambling should therefore be taxed.

Mr Rasmeni also wanted further information from the SA Jewish Board of Deputies on the outreach work they mentioned that should be done. He asked them to indicate what kind of outreach work was required and who should do the outreach work.

Mr Bagraim said that there should be built in outreach work built into the Bill. Licence holders should do outreach work which could include the building of houses or feeding schemes to help the poor.

Mr Rasmeni asked what structures were envisaged for interactive gambling to spread benefits.

Mr Bagraim referred to the tobacco industry and recommended that similar measures should be introduced to try and minimise negative externalities.

Mr Labuschagne asked if there was specific shortcoming related to the Bill which was left out or not addressed.

Ms Ramodibe wanted clarification on the SA Jewish Board’s view that although gambling was criminal it could not be helped. She also wanted clarification on the Board’s view that such behaviour sometimes became uncontrollable.

Ms Ntuli wanted clarification on the SA Jewish Board of Deputies view that government should consider a special tax because gambling had negative externalities.

Mr Bagraim said that after income tax was deducted, there should be a levy imposed on licence holders. He said that it was unrealistic to expect that interactive gambling would not happen because it was illegal.

Western Cape Gambling and Racing Board (WCGRB) submission
Ms Alicia Gibson (Manager: Legal Services) explained that WCGRB was responsible for the ongoing licensing and regulation of casinos, limited payout machines, totalisator and bookmaking industries in the Western Cape.

The Board viewed regulation as preferable to prohibition provided that a
proper, credible and constitutionally defensible legal framework has been created and that the regulatory relationship between the regulator and licensee were taken up with sufficient detail and clarity.

A coherent licensing and regulatory regime should provide a legal basis for all the primary powers and functions conferred on the regulator in respect of licensing and day-to-day regulation as stipulated by the elected legislature. The board felt that no such provisions have been put in place in the current Bill and that effectively all detail as to the manner in which the industry was to be regulated has been left in the hands of a single political functionary. This could create material conflicts, dichotomies and anomalies in Bill and thus in the Act itself. Separate legislation was proposed.

The degree of and timeframes set for consultation processes was inadequate.

The WCGRB preferred approach was that provincial, rather than national licensing and regulation remained unchanged with existing land-based casinos as the preferred interactive gambling licensees. This would not be protectionism, but motivated by considerations of practicality and efficiency and the extent of ongoing job creation by land based operators versus interactive gambling operators. Extensive experience of provincial Boards in day-to-day regulation and the overwhelming bulk of required legislation being in place provincially were also cited as a reason for remaining with land based casinos. Land-based operators were technologically adept and capable of setting up systems at short notice.

The WCGRB identified the following shortcoming in the Bill. The Bill displayed a p
piecemeal treatment of subject matter with no coherent licensing and regulatory regime. Anomalies in the Bill included inconsistencies in procedural requirements for issue of national licences by the National Gambling Board (NGB) and provincial Boards.

The WCGRB felt strongly that unacceptably wide powers would also be conferred on a single political functionary, the Minister. Poor and inaccurate drafting of the Bill was identified with regards to definitions. A lack of comprehension of the subject matter was displayed in the Bill as well as a haste in securing enactment of Bill.

The WCGRB committed themselves to an outcome which would secure the interests of the country and all its citizens, and enhanced South Africa’s already hard-earned respected status as a credible jurisdiction, as well as recognising the interests of industry stakeholders.

Discussion
Dr Rabie said that the function of the National Gambling Board and the provincial gambling boards needed to be demarcated to ensure that there was not an overlap. He suspected a turf issue between the National Gambling Board and the provincial gambling boards.

Ms Gibson said that demarcation was not a turf issue but due to historical development of the industry in SA. Since the provincial board had experience and relationships with provincial licencees it was their proposal to regulate on provincial level. Regulation on provincial level would also be more cost efficient.

Dr Rabie asked how it was possible that some countries like the USA prohibited interactive gambling.

Ms Gibson said that they have contact with counterparts around the world through the International Association oiof Gambling Regulators. The USA regulators could not regulate their industry because it went underground. Ms Gibson said that regulation was preferable to prohibition.

Mr M Nonkonyana (ANC) wanted clarification on the role of the Western Cape Racing and Gambling Board compared to the National Gambling Board.

Ms Gibson said that the WSRGB was acting in terms of the provincial gambling legislation like all other provinces which had legislation in place to regulate gambling provincially. The National Gambling Board has a relationship with the provincial gambling authorities.

Gauteng Gambling Board submission
The Gauteng Gambling indicated that they mostly concurred with the WSRGB. Interactive gambling should be regulated whether it be through an amendment or a separate Bill. Current land based casinos should not necessarily be allowed to do interactive gambling but should go through a qualifying process with all other potential operators. Different tax rates existed within the casino industry and a tax rate for interactive gambling was acceptable as long as it was reasonable.

The Bill left out a number of issues which should have been addressed. It agreed with the WSRGB
that unacceptably wide powers would also be conferred on the Minister in the Bill.

National Gambling Board under the old Act developed norms and standards with limited oversight functions over provincial boards. The current Bill radically departs from the current scheme and gave the National Gambling Board the powers of a licensing authority. This would create inconsistencies given that the National Gambling Board would have an oversight role whilst they were not subjected to oversight themselves. No explanation was provided for this deviation form the current scheme. Expertise built throughout the provinces should be used to regulate the industry.

Parameters should be listed given that wide powers were conferred on the Minister. Where wide discretion was conferred on a functionary, guidance should be provided on the conditions and circumstances, under which those powers were to be exercised.

Some definitions were limited and it should be looked at again. Suppliers of interactive devices for gambling should also be licensed or regulated.

National Responsible Gambling Programme (NRGP) submission
Prof Peter Collins (Executive Director) stated that remote gambling was defined as gambling which occurred via the internet, telephony, interactive television and other technology, when the providers and consumers were located in different places. Remote gambling was already widely available to South Africans and accounted about 2 % of gambling undertaken by South Africans. It popularity was likely to grow substantially as increasingly user-friendly and cheaper technology became available.

Good policy for remote gambling was to minimise harm and maximise benefits from new ways of delivering gambling products. Remote gambling was illegal in South Africa (SA) although most South Africans appeared to be unaware of this. Prohibition of remote gambling was not something that SA’s law enforcement agencies could reasonably be expected to enforce, given that public opinion would not tolerate the raiding of people’s homes and confiscating their hard drives to ascertain whether they had been playing poker online. The main challenge facing SA was the development of appropriate legislation to protect SA consumers.

The dangers of remote gambling was the risk of stimulating “problem gambling” to the extent that it offers opportunities for continuous, ‘rapid action’ play, high stakes, high and frequent prices and convenience. There was however no reason to believe that online gamblers would not be able to gamble in a sensible and responsible way. International consensus was that about 1 % of adults in populations, where commercially gambling opportunities were readily available, was full-blown gambling addicts with an identifiable neurological disorder and about a further 4 % gambled excessively to the point where they did significant damage to themselves. Internet gambling made it easier for operators to put in place safety measures likely to discourage people from excessive gambling like self-test for gambling problems, education about how to gamble safely and internet counselling facilities.

Internationally remote gambling was prohibited in some countries (Australia and the United States of America) and authorised in mostly small self-governing territories such as Antigua, Costa Rica, Vanuatu, Gibraltar, Alderney, the Isle of Man and Malta as well as the United Kingdom.

The NRGP was gambling-neutral and thought that remote gambling was not yet a serious source of gambling problems in SA. It would likely become a problem if internet gambling remained prohibited than if it was well regulated with operators required to put in place safety measures. Technology could be used to help regulation of remote gambling. The NRGP favoured legislation and regulation of remote gambling.

Discussion
Dr Rabie asked what an effective tax rate would be for SA given that the tax rate in Britain was 15 %.

Prof Collins said that there was not an ideal tax rate. Some countries wanted to attract interactive gambling operators and set their tax rate very low while others set their tax rate higher. South African consumers should ideally gamble with SA operators which would allow tax collected to stay within the country.

Mr Labuschagne asked professor Collins what was lacking in the Bill or what should be taken out. He also wanted to know if the fact that internet software could deliver protection should be written in the Bill.

Prof Collins said that the Bill seemed to leave a great deal of discretion to regulators. There was merit in leaving discretion to regulators otherwise with required changes one would go to parliament regularly. He also suggested that one should look at the player to player component of interactive gambling which was very popular. He proposed a requirement that before people can gamble on the internet, they would have to set themselves daily or monthly limits on their losses.

Civil Society representative for SA Advisory Counsel on Responsible Gambling submission
Mr Dudley Baylis said that the legislation of interactive gambling was a serious policy mistake if there was a belief that it would enable business growth.

Mr Baylis painted a picture of how people could become addicted to gambling. Compulsive gambling was a clinically diagnosable disease as specified by the American Psychiatric Association. Worldwide gambling was readily available with 5 % of the population falling victim to this disease in various degrees of severity. Gambling was counter productive within society and led to lying, stealing, borrowing, chasing wins, withdrawing from society, pawning and selling of household goods and attempted suicide.

A Centre for Addiction and Mental Health (Toronto) study concluded that the proximity to gambling venues had a positive correlation effect on the incidence of problem gambling. Griffiths and Parke of Nottingham Trent University concluded that technological developments in interactive gambling would increase the potential for problem gambling worldwide.

Mr Baylis felt that the Bill should be returned for further research and that the scope of advice and opinion on this subject be put to a far wider audience.

Discussion
Mr Labuschagne said that legislation would be passed and that Mr Baylis should provide the Committee with specific recommendations regarding what should be added or removed from the Bill.

Mr Baylis said an independent research body should be established to monitor gambling and ensure that there was accountability. Gambling should not only be informed by the DTI but also by other ministerial bodies such as Health and Finance.

Mr Rasmeni asked what informed the notion that adequate research was not done in the drafting the Bill.

Mr Baylis said that there was not a sufficient maturation period for interactive gambling to conduct proper research. Comments from church groups and trade unions indicated to Mr Baylis that they were not adequately consulted.

Mr Rasmeni asked what informed Mr Baylis view that the Bill was promoting gambling as opposed to reducing gambling. 

Mr Baylis said that legislation should be drafted not increase gambling but decrease it, while allowing sufficient choice.

Mr Rasmeni asked what one should do in terms of legislating in order to decrease gambling.

Mr Baylis said he had established a Gambling Anonymous Group in Diepkloof (Johannesburg) amongst people who spent money, which should have been spent on necessities, in casinos. He proposed that legislation should not be passed but that further input should be sought.

Justice Alliance of South Africa (JASA) submission
Mr John Smyth said that
JASA was a coalition of churches and individuals committed to upholding Judeo-Christian values in South African society. He said that it would be impossible to ensure children did participate in online gambling given the wide usage of credit cards by their parents. The real danger was that children would have their appetites whetted to what could easily become an addiction.

JASA felt that gambling was a moral issue and had been seen to destroy lives. They agreed with a recent report of the Royal College of Psychiatrists in Britain that the concept of promoting “responsible gambling” was disingenuous. Online gambling would develop into a social evil which was available 24 hours a day, 7 days a week.

JASA was also concerned about reports that the provincial legislatures were already arranging public hearings on the Bill although it had not yet been passed by the National Assembly. It was felt that the constitutional processes needed to be followed.

Discussion
Mr Labuschange asked Mr Smyth how he would formulate a Bill which would decrease gambling.

Mr Smyth said that he proposed that the amendment Bill be taken back.

Mr Rasmeni asked Mr Smyth if he felt that the DTI did not consult adequately.

Mr Smyth said that there had been little consultation on the Bill.

Mr Martins said that the DTI had indicated to the Committee that they might not have consulted as widely as they wanted to. The public hearings were part of the process of consulting with all stakeholders. The DTI presented issues to Parliament and the latter would elaborate and amplify all other aspects which might not have been given sufficient consideration.

The meeting was adjourned.

 

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