National Gambling Amendment Bill: NCOP amendments, EU/SA Trade Development and Cooperation Agreement: Briefing by Department

Meeting report

Opening Remarks
The Chairperson noted that the NCOP Committee felt that if the Bill was left as amended by the Portfolio Committee, then constitutional challenges might occur.  He asked the Department to comment on what was proposed in the NCOP so that the Committee could deal with the matter.

Mr Fungai Sibanda, Chief Director, DTI, noted that there was one major issue brought up at the NCOP, which related to the advertising of interactive gambling. During the Portfolio Committee’s deliberations with the Department, the Portfolio Committee proposed that advertising for interactive gambling be prohibited. The Department effected the amendment, and took the amendment to the NCOP. The NCOP on the other hand noted in their deliberations, that the manner in which the clause was being applied was discriminatory, and was thus subject to constitutional challenges. The other amendments made by the NCOP Committee were technical amendments.

Mr Johan Strydom, Legal Advisor: Department of Trade and Industry (DTI) added that the amendments were drafted in close consultation with the state law advisors. He noted that Bill B31C-2007 was the Bill that contained the NCOP amendments. B31D-2007 was the Bill as approved by the Portfolio Committee, incorporating the amendments made by the NCOP.  The issue of advertising was the only real amendment of substance as it dealt with matters of policy and law. Clause 15 as adopted by this Committee had a very simple provision in it. There was an extensive debate by this Committee on whether any advertising or promotion of interactive gambling was permissible. There was a very strong sentiment that there should be a blanket prohibition on any form of advertising or promotion of interactive gambling and this amendment was effected.
 
However there was a dilemma. It was argued that interactive gambling was the same as any other form of gambling. Therefore if one had to regulate advertising of interactive gambling, then one would have to regulate the advertising of all forms of gambling. Since the Bill was a Section 76 Bill (that is, legislation having provincial competence), the Department was asked to draft an opinion on the matter, which was done by the Office of the State Law Advisor.  During the consultations on the matter, the Department was told that according to the Constitution everyone had the right to freely participate in economic activities, and when Parliament made laws they should be equitable and adhere to the principles of fair administrative justice. Another fundamental principle that was highlighted during the consultations was that there should not be any legislative provisions that were discriminatory. Having considered these principles it was decided that should the blanket prohibition remain in the Bill, it was likely to be constitutionally challenged.  The Department concluded that advertising in respect to interactive gambling, should be dealt with in the same manner as advertising in a non discriminatory manner. Bearing in mind the strong political sentiment in both the Portfolio Committee and the NCOP, it was advised that the Department should find an overall approach that might in future be applicable to all kinds of gambling, instead of singling out a specific type of gambling. For the time being it was suggested that in order to adhere to constitutional principles, the Department should revert back to the version of the Bill as initially introduced by the Minister. 

Mr Sibanda added that the Minister was going to meet with the National Gambling Council and provincial MECs in order to look into gambling advertising.

Discussion
The Chairperson said that the purpose of the briefing was not to deal with the issues brought up by the Portfolio Committee, but to look at all the issues that had been brought forward by the NCOP.

Prof B Turok (ANC) said that Mr Strydom may have forgotten the main case that was being made by the Portfolio Committee. Interactive gambling was different from other forms of gambling, in that it enabled children to engage in gambling activities from their parent’s computers, whereas they were not allowed in casinos. That was the Portfolio Committee’s main concern. Interactive gambling opened up a whole new frontier of gambling, and should not be placed in the same basket as other gambling activities such as casinos or horse racing. Mr Strydom has forgotten that there was a major difference in principle between what was in the original Bill and the Pportfolio Committee’s amndment to Vlause 15. One of the main functions of Parliament was to uphold the moral fibre of society, and it would therefore be a mistake for the Portfolio Committee to change its position.
 
The Chairperson said that the Committee accepted the general principle of law having to apply equally, however one needed to find a solution for how one could address the Committee’s concerns.

Mr B Labuschagne (DA) noted that he too was against advertising in gambling; however whether there was advertising or not, children could still abuse the internet. The matter should therefore be left to the Minister, and the Committee should convey to the Minister their concerns about gambling advertising in general. 

Mr S Rasmeni (ANC) asked whether the crafting of the amendment was in line with the principal Act

Mr D Oliphant (ANC) said that it would be extremely difficult for anyone to monitor children in the privacy of their own homes. The Department should comment on whether the amendment that had been brought forward would be in line with the Constitution. 

Mr Strydom replied that that the amendment that was being proposed was not the same as the principal Act; however it was in a sense discriminatory in that it had an added ministerial power. The Department noted the comments that had been made at this meeting, and believed that all the arguments that had been advanced by Prof Turok were valid. The Department would not try and counter what had been advanced by Prof Turok, however the Department’s predicament was merely a matter of law. The definition of ‘interactive game’ was not in the Bill and was in the principal Act all along right from its inception. The initial idea was that there should be provision for interactive gambling. In the principal Act, an ‘interactive game’ was defined as a gambling game that was played or made available to be played. The gambling game was defined as any activity that was described in section 5.

The problem with section 5 was that it did not speak specifically to a form of gambling, but merely set out the principles. As long as the game met the section 5 requirements, then the game would be a gambling game.  A solution would be to take out interactive gambling from section 5, and since removing it from section 5 would be unconstitutional, the Department would then argue that interactive gambling was taken out in order to protect the interest of minors. It however could be argued that minors also participated in the other forms of gambling that were classified under section 5.  It was therefore decided that a general approach had to be taken, in which all forms of gambling classified under section 5 were considered. 

The Department felt strongly about the matter, but was legally constrained. There was a limitation clause in Section 36, which stated that even if something was discriminatory, Parliament could intervene if there were justifiable limitations for the intervention.  However given the fact that the interest of minors, was not only limited to interactive gambling, but also applied to all other forms of gambling that fell under Section 5, then Parliament would fall short of using the limitation of rights clause.

Mr Sibanda added that the matter needed to be referred back to the policy principle in order to make a decision on gambling in general. The Bill had brought to the fore issues surrounding the socio economic impact of gambling. The Department had looked at whether it was possible to ban gambling advertising; however it was discovered that it might pose some legal challenges.

Mr Themba Maresha, Chief Operating Officer, National Gambling Board, replied on whether the amendment was in line with the principal act. He noted that effectively what was being introduced in terms of the amendment was to give the Minister the power to prescribe the manner and form of interactive gambling. The scheme of advertising that was contained in the principal Act, would now apply to interactive gambling. The Minister may have to make regulations that dealt with issues surrounding the protection of children and people that were vulnerable to gambling of which advertising may be an implication. Whatever the Minister decided, would have to be done in consultation with the Portfolio Committee, so that the Committee could be satisfied that the measures taken would be adequate to allay their fears about interactive gambling advertising.

Prof Turok said that there was no urgency for the Bill and that there needed to be a second thought on the Department’s position. Parliament was supreme, and whether there was a battle between a moral or legal position then Parliament should be the final adjudicator and not the Minister. Parliament should also not delegate matters of morality to the Minister. A new frontier had opened up with computer technology where gambling could be done from home. Those who were against gambling did not want a new frontier to be opened up, especially when children were concerned. The Committee should bring in top constitutional experts in order to assist in the battle between morality and the law.

Ms D Ramodibe (ANC) said that she understood the Department’s predicament. The initial thought had been that the Bill was to regulate interactive gambling as it was not currently regulated and there was the need for regulation. There would always be unfair discrimination, and the Constitution stated that the right to trade may be regulated.  Another argument that may arise would be that the issue was not one of general application, since similar types of gambling were allowed to advertise. The Department could also argue that the reason why the Bill was formulated, was to separate interactive gambling from all other forms of gambling. There was also the issue of the limitation and the purpose; clarity should be provided on how far the Department tried to use section 36 in order to determine how banning gambling advertising in general would be subject to constitutional challenges.

Mr Strydom replied that the Department had received volumes of opinion on the issue of gambling advertising. The Department however requested the Committee not to adopt the amendments yet, in order to allow the Department time to first look into the issues that had been raised by Prof Turok and other members of the Committee.

The Chairperson noted that there would never be an agreement on the matter.  The issue was a policy issue, and the Minister was not the only one who was responsible for formulating the law.  At the end of the day, Parliament or the ruling political party would be responsible for taking a blanket policy on gambling. The NCOP had had time to deliberate on the matter, and the Committee should take more time to deliberate, before the formal motions of adopting the new proposed amendments to the Bill were taken.

Additional Protocol to South Africa/European Union Trade Development & Cooperation Agreement
Mr Mudunwazi Baloyi, Chief Director: Bilateral Trade Relations, DTI, outlined the key features of the Agreement before explaining that the Additional Protocol dealt with the enlargement of the European Union. Ten additional member states had joined in 2004 followed by another two in 2007. The trade implications of this were explained as were the challenges for South Africa.

The objective of the TDCA was to encourage South Africa’s drive to open up to the global economy, and to promote South Africa’s development. Some of the key features of the TDCA included the phasing out of customs duties on certain products. The EU would liberalise 95% of imports from South Africa within 10 years. South Africa on the other hand would liberalise 86% of imports from EU within 12 years. The EU also granted tariff quotas for certain agricultural products. The full impact of the Agreement would only really be felt in 2012

Discussion
The Chairperson reminded members that the Additional Protocol to the TDCA was tabled only on the 24 March, and that the Department’s briefing was merely an informal one. The Department would be given another opportunity to formally present the Additional Protocol at a later stage.

Prof Turok said that he was surprised the Department was unable to evaluate the impact of the TDCA. During the formal deliberations the Department should provide some assessments on the benefits of the agreements. When one looked at the South African exports to Bulgaria, one noticed that South Africa exported primary products and imported manufactured goods. Bulgaria and Romania were backward countries. The paper was a little ambiguous on the benefits of trade with the EU. The arrangement was asymmetrical, and the Department should comment on whether South Africa had benefited from opening up to the global economy, and whether opening up should be encouraged when relationships were asymmetrical.

Mr Labuschagne asked whether the TDCA would last for 12 years or would be assessed after 12 years. The Department should also comment on why nuclear reactors were being imported from Romania and Bulgaria and whether they were meant for electricity generation.

Mr Rasimeni focused on slide 21 of the presentation, and noted that the tariff that was faced was different from those of EU countries. He asked the Department for commen. The Committee would also be interested about the impact of the TDCA, and one could not wait 12 years in order to asses the impact of the Agreement. The Department should comment on whether they had made a free trade agreement with SADC.

Mr S Njikelana (ANC) said the issue of free trade needed a little more clarification. The presentation referred to the key features of the TDCA, however there were some serious doubts about some of the key features. IBSA was more effective than the EU in facilitating South Africa into the global economy. Clarity should be provided on the extent to which South Africa was firm and resolute in ensuring beneficiation from primary products instead of exporting them. There needed to be an assessment or even an audit of the TDCA. One should not create an illusion that the TDCA was a good agreement, and the Portfolio Committee should meet in order to look into the impact of the TDCA.

Mr Oliphant noted that the Portfolio Committee’s role was not clear, and clarity should be provided on whether Parliament should be part of the process.

The Chairperson pointed out that this was an initial briefing. Therefore the Committee’s role to impact and give guidance as effectively as possible would be when the Department returned. When the deliberations had been completed, the Additional Protocol of the TDCA would be taken to Parliament for debate, after which it would be sent to the President for signing. After it had been signed, it was the Committee’s responsibility to assess the impact of the TDCA.

Mr Baloyi replied that the Department noted the comments that had been made, and hopefully they would assist the Department in going forward.  On the manufacturing capacity of the South African economy, South Africa was a manufacturing economy, and a lot of what was manufactured was primarily for consumption. Hence most of the exports were primary products. Many countries had come to South Africa to primarily lock in sources of supply, which resulted in South Africa exporting semi processed primary product back to these countries. These products are then imported back into South Africa as finished products.

The EU was South Africa’s number one trading partner, followed by the US and Japan.  If one looked at the EU holistically it was an overwhelming economy and South Africa was merely taking a chance when they decided to enter the comprehensive free trade agreement with the EU. On the open-ended nature of the Agreement, there were many obligations which had to be implemented. For South Africa the implementation would occur in a phased in approach, where South Africa would only be allowed to reduce certain tariffs from year 6 onwards, and 86% would open up to 0 tariffs in year 12. Year 12 would be the implementation phase, and after the 12 years, one could use the legal instruments to end the agreements.

South Africa had been importing semi processed goods from Romania and Bulgaria, and these served as input into the manufacturing process. It was unclear where the nuclear processors went, however these nuclear processors was meant for electricity. The Department would be keen to conclude the assessment of the full impact of the agreement, and the economic impact of Romania and Bulgaria who are at a similar stage of development as South Africa.

Ms Kekeletso Mashingo, Deputy Director, DTI, added that a study was conducted in 2004, but that study was premature. The study may have been dwarfed by many changes, and the DTI has decided to undertake a study of the full impact.

The meeting was adjourned.