ATC100311: Report: Review of the National Gambling Legislation

Trade and Industry

Preliminary Report of the Portfolio Committee on Trade and Industry on the Review of the National Gambling Legislation, dated 11 March 2010

 

 

1.       INTRODUCTION

 

The Portfolio Committee on Trade and Industry received a request from the Department of Trade and Industry (DTI) to provide input on the proposed regulations for the implementation of Interactive Gambling (IG) in terms of the National Gambling Amendment Act, 2008 (Act No. 10 of 2008). The Committee welcomed the opportunity to study the regulations and engage with the Department on the issues, especially since the Amendment Act did not require this.

 

During the deliberations, it became apparent that vulnerable members of the community whether youth or those with gambling addictions were not adequately protected and/or supported by the current legislation. Furthermore, the internet-based nature of interactive gambling allows it to cross borders, which impedes enforcement of compliance in the legislation including regulations.

 

The Committee requested a legal opinion from the Parliamentary Legal Services relating to Parliamentary processing of subordinate legislation. One of the concerns highlighted in the legal opinion was the absence of the process of approving regulations within the principal Act. Currently, there is no procedure in the Rules of Parliament for dealing with and processing subordinate legislation.

 

After studying the principal legislation, as well as points raised by the parliamentary legal adviser and the Committee’s own researcher, it became apparent to the Committee that it would not be very constructive to adopt a piecemeal approach to the interactive gambling subordinate legislation. As a result, a decision was taken to embark on a broader legislative review process which would include public hearings. The focus of the review was on the vast socio-economic impacts of gambling on local communities and society in general, the impact of misleading advertising, the regulation of cross-border gambling, the efficacy of the current regulatory environment and the implementation of the interactive gambling legislation that had been passed in 2008.

 

 

2.        CONTEXTUAL BACKGROUND

 

Gambling was restricted in South Africa as early as 1673. The Gambling Act of 1965 officially banned all forms except betting on horse racing. Gambling was legalised in the former Transkei, Bophuthatswana, Venda and Ciskei (TBVC). By the late 1970s, casinos had already started operating in the Bantustans of Bophuthatswana, Ciskei, Transkei and Venda.

 

The prohibition of gambling was ineffective with an estimated 2 000 casinos operating illegally in South Africa by 1995. Some scholars argued that illegal gambling was tacitly supported by mining companies in order to keep black African workers locked in poverty and available as a cheap source of labour (Sallaz, 2001). In Colorado, casino facilities were located in old mining towns that were in need of funds to preserve their historic structures (Distressed Cities Increasingly Bank on Casino Gambling, 1993).

 

In October 1994, the Lotteries and Gambling Board, published an interim report chaired by Prof NE Wiehahn which expressed a view that “the Gambling Act, 1965 (Act No. 51 of 1965) no longer reflects the true moral viewpoint of the majority of South Africans and that the Government should legalise lotteries and gambling in the Republic of South Africa”. (See Annexure A for further details)

 

The final Wiehahn Report on Gambling (1995) recommended that all forms of gambling be regulated. In 1996, the Wiehahn Report informed the National Gambling Act (Act No. 33 of 1996). However by then, provincial lawmakers viewed casino taxation as one of the few forms of independent revenue generation available to them.

 

The National Gambling Act (Act No. 7 of 2004) repealed the National Gambling Act (Act No. 33 of 1996) and regulated various forms of gambling activities to:

 

§         Protect the public against the adverse effects of gambling;

§         Limit, control and monitor possible proliferation of gambling and illicit gambling activities;

§         Enforce responsible gambling operations by requiring operators to contribute to social development initiatives, SMME (Small Medium and Micro Enterprises) development, and facilitate empowerment of HDIs (Historically Disadvantaged Individuals) and BBBEE (Broad-based Black Economic Empowerment); and

§         Contribute to infrastructure development in rural communities.

 

Section 11 of this Act made interactive gambling unlawful in South Africa. The final Wiehahn Report on Gambling (1995) had not considered interactive gambling, as this form of gambling was largely non-existent at the time. However, in keeping with Government’s broad policy to regulate all forms of gambling, the 2004 Act required the Minister of Trade and Industry to introduce legislation for the regulation of interactive gambling (IG) within two years of the president’s assent. The National Gambling Amendment Act (Act No. 10 of 2008) legislated interactive gambling and provided for implementing regulations to be drawn up.

 

 

3.         PROCESS

 

Following the Committee decision on the 12 August 2009, members of the public and relevant implementing agencies were invited to express their views on gambling legislation in general either through written submissions or in the public hearings in November 2009, January and February 2010. A full list of participants is provided in Annexure B of this report. Finally, Members of the Committee visited the GrandWest Casino in Goodwood, Western Cape, to determine the effectiveness of current gambling legislation within the casino environment.

 

 

4.       KEY ISUES RAISED IN THE SUBMISSIONS

 

Key issues have been grouped in terms of socio-economic impact, of legalised gambling, the impact of misleading advertising, regulation of cross-border gambling, the current regulatory environment and interactive gambling. A summary of the individual submissions are provided in Annexure C.

 

4.1.       The socio-economic impact of legalised gambling

 

Generally, submissions by the gambling industry reported that gambling activities have largely had a positive impact on the economy through income generation, employment opportunities, and its contribution to tax revenue, infrastructure development and corporate social investment. The main economic contributor has been the casino industry. In addition, industries such as the limited pay-out machines industry refer to the significant opportunities provided for black economic empowerment and small business development.

 

Industry players and the administrator of the National Responsible Gambling Programme (NRGP), the South African Responsible Gambling Foundation (SARGF), were of the opinion that problem gambling was a phenomenon that affected a small percentage of gamblers and it was inferred that the public generally accepted it as a recreational activity. The SARGF also stated that the industry made financial contributions to the NRGP, which is used to promote public awareness of problem gambling and for the treatment programmes for problem gamblers.

 

On the other hand, concerned institutions and citizens alluded to the negative impacts of gambling on society and in particular families. One of the written submissions referred to a recent study conducted by the National Gambling Board (NGB) entitled “The Socio-Economic Impact of Legalised Gambling in South Africa”. The study showed that the poor and less affluent were most impacted upon by gambling activities including the National Lottery. Other possible social consequences of excessive gambling noted by concerned parties covered neglected family responsibilities including domestic violence; impaired work ethics and related costs to business through reduced productivity; crime; financial problems and stress related illnesses; and costs to government in terms of direct regulation and social service costs. There is also a view that gambling does not contribute to the GDP of the country as it is a zero-sum game.

 

4.2.       Impact of misleading advertising

 

The industry players indicated that there was generally compliance to advertising requirements within the regulated industries. The Casino Association of South Africa pointed out that the industry players may be subjected toadministrative penalties, or even the suspension or revocation of the licence if they failed to adhere to these requirements. However, according to land-based industry players the bulk of misleading advertisements were on radio, television, the Internet and when in print media were published by unlicensed or unregulated interactive gambling operators.

 

Another view expressed in the submissions was that while the industry may be adhering to the requirements, the principle behind advertising was to develop an emotional bond between the consumer and the product. Therefore, despite efforts to include warnings related to the dangers of advertising, it could still entrench a culture of gambling, particularly among the youth, rather than one that promotes decent work and productivity. Furthermore, advertising tends to be misleading by creating the impression that one may be the next winner, which can be most damaging to individuals who least can afford the financial loss.

 

4.3.       Regulation of cross-border gambling

 

Standard Bank sent a written submission with concerns about the implementation of the new Act in terms of their role in facilitating electronic transactions. They explained that according to Section 2.16 of the Exchange Control Regulations[1], cross border gambling activities are prohibited including the participation in foreign lotteries and betting organisations. The Bank has been advised to hand over all proceeds received from foreign gambling but can only verify the source of the funding based on the client’s declaration.

In addition, the bank submitted that it was not in a position to differentiate between a service provider that transacts at a land-based site and an online casino simultaneously. Thus, compliance with all the provisions of the Lotteries and National Gambling Acts and the Exchange Control Regulations was difficult.

 

4.4. Current regulatory environment

 

Primarily, each industry player commented on how the current legislation impacted on their area and/or how more lenient legislation on other industries undermined their market share. They identified seven key challenges in the current legislative environment.

 

§         Firstly, there was an onerous compliance costs on national industry players, due to differing compliance standards between provincial gambling boards and between national and provincial gambling boards. In addition, there was a need to comply with additional legislation such as liquor and business legislation. This was particularly challenging in the LPM industry where there were numerous challenges in terms of the zoning of sites in former black areas, types of eligible sites, restricted advertising, the limit on the number of LPMs allowed per site and the LPM stake and prize limits that have not been adjusted since their establishment.

§         Secondly, the limited capacity of municipalities and provincial gambling boards to process the relevant licence applications in a timely manner. This becomes challenging when a site owner requires a number of permanent licences simultaneously to run his/her establishment legally.

§         Thirdly, not all forms of gambling receive similar levels of regulation and these differences in legislative requirements lead to lost opportunities and unfair competition. An example includes operating the totalisator compared to operating as a bookmaker.

§         Fourthly, manufacturers of gambling machines raised concerns about being over legislated in terms of the Financial Intelligence Centre Act and the certification and distribution of gambling machines and devices.

§         Fifthly, the use of electronic bingo machines is currently being disputed, as the view is that the machines do not truly offer the game of bingo. In CASA’s opinion, the emergence of electronic bingo machines means that bingo halls would be operating as casinos without the required contributions that casinos must make, as the bingo halls are not stringently regulated.

§         Sixthly, the capacity of the central electronic monitoring system to monitor LPMs countrywide, as the number of LPMs is rising.

§         The seventh issue was raised by a community leader who pointed to a possible compromise of the integrity and independence of the National Responsible Gambling Programme. It was stated that there were four representatives from the gambling sector sitting on the South African Responsible Gambling Trust and furthermore the NRGP programme is funded by proceeds from the industry.

 

4.5. Interactive gambling

 

There was general consensus in the submissions for various reasons which they stated that interactive gambling was a challenge. However, there was disagreement in whether or not it should be legalised given the ease of access and the borderless nature of interactive gambling sites. One of the key challenges was that regardless of the government’s stance on interactive gambling, foreign online gambling sites would continue to offer services within South Africa due to the inability to control access to these sites.

Industry players were concerned of the impact on land-based facilities; the rate of taxation compared to land-based facilities; the competitiveness of legal interactive gambling sites given the restrictive and cumbersome regulations being proposed and the access of sites to youth through various electronic equipment. Civil society including churches and community leaders expressed a strong view that interactive gambling would have a negative impact on society and should not be legalised. If it was legalised it should be subjected to strong controls

 

 

5.              KEY ISSUES HIGHLIGHTED BY DTI AND RESPONSIBLE AGENCIES

 

5.1.             Department of Trade and Industry (DTI)

 

The submission focused on the evolution of gambling legislation within South Africa. The review of the gambling industry by the Wiehahn Commission led to the National Gambling Act of 1996 being passed. In 2004, this Act was repealed and replaced with the National Gambling Act of 2004 which recognised the concurrent powers by the National and Provincial governments. The 2004 Act provided for uniform norms and standards applicable in South Africaand also establishes institutions responsible for coordinating and administrating national gambling policy.

 

The introduction of the 1996 and 2004 Acts introduced significant changes with respect to regulations and enforcement, fair, transparent and equitable licence allocation and economic empowerment. At present, the gambling industry is faced with a number challenges with respect to technological advancements and global interaction of economies. This brought about the need to introduce interactive gambling with the National Gambling Amendment Act of 2008. This highlighted a number of challenges with respect to the limited approach in regulating this form of gambling which currently excludes Person to Person and the lack of control measures to ensure the protection of society and integrity of the economy. Interactive gambling saw the emergence of international syndicates which operates outside the border of South Africa and the money laundering opportunities.

 

5.2.             National Gambling Board (NGB)

 

The submission focused on the legislative impediments faced by the NGB in executing their legislative mandate. Gambling, being a concurrent legislative competency, resulted in lack of uniformity in regulating gambling activities and procedures. A unilateral amendment of legislation by provincial governments resulted in legislation conflicting with National Gambling legislation.

 

New challenges are facing the gambling industry with the advancement in technology resulting in the need for the formulation of a new Bingo policy and review of regulation procedures. The submission highlighted inconsistencies between casino and bingo licensing as both are competing in the same market. Concerns were highlighted with respect to Limited Payout Machines (LPM), as inconsistencies exist between municipal by-laws and gambling legislation and between provincial Business Act requirements and Gambling Laws with regard to licensing of machines.  The NGB informed the Committee that the horseracing activities are broadly defined within the 2004 Act and would require detailed amendments as well as the development of policy on regulation of racing and betting activities, including sporting activities.

 

The economic impact of the Fafhee form of gambling is not known but various socio-economic studies would suggest that the Fafhee games contributed towards the increase in irresponsible gambling. Currently, the Fafhee form of gambling is unregulated.

 

With respect to interactive gambling, the NGB realised the urgency to develop and determine a clear policy position. This would allow for the revisiting of key issues such as the proposed tax rate of 6 per cent, the imposition of maximum credit limit in a player account, player registration, the concept of E-wallet, and the issue of advertising. The need for the establishment of clear regulatory environment with respect to interactive gambling is urgent.

 

5.3.             National Regulator for Compulsory Specifications (NRCS)

 

The NRCS mandate is to promote the right and obligations of government to protect the safety of the public and the environment. The National Gambling Act mandates the NRCS to analyse the test reports of gambling equipment and issue a letter of certification (LOC) in accordance with the relevant compulsory specification. NRCS therefore protects gamblers by ensuring that the service providers strictly comply with compulsory specifications. Currently, there is no provision in the law that governs compulsory specification on performance.

 

5.4.             Financial Intelligence Centre (FIC)

 

The FIC is a statutory body established to identify the proceeds of crime and to combat money laundering and terror financing. In relation to gambling, the Financial Intelligence Centre’s (FIC) responsibilities include monitoring compliance with obligations relating to combating money laundering and terror financing and providing guidance to the National Gambling Board, as the supervisory body for gambling, in terms of their performance of their functions relating to the combating of money laundering and terror financing.

 

The FIC reported concerns regarding the implementation of the interactive gambling legislation, as well as possible measures to mitigate these risks. These included possible abuse of interactive gambling facilities and vulnerabilities of interactive gambling to money laundering abuse. The Centre emphasised the fact that interactive gambling does not provide strong supervision, as it works from the basis that one cannot adequately verify the identity of one’s customer. Some of the key vulnerabilities are:

 

§         The ability to verify customer identification and monitor that the registered account is not being used by another person;

§         Limited access to customer records and transactions where the online casino is hosted offshore;

§         The jurisdiction of interactive gaming service providers is unclear, where these are hosted outside South Africa, which negatively impacts on compliance with the FIC Act and other South African legislation; and

§         The ability to supervise and enforce an effective licensing regime, where illegal or rogue online casinos are prohibited from entering and operating within the borders of South Africa and legal online casinos are regulated. This would require access to information for probity checks, supervision over possible cross-border activities, and the ability to enforce remedial action and revoke licences due to non-compliance, while prohibiting access to these online casinos within South Africa.

 

 

6.        RECOMMENDATIONS RECEIVED FROM ALL THE SUBMISSIONS

 

Most of the submissions received came from industry players and therefore the recommendations focused on streamlining the implementation of gambling activities by easing the administrative burden. The key recommendations made by the industry players, civil society, community leaders, the DTI and responsible agencies, as well as FIC because of money laundering, are listed below. A full list of the recommendations is available in Annexure D.

 

6.1.       General:

 

One of the key general recommendations focused on the protection of vulnerable groups, including the poor and the need for these to be explicitly included in socio-economic analyses. Furthermore, the promotion of gambling should be curbed and a culture of productivity should be promoted, especially since the advent of interactive gambling and increased Internet access could exacerbate problem gambling activity. Finally, there was a call for strictly enforced penalties, which should include jail terms.

 

6.2.       Casino industry:

 

The main recommendation from the casino industry was that regulations for casinos should return to focusing on substantive operational risks identified by regulatory authorities.

 

6.2.             Limited Payout Machines Industry:

 

The recommendations made in respect of the LPM industry focused on increasing the LPM stake and prize limits to account for inflation over the last 13 years; standardisation of legal requirements for operation and licensing, particularly in areas where zoning is unavailable; temporary LPM licences for taverners awaiting approval for a permanent liquor licence; exclusion from requirements in terms of the National Register of Excluded Persons and participation in the selection of the monitoring system being used.

 

6.4.       Interactive gambling:

 

The following recommendations related to interactive gambling:

 

6.4.1.            The National Gambling and Lotteries Acts should be amended to include a clause similar to the one in the Films and Publications Board Act section 24(B) (3), which stipulates that “any person that facilitates transactions, knowing that such transaction will facilitate access to, or the distribution or possession of, child pornography, shall be guilty of an offence.”

6.4.2.            The insertion of a provision in the National Gambling Act to deem interactive gambling to take place “where the player is located” in cases where an interactive gambling operator is not licensed in South Africa.

6.4.3.            Sun International feels that the interactive gambling debate should be reopened in order to identify relevant policy objectives.

6.4.4.            Justice Alliance South Africa is strongly opposed to legalising interactive gambling.

6.4.5.            The enforcement of the law in terms of interactive gambling is assessed in relation to government’s capacity.

6.4.6.            The legal difficulties in prosecuting illegal interactive gambling operators for misleading advertisement could be addressed by inserting the clause “where the player is located” into the relevant section.

6.4.7.            Probity checks should be applied strictly to ensure that criminals do not acquire a controlling interest in online casinos.

6.4.8.            Rogue or unlicensed online casinos must be prevented from making (or continuing to make) their services available in South Africa.

6.4.9.            Money flow to rogue or unlicensed on-line casinos must be prevented.

6.4.10.         Licensed operators must subject their operations to the jurisdiction of all South African laws and establish a presence in South Africa, including a locally based gateway to provide services to South African based gamblers.

6.4.11.         Compliance by online casinos with legal obligations, such as customer identification, must be supervised and this monitoring process must include the ability to examine compliance through the inspection of their systems and records.

6.4.12.         Supervisors must be able to take action against licensed online casinos where they fail to comply with their legal obligations

6.4.13.         Transaction related information must be held in South Africa where it can be accessed by South African law enforcement agencies.

6.4.14.         Sufficient capacity to supervise compliance and prevent unlicensed or rogue operators from offering interactive gambling facilities must be ensured.

 

6.5.       Electronic Bingo Machines:

 

The main recommendation was that the National Gambling Act should be amended to include the Gauteng Gambling Board’s definition of Bingo to include the use of electronic bingo machines, as this appears to be contradictory within the current national legislation.

 

6.6.       Manufacturers of gambling equipment:

 

The recommendations relevant to gambling equipment manufacturers related to the easing the regulatory burden of approving, certifying and distributing gambling equipment and devices, particularly in relation to concurrent requirements; amending the National Gambling Act to reflect the changes in the application for certifying gambling equipment and aligning regulations for compulsory specifications to the NRCS Act;

 

6.7.       Advertisements:

 

The following recommendations were made in terms of advertising: alignment of the national gambling legislation with the Code of Advertising Practice and the Consumer Protection Act; to transfer the censoring function of gambling advertisement to existing authorities, such as the Advertising Standards Authority of South Africa; tighter regulation and monitoring of advertisements, particularly for interactive gambling and the use of advertisements to raise public awareness of the dangers of gambling.

 

6.9.       Minors:

 

The recommendations relevant to minors related to strict enforcement where underage gamblers are admitted, including a helpline to report illegal practices; the location of gambling sites to venues applying similar age restrictions; and the use of signage to display restrictions clearly.

 

 

7.         SITE VISIT TO GRANDWEST CASINO

 

A few Members of the Committee visited the GrandWest Casino on 23 February 2010. The full report on the site visit is available in Annexure E. The Members were taken on a general tour of the complex, which included restaurants, fast food outlets and shops, the casino, the loyalty club members’ area, conference facilities and entertainment areas.

 

The regional manager, Mr John Fraser, explained that the grounds offered about 2 000 employment opportunities, of which approximately 1 000 were directly linked to the casino’s facilities. Most of the establishment’s employees had permanent contracts and employed on a schedule basis to allow labour flexibility. In addition, the casino had provided extensive training and promotion opportunities to individuals from surrounding areas.

 

The Members were shown the electronic and camera surveillance room, where activities on the casino floor, in general and other designated areas were monitored for compliance with the relevant legislation and to ensure the safety of clients. The casino is operated on an electronic basis, with punters having to use issued electronic cards to gamble. This assists the casino in ensuring that money deposited there were used for gambling transactions and to monitor for potential money laundering activities.

 

The surveillance team designated one staff member per shift to manually monitor for the presence of problem gamblers and nationally banned individuals within the surveillance room on the basis of the National Gambling Board’s problem gambling and the Casino Association of South Africa’s databases. A second mechanism to prevent problem gambling is that punters need to provide an identity document when claiming their winnings, which is checked against the problem gambling database. Registered problem gamblers would then forfeit their winnings.

 

The financial manager, Mr Wayne de Wet, also explained that the use of loyalty cards assisted in identifying possible suspicious activities and problem gamblers, and did not necessarily encourage gambling. The regional manager assured the Members that Sun International only extended credit to punters on rare occasions and this was aimed at high rollers, and these funds were generally repaid shortly thereafter.

 

The regional manager then outlined Sun International’s corporate social investments within the region, which included the extension of bursaries and funding the Shawco Community Health Project.

 

The following observations emerged from the visit:

 

§         The GrandWest Casino appeared to be highly regulated and well monitored with a high compliance rate.

§         There may be a gap in identifying, registering and monitoring problem gamblers, especially for those falling into more vulnerable groups including pensioners. As these individuals may not be regular gamblers but may lose a significant proportion of their income in a few sittings at casinos.

§         The monitoring of the use of day cards for the possibility of money laundering activities should be reviewed on a daily basis.

§         There may be a need for the Committee to visit smaller gambling establishments to assess the controls that are being implemented to monitor problem gamblers and money laundering.

 

 

8.         PRELIMINARY OBSERVATIONS

 

During the final phase of the oversight process the Portfolio Committee of Trade and Industry were informed by DTI of a commission they had established at the end of last year to study the issues around gambling. In view of this, the Committee took a decision to report on its preliminary observations with a few recommendations. The Committee have been told to expect the final report of the Commission at the end of May 2010. The Committee will then study this report and once again exercise its oversight and deliberate and take a final report to the House in the second half of this year.

 

8.1.        The illegal use of interactive gambling sites, even if regulated in South Africa, will be hard to curb and monitor due to continuous technology development. On the one hand, regulation would provide a legally protected space for South African adults to engage in recreational online gambling activities. This space could allow government to identify problem gamblers. However, regulating the activity will not necessarily inhibit the use of ‘illegal’ foreign sites that could still be accessed by the very individuals that the legislation seeks to protect, such as minors and problem gamblers.

8.2.        The disparity between the rules for the National Lottery in comparison to other land-based gambling activities in terms of the promotion of National Lottery sales compared to restricted operations for other land-based gambling activities.

8.3.        National and provincial gambling legislation should be reviewed for alignment and recommendations made to the relevant parties for consideration.

8.4.        The requirements for the LPM industry should be reconsidered given varying restrictions across provinces

 

 

9.       RECOMMENDATIONS

 

9.1.             Parliament should develop procedures to address the processing and oversight of subordinate legislation.

9.2.             A comprehensive study should be conducted on the, as yet, not proven economic benefits intended by the legislation and also the costs to society and government and the fiscus.

9.3.             At this stage, gambling should be more rigorously regulated and its proliferation halted.

9.4.             Interactive gambling advertisements and sponsorships in South Africa should be prohibited, in the absence of any regulations.

9.5.             Operators should have an obligation and accountability/liability towards persons becoming gambling addicts and their deprived and affected families.  Stronger measures need to be put in place to prevent compulsory and addictive gamblers from running up debt for themselves and their affected families at licensed gambling facilities.

9.6.             The FIC need to set up stronger measures, in co-operations with South African banks, to prevent cross-border flow of funds due to interactive gambling activities, specifically also from credit card transactions.

9.7.             Ways to curb advertising that presents gambling as a way to get rich and stronger warnings against the risks associated with gambling should be considered.

 

 

10.        ACKNOWLEDGEMENTS

 

The Committee acknowledges the contributions made by industry players, civil society, community leaders and DTI and responsible agencies and FIC for their inputs into the gambling review process, thus far.  The Committee also wishes to thank its Committee support staff in particular the Committee Secretary, Content Advisor and Researcher for their conscientious commitment to their work.  The Chairperson thanks all Members of the Committee for their active participation during deliberations and their constructive recommendations to the House.

 

 

References

 

Distressed Cities Increasingly Bank on Casino Gambling, National Civic Review, Summer 1993, p. 303.

Sallaz, J.J. (2001) Gambling with Development: Casino Capitalism in South Africa and on Indian Lands in California. Working Paper No. 17. University of California Berkeley. Available:

http://www.iir.berkeley.edu/culture/conference/sallaz.pdf [Accessed: 22 September 2008].

Wiehahn Commission (1994) Interim Report on Lotteries and Gambling in the Republic of South Africa. Report submitted to the Lotteries and Gambling Board.

Wiehahn Commission (1995) Main Report on Gambling in the Republic of South Africa. Report submitted to the Lotteries and Gambling Board.

 

ANNEXURE A: RECOMMENDATIONS EMERGING FROM THE INTERIM WIEHAHN REPORT

 

The Wiehahn Interim Report of the Lotteries and Gambling Board recommended that:

 

§         Government stated in policy that, in principle, only licensed forms of lotteries and gambling in the Republic of South Africa are allowed;

§         Lotteries and gambling activities shall be subject to the control, regulation and supervision provided for by statutes and other provisions which will be promulgated by legislatures;

§         Funds that accrue from lotteries and gambling in the Republic of South Africa shall be utilised, inter alia, for taxes, levies, licensing, administration cost and an appreciable percentage for the Reconstruction and Development Programme and other recognised and approved projects for the upliftment  and development (in its widest context) of the disadvantaged and disabled in the South African Society;

§         The lotteries and gambling industries be compelled to uphold the highest standards of moral conduct and professionalism and to develop a code of conduct which will embrace the principles of honesty, integrity and fairness; and

§         Section 5 of the General Law Sixth Amendment Act, 1993 (Act 204 of 1993), be implemented without delay and all illegal casinos be closed without delay.

 

ANNEXURE B: LIST OF PARTICIPANTS

 

The following institutions and individuals made written and/or oral submissions to the Committee:

 

1.       Family Policy Institute

2.       Justice Alliance for South Africa

3.       Limited Payout Machine Association SA

4.       Casino Association of SA

5.       Bingo Association of SA

6.       Phumelela Gaming & Leisure Ltd

7.       Aristocrat Technologies Africa (Pty) Ltd

8.       A G Consulting CC

9.       The Standard Bank of South Africa Limited

10.   Thuo Gaming SA (Pty) Ltd

11.   Department of Trade and Industry

12.   Financial Intelligence Centre

13.   National Regulator for Compulsory Specification (NRCS)

14.   National Gambling Board

15.   Advertising Standards Authority of SA

16.   Sun International

17.   Ms T Soko, Advocacy Group at King of Kings Baptist Church

18.   Ms S Day, Concern Citizen

19.   Rev R Cawood, Fish Hoek Methodist Church

20.   Ms J Mason, Concern Citizen

21.   Ms S Naidoo, Concern Citizen

22.   Ms C Whyte, Concern Citizen

 

 

 

ANNEXURE C: SUMMARY OF WRITTEN SUBMISSIONS

 

RNGL

Institution

Description

Concerns/Recommendations

1

Thuo Slots

A route operator that supply, install and operate Limited Payout Machines (LPMs) at premises that have a pre-existing primary business, such as restaurants, sports bars and betting rooms. These are licensed by the provincial gambling boards as secondary businesses. It operates in the Western Cape and KwaZulu-Natal.

Socio-economic impact of legalised gambling: Thuo Slots provided broad benefits of the LPM industry including job creation and SMME and BBBEE opportunities.

 

Impact of misleading advertising: Advertising is limited to the display of the route operator’s corporate logo at the site.

 

Current regulatory environment: Thuo Slots felt that the LPM industry is subjected to very strict statutory limitations such as (i) the stake and prize limits of R5 and R500 respectively is outdated as it has not been adjusted since 1996, (ii) the types of eligible venues, the permitted number of LPMs per site, the restricted advertising and the restriction on jackpots and linked games. In addition, the implementation of the national central electronic monitoring system (CEMS) is cumbersome as the CEMS is unable to effectively handle the increasing volumes of data generated by the LPMs, which affects the operation of the LPM industry.

 

Interactive gambling: The current illegal operation of on-line gambling is undermining the effective regulation of the gambling industry and the amended Act should be implemented and full enforced as soon as possible.

 

Recommendations: Section 27 of the National Gambling Act should be amended to permit route operators to have a choice in the monitoring system being used and that this amendment be implemented before the termination of the current CEMS contract in 2012. The LPM stake and prize limits be adjusted to R10 and R1 000 respectively.

 

2

Standard Bank

Standard Bank acts as an acquirer of merchants that use the bank’s infrastructure s its primary source for card transactions and as an issuer of cards to its current and potential customers. Merchants could include an interactive gaming company/entity or a separate entity that provides this service on behalf of other entities.

Regulation of cross-border gambling: Section 2.16 of the Exchange Control Regulations[2] prohibits cross border gambling activities including the participation in foreign lotteries and betting organisations. The Bank has been advised to hand over all proceeds received from foreign gambling but can only verify the source of the funding based on the client’s declaration of the source.

 

In terms of its acquiring role, the bank is not in a position to differentiate between a service provider that transacts at a fixed site or casino and an online casino simultaneously. Thus, compliance with all the provisions of the Lotteries and National Gambling Acts and the Exchange Control Regulations become difficult.

 

Current regulatory environment: The current legislation does not define banks’ obligations in relation to the processing or facilitating of transactions.

 

Interactive gambling: Concern in terms of facilitating illegal interactive gaming by processing transactions arising from cardholders’ participation in interactive gaming. In addition, the Bank would like to verify that the obligation for valid licensing is the responsibility of the service provider and not the bank.

 

Recommendation: The National Gambling and Lotteries Acts be amended to include a clause similar to the one in the Films and Publications Board Act section 24(B) (3), which stipulates that “any person that facilitates transactions, knowing that such transaction will facilitate access to, or the distribution or possession of, child pornography, shall be guilty of an offence.”

3

The Bingo Association of SA (BASA)

BASA represents licensed bingo operators operating in South Africa. There are licensed centres in Gauteng, Mpumalanga and KwaZulu-Natal. The North West Gambling Board is currently adjudicating over bingo licence applications. Bingo is a low stakes form of gambling that is played within a social setup.

Socio-economic impact of legalised gambling: The eight Bingo operations in Gauteng employ over 500 people mostly from previously disadvantaged communities. There have been minimal calls (0.11% of all calls) to the National Responsible Gambling programme (NRGP) helpline regarding Bingo in comparison to other forms of gambling since 2000. Thus, BASA believes that Bingo does not have a negative impact on society.

 

Current regulatory environment: There is some confusion around whether the current definition of bingo allows for the use of electronic bingo machines and the inclusion of high technology for the purposes of operating bingo.

 

Interactive gambling: BASA felt that illegal interactive gambling may negatively impact land-based gambling and that regulating this may be the only solution.

 

Recommendations: The National Gambling Act be amended to include the Gauteng Gambling Board’s definition of Bingo to include the use of electronic bingo machines, as this appears to be contradictory within the current national legislation.

 

4

AG Consulting

AG Consulting has been involved in drafting legislation and regulations and provides services in terms of gaming law and compliance.

AG Consulting’s presentation highlights issues per gambling form with an emphasis on interactive gambling.

 

Socio-economic impact of legalised gambling:

The casino industry has made large investments in infrastructure and job creation and generates fiscal revenue. The NRGP has led to a decline in the number of problem gamblers.

 

In terms of the LPM industry, there is a significant contribution to small business contribution.

 

Current regulatory environment: In terms of the LPM industry, there are enormous operational constraints due to zonings and a limit on the number of LPMs. In addition, the licensing process has been suspended in certain provinces and disparity between provincial approaches.

 

In terms of Bingo, the development of the industry has been fragmented and highly contentious. Currently, there is a legal dispute about the use of electronic bingo machines. 

 

Interactive gambling: The provision of illegal interactive gambling by neighbouring states including the open and extensive advertising is unresolved. The presentation provides the advantages and disadvantages of various issues when considering policy in terms of interactive gambling. These issues include the difficulties of policing borderless activities, the increase in problem gambling, money-laundering and under-age play. These policy considerations lean toward the regulation of interactive gambling.

 

Recommendations:

In terms of the LPM industry, there should be standardisation of certain basic procedures pertaining to advertising, criteria for licensing sites, public hearings and site location requirements.

 

The insertion of a provision in the National Gambling Act to deem interactive gambling to take place “where the player is located” in cases where an interactive gambling operator is not licensed in South Africa.

 

 

5

Phumelela Gaming & Leisure Ltd

Phumelela operates as a horse racing and totalisator[3] in the Eastern Cape, Gauteng, Limpopo, Mpumalanga, Northern Cape and North West. It has five racecourses and allied training centres in four provinces and over 230 betting shops and operates two call centres in the Eastern Cape and Gauteng and a betting website. It commingles its horse racing and sports betting totalisator pool with Gold Circle, which operates in KwaZulu-Natal and the Western Cape. In addition, Phumelela has shares in Phumelela Gold International Limited and operates internationally in terms of simulcast products and coverage of races, as well as an online totalisator operation.

Socio-economic impact of legalised gambling: Totalisator betting operations generates tens of thousands of direct and indirect jobs. Directly, Phumelela has 2 000 employees and 50.23% black ownership. It has contributed R160 million to the fiscus in national and provincial taxes in the year ending 31 July 2009 excluding various licence fees. It is also involved in NRGP initiatives.

 

Impact of misleading advertising: Phumelela complies with the advertising requirements.

 

Regulation of cross-border gambling: Unsure whether regulation is effective as foreign online operators continue to offer services in South Africa.

 

Current regulatory environment: The environment is not efficient due to the nine provincial gambling boards and the national gambling board’s different standards and the lack of cooperation between these. As Phumelela operates across a number of provinces, its cost of doing business and compliance is increased and some provinces have not updated their legislation yet. There is also a need for processes and decisions to consider commercial aspects.

 

Different gambling forms are not subjected to similar requirements, thus certain forms are more heavily regulated than others leading to lost opportunities and unfair competition. The totalisator is losing about R200 million due to open bets being offered by bookmakers that ‘unlawfully’ compete with the totalisator and use its intellectual property. This also means that fewer funds are being contributed to horseracing.

 

 

Interactive gambling: Phumelela believes that delaying the regulation of this industry may mean that South African operators are losing opportunities and that the websites may be unattractive as the proposed regulation is too onerous compared to other jurisdictions.

 

6

Aristocrat Technologies Africa (Pty) Ltd

Aristocrat is a manufacturer, supplier or maintenance provider of electronic gaming machines[4] and online casino monitoring systems[5] to licensed casinos and LPM gambling operations in the sub-Saharan and other regions of Africa.

Current regulatory environment: Current challenges faced by Aristocrat’s business operations are:

a) The listing of compliance to the Financial Intelligence Centre Act (FICA) as a condition for a national manufacturer’s license is unnecessary, as the FICA does not apply to the operations of a manufacturer.

b) The onerous responsibilities of applying to all nine provincial gambling boards for approval of gambling equipment even though the equipment has been tested and certified based on national standards for gambling equipment as published by the South African Bureau of Standards.

c) The double work of having to register gambling equipment and devices on the National Gambling Machine and Devices Register and then having to apply to the provincial gambling boards for distribution approvals for the movement of the same gambling machines and devices.

 

Recommendations:

(a)The removal of the certification of gambling equipment and devices or, if certification is required then there must be more than one certification agency, accredited to ISO/IEC 17020[6], in the industry and who are competent in the evaluation of gambling equipment.

b) The reinterpretation of the concurrent national and provincial regulations of gambling to consider approval of gambling equipment to be a matter of national approval as opposed to 9 separate approvals by each provincial gambling board for the same equipment.

c) The updating of clauses 19 to 23, with regard to the National Gambling Machine and Devices Register, to allow for one stream of activity with regard to the approval of distribution of gambling machines and devices and the registration thereof as opposed to 2 separate processes currently governing the two requirements.

 

7

Family Policy Institute (FPI)

FPI is a non-profit research and educational organization dedicated to articulating and advancing a family-centred philosophy of public life.

Socio-economic impact of legalised gambling: FPI presents nine social costs related to gambling. These include crime, business and employment costs (such as lost productivity), bankruptcy, suicide, illness associated with depression and stress among others, social service costs, direct government regulatory costs, family costs (such as abuse, child neglect or divorce) and abused money acquired through false pretences. FPI notes that gambling removes money from the economy and that the net social effect of gambling is negative.

 

Impact of misleading advertising: FPI refers to the role of advertising in creating an emotional bond between the consumer and the product. Therefore advertising will tend to favour gambling rather than make consumers aware of the possible dangers. In principle advertising provides an incentive to play and an idea that you will in all likelihood be the next winner, which is misleading. This usually preys on those that can least afford the financial loss enticing them into potentially even further impoverishment. The FPI also describes the potential harm of advertising on youth in normalising this activity.

 

8

South African Responsible Gambling Foundation (SARGF)

The SARGF is responsible for the NRGP since 1999. The SARGF delivers programmes of public awareness, training, treatment and a curriculum for schools relating to the dangers of gambling and how to avoid them. It also undertakes research and keeps abreast of the best international research conducted. It covers casinos, the National Lottery, scratchcards, racing and other sportsbetting, LPMs, remote gambling and illegal gambling.

 

Socio-economic impact of legalised gambling: The SARGF receives an income of R15.6 million from the gambling industry. According to their study, participation rates in gambling have decreased significantly and there has not been an increase in problem gambling between 2005 and 2008.

 

Interactive gambling: Even though SARGF believes that problem gambling is currently at a minimum, interactive gambling is considered a key challenge, whether legal or not, as control access to these types of sites will be problematic.

9

Sun International

Sun International is aleisure group offering superior gaming, hotel and entertainment experiences. It operates and manages 22 casinos in South Africa. It is also amember of the Casino Association of South Africa (see RNGL 18 for a description and other issues).

Interactive gambling: Several policy considerations were raised that should be taken into account when finalising the regulations and taxation for interactive gambling:

·         Rate of taxation to prevent ‘arbitrage’ from local operators of land-based play to online play and to ensure international competitiveness.

·         Definition of employment and investment objectives in terms of interactive gambling, as this can be operated at a low base, excluding the call centre function.

·         Current access of online gambling available of electronic equipment by youth.

·         Restrictive and cumbersome regulations in order to protect the public may deter users and operators from participating in South African licensed operations.

·         The operation of illegal online casinos with impunity.

Recommendations: Sun International feels that the interactive gambling debate should be reopened in order to identify relevant policy objectives.

 

 

10

Justice Alliance of South Africa (JASA)

JASA is a coalition of churches and individuals committed to upholding Judeo-Christian values in the South African society. JASA has attached a study/submission by the Royal College of Psychiatrists, which is a statutory body responsible for the supervision of the training and accreditation of psychiatrists in Britain. In addition, it provides guidelines and advice regarding the treatment, care and prevention of mental and behavioural disorders.

Current regulatory environment: The NRGP is supervised by the South African Responsible Gambling Trust, which has at least four representatives from the gambling industry. This is a conflict of interest and undermines the NRGP’s integrity and independence. In addition, the schools programme may be introducing children to gambling at a young and impressionable age.

 

Interactive gambling: JASA is concerned about the ability to prevent children from accessing gambling sites. They believe that this is a moral issue and gambling has been seen to destroy lives. Interactive gambling is especially dangerous as it can be accessed 24 hours, 7 days a week.

 

JASA believes that the notion of ‘responsible gambling’ is disingenuous and tougher regulations should be in place regarding interactive gambling.

 

Recommendations: JASA is strongly opposed to legalising interactive gambling.

 

11

Zonke Monitoring Systems

Zonke is the current National CEMS operator that monitors the LPM industry as guided by Section 27 of the National Gambling Act and its regulations.

Current regulatory environment: Conflicts between national and provincial gambling and other legislation exist. The roll-out phase has been slowed due to factors such as:

·         The lack of zoning in former black areas, as Section 56(a)(ii) prohibits licensing in inappropriately zoned areas.

·         The Business Act (No. 71 of 1991) provides for a similar licensing process as the National Gambling Act for premises where three or more coin operated machines are operated leading to duplication. In addition, the lack of capacity in certain municipalities has also limited/delayed the issuing of these business licences.

·         Liquor licences: Certain provinces require businesses operating LPMs to possess permanent liquor licences. The issuing of liquor licences is often problematic due to capacity issues and inefficiencies.

 

Recommendations: Zonke recommends the following:

·         Zoning: The issuing of LPM site licences should consider the local authorities comments where zoning is unavailable and taverns operating for more than 10 years should be eligible. This would entail an amendment to Section 56 as proposed.

·         The Businesses Act: Amending the Business Act to exclude gambling electronic equipment, however this would need to be done at a provincial level as the Act has been assigned to each province. This could be facilitated through the MinMEC or the National Gambling Policy Council mechanism.

·         Liquor licences: Affected taverners should be granted a LPM licence if they can prove that they are awaiting approval for a permanent licence, on condition that the LPM licence will lapse if the liquor licence approval is unsuccessful.

 

12

Advertising Standards Authority of South Africa (ASASA)

ASASA is an independent self-regulatory body established by the advertising and marketing communications industry. It regulates the industry through the Code if Advertising Practice, which contain standards that must be adhered to by advertisers, agencies, marketers and broadcasters when communicating with the public about their offers.

Recommendations: ASASA recommends the following changes to the gambling regulations:

·         Sub-section 4(a) of Section 7 be deleted from the Regulations as same is regulated by Clause 4.2 of Section II of the Code as well as Section 41 of the Consumer Protection Act.

·         Sub-section 17(5) might be unconstitutional in that there are mechanisms in place for the public to opt-out regarding unsolicited messages.  This issue might as well be dealt with by the Direct Marketing Association of South Africa.

·         The phrase “on its own accord” be deleted from sub-section 7(6).  It is our view that such powers afford the Board to censor marketing material. It is our view as well, as indicated earlier on, that such mandate be removed from the Board and be vested with the ASASA and/or the Tribunal (to be established in terms of the Consumer Protection Act).  This argument also goes to sub-section 7(7) and 7(8).

 

In terms of the National Gambling Act, ASASA recommends that sub-sections 15(1)(a)(i) and 15(1)(a)(ii) be deleted from this Act, as they are provided for in Section 41 of the Consumer Protection Act as well as the Code of Advertising Practice.

 

13

Fish Hoek / Kings Baptist Church

 

Socio-economic impact of legalised gambling: According to a study on the social impact of gambling in South Africa, most people who gamble earn less than R2 500 per month[7]. While a study by the National Gambling Board showed that there are 12 people affected by each problem gambler[8]. Other spheres that are affected by gambling include mental health, financial, community and work.

 

Recommendations: Kings Baptist Church recommends that gamblers are educated and are made aware of the possible dangers of gambling by:

·         Displaying the odds of winning on slot machines and LPMs, as well as a tally of how much money the gambler has spent on a particular machine.

·         The helpline number should be displayed on prominent signs in gambling areas.

·         Possibly a restriction in terms of the minimum distance between an ATM and a gambling location/machine.

 

Other recommendations were that:

·         Very strict enforcement should be applied to sites that are found to admit underage gamblers such as penalties and the loss of licences.

·         A minimum size and the prominent positioning of signs indicating under 18s are not allowed, especially on interactive gambling websites.

·         The close monitoring of online advertising, particularly via e-mail websites, in terms of underage gambling. Tight regulation of television adverts that portray gambling as a glamorous activity. Levies or taxes from the industry could be used to fund alternative advertisement of the possible dangers of gambling.

·         A national campaign with a helpline could be run where people could report under-aged gambling, unfair practices, particularly of smaller gambling establishments and unlicensed establishments.

14

SARGF

See RNGL 8

See RNGL 8

No RNGL 15

16

Limited Payout Machine Association South Africa (LPMASA)

The LPMASA represents all South African licensed route operators.

Socio-economic impact of legalised gambling: The LPM industry has directly invested more than R405 million in the six operational provinces[9] over the last eight years. Gross gaming revenue has been more than R475 million and the annual operating revenue is R315 – 400 million.

Current regulatory environment: LPMs are facing challenges such as obtaining licences for sites due to the cumbersome approval process set by provincial regulators and site-owner’ failure to adhere to licensing requirements.

 

Recommendations: The LPMASA has made the following recommendations:

·         Not to implement Sections 14(10) to (12) in respect of the LPM industry, as it is difficult to comply with the strict national exclusion register requirements/guidelines due to excessive regular trade requirements and limited resources.

·         Revise the stake and prize limits.

·         Explicitly define the LPM industry to provide for this to be accommodated in the current Land Use Management Act and various town planning schemes.

 

17

Carol Whyte

A concerned citizen

Socio-economic impact of legalised gambling: Mrs Whyte indicated that a narrow picture of the socio-economic impact of gambling is usually provided. She refers to the answers provided by respondents in a NGB commissioned study, where 71.3% of households stated they would be using money spent on gambling to purchase household necessities and 27.3% would be saving these funds[10]. Therefore, the recreational activity of gambling will not increase South Africa’s productive capacity, and is therefore a diversion from human capital development and sustainable economic development. South Africa’s global rankings in terms of welfare and casino statistics were disproportionate in 2000 and its propensity to gamble was higher than in other countries where welfare was higher.

 

In addition, inadequate attention is given to the social consequences of the damaging effects of excessive gambling on work ethics and family responsibilityThere is also a massive underestimation of the inherent dangers and social impact of gambling on youth relative to problems such as substance-abuse, HIV/AIDS and poor scholastic performance at all levels of the education system.

 

Furthermore, the poor are spending more of their disposable income on gambling activities, including the lottery, according to NRGP reports on Gambling and Problem Gambling in South Africa.

 

Impact of misleading advertising: Mrs Whyte’s concern is that advertising further entrenches the culture of gambling instead of decent work and productivity over the long term, particularly among the youth who are already engaging in gambling activities.

Other: The independence of the SARGF is questioned and its authority in commenting on the state of gambling and problem gambling in South Africa, as results can be manipulated depending on who is commissioning the study.

 

Recommendations: Mrs Whyte recommends that:

·         All advertising be limited to raising public awareness of the dangers of gambling.

·         The Committee consider the Wiehahn Report on Gambling that forms the basis of the National Gambling legislation.

·         The impact on vulnerable groups is included in socio-economic analyses.

·         The poor are protected.

·         Interventions are implemented to promote a culture of productivity rather than one of gambling.

·         Promotion of gambling is done way with in a phased manner.

·         The enforcement of the law in terms of interactive gambling is assessed in relation to government’s capacity.

·         Research by institutions commissioned by industry or gambling authorities is cautiously evaluated.

·         Ensure that regulations curb gambling rather than promote it considering the explosive effect that increased internet access will have.

 

18

Casino Association of South Africa (CASA)

CASA is a voluntary association. Its members hold 35 of the 37 operational casino licences in South Africa. It represents and advances the interests of the casino industry and presents the facts about casino entertainment to the public, media, regulators and policy-makers through education and advocacy.

The first letter was dated February 2009 and outlines the role of the casino industry in terms of BBBEE. CASA argued that its industry was one of the few that had a meaningful framework in place in terms of the promotion of black economic empowerment and this has been included in the conditions of the licences awarded. These constitute binding and legally enforceable contracts between the relevant gambling boards and casino operators. Its contribution to BBBEE has included the creation of 100 000 direct and indirect job opportunities and filling these with more than 80% previously disadvantaged individuals and contributing to corporate social investment initiatives including the creation of broad-based community trusts. Nationally, the industry scored a level 6 Empowerdex rating, with 46% of the economic interest and 46% of all voting rights being held by black individuals.

 

19

CASA

See above

Socio-economic impact of legalised gambling: CASA has indicated the contribution that the casino industry has made in terms of direct job opportunities (33 278), related tourism and leisure infrastructure investment (more than R19.6 billion) and government revenue (R4.43 billion). It has also played a key role in BBBEE objectives and provided 90% of the gambling industry’s contribution to the NRGP.

 

Impact of misleading advertising: CASA felt that misleading advertisement does not occur within the licensed gambling sector and that the legislation deals extensively with these standards. This is also matched by provisions in the applicable provincial legislation. Failure to adhere to these may result in administrative penalties, or the suspension or revocation of the licence. All advertisements in the casino industry must include reference to the NRGP, and the helpline number and be at least 10% of the size of the advertisement. There is also a Code of Conduct in this regard.

 

In CASA’s opinion, the bulk of misleading advertisement on television, the Internet and in print is published by unlicensed or unregulated interactive gambling operators.

 

Current regulatory environment: CASA feels that the legislation has moved from a risk-based focus to a micro-management of the industry and thus leading to over-regulation that is becoming ineffective.

 

The legislation does restrict licensed gambling activities and therefore does not over-stimulate the latent demand for gambling.

 

No restrictions were placed on bingo operations and the advent of electronic bingo machines does compromise bingo halls as these machines do not truly offer the game of bingo. In CASA’s opinion, this emergence means that bingo halls would be operating as casinos without the required contributions that casinos must make.

 

Other: CASA considers the National Lottery a form of gambling, which though regulated faces very few restrictions when compared to other gambling forms. This lack of stringent regulations is attractive to the poor and contributes to their further impoverishment.

Recommendations: CASA feels that:

·         The legal difficulties in prosecuting illegal interactive gambling operators for misleading advertisement could be addressed by inserting the clause “where the player is located” into the relevant section.

·         Regulation for casinos should return to focusing on substantive operational risks identified by regulatory authorities.

 

20

Shamla Naidoo

Manager of the Student Orientation and Advocacy at the University of Cape Town

Ms Naidoo indicated that information on the control monitoring systems available, a breakdown of profit margins and submissions, as well as the percentage of disposable income that was gambled, research on who the target market is, the socioeconomic impact on the gambling community and society, the addictive nature of gambling and its counterproductive impact on a developing economy was required to comment strategically and intelligently on gambling policy, legislation and research.

 

She outlines a number of normative aspects that should be considered when assessing policy and legislation, such as the country’s history and objectives, the need for economic, emotional/psychological and family recovery, as well as the need to use appropriate benchmarks to regulate the gambling industry.

 

She also states that the easy access tointeractive gambling will increase the pace of economic or financial destruction.

 

She concludes that many individuals and families have been ravaged by this industry and government must implement controlled and socially responsive legislation to prevent this destruction.

 

 

 

21

Sandy Day

A concerned citizen

Socio-economic impact of legalised gambling: Gambling is an activity that devastates individuals, their families and social circles; causing financial ruin and personal and family breakdowns.

 

Interactive gambling: Interactive gambling sites should be prohibited in South Africa, as there are already casinos and gambling machines available and such sites will only make it easier for people to lose more money. At the very least, there should be restrictions imposed on them, such as certified copies of photo ID (i.e. a passport or identity book) must be submitted to the site organizers before a client is allowed to play to restrict the gambling activities of underage people and make it more difficult for others to participate in internet gambling.

 

Recommendations:

·         Slot Machines should not be placed near venues that are frequented by children and families; but rather where similar age restrictions to gambling are applied.

·         Penalties should be strictly enforced and since money is readily available in gambling establishments, jail terms should apply to illegal activities, instead of fines.

·         All gambling sites, whether interactive or not, must have clear and prominent signage displaying the age limits and restrictions that apply in terms of the gambling legislation, including the responsibilities of the gambling site owners and the players.

·         Staff should be aware of the legislation regulating their industry.

 

 

APPENDIX D: RECOMMENDATIONS RECEIVED FROM ALL THE SUBMISSIONS

 

Most of the submissions received came from the industry players and therefore, their recommendations focused on streamlining the implementation of gambling activities by easing the administrative burden. The following recommendations were made by the industry players, civil society, community leaders and DTI and responsible agencies and FIC because of money laundering.

 

1.         General:

 

1.1.                  The Committee should consider the Wiehahn Report on Gambling that forms the basis of the National Gambling legislation.

1.2.                  The impact on vulnerable groups should be included in socio-economic analyses.

1.3.                  The poor should be protected by the legislation.

1.4.                  Interventions are implemented to promote a culture of productivity rather than one of gambling.

1.5.                  Promotion of gambling is done away with in a phased manner.

1.6.                  Research by institutions commissioned by industry or gambling authorities is cautiously evaluated.

1.7.                  Ensure that regulations curb gambling rather than promote it considering the explosive effect that increased internet access will have.

1.8.                  Penalties should be strictly enforced and since money is readily available in gambling establishments, jail terms should apply to illegal activities, instead of fines.

1.9.                  Staff employed by gambling institutions should be aware of the legislation regulating their industry.

 

2.         Casino industry:

 

2.1.             Regulations for casinos should return to focusing on substantive operational risks identified by regulatory authorities.

 

3.        Limited Payout Machines Industry:

 

3.1.             Section 27 of the National Gambling Act should be amended to permit route operators to have a choice in the monitoring system being used and that this amendment should be implemented before the termination of the current CEMS contract in 2012.

3.2.             The LPM stake and prize limits of R5 and R500 respectively should be adjusted to R10 and R1 000 respectively.

3.3.             In terms of the LPM industry, there should be standardisation of certain basic procedures pertaining to advertising, criteria for licensing sites, public hearings and site location requirements.

3.4.             The issuing of LPM site licences should consider the local authorities’ comments where zoning is unavailable and taverns operating for more than 10 years should be eligible. This would entail an amendment to Section 56 as proposed.

3.5.             Explicitly define the LPM industry to provide for this to be accommodated in the current Land Use Management Act and various town planning schemes.

3.6.             Amending the Business Act to exclude gambling electronic equipment, however this would need to be done at a provincial level as the Act has been assigned to each province. This could be facilitated through the MinMEC or the National Gambling Policy Council mechanism.

3.7.             Affected taverners should be granted a LPM licence if they can prove that they are awaiting approval for a permanent liquor licence, on condition that the LPM licence will lapse if the liquor licence approval is unsuccessful.

3.8.             Not to implement Sections 14(10) to (12) in respect of the LPM industry, as it is difficult to comply with the strict requirements/guidelines for the National Register of Excluded Persons due to their excessive regular trade requirements and limited resources.

 

4.         Interactive gambling:

 

4.1.                  The National Gambling and Lotteries Acts should be amended to include a clause similar to the one in the Films and Publications Board Act section 24(B) (3), which stipulates that “any person that facilitates transactions, knowing that such transaction will facilitate access to, or the distribution or possession of, child pornography, shall be guilty of an offence.”

4.2.                  The insertion of a provision in the National Gambling Act to deem interactive gambling to take place “where the player is located” in cases where an interactive gambling operator is not licensed in South Africa.

4.3.                  Sun International feels that the interactive gambling debate should be reopened in order to identify relevant policy objectives.

4.4.                  Justice Alliance South Africa is strongly opposed to legalising interactive gambling.

4.5.                  The enforcement of the law in terms of interactive gambling is assessed in relation to government’s capacity.

4.6.                  The legal difficulties in prosecuting illegal interactive gambling operators for misleading advertisement could be addressed by inserting the clause “where the player is located” into the relevant section.

4.7.                  Probity checks should be applied strictly to ensure that criminals do not acquire a controlling interest in online casinos.

4.8.                  Rogue or unlicensed online casinos must be prevented from making (or continuing to make) their services available in South Africa.

4.9.                  Money flow to rogue or unlicensed on-line casinos must be prevented.

4.10.              Licensed operators must subject their operations to the jurisdiction of all South African laws and establish a presence in South Africa, including a locally based gateway to provide services to South African based gamblers.

4.11.              Compliance by online casinos with legal obligations, such as customer identification, must be supervised and this monitoring process must include the ability to examine compliance through the inspection of their systems and records.

4.12.              Supervisors must be able to take action against licensed online casinos where they fail to comply with their legal obligations

4.13.              Transaction related information must be held in South Africa where it can be accessed by South African law enforcement agencies.

4.14.              Sufficient capacity to supervise compliance and prevent unlicensed or rogue operators from offering interactive gambling facilities must be ensured.

 

5.         Electronic Bingo Machines:

 

5.1.             The National Gambling Act should be amended to include the Gauteng Gambling Board’s definition of Bingo to include the use of electronic bingo machines, as this appears to be contradictory within the current national legislation.

 

 

 

6.         Manufacturers of gambling equipment:

 

6.1.             The removal of the certification of gambling equipment and devices or, if certification is required then there must be more than one certification agency, accredited to ISO/IEC 17020, in the industry that are competent in the evaluation of gambling equipment.

6.2.             The reinterpretation of the concurrent national and provincial regulations of gambling to consider approval of gambling equipment to be a matter of national approval as opposed to 9 separate approvals by each provincial gambling board for the same equipment.

6.3.             The updating of clauses 19 to 23, with regard to the National Gambling Machine and Devices Register, to allow for one stream of activity with regard to the approval of distribution of gambling machines and devices and the registration thereof as opposed to 2 separate processes currently governing the two requirements.

6.4.             The relevant sections of the National Gambling Act should be amended to address the changes in terms of the process for applying for certification of gambling equipment.

6.5.             The NGB should develop regulations that are aligned to the NRCS Act, so that compulsory specifications for gaming devices and related apparatus only cover safety matters and do not include performance matters.

 

7.         Advertisements:

 

7.1.             Sub-section 4(a) of Section 7 be deleted from the Regulations as same is regulated by Clause 4.2 of Section II of the Code of Advertising Practice as well as Section 41 of the Consumer Protection Act.

7.2.             Sub-section 17(5) might be unconstitutional in that there are mechanisms in place for the public to opt-out regarding unsolicited messages.  This issue might as well be dealt with by the Direct Marketing Association of South Africa.

7.3.             The phrase “on its own accord” should be deleted from sub-section 7(6).  It is Advertising Standards Authority of South Africa’s (ASASA) view that such powers afford the Board to censor marketing material.  It is their view as well that such mandate be removed from the National Gambling Board and be vested with the ASASA and/or the Tribunal (to be established in terms of the Consumer Protection Act).  This argument also goes to sub-section 7(7) and 7(8).

7.4.             In terms of the National Gambling Act, ASASA recommends that sub-sections 15(1)(a)(i) and 15(1)(a)(ii) be deleted from this Act, as they are provided for in Section 41 of the Consumer Protection Act as well as the Code of Advertising Practice.

7.5.             The close monitoring of online advertising, particularly via e-mail websites, in terms of underage gambling. Tighter regulation of television adverts that portray gambling as a glamorous activity is necessary. Levies or taxes from the industry could be used to fund alternative advertisement of the possible dangers of gambling.

7.6.             All advertising be limited to raising public awareness of the dangers of gambling.

7.7.             Gamblers are educated and are made aware of the possible dangers of gambling by:

o        Displaying the odds of winning on slot machines and LPMs, as well as a tally of how much money the gambler has spent on a particular machine.

o        The helpline number should be displayed on prominent signs in gambling areas.

o        Possibly a restriction in terms of the minimum distance between an ATM and a gambling location/machine.

 

8.         Minors:

 

8.1.             Very strict enforcement should be applied to sites that are found to admit underage gamblers such as penalties and the loss of licences.

8.2.             A national campaign with a helpline could be run where people could report under-aged gambling, unfair practices, particularly of smaller gambling establishments and unlicensed establishments.

8.3.             Slot Machines should not be placed near venues that are frequented by children and families; but rather where similar age restrictions to gambling are applied.

8.4.             A minimum size and the prominent positioning of signs indicating under 18s are not allowed, especially on interactive gambling websites.

8.5.             All gambling sites, whether interactive or not, must have clear and prominent signage displaying the age limits and restrictions that apply in terms of the gambling legislation, including the responsibilities of the gambling site owners and the players.

 

ANNEXURE E: SITE VISIT TO GRANDWEST CASINO

 

1.         Introduction

 

Two Members of the Committee, Mr B Radebe and Mr A van der Westhuizen, accompanied by Mr John Fraser, the regional commercial manager of Sun International, Mr Wayne de Wet, the financial manager of GrandWest and Mr Themba Marasha, the Chief Operations Officer from the National Gambling Board, visited the GrandWest Casino on 23 February 2010.

 

The Members were taken on a general tour of the complex, which included restaurants, fast food outlets and shops, the casino, the loyalty club members’ area, conference facilities and entertainment areas. Sun International informed the Committee that it leases the additional areas to franchises. These establishments are operated by their relevant franchisees.

 

2.         Findings

 

The regional manager explained that the grounds offered about 2 000 employment opportunities, of which approximately 1 000 were directly linked to the casino’s facilities. He indicated that the casino had provided extensive training and promotion opportunities to individuals from surrounding areas, most of whom only had a matric certificate. Furthermore, most of the establishment’s employees had permanent contracts but were on duty on a schedule basis, to allow for the casino being open 24/7 and for seasonal demands.

 

The Members were shown the electronic and camera surveillance room, where activities on the casino floor, in general and other designated areas were monitored for compliance with the relevant legislation and to ensure the safety of clients. The casino is operated on an electronic basis, with punters having to use issued electronic cards to gamble. This assists the casino in ensuring that money deposited there were used for gambling transactions and to monitor for potential money laundering activities.

 

The surveillance team designated one staff member per shift to manually monitor for the presence of problem gamblers and nationally banned individuals within the surveillance room on the basis of the National Gambling Board’s problem gambling and the Casino Association of South Africa’s databases. A second mechanism to prevent problem gambling, where these individuals have not been detected visually or electronically, is that punters need to provide an identity document when claiming their winnings, which is checked against the problem gambling database. If they are found to be registered problem gamblers they would then forfeit their winnings, as agreed upon registration. The regional manager emphasised that employees were trained to identify possible problem gamblers.

 

The financial manager also explained that the use of loyalty cards assisted in identifying possible suspicious activities and problem gamblers, and did not necessarily encourage gambling. The regional manager assured the Members that Sun International only extended credit to punters on rare occasions and this was aimed at high rollers, and these funds were generally repaid shortly thereafter.

 

The regional manager then outlined Sun International’s corporate social investments within the region. This included the GrandWest CSI Bursary Fund, which was open for any field of study and was available directly from the tertiary education institutions, and the Shawco Community Health Project, which provides quality clinical services in under-resourced and impoverished communities within the Cape Metropolitan area.

 

3.         Conclusion

 

In general, the GrandWest Casino appeared to be highly regulated and well monitored with a high compliance rate. This may be attributed to longstanding, well working relationships with the provincial and national gambling boards. In addition, as casinos are relatively large establishments and licences are limited coupled with high investment costs, there is an in-built incentive to cooperate and comply with the gambling boards.

 

However, there may be a gap in identifying, registering and monitoring problem gamblers, especially for those falling into more vulnerable groups including pensioners. As these individuals may not be regular gamblers but may lose a significant proportion of their income in a few sittings at casinos. In addition, the monitoring of the use of day cards for the possibility of money laundering activities should be reviewed on a daily basis.

 

Furthermore, there may be a need for the Committee to visit smaller establishments, such as limited payout machines and totalisators, to assess the controls that are being implemented to monitor problem gamblers and money laundering.

 

Report to be considered.

 


[1] These regulations are issued in terms of the Currencies and Exchanges Act (No. 9 of 1933).

[2] These regulations are issued in terms of the Currencies and Exchanges Act (No. 9 of 1933).

[3] A totalisator (also “tote board”) is an automated system that registers bets and divides the total amount bet among those who won (http://www.thefreedictionary.com/Totalisator).

[4] Electronic gaming machines include hoppers, bill validators, monitors, coin comparitors, sophisticated circuitry and EPROMs.

[5] The online casino monitoring systems are driven by software developed by Aristocrat Technologies Australia (Pty) Ltd. and some of its subcontractors.

[6] This refers to the General Criteria for the Operation of Various Types of Bodies Performing Inspection.

[7] S. Rule and C. Sibanyani (2000) The Social Impact of Gambling in South Africa.

[8] NGB (2002) The Promotion of Responsible Gambling in South Africa.

[9] The operational provinces are the Eastern Cape, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, North West and Western Cape.

[10] The National Gambling Board’s (NGB) (2003) Economic Impact of Legalised Gambling in South Africa.

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