National Gambling Board Annual Report 2021/22 & Q1 Performance 2022/23

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Trade, Industry and Competition

25 October 2022
Chairperson: Ms J Hermans (ANC)
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Meeting Summary


National Gambling Board (NGB);

The National Gambling Board (NGB) briefed the Committee on its 2021/22 Annual Report and its first quarter performance report for the 2022/23 financial year.

The NGB achieved its 7th consecutive clean audit and achieved all of its targets.

Members heard that overall, the industry has not recovered from the pandemic in respect of jobs. However, there were specific sectors that were showing signs of recovery, such as the Limited Payout Machines industry., while the casino and bingo industries are still falling behind.
The NGB acknowledged the unfortunate harm that gambling does to families and communities. The South African Responsible Gambling Foundation was established to help address this. It provides treatment and counselling to those affected by gambling and their immediate family members.
The NGB highlighted that it engaged with law enforcement bodies through the stakeholder priority committee to address illegal gambling. It meets with the police and other bodies to ensure that they come up with strategies to combat illegal gambling, and that the police follow up on these activities.
It was noted that the National Gambling Amendment Bill is a subject matter of mediation between the two houses and that many of the NGBs plans and interventions can only be taken forward once this bill is passed. The Board indicated that the Committee’s intervention in this regard would be greatly appreciated.

The Members asked questions about transformation in the industry, rehabilitation programmes, and the monitoring of illegal gambling.

Meeting report

National Gambling Board (NGB) Annual Report 2021/22 & First Quarter Performance Report 2022/23

Ms Caroline Kongwa, Chief Strategic Adviser, NGB, gave the presentation. 
Some of the key achievements for the 2021/22 financial year include:
NGB achieved its 7th consecutive clean audit
There was a rebound in the gambling industry that saw GGR (gross gaming revenue) revert back to pre-COVID-19 levels at R34.4 billion
Tax collection also increased to R3.2 billion reaching pre-pandemic levels.

Gauteng made up the largest portion of GGR across all gambling modes, making up 28.8% of the total, followed by the Western Cape at 24.9% and KwaZulu-Natal (KZN) at 15.9%.

All of the targets of the annual performance plan were achieved, such as:
Conducting ten broad-based public educational interventions about the risks and socio-economic impact of gambling
Three reports on economic analysis and research conducted on the impact of gambling submitted to the Accounting Authority
Three reports (based on unaudited data) and one annual report on audited gambling sector performance were submitted to the Accounting Authority

100% of the first quarter targets have been achieved and the NGB has spent 22.75% of its budget thus far. The financial performance of the NGB reflects revenue generated amounts to R76 million and total expenditure incurred was R59 million, thus a surplus of approximately R17 million was realised for the quarter ended 30 June 2022.

There is a notable trend in the strengthening of oligopolies from a competition perspective in the gambling industry. Regulatory certainty is required for better regulation of the gambling industry and thus pending legislation requires finalisation. A substantive review of National and Provincial legislation is required.
(See Presentation)

Mr S Mbuyane (ANC) asked how the NGB is going to solve the issue of governance structure and administration. With regard to legislation, what is the process now? The NGB operates at a national level, and there are provincial gambling boards. How can the Committee assist the NGB so that it can monitor all of the provincial boards? The provinces each have their own legislation when it comes to gambling.

His next question was about participation in the industry. The state creates a lot of red tape. How is the process going in reducing this red tape? This is important for increasing participation, especially among those who are previously disadvantaged. 35% of businesses in the industry are owned by black people. When will transformation occur? Transformation is now a policy of the government. 35% is too low. GGR recovered back to pre-covid levels. How many jobs were lost during the pandemic? How many were recovered? Were any new jobs created? The Competition Commission, in its concentration report, found that the gambling sector had large levels of concentration, with big casinos gaining. These big casinos account for 95% of revenue. What is the role of the NGB in de-concentrating the industry? Does the NGB have any achievements with regard to bringing other small players into the sector? The presentation said that the entity conducted 11 broad-based public awareness programmes. How many of these were situated in rural areas? What practical steps is the NGB taking to support industrialisation and localisation in the manufacturing of gambling services, besides doing analysis and producing reports?

Mr C Malematja (ANC) applauded the NGB for its performance. Gambling has negative social and economic consequences. What awareness programmes does the NGB have in place to address this? Gambling can destroy families if it is not controlled. What consequence management has been put in place to deal with those who avoid tax? Some of the provinces have not been paying their taxes as they should. What are the reasons for this and what are the consequences? He agreed with Mr Mbuyane that economic transformation is important. How many women, youth, and people with disabilities are able to participate in the industry, and own and/or manage firms? He commended the NGB on meeting all of its targets and overachieving on some of them. He also commended the entity for how it is dealing with illegal gamblers.

Ms N Motaung (ANC) asked whether the NGB is assessing other forms of illegal gambling. If yes, what forms of illegal gambling have they assessed? Are they planning on addressing this illegal gambling? Are they monitoring in different provinces or are they relying on the provinces to assist them?

Ms Kongwa said that the change in governance structure was impacted by the National Gambling Amendment Bill. It is a subject matter of mediation between the two houses. The NGB is waiting for this process to be concluded. The NGB has been waiting for quite a while for the Bill to be approved. The Committee’s intervention in this regard would be greatly appreciated. Beyond the 2018 Bill, there are various regulatory matters that require attention. There are various issues that they planned to legislate on so that they can have greater regulatory insight into the gambling industry. Some of them were in the Bill, such as extending the national central electronic monitoring system so that they are able to account for all of the financial transactions in the industry. Another legislative reform that they wanted to pursue was aimed at the issue of gambling operators taking bets on the outcomes of the lottery. There are matters in court dealing with this issue. The entity would have loved regulatory certainty and hopefully, the legislative process can assist in that regard. The legislative review was planned to focus on the governance structure and other more substantive matters.

The NGB advised before that since the sector does not have a charter, the development of a charter would assist with the issue of transformation. They have given this advice to the DTIC before. Government and industry would give input on this. It would need to be initiated by the industry, but they could at least come to an agreement as to how the transformation agenda within the industry can be driven. The NGB agrees that this is a very important issue. The issuance of a license is a tool to drive economic development, create jobs and increase investment in the provinces. Legislation as it is, in terms of section 53 of the National Gambling Act, says that a province may consider commitments that a license applicant makes. There is no onerous obligation that clearly targets transformation and makes it mandatory. In certain areas, there has been no commitment to this. The NGB is not able to, at this point, undertake practical steps because of its mandate. Provinces have the tool to license, not the NGB. If a Provincial Licensing Authority (PLA) or a provincial gambling board has the power to license, they can definitely make contributions in this respect. It could come through license conditions. They have pointed out that there are almost no local manufacturers. It is all imported. There are ways in which the Department of Trade, Industry, and Competition could assist with this through the issuing of grants. They are definitely looking at industrialisation. There is a well-established gambling industry in Africa. Some countries’ regulatory frameworks are not as well established as South Africa’s. South Africa has the opportunity to export gambling machines to other African countries. They have spoken to other jurisdictions within Africa and they are also importing machines. This would be aided by the African Continental Free Trade Area Agreement. Industrialisation at a continental level could be boosted through the local economy. They see the opportunities but they cannot license because of their mandate, so they are unable to take practical steps.

With regards to de-concentration, they have done what they can possibly do as guided by the mandate. If the NGB observes unfair or uncompetitive conduct, they have to report it to the Competition Commission. In the past year or two, they have put in a request for consideration of a market inquiry into the gambling industry. The Competition Commission then produced a market concentration report. They are still hoping for an enquiry. Only the Minister or the Competition Commission, on its own accord, can do this. They have written to the Minister. They are concerned about the mergers. It is understandable from a financial perspective. There have been no findings so far about the abuse of dominance, but they are concerned. They continuously monitor and report on dominance, both in terms of market concentration and shares and mergers. This issue is mainly in the purview of the Competition Commission. They have not shied away from their duties and they have written to both the Minister and the Competition Commission on those observations. They have played their observatory role, as outlined in the mandate. They have not gone to the rural areas. They are in discussion with the Eastern Cape Gambling Board so they are going to start in the Eastern Cape in quarter two. They did not forget the Committee’s advice to specifically target the rural areas. They did have capacity issues, but they did get the resources to focus on this and a concerted effort was made. They are monitoring this.

Ms Yvonne Gwenhure, Senior Economic Researcher, NGB, said that just over 4000 industry jobs were lost during the pandemic. The casino industry has shed most of the jobs. There has been a sharp increase in job creation in the bookmaker industry between 2021 and 2022 compared to pre-pandemic levels. Overall, the industry has not recovered from the pandemic in respect of jobs. However, there are specific sectors that are already showing signs of recovery, such as the LPM industry. The casino and bingo industries are still falling behind.

Ms Kongwa said that the South African Responsible Gambling Foundation (SARGF) has been established. It is a license condition that every gambling operator contributes 0.01% of GGR to the foundation. The foundation runs programmes for counselling. In the Bill, they were looking at setting up a rehabilitation or a responsible gambling programme within the NGB. This way, the government will have specific and direct plans to implement such a programme. Looking at other jurisdictions, there are various models with which responsible gambling can be dealt with. They are looking into research examining it from a public health perspective, like the way drug or alcohol addiction is handled. Right now, the handling of this issue is only done by the foundation. It is definitely on their radar. They acknowledge the unfortunate harm that it does to families and communities. It is a concern. Through legislation, the plan was to ensure that government should take control of this aspect and establish programmes. This appeared in various drafts of the Bill and it is going to find its way into the larger amendments. The NGB does not have a mandate that specifically addresses consequence management unless there is a transgression of the National Gambling Act. However, in their oversight, they do question their colleagues about what bottlenecks they are experiencing. They are able to monitor which machines are active, which are withdrawn, and which provinces are experiencing a dip. They can also access the reasons reported, such as if an operator has surrendered their license. They do continuously monitor. Out of 41 casinos, 38 are operational and three are not rolled out. The KZN Gambling Board has expressed an interest in motivating another casino based on socio-economic studies that they have done. This would require legislative intervention. They have expressed concern over the stagnation of the Limited Payout Machines (LPM) industry rollout, which began in the 2000s. They have had discussions but these do not call for punitive measures unless there is a breach of the Act.

The legislation empowers the NGB to ensure that proceeds of illegal gambling are confiscated. There was a proposed revision that the NGB should have the power to directly deal with enforcement issues. The Bill is still being mediated by the national legislature. They are not sure when this will be resolved. They do have authority currently, but it is limited. It is based on the invitation of the province to collaborate with the NGB and deal with illegal gambling. They do interact with the provinces. They have ensured that they facilitate with the National Commissioner’s office with respect to police issues. They continuously call on provinces and law enforcement. They have been participating in stakeholder committees that have been created to address illegal gambling.

Mr Nkoatse Mashamaite, Chief Compliance Officer, NGB, said that they engage with law enforcement bodies through the stakeholder priority committee to address illegal gambling. They meet with the police and other bodies to ensure that they come up with strategies to combat illegal gambling, and that the police follow up on these activities. In the first quarter of the 2022 financial year, there were 3312 cases that were reported. 1518 cases were found guilty. 2751 cases are pending. 1318 cases were withdrawn, which is concerning. 58 cases were found not guilty. They are working with the NPA to ensure that these crimes are prioritised. 4887 were reported in the previous financial year, through this work with the police. They also confiscate winnings. In the past quarter, they reported R84 873 which must go to court. They are also working with the provincial licensing authorities and they manage a register. They receive reports from the provinces on how many cases were reported to the police and how many raids were conducted. In Gauteng, 10 cases were reported to the police and 72 raids were conducted. Computers and machines aiding this were also confiscated and/or destroyed. The Western Cape had nine reported cases and nine raids were conducted. 13 devices were confiscated and six were destroyed. $400 was confiscated.

Ms Kongwa said that she is not aware of any specific programmes that target women, youth, and people with disabilities. The NGB has been monitoring the transformation efforts or commitments made at the time of licensing. Traditionally, the betting sector was licensed at a provincial level and bets were taken on contingencies. They do not agree with betting operators taking bets on lotteries. This matter is subject to litigation. Betting operators are providing online gambling games. An individual can place a bet on a contingency or an outcome of an event. They are actually providing online games. They are looking into this. They have spoken to the laboratories and how they have ended up issuing Letters of Certification (LOCs). They have spoken to the provinces and notified the National Regulator for Compulsory Specifications (NRCS). The test report informs the issuance of the LOC which the province then uses to license a particular game or product. From a monitoring perspective, they are talking to regulators who are in the value chain of the licensing of these online games. This was never the original intention of licensees but things have changed. There is various legislation being promulgated at the national and provincial levels. Having one national piece of legislation to regulate gambling would assist as opposed to having a national and provincial gambling act. In other industries, this is possible. The Minister has the power to set the maximum amount of licenses and to determine which modes of gambling are legalised. The uniformity and consistency issue will be better served by having one piece of legislation. Other jurisdictions do this. This should not be construed as their attempt to take power away from the provinces. However, a lot of challenges would be overcome if they only had one piece of legislation.

Mr D Macpherson (DA) said that Ms Kongwa should not wade into the idea of one piece of legislation. It is an exclusive mandate as enshrined in the Constitution. Changing this would mean Constitutional reform. All nine provinces would fight the government on this, as they have done on the Amendment Bill. The issue is not about serving government priorities. The issue is the lack of legislation and regulation on gambling, particularly online gambling. The Department has been in complete dereliction of this for over a decade. He understands why provinces have decided that national government is not going to assist them on this issue and that they have decided to do their own thing. This is why the Mpumalanga regulator licenses online gaming as it does. It is tired of waiting for national government to do its job. It is laughable when they are told that $400 was confiscated in online winnings. This is a multi-billion rand industry that is happening completely out of sight and out of reach of the government because the government refuses to do anything about it. Why does the DTIC keep dragging its feet on putting a Bill to parliament relating to online gaming? It is purely an ideological issue. They believe that they can ban online gaming and it doesn’t take place. The biggest losers of this are the state, Treasury, and patrons of gaming in South Africa. They have no rights or recourse to any protection as casino players would. Will the DTIC support the private member’s Bill that he is going to put on the table that will effectively and finally regulate and legislate online gaming?

Mr Malematja said that the NGB has made it clear that through their mandate they have been able to tackle online gambling. Fafi is a big problem in the townships. Their efforts are a good step in the right direction, compared to the apartheid government where there was no transparency.  At least this government is trying.

Mr Mbuyane asked what control and monitoring measures are in place to combat underage online gambling. The presentation said that during the pandemic people were gambling online. How is the government getting what is due to them, if they are monitoring the process? There is now a daily lottery. What is the NGB doing about this? Even if they need to change the Constitution, it is possible to put the necessary legislation in place for better monitoring of gambling. This is one country. There cannot be laws that govern provinces separately.

Mr Z Burns-Ncamashe (ANC) said that he has been considering the issues of the social and economic ills that gambling brings, while equally appreciating the revenue it generates. He is trying to understand the strategy for dealing with those who are addicts. Gambling can disintegrate family units and aid alcoholism. Are there any strategies to mitigate these negative effects, while also maintaining revenue?

Mr Mashamaite said that lotteries are regulated separately by the National Lotteries Commission. In the forums that he discussed earlier, this Commission is also participating in combatting illegal gambling. Fafi is also included in the Commission’s purview. Gambling enforcement primarily lies with the provinces and the NGB comes in later to assist with the police and NPA. There is indeed effort to deal with online gambling. They are also dependent on the banks, who share information with the NGB.

Ms Kongwa said that if one looks at the connection between the gambling and financial services industries, other jurisdictions are making sure that they have monitoring systems in place for all their forms of gambling. South Africa is not there and this is something that they proposed in the Amendment Bill. The legislation would ensure that every gambler would be able to register. This also addresses responsible gambling and protection. They would know who is gambling and that they are traceable. It would also assist in tracing financial transactions. The banking industry complies with Know your Customer (KYC) and all the declarations required. The gambling industry is reliant on financial transactions. South Africa does not have these things in place. There are things that would be required before one could venture into other modes of gambling, such as online gambling. Without the correct monitoring systems, they are on the back foot. Other countries are able to block websites. They have explored this. They would go to the ZA registry that works with the Department of Communications and the Internet Service Provider Association. They have measures in place to block these websites, but usually, it is non-South African domain websites that do the illegal online gambling.

They are cognisant that having one piece of legislation would require Constitutional change. So be it. The NBG welcomes the sentiments of Mr Mbuyane. She appreciated the concerns raised by Mr Macpherson. With greater control and monitoring systems in place and a regulatory system that supports this, one is able to provide regulatory certainty.

There is definitely a strategy in place to address the ills of gambling. In South Africa, it is peculiar. The licensee funds intervention regarding the negative impacts. They referred to the SARGF earlier. The operators fund the foundation. They can take a step further and look at what role the government can play. In the legislation, there are the self-exclusion regulations which tie into the counselling process. The first step is self-exclusion. The law also stipulates that if a family member thinks that the person has a problem with gambling, they can make an application to the court. They tried to deal with these issues in the version of the Amendment Bill before Parliament. The strategy is in place from a national perspective. The NGB’s mandate stipulates that they should monitor the negative impacts. They are working with the DTIC to ensure that the NGB is empowered to implement a rehabilitation programme for individuals and families that are negatively impacted by gambling.

Ms Zandile Brown, Acting Chairperson, National Lotteries Commission, noted the comments made by Mr Macpherson. She added that the passing of the Bill is dependent on the completion of the mediation process. The administrator is still in place because the Bill provides for the appointment of a CEO. This person cannot be appointed until the Bill is passed.

The meeting was adjourned.

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