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PERSPECTIVE AND BALANCE NEEDED IN NEW GAMBLING BILL

[Cape Town, 19 September 2003] Eleventh hour changes to the proposed National Gambling Bill have exposed the draft legislation to legitimate criticism that the Bill is being rushed through parliament without sufficient consultation and an adequate understanding of its full economic, political and social implications.

Addressing the Portfolio Committee on Trade & Industry today, Casino Association of South Africa (CASA) chairperson, Jabu Mabuza, said that despite the fact that the Bill had been three years in preparation, the casino industry was only offered an opportunity to participate in the process as late as July. Subsequently, the draft Bill was then substantially changed, without reference to any interested party in civil society.

Other directly affected stakeholders, including organised labour, tourism and hospitality industry institutions and structures, and even other sectors of the gambling industry, such as horse racing, were not even informed of the Bill or given the opportunity to comment.

"This process could not be described as adequate in terms of the norms of parliamentary democracy, nor could the process followed be accounted transparent or fair.

"That said, CASA still endorses and supports many of the proposals contained in the new Bill, not least of which is the rationalisation of the different and more defined roles of public sector structures responsible for the industry. Similarly, a national standard for advertising has been a long-time in coming, and we welcome it, among other components of the Bill".

However, Mr Mabuza said that some of the provisions of the draft Bill would have unintended and damaging consequences for the industry, its workers, shareholders, and business partners, empowerment, as well as tourism and associated sectors in the economy.

"Originally designed to resolve grey areas in the respective responsibilities of policy makers and regulators, at the eleventh hour new provisions were added to the Bill, ostensibly to deal with compulsive and problem gambling, which will have a clearly negative effect on industry, and which, by common consent, will have little or no effect on the 1% of South Africans who are compulsive gamblers.

"Similarly, those provisions in the Bill designed to ameliorate the circumstances of the poor who gamble are misinformed. The poor do not have access to credit or credit cards, and the free and discounted services outlawed in the legislation are only made available to customers who have the resources to go gambling".

Mr Mabuza said that research undertaken in South Africa had demonstrated that the poor were not gambling at casinos "in meaningful numbers". This was because compared to the lottery and scratch cards, for example, the cost of casino gambling, with entrance fees and other economic barriers to entry, was relatively high.

Introduced without any consultation were "draconian proposals" which included:

Ministerial discretion to increase the amount of available gambling in SA
Removing ATMs from all casino resorts and entertainment centres, race
tracks and including other multi-purpose venues where gambling takes place
Making it illegal, after the fact, to have casinos located in undefined close proximity to schools
Making credit illegal, including the use of credit cards and money taken as deposits
Enforced six hour closures, which constitutes a full shift
No discounted or complimentary hospitality services or tourism packages.

He summarised the major implications as follows:

A probable decline of up to 25% in casino revenues, with the horse racing industry unlikely to survive
With a reduced dividend stream to shareholders, already fragile empowerment structures in the industry faced almost certain collapse
Significant numbers of jobs - between 8 000 and 10 000 - may be lost in the casino sector alone, especially amongst the lowest paid
Marginal casino operations will be required to close, including some in already investment-scarce rural areas
Over 5 000 new hotel rooms have been developed since 1996 by the casino sector. Certain of these new hotels may be forced into closure
Existing casinos will inevitably be downsized, with a concomitant impact on local economies
Significant revenues, estimated at R400-million, to national government and the provinces will be lost
Relationships with empowerment business partners in gambling businesses will be devalued
Indirect employment, especially of SMMEs through prescribed empowerment procurement policies, will be reduced
The widely acknowledged ability of the gambling industry to cross-subsidise tourism infrastructure (such as funding for international convention centres) will be compromised, and other licence conditions will become unaffordable
International tourism marketing synergies will be lost because events like the Nedbank ('Million Dollar') Golf Challenge may no longer be viable
There will be an inevitable revival in the illegal gambling industry, with consequences for policing
There will be little or no meaningful impact on the phenomenon of problem gambling
Casino resort complexes currently in development (Suncoast in Durban, Sibaya at Umdloti, and projects at Bloemfontein and Welkom), which represent capital expenditure of R1.3-billion, will be subject to costly delays, changes to approved plans, or even abandonment, which will give rise to potential claims.

"What should be of particular concern is that the new Bill, if passed in this form, will lead to an enforced breach of existing license conditions, especially in the empowerment arena, which may lead to legal action in courts throughout the country. Many of the bid commitments made at the time licenses were awarded will be rendered unaffordable because of the harsh provisions contained in the Bill, necessitating, at the very least, a re-negotiation with provinces of these obligations".

Mr Mabuza said that the unintended negative consequences of the Bill warranted empirical research and further consultation.

"All of the affected stakeholders, in the public sector and civil society, have strong reasons to come together to contribute in a constructive way to ensure that the Bill meets government's needs, but without the unintended economic, political and social upheaval which may well result from an otherwise worthwhile piece of legislation", he said.

South Africa's existing legislative and regulatory framework, he said, for the gambling industry enjoyed respect and credibility internationally. And it had served to achieve government's policy objectives in terms of black economic empowerment, new investment, job creation, taxation, and consumer protection. Moreover, excluding the lottery, it had been successful in restricting and containing the supply of gambling.

The debate surrounding the new Bill was one which needed greater perspective and balance.

"One must recognise that South Africa's new casino industry, a product of this government's policy after 1996, did not evolve against a background which was virginal in respect of casino-type gambling. On the contrary, the main reason for government's introduction of the new gambling dispensation was the existence of a flourishing illegal casino industry in every town and city in the country.

"It was estimated that as recently 1995, there were up to 150 000 illegal slot machines in South Africa, paying no tax, employing very few people, and providing a platform for associated criminal behaviour such as prostitution and drug dealing. Moreover, this vast illegal industry was one almost entirely controlled by whites, offered players no protection against fraud, was readily accessible to minors, and ignored problems associated with compulsive gambling".

Today, said Mr Mabuza, this had been replaced by a rigorously and effectively regulated legal industry which contributed very substantially to the public purse, and which had funded public infrastructure to a considerable amount, including critically needed new tourism plant, such as convention centres and over 5 000 hotel rooms, among other investments.

"In just six years, our new casino industry - which has fewer than 20 000 slot machines - has been responsible for some R12-billion in new investment, which means, according to National Gambling Board research, a multiplied contribution to South Africa's GDP of more than R36-billion in terms of accepted economic multipliers. In this time, we have created over 30 000 direct and 64 500 indirect new jobs, many for first time workers, and last year alone, we accounted for nearly R1.3-billion in provincial gambling taxes and VAT, which, taken together with company tax, yielded over R1.7-billion to government in revenue.

"Moreover, our sector has substantially advanced government's transformation agenda in respect of the tourism and leisure industry. Previously disadvantaged shareholders enjoy substantial control (just over 60% of voting shares on average) in the casino sector, with a 38% effective economic interest in the industry. Our fulfilment of obligations in terms of black economic empowerment through recruiting, procurement, outsourcing and other measures is audited regularly by the authorities.

"As a consequence of the strict regulatory environment in South Africa, our casinos are subject to tightly enforced controls in terms of player protection, the exclusion of minors, probity standards, and other compliance measures, including our substantial funding of the internationally-acknowledged National Responsible Gambling Programme (NRGP), a comprehensive public/private sector initiative of government regulators and industry to address the issue of problem gambling.

"It seems to me obvious, then, that the situation obtaining in South Africa today, with respect to casino-type gambling, is one which is infinitely better than that which existed prior to 1996. And independent research by the National Gambling Board shows that this is something of which South Africans approve: 73% of our citizens endorse a regulated gambling industry, and 87.8% do not have philosophical, moral or religious objections to gambling", he said.