Final Report Submitted to the Minister of Trade and Industry
Final Report submitted to the Minister of Trade and Industry
September 2010
Table of Contents
Glossary of Terms 4
Executive summary 4
Chapter 1: Introduction and context 4
1.1 Introduction 4
1.2 The evolution of gambling and gambling policy in South Africa since 1994 4
1.2.1 Introduction 4
1.2.2 The Wiehahn report 4
1.2.3 Balancing competing policy and regulatory objectives 4
1.2.4 The evolution of gambling post-Wiehahn: 1996 -2002 4
1.2.5 The first review of gambling policy 4
1.2.6 Conclusion 4
1.3 The Gambling Review Commission 4
1.4 The Parliamentary Process 4
1.5 Approach of the Commission 4
Chapter 2: Overview of South African gambling industry 4
2.1 Introduction and quick overview of the industry 4
2.2 Economic trends: general overview 4
2.2.1 GGR for Casino’s, LPMs, Betting and Bingo: 2001-2009 4
2.2.2 Gambling taxes: Casino’s, LPMs, Betting and Bingo 4
2.3 The Casino industry 4
2.3.1 Ownership 4
2.3.2 Casino GGR and tax contributions 4
2.3.3 Size and growth of the casino industry 4
2.3.4 Employment in the casino industry 4
2.3.5 Casino non-gaming revenues 4
2.3.6 Capital expenditure and social infrastructure spend 4
2.3.7 Casinos and CSI 4
2.3.8 Casinos and B-BBEE 4
2.3.9 Conclusion 4
2.4 Bingo 4
2.4.1 The bingo industry 4
2.4.2 Bingo revenues 4
2.4.3 Electronic bingo terminals 4
2.4.4 Black Economic Empowerment 4
2.4.5 Conclusion 4
2.5 Limited Payout Machines (LPMs) 4
2.5.1 Rollout of LPMs 4
2.5.2 Key industry players 4
2.5.3 Economic performance of LPMs 4
2.5.4 Employment creation 4
2.5.5 Viability of LPM industry 4
2.5.6 Corporate social investment 4
2.5.7 Conclusion 4
2.6 Betting: 2001-2009 4
2.6.1 Horseracing and betting 4
2.6.2 Horseracing and employment 4
2.6.3 Horseracing and Community Social Investment 4
2.6.4 Horseracing and B-BBEE 4
2.6.5 Bookmakers and B-BBEE 4
2.6.6 Conclusion 4
2.7 The National Lottery 4
2.7.1 A revenue maximisation mandate 4
2.7.2 Lottery products 4
2.7.3 Economic performance to date 4
2.7.4 Conclusion 4
Chapter 3: The social impact of gambling 4
3.1 Introduction 4
3.2 Who gambles 4
3.2.1 The National Prevalence Studies 4
3.2.2 What is the level of gambling participation in South Africa 4
3.2.3 What games do South African gamblers play 4
3.2.4 Participation by population group 4
3.2.5 Participation in gambling by class/economic status 4
3.2.6 Participation in gambling by gender 4
3.2.7 Participation by age 4
3.2.8 Where do people gamble: Formal and informal venues 4
3.3 Perspectives on problem gambling 4
3.3.1 Defining problem gambling 4
3.3.2 Problem gambling: South African trends 4
3.3.3 South African in perspective: International comparisons 4
3.3.4 Problem gambling and race 4
3.3.5 Problem gambling and type of dwelling 4
3.3.6 Problem gambling and the poor 4
3.3.7 Comorbidity and problem gambling 4
3.3.8 Summary 4
3.4 Underage Gambling 4
3.4.1 Prevalence of gambling among the youth of the country 4
3.4.2 Conclusions 4
3.5 Regulatory measures 4
3.5.1 Introduction 4
3.5.2 Minors 4
3.5.3 Excluded persons 4
3.5.4 Credit 4
3.5.5 Advertising 4
3.5.6 Standards for gambling premises 4
3.5.7 International practice and lessons 4
3.6 Research, education, prevention and treatment 4
3.6.1 Regulators 4
3.6.2 Civil society and private organizations 4
3.6.3 Gambling operators 4
3.7 Conclusions 4
Chapter 4: Adequacy and effectiveness of current regulatory framework 4
4.1 Introduction 4
4.2 The implications of concurrent jurisdiction in gambling regulation 4
4.3 Concurrent jurisdiction and the exercise of co-operative governance 4
4.3.1 The National Gambling Policy Council 4
4.3.2 Conclusion 4
4.4 The regulatory framework 4
4.4.1 The National Lotteries Board 4
4.4.2 The National Gambling Board 4
4.4.3 Provincial gambling regulatory authorities (PGRAs) 4
Chapter 5: The impact of gambling policy 4
5.1 Introduction 4
5.2 Taking stock of gambling policy to date 4
5.2.1 Protection of society from the over-stimulation of latent gambling 4
5.2.2 Strict control and supervision of industry 4
5.2.3 Uniformity and harmonization of policy at all levels of government 4
5.2.4 Revenue generation 4
5.2.5 Economic empowerment of the historically disadvantaged 4
5.2.6 Job creation 4
5.2.7 Conclusion 4
5.3 The managed rollout of licensed gambling activities 4
5.3.1 Casinos 4
5.3.2 Limited Payout Machines 4
5.3.4 Bingo 4
5.3.5 Betting 4
5.3.6 Lottery 4
5.4 Minimising the negative social impact of gambling 4
5.4.1 Expanding research, education and treatment 4
5.4.2 Implementing regulatory measures to protect the vulnerable 4
5.5 Improving uniformity and accountability in the regulatory framework 4
Chapter 6: New forms of gambling 4
6.1. Introduction 4
6.2. Criteria for assessment 4
6.2.1 Demand 4
6.2.2 Proliferation 4
6.2.3 Protection 4
6.2.4 Geographical location 4
6.2.5 Economic viability 4
6.2.6 Economic impact. 4
6.2.7 Competition 4
6.2.8 Enforcement 4
6.2.9 Revenue 4
6.2.10 Animal welfare (where relevant) 4
6.3 Greyhound racing 4
6.3.1 Background 4
6.3.2 The contemporary activity 4
6.3.3 Arguments for legalisation in SA 4
6.3.4 The global greyhound industry 4
6.3.5 Analysis and conclusion 4
6.3.6 Recommendation 4
6.4 Bush racing 4
6.4.1 Introduction 4
6.4.2 International precedent 4
6.4.3 Analysis and conclusion 4
6.4.4 Recommendation 4
6.5 Fahfee 4
6.5.1 Introduction 4
6.5.2 History 4
6.5.3 The contemporary game 4
6.5.4 Analysis and conclusion 4
6.5.5 Recommendation 4
6.6. Bingo and electronic bingo terminals 4
6.6.1 Introduction – the game of bingo 4
6.6.2 What are Electronic Bingo Terminals (EBT’s) 4
6.6.3 The evolution of bingo and EBT’s internationally 4
6.6.4 Analysis and conclusion 4
6.6.5 Recommendation 4
6.7 Poker 4
6.7.1 Introduction 4
6.7.2 Defining the game 4
6.7.3 Poker in South Africa at present 4
6.7.4 Online poker 4
6.7.5 Analysis and conclusion 4
6.8 Betting exchanges 4
6.8.1 Introduction 4
6.8.2 Person-to-Person Betting 4
6.8.3 What is a betting exchange? 4
6.8.4 Betting exchanges and the existing regulatory framework 4
6.8.5 International precedents 4
6.8.6 Comments from the Western Cape Bookmakers Association 4
6.8.7 Analysis and conclusion 4
6.8.8 Recommendation 4
6.9 Virtual racing 4
6.9.1 Introduction 4
6.9.2 Analysis and conclusion 4
6.10 Online gambling 4
6.10.1 What is Interactive Gambling? 4
6.10.2 The dangers of the current approach 4
6.10.3 International precedents 4
6.10.4 Shortcomings of the existing legislation 4
6.10.5 Analysis and conclusion 4
6.10.6 Recommendations 4
References 4
Glossary of Terms
ATM Automatic Teller Machine
ACT Australian Capital Territory
BEE Black Economic Empowerment
B-BBEE Broad-Based Black Economic Empowerment
CASA Casino Association of South Africa
CEMS Central Electronic Monitoring System
CEO Chief Executive Officer
CPSI Canadian Problem Gambling Index
CSI Corporate Social Investment
DA Distributing Agency
DSG Destination Style Gambling
DTI Department of Trade and Industry
EBT Electronic Bingo Terminal
FICA Financial Intelligence Center Act
GA Gamblers Anonymous
GDP Gross Domestic Product
GGR Gross Gaming Revenue
GPI Grand Parade Investments
GRC Gambling Review Commission
HCI Hosken Consolidated Investments
JSE Johannesburg Securities Exchange
LPM Limited Payout Machine
NGB National Gambling Board
NLB National Lotteries Board
NLDTF National Lotteries Distribution Trust Fund
NPS National Prevalence Study
NRGP National Responsible Gambling Programme
MEC Minister of Executive Council
MPM Medium Payout Machine
PDI Previously Disadvantaged Individual
PGRA Provincial Gambling Regulatory Authority
PGSI Problem Gambling Severity Index
RDP Reconstruction and Development Programme
RIGT Responsibility in Gambling Trust
SACTWU South African Clothing and Textiles Workers Union
SAPS South African Police Service
SARGT South Africa Responsible Gambling Trust
SOGS South Oaks Gambling Screen
USA United States of America
VAT Value Added Tax
VBT Video Bingo Terminal
Executive summary
Introduction
Since the legalization of gambling in South Africa in 1996, the gambling industry has grown and evolved substantially. Technological advancements on existing forms of gambling and new forms of gambling have emerged and have created challenges for regulators and policy makers. Furthermore, some forms of illegal gambling have persisted and appear to be growing in popularity.
Concerns about the socio-economic impact of gambling in South Africa, especially on the poor, have been lingering since the legalization of the industry. A substantial body of research has been conducted over the period and enables a better assessment of the impact of current gambling activities on society.
The recent debates about the possible legalization and regulation of interactive gambling have opened up broader questions about the appropriateness of current gambling policy, regulation, and the proliferation of gambling opportunities. To consider these broad questions, as well as specific challenges around the regulation of particular forms of gambling, the Minister of Trade and Industry appointed a five-member Gambling Review Commission (“the Commission”) in December 2009 with a broad remit to “consider if the currently legalised gambling activities can/should be expanded or curtailed considering the number of casinos, limited payout machines and bingo outlets already licensed”, having regard for the “socio-economic consequences attached to gambling, such as problem gambling, youth gambling and other social concerns”.
The Commission was specifically requested to review the evolution of the gambling industry since 1996; to assess its social and economic impact, with specific reference to the demography of gambling participants, the incidence of problem gambling and gambling addiction, youth gambling; and the efficiency and effectiveness of current strategies to mitigate the negative effects of gambling. The Commission was further tasked with an assessment of proliferation in South Africa, considering licensed and unlicensed activities and technological developments and the viability of new gambling activities. Lastly, the Commission was required to consider the extent to which regulatory bodies have met their legislative objectives, to benchmark with international jurisdictions and to make policy recommendations regarding the gambling industry on the basis of its assessment. The Commission’s mandate included a consideration of the national lottery.
The current policy framework
The policy on gambling that has been guided by the 1995 report of the Lotteries and Gambling Board, also known as the Wiehahn Commission. The Board was established in August 1994 by the Minister of Justice with a mandate to advise the government on the establishment of a national policy on gambling for South Africa, given that gambling, other than betting on horseracing was illegal at that time. The report of the Wiehahn Commission has guided the managed rollout of gambling in South Africa since 1996, having identified the following key objectives for gambling policy: -
1. The protection of society from the over-stimulation of latent gambling through the limitation of gambling opportunities;
2. The protection of players and integrity and fairness of the industry through the strict control and supervision of the industry;
3. The uniformity and harmonization of policy and legislation at all levels of government and across provinces through minimum norms and standards, co-operation and co-ordination;
4. The generation of revenue and taxes for provincial government and for good causes;
5. The economic empowerment of the historically disadvantaged;
6. The promotion of economic growth, development and employment.
Pursuant to the report, the policy and regulatory framework was put in place, closely following the recommendations and objectives of the Wiehahn Commission report. The National Gambling Act, 1996 and the National Lotteries Act, 1997 were promulgated and the National Gambling Board and the National Lotteries Board were established. The National Lotteries Board was responsible for the regulation of a state-owned but independently operated national lottery and sports pools, as well as for the administration of the National Lotteries Distribution Trust Fund (NLDTF). The National Gambling Board was not a regulatory body, but rather a body established to provide policy advice and to promote uniformity among provincial gambling regulators, who had the responsibility for the licensing and regulation of gambling activities in their respective provinces. Each province also formulated and promulgated its own gambling legislation. Within this regulatory context, the roll out of gambling activities began, starting with the licensing of casinos within the maximum number of licences that had been set in national legislation. Bingo was also licensed initially, but its rollout was limited to the Gauteng Province. Next the roll out of Limited Payout Machines (LPMs) began.
The first review of gambling policy and legislation occurred in 2002. This review was propelled by three matters, namely the ongoing disputes and contestation between provincial gambling regulatory authorities (“PGRAs”) and the National Gambling Board (“NGB”), the rising concerns about the potentially negative socio-economic impact of gambling, and thirdly, to deal with forms of gambling that had not been dealt with or anticipated in the National Gambling Act, 1996, in particular interactive gambling and horseracing.
What began as a set of amendments resulted in a substantial policy review and new piece of legislation (National Gambling Act 2004). The legislation sought to clarify and review the respective roles of the NGB and the PGRAs and to sought to institutionalize co-operative governance in a statutory body called that National Gambling Policy Council (“Policy Council”). The role of the NGB was changed from being purely advisory to having an oversight function as well. The legislation further introduced new regulatory measures to mitigate the potential social harm of gambling. The current review will consider the impact of those changes and assess their effectiveness.
The South African gambling policy adopted conforms largely to a sumptuary model. This is an approach, which seeks to contain excessive demand for gambling and to satisfy only existing demand and is consistent with restrictions on the advertising of gambling. A revenue maximisation approach on the other hand imposes few restrictions on advertising. This is the approach that has been adopted with respect to the National Lottery.
Overview of the gambling industry
Since its legalisation in 1996, the gambling sector has grown into a small but maturing sector. Gross gaming revenues have doubled in real terms between 2001 and 2009 and now stand at R15.921 billion (R18.129 billion, if the lottery is included). In 2009, the sector generated R1.5 billion in tax revenues for provincial government and is the second highest generator of “own revenues” for provincial governments. In addition, the national lottery generated R1.4 billion in funds for good causes. The sector accounts for substantial employment, with a total of 56,958 direct jobs created and sustained in the industry. The casino industry alone accounts for 51, 317 jobs (90%), 85% of the GGR and 80% of the tax revenues.