CAPE CMS (PTY) LTD
8 September 2003
COMMENT ON THE NATIONAL GAMBLING BILL (B48-2003)
Paragraph 26 (3) (c) "Must collect money from those machines"
o This relates to the Licenced Route Operator being forced to collect monies from all machines installed at sites he has contracted with rather than offering alternative operational approaches. Some Provinces allow a single route Operator to have a licence for 2000 LPM devices. Based on experience gathered in Mpumalanga, "Gross Weekly Take" (cash left behind in each LPM in one week) is R 1200.00. This would entail Weekly cash collections (mainly coins) of R 24 million. a very attractive target for hijackers. A far more sensible approach would be to require the Site Operator to deposit the "Gross Weekly Take" into a prescribed account, defined either by the Route Operator or preferably the Provincial Gambling Boards, for reconciliation and distribution.
Paragraph 27 (4) "Every licenced pay-out machine that is made available for play must be electronically linked to the national central electronic monitoring system and the licensee of that machine must pay the prescribed monitoring fees in relation to that machine.'
In the Constitutional Court hearing of the 8th November 2001 (CCT 32/01) where the National Gambling Board applied for an urgent interdict against the KwaZulu-Natal Gambling Board and the KwaZulu-Natal Premier to stop the KwaZulu-Natal Gambling Board going ahead with implementing its own provincial central monitoring system for LPM's. The Constitutional Court entered into its findings of the 21st December 2()0 I, that (3) "Electronic monitoring of gambling machines outside Casinos. In terms of section 44 (1) (a) (ii) read with section 104 (1) (b) (i) of the Constitution and with schedule 4 thereof states "the national legislature and provincial legislature have concurrent legislative competence to pass laws concerning gambling." Paragraph 27 (4) of the proposed new gambling bill, attempts to undermine the Constitutional rights of the province in this regard and should not be permitted.
The Constitutional Court also prescribed (Paragraph 36 of the findings) that the parties should "consider alternative possibilities and compromises and to do so with regard to the expert advice the other organs of state have obtained." This was accomplished in meetings held over two days between elected representatives of the Department of Trade & Industry, the National Gambling Board, The Office of the Premier of KwaZulu-Natal and the KwaZulu-Natal Gambling Board, ending on the 6th August 2002. The transcripts from these meetings clearly indicate that consensus was reached on a compromise that would best meet the requirement:" of all parties The DTI representative and Chairperson of the meeting states on page 59/10 of the transcript "It does seem to me. however. that the option of the tandem system (where the Province runs its own system, fully compatible with the national system and allows the national Gambling Board direct on-line access to the data) as you outlined, would be the most preferred option, certainly from a KwaZulu-Natal perspective. and is the option that if we pursued that option, would be the not likely to resolve conflict and. I think the current dispute." The Chairperson goes on to say on page 59/20 of the transcript 'What I would like to propose is that I present my Minister (Alec Erwin) with a range of options and I'll take you through the options that I will be presenting, but that I will indicate to him that this (the tandem option) would be the option that would solve the problems". It would appear therefore that the Minister of Trade and Industry has totally ignored the recommendations of his own elected Chairperson, together with the consensus of the other parties present at meetings to reconcile differences and ordered by the Constitutional Court, in favour of placing the interests of the National Gambling Board and its Chairman Chris Fismer, before the interests of the Provinces.
The National Gambling Board's Central Monitoring System is supplied and operated by Zonke Monitoring Systems (Pty) Ltd. (7onke). [here are several problems to this situation, namely.
The original business plan submitted by Zonke as part of [her bid to secure the licence to supply and operate the N(}B Central Monitoring System, forecast a rollout of 46,000 LPM's within two years of winning the tender. In addition they forecast a much publicised financial "break even'' situation of 21.000 LPM's In the two years since they were awarded the contract there are less than 100 licenced LPM's installed. As the only source of income for Zonke comes from a small percentage of each LPM gross take, which is connected to the central monitoring system. and that infrastructure costs remain relatively constant no matter how many LPM's are connected. we fear that the Zonke shareholders and investors could at any time decide this is no longer a viable business opportunity and pull out. leaving every province in a situation where it could not implement its LPM licencing responsibilities.
This possibility was voiced by non other than IBM. the giant multinational IT company, who were originally partners with Zonke in their successful bid to the NGB. pulling out of he relationship as they announced publicly that they did not believe it could be a viable business in the short term.
The Zonke system, while providing the requirements for a Central Monitoring System, which meets the SABS specification 1718, does not necessarily provide all of the requirements of a provincial gambling board Such requirements as computerised Licence application processing, computerised site policing and site banking reconciliation and funds distribution are not available.
Zonke do not have their own hardware infrastructure ~ which to run the central monitoring application this is in fact subcontracted to a subsidiary of Dimension Data, over which they have no direct control. This can be a very dangerous situation when hardly are resources are shared with other clients of the subcontractor. which client has priority over these resources'? Also the subcontractor could decide that the business was no longer financially viable and cancel any contract with Zonke, again leaving the provincial gambling boards without the ability to issue licences. and generate gaming tax income in the LPM arena.
On a technical note, assuming that the population of LPM's eventually reach the regulated 50.000 unit level, the NGB central monitoring system will have to gather data from approximately 17,000 sites (assuming an average of 3 LP M's per site. 5 LPM's is maximum) each day. Each upload of data is in the majority over standard Telkom dial up lines. and takes approximately 4 minutes from initial connection through verification, through data upload, to closure. This is a total of I .133 hours. assuming this had to be captured in an 8-hour shift, then 141 simultaneous telephone connections would have to be sustained throughout that period. Assuming that only 50/o of the connections could not be made automatically because of Site Data Logger line or exchange malfunction, manual connection would need to be established to acquire the necessary data, from 850 sites, taking just 5-minutes per call. this would require nine full-time operators to gather the manual data. It is important to note that national regulations call for each LPM to Switch itself oft' automatically if data has not been gathered in the preceding 72-hours. Using one NGB system. places the provinces ability to maximise LPM tax revenues at greater risk.
The Zonke Central Monitoring software application was created by Cotswold Micro Systems a U.K. based company. the brainchild of one of its directors Mr. Maurice Colclough. Mr. Colclough has recently been diagnosed with cancer and has returned to the UK for intensive medical treatment. The loss of his skills, either temporarily. or god forbid permanently. could have serious repercussions to the ongoing support of the Zonke application.
In conclusion we believe that to ''place all of ones eggs in one basket", places the provincial gambling boards at considerable risk in the execution of their gaming responsibilities. Rather a. low those provinces who have the LPM al location. which would support their own infrastructure (generally accepted at around 4000 units). to operate or subcontract the operation of their own systems and to include in the act the requirement that those systems meet the SABS specification 1718, which is an integral part of the legislation. After all it does not cost the provincial earnblin2 board's one cent to operate the system. this is ultimately paid by the Route Operator, and whether it is 6% of the LPM's gross take at national level or provincial level, makes no difference whatsoever. In fact the opportunities for local employment. and skills transfer to local people is greatly enhanced.
For emphasis we reiterate that:
Section 27 should be deleted and the electronic monitoring system should become a provincial and not a national function for the following reasons:
i) the NGB's function is not that of monitoring or controlling limited payout machines operating within a Province. Slot machines in casinos are monitored via a dedicated line from each casino to the Provincial Gambling Boards and not to the National Gambling Board.
ii)The Province will issue the licenses for route and site operators and will have the function of ensuring compliance (policing) by the licensees with the terms of their licenses.
iii) If section 27 (i) is allowed to stand the Province will have to access data monitored by the National Gambling Board in Pretoria in order to fulfill this important function (policing).
iv) It is clearly undesirable that the issuer of a license has to look elsewhere for data on his licensee's conduct - he should monitor that data himself.
It was quite obvious from the hearings before the constitutional court on 8 November 200~ that the judges disapproved of the NGB's decision to try to interdict the Premier of KZN from introducing a Provincial system. The NGB's counsel was repeatedly asked what was wrong with the Provinces performing this function and relaying it to the NGB whatever data it required. Counsel had no answer to these questions and the NGB's application was dismissed with costs.
Clearly the NGB was humiliated by the roasting it received from the constitutional court and section 27 is its attempt to save face. Obviously this is not what Ie2islation should be designed to do.
In KZN section 27 is regarded as a politically motivated attempt to usurp a provincial competence and all other Provinces tacitly concur. However only KZN has taken the decision it has. namely. to run its own monitoring system in terms of its own legislation.