Response by the Minister of Trade and Industry, Alec Erwin, to the Joint Public Hearings on the Gambling Bill, 2003

Cape Town, 22 September 2003

1. Introduction

Dr. Davies, honorable Members of Parliament,

Gambling and any legislation to regulate it will always be controversial. It is because we have so many mixed feelings about this industry. Is it a social evil that we can afford as South Africa? Or is it a relatively harmless form of entertainment? What is also the case is that this is a large industry that handles a large amount of cash and this also requires oversight

As government, our position has been clear since 1994. We do not believe that it is possible or feasible to prohibit and criminalize gambling. Experience prior to 1994 has shown that a large illegal industry is spawned. Rather, in our view it is an industry that must be tightly regulated, to minimize the potentially negative impact that it can have on society. Like liquor, it is a product that is potentially dangerous. It can destroy people's lives, damage the social fabric and our communities, if not properly controlled. If it is effectively regulated we accept that the industry is also a provider of jobs and legitimate income. This policy position is the starting point for the introduction and discussion of the National Gambling Bill, 2003, and is at the heart of my response to the public hearings, which took place last week.

Before I respond to some of the issues raised at the hearing, I would like to address two fundamental issues, namely the need for a new Bill and the consultation process pursued with respect to the Bill.

2. The Need for a New Bill

The Committee indicated at the end of the public hearings that the need for a new Bill, rather than amendments to the existing Bill had not been debated. I would like top put to the Committee the reasons for placing before the Committee a new Bill, rather than a set of amendments.

We must remember that the existing National Gambling Act, 1996 was drafted and enacted before the final Constitution of South Africa was adopted and at a point when the implementation of concurrent jurisdiction between national and provincial government was still largely untested. Furthermore, the 1996 Act came into an environment where the previous prohibitions on gambling had spawned a large illegal industry and the broader social and economic impact of the industry was as yet unclear in South Africa.

The National Gambling Act has now been in place for seven years. During that period, both national and provincial government has learnt more about the exercise of concurrent jurisdiction. Furthermore, the policy debate has shifted from the previous focus on illegal gambling to a focus on more effective and uniform supervision over an industry that is characterized by large cash transactions that could be abused and manipulated by unscrupulous persons. The dangers of money of laundering are one concern. There is also little doubt about the potentially negative socio-economic consequences that gambling and problem gambling in particular can have.

The need for a new Bill must be seen therefore in the context of a changed policy environment, an environment in which the exercise of concurrent jurisdiction has necessitated a clearer definition of roles and the introduction of mechanisms to give effect to co-operative governance, and an environment in which the impact of gambling on our society has become clearer. These matters have necessitated a more fundamental review of the principles of the 1996 Gambling Act than could be accommodated through mere amendments.

In addition, as I indicated earlier, the 1996 Gambling Act was drafted at a time when the final Constitution had not yet been adopted. The Act leaves key areas of regulation to secondary legislation, which is contrary to the Constitution of South Africa. The new Bill incorporates those regulations and seeks to give greater certainty to both industry and to the public about their rights and responsibilities. Certain inputs at the public hearings also indicated that the Bill was deficient in that it did not address matters such as Internet Gambling. The reality is that Internet Gambling is a very specialized area of regulation. While we initially intended to include it in this Bill, the sections regarding Internet Gambling are so extensive, that they merit accommodation in a separate law. Internet Gambling is an emerging area, and there is a lot of learning about its regulation going on internationally. It was our view that more research was required and that the need for extensive consultation with provinces and provincial regulators, not to mention industry and other stakeholders, would have delayed this Bill by at least a year, if not more. It is for that reason that the provisions regarding Internet Gambling were not incorporated in the Bill before you. However, the Bill does outline a process for arriving at new Internet Gambling legislation.

I believe it would have been impractical and cumbersome to address these issues through amendment.

3. The Consultation Process

Turning now to consultation on the Bill, a number of submissions at the public hearings raised concerns about the process that the dti adopted. The consultation process on the Bill was outlined to the Committee when the Bill was introduced. However allow me to provide that overview again.

As indicated previously, the first 10 drafts of the Bill focused almost entirely on the clarification of roles and the exercise of concurrent jurisdiction. Not surprisingly, therefore, extensive consultation with provinces and provincial regulators was pursued. Due the constraints of the Parliamentary schedule, the Bill had to be introduced into Parliament on 1 August 2003. In order to meet the timeframes, only a short public consultation period could be adopted. The Bill was published hr 3 weeks, ending 18 July 2003, which gave the dti two weeks to consider the comments, to effect the necessary changes and to submit the Bill to the State Law Advisors for certification. A workshop with industry and public interest groups was convened to clarify any questions that stakeholders had about the Bill. At the workshop, it was indicated that the dti would accept comments that came after the closing date. And in fact, the dti received a number of additional submissions, one as late as 29 July 2003. All those submissions were considered and incorporated where relevant. In effect, a five-week process of public consultation was provided. The normal period for consultation is six weeks.

In addition, in order to provide stakeholders, particularly industry with the opportunity to prepare adequately for the public hearings, the Bill that was submitted to the State Law Advisors was circulated to interested parties in early August. Stakeholders were also kept abreast of the Parliamentary schedule. This is a well organized and well resourced industry that is quite capable of effective consideration and response in this time period.

It is therefore not clear to be me why industry feels that they have not had adequate opportunity to evaluate the Bill and its provisions. Most of the comments relate to the public interest provisions that were incorporated in the Bill and that are a direct result of the public consultation process. Many of the measures to combat problem gambling were introduced pursuant to inputs received. The dti was of the view that these provisions should be publicly debated. I cannot think of a more appropriate forum for such debate than the Parliamentary process and the public hearings.

4. Response to Key Issues

I would now like to turn to the matters of policy that were raised during the public hearings. The three main issues that have emerged are the following:

· Concerns about the measures introduced to combat the incidence of addictive and problem gambling:

· The need to limit gambling opportunities and Limited Payout Machines n particular:

· The treatment of the Horseracing Industry in the Bill

It is the first issue that appears to have concerned industry the most, namely the introduction of measures to combat the incidence of problem gambling and to limit the potentially negative socio-economic effects of this industry. These measures included restrictions on the use of credit, credit cards and deposits, the placement of ATMs, limitations on legitimate means to induce gamblers to engage in gambling activity, the requirements that casinos be closed for a minimum period, as well as the location of casinos. A scheme of self-exclusion, and court-ordered self exclusion, was also introduced. In addition, provision has been made for provinces to consider impact that the location of gambling premises have on society. Finally, provision was made for the National Gambling Board to monitor the impact of gambling.

I am concerned that the industry is opposed to such responsible measures. This does not do them credit. However, we accept that we have to be pragmatic and are prepared to amend and simplify certain measures without removing them as instruments. We should reject threats of reduced government revenue. The response is clearly not that from a mature industry that recognizes that the welfare of society and a reduction in negative socio-economic effects are in the long-term interests of the industry.

We have reviewed the provisions that were debated publicly and are proposing the following changes:

· The deletion of section 13. We are proposing restrictions regarding the advertising of free services and free gambling in section 15. While we have serious concerns about a potential impact that credit extension for gambling may have on the poor, we believe that this may be properly regulated in a Consumer Credit law.

· We believe that the location of gambling activities and their operation are matters that should probably be dealt with in licenses. We further believe that these requirements can be introduced and monitored through provincial licensing authorities. In fact, the requirements that they take the socioeconomic impact into consideration in the award of licenses, as well as their ability to attach conditions, strengthens and support existing provincial jurisdiction and powers.

· We believe that the restrictions on ATMs should remain in place, but: recognize that it would be feasible only to restrict the location of ATMs in premises where gambling activity takes place. Thus, we propose narrowing this restriction.

· Similarly, we wish to retain the self-exclusion scheme, but propose to give industry greater certainty by allowing the Minister to prescribe measures that must be implemented to ensure that a person is not self-excluded, and also provide for a limitation of their liability.

· Finally, we have taken on board the request for an explicit public education role for the National Gambling Board.

A number of submissions were made about the treatment of the Horseracing industry in the Bill. Submissions ranged from proposals that the industry was the equivalent of a sport and therefore did not require regulation, to arguments that it should be regulated through standalone legislation. We acknowledge that the treatment of Horseracing is not clear in the Bill. That is not in respect of the gambling activities but rather those related to the rules of conduct for the industry and their enforcement. Let me say that the Horseracing industry is not the same as cricket or boxing. It is an industry that is dependent on gambling for its continued existence. It is a form of gambling that is entrenched in South Africa as, historically, it was the only legal form of gambling. Thus, we believe a strong case can be made for the differentiation of the horseracing industry from sports and for its regulation. We therefore propose deleting the references to the Horseracing Authority from the Bill, with a view to drafting additional provisions regarding the regulation of the conduct and rules. for addition by way of amendment to this Bill at a later point.

Another major area of debate at the hearings was the limitation of gambling opportunities, and of Limited Payout Machines, in particular. I was surprised at some of the comments that there should be no limitation on the number of gambling opportunities to be offered.

Let me be quite clear about the government's position in this regard. We take a more restrictive approach to gambling opportunities available to the broader public. We will consider the potentially negative socio-economic consequences in making such decisions. There is therefore no intention to increase the number of casinos or LPMs available. Instead, we will be taking a close look at the number currently in regulation, and if anything, reduce the maximum numbers currently in place, after consultation with our provincial counterparts. The current limit on the number of casinos is 40, but only about 33 licenses have been issued, with 31 casinos operational. A strong case can be made to cap the number of casinos at that level. In addition, the initially envisaged maximum number of LPMs of 50,000 is in hot possibly too high. We would need to consider this figure with our provincial counterparts and possibly revise the maximum number downwards. However, I Feed to highlight to the Committee that as the Minister of Trade and Industry, I only establish the maximum. It is provinces that issue the licenses and give effect to the policies. Provinces must make their own political decisions about the proliferation of gambling activities.

I believe the Policy Council will be a valuable vehicle for discussing these matters and to promote caution and a common approach. It is for this reason, the fact that the Council is primarily established to deal with policy matters, as its name indicates, that it is not feasible for industry to be represented on it. Industry can lobby provincial and national government and seek to influence policy. However, policy formulation remains the domain of government.

Let me also Take this opportunity to clarify the position with respect to the National Central Electronic Monitoring System. Some comments and inputs suggested that this should be left to provinces to regulate. The Central Electronic Monitoring System is a key feature to exercise control over the Limited Payout Machine industry .0 ensure that the revenues reported are accurate, that there is no tampering with machines and also to limit the opportunities for illegal machines. International experience with respect to LPMs has indicated to us that this is an industry that requires close monitoring. I must state emphatically that we are not preventing provinces from exercising their powers or in any way trying to assume those powers. In addition, there are matters of national concern, such as the accurate statement and collection of value added tax. For these reasons, we are insisting on a national system, but without limiting the capacity of provinces to exercise their rights and responsibilities. This is not inconsistent with the Constitution - it is in fact perfectly in line with the Constitution.

Another issue that was raised was that Limited Payout Machines is a vehicle for Black Economic Empowerment. Allow me to state the government position in this regard. As in the Liquor industry, we should not isolate certain activities for black economic empowerment. But rather, black economic empowerment should occur throughout the industry and it's implementation must be monitored. The National Gambling Board and the dti are both concerned with the effectiveness of BEE measures currently in place. For this reason, we have strengthened the ability of provinces to evaluate the commitments made by licensees. In addition, the National Gambling Board has a monitoring function. In fact, the National Gambling Board has established a Task Team, chaired by Professor Pityana, to perform a broad-based audit on Black Economic Empowerment in the gambling industry.

These then where the major policy issues that were raised. A number of more technical inputs were also provided in the submissions. We have carefully reviewed all the technical inputs, and taken on board those that are consistent with policy and with our intention. A presentation of the amendments will be made available to the Committee first thing tomorrow if our proposals on how to proceed are acceptable.

5. Conclusion

I believe that in the time available the dti has carefully evaluated the inputs made by stakeholders and the Committees in its initial deliberations and has sought to address the concerns, while remaining true to the objectives of the Bill, namely to clarify and facilitate the exercise of concurrent jurisdiction and the limitation of the potential negative socio-economic consequences of gambling. We believe that further consultations will not add value to the contents of the Bill and therefore request the Committee to consider whether the changes we have proposed adequately address their concerns.

I wish to thank the Committees, both the Portfolio Committee and the Select Committee, for hosting these joint hearings and all the participants who made submissions. We believe that is very important for the public interest matters to DC fully aired before this Committee