Posted: October 24, 2011
Minister says Gambling Industry Relatively Well Regulated
Minister Rob Davies Speaking Notes at the Opening of the International Association of Gaming Regulators Conference, on 24 October 2011 at Cape Town International Convention Centre
Ladies and gentlemen
It gives me great pleasure to address the opening session of this conference of the International Association of Gaming Regulators. This is the first time the Association has held its conference in Africa, and we very much appreciate your decision to come to our continent and country. Let me welcome all our visitors to our country. I sincerely trust that you will have a fruitful conference and an enjoyable stay in South Africa.
The topics you will be addressing over the next three days are all very pertinent and relate very much to the challenges we have to confront in South Africa.
In the period before our democratic transition, gambling in South Africa was very restricted. Before 1994, the only form permitted in most of South Africa was betting on horse racing. Towards the end of the apartheid period, so called independent homelands licensed casinos in some rural areas. But the reality was that as we approached our democratic transition, a sizeable illegal gambling industry had sprung up in many of our major centres. In 1995, the government appointed a Commission headed by Judge Wiehahn to chart the way forward. The basic recommendation of the Wiehahn Commission was that we should establish a framework of regulation and permit roll out within this framework and that remains the basis of our policy to date.
A major premise of this approach is that the roll out of a regulated industry can bring economic benefits, but that these have to be balanced against potentially negative socio economic impacts, particularly on the poor. Gambling, accordingly, cannot be treated as an entertainment activity like any other. It is an activity with specific features that could potentially be associated with negative social effects. Apart from the phenomenon of compulsive or addictive gambling that exists wherever the activity takes place, we need also to take account of high levels of poverty and inequality in our society and the possibility, therefore, of undesirable overstimulation targeting low income people. Consequently we have insisted that roll out be combined with tough policy and regulatory scrutiny.
Our regulation therefore determines inter alia the forms of activities allowed, the number of outlets permitted in different areas and in the various forms of activity, and the technical specifications of machines. Our legislation also requires our regulators to ensure that actual or potential punters are protected against predatory practices by operators.
By all accounts, the economic impact of gambling since 1994 has been significant. Gross gaming revenue doubled between 2001 and 2009 and stood at R15, 921 billion (over $2billion) in that year. In the same year, the industry generated R 1, 5 billion in tax revenue for provincial governments and accounts for substantial employment totaling 56.958 direct jobs. The casino industry alone accounts for 51.317 jobs, 85 per cent of gross gaming revenue and 80 per cent of the tax revenue contributed by gaming. Casinos have made significant contributions to infrastructure development in leisure sector with a cumulative capital expenditure of R18, 8 billion as at March 2009.
Evidently then, the gaming industry has grown and evolved substantially since the mid 1990s with new technologies and new forms of activity developing since then. As a result, we have found ourselves being bombarded with an ever increasing number of piecemeal proposals to permit new activities or to take existing activities to new areas. This has now reached the point where it threatens the coherence of the framework established in the mid 1990s. Meanwhile, our Parliament has raised serious reservations about the impact these activities might have on the poor. For this reason, I appointed a 5 member Gambling Review Commission in December 2009 and requested that they review the evolution of the gambling industry since 1996; assess its social and economic impact, with special 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 making an assessment of the proliferation in South Africa considering both licensed and illegal activities as well as technological developments and the viability of new activities. Lastly, the Commission was asked to consider the extent to which the regulatory bodies have met their legislative objectives, to benchmark them with international jurisdictions and to make policy recommendations regarding the gambling industry on the basis of its assessment.
The Commission tabled its report earlier this year, and it is currently before Parliament for further consideration and recommendation. The Commission found that the gaming industry in South Africa is relatively well regulated. Good legislation is in place and the relatively high level of compliance makes South Africa an internationally respected jurisdiction. The report revealed that the number of adults who gamble regularly had decreased between 2005 and 2008, although by comparison with other jurisdictions our overall Gross Gaming Product per capita remains high. Interestingly it found persons in lower income groups are less likely to gamble with 71 per cent of the lowest income cluster abstaining altogether, compared to 58 and 65 per cent in the two highest income categories.
The review also touched on the issue of problem gambling, which it said had increased since the introduction of the National Lottery but had since declined. However, compared to other countries in Europe, South Africa has high levels of problem gambling. In taking stock of gambling policy, the Commission found that limitations imposed by the policy for managing the roll out had indeed restricted the size of the gambling sector. At present, South Africa has a total of 22.206 gaming machines, significantly down on the estimated total number of legal and illegal machines in the country in the mid 1990s. This means we have one machine per 2.193 persons. If we rolled out Limited Payout Machines to the maximum envisaged, however, the ratio would decline to one machine per 608 persons. This compares to Italy with a ratio of one to 171 or New South Wales which has one machine for every 69 people.
The commission raised concerns with what its report termed “worrying trends”. These include what they called the continuing erosion between public and gambling space, as a result inter alia of the integration of casinos and shopping malls. The Commission also identified a trend where clear limits had not been set of “creeping proliferation”.
The Commission noted that because of the proliferation of some forms of gambling to low income communities, the poor appear to be especially vulnerable to problem gambling.
Based on these findings among others, the Commission felt that while gambling policy and regulation, “has been largely successful, there was a need to strengthen aspects of policy, particularly with respect to the management of potential proliferation, to review some of the regulatory structures and coordination mechanisms and possibly to enhance some of the harm mitigating measures”. Under certain, very specific circumstances, the Commission recommended that a limited number of new forms of gambling could be accommodated.
In summary, the Commission argued that while there was no reason to depart from the current paradigm of gaming regulation, we did need to pay attention to specific aspects and new challenges. The latter includes, critically, the question of online gambling. This is not yet legal in South Africa, and we will act against any found to be “jumping the gun”, who should also not assume that they will be the beneficiaries if we do eventually decide to licence such activities. We know that a number of jurisdictions prohibit interactive gambling but also that the trend is towards licencing and regulation. In this regard, the Commission made a recommendation that I know will be the subject of much debate viz. that legislation should cater for all forms of online gambling, including person to person betting and participation in offshore operations.
As we speak, the Commission’s report is before the National Assembly’s Portfolio Committee on Trade and Industry, which will organise public hearings and hopefully finalise its report before the end of the year. As gambling is a concurrent function, the report will also be considered by the National Council of Provinces and Provincial legislatures. That being the case, you will appreciate that I need at this stage to refrain from making any specific comment of my own. But I do want in conclusion to repeat a point I made earlier: many of the topics you will be discussing in this conference touch the very issues that we ourselves are grappling with. I have no doubt that there will be many valuable insights in your sessions over the next three days. I wish you well in your deliberations and look forward to receiving a report on the outcome of this important conference.