National Gambling Amendment Bill: briefing; Meeting with Association of South East Asian Nations Heads of Missions

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
14 February 2007
NATIONAL GAMBLING AMENDMENT BILL: BRIEFING; MEETING WITH ASSOCIATION OF SOUTH EAST ASIAN NATIONS HEADS OF MISSIONS
 
Chairperson: Mr B Martins (ANC)

Documents Handed Out:
National Gambling Amendment Bill 2007 presentation
Socio-economic impact of legalised gambling in South Africa (October 2005)

SUMMARY
The Committee was briefed by the Association of East Asian Nations’ Heads of Missions. The delegation noted that trade relations between South Africa and their specific countries have increased vastly since 1994. It was also highlighted by all speakers that the balance of trade is still slightly in favour of the ASEAN countries and that there are prospects for improvement in this regard. ASEAN countries had also invested heavily in the capacity building and training of young South Africans, and in other sectors besides trade, such as culture, science and technology. Members were interested in how the economies of these Asian countries were able to grow so rapidly and developmentally, and asked that be dialogue between South Africa and these countries on this. There were also questions regarding government involvement in the economy. It was agreed that ongoing contact was necessary to better trade relations.

The Department gave a briefing on the National Gambling Amendment Bill, which is to now include and regulate interactive gambling or ‘online gambling’. Issues such as the protection of players, advertising, licensing, problem gambling, money laundering and empowerment were raised. The Committee was generally concerned about the effect gambling has on the poor in South Africa and if empowerment would actually occur. Members also sought clarity on the issue of socio-economic empowerment, noting that the presentation lacked facts and figures to back up its claims. 

BRIEFING

Association of South East Asian Nations’ Heads of Missions briefing

Justice M Rubin (High Commissioner of the Republic of Singapore) noted that Singapore and South Africa have excellent bilateral trade relations, with trade with South Africa in 2006 amounting to approximately U$ 1 billion. This year, trade between Singapore and South Africa increased to about U$1.4 billion. He noted that although the balance of trade is slightly in Singapore’s favour, there are prospects for improvement. Singapore is currently trying to enter into a broad agreement, not necessarily a pre-trade agreement, but some sort of cooperation agreement. Singapore has already initiated, with the cooperation of South Africa, having a joint trade agreement. He explained that although free trade is regarded by segments of the economy as not conducive to some industries as they are hardly protected, Singapore is of the view that if a free-trade agreement is managed properly, it will benefit both parties.

Mr Y A Jabar (High Commissioner of Malaysia) explained that trade between Malaysia and South Africa is also excellent, breaching the U$ 1 billion mark in 2006 in bi-lateral trade. These figures have been growing since 1994. Malaysia exports electronics, electronic products, palm oil, furniture and in the last two years automobiles (Proton automobiles were launched in South Africa in August 2005). Much is being done to increase economic contact between South Africa and Malaysia, and that there has been very good cooperation from the South African government and the private sector. However, there are still many areas where relations can be deepened. Malaysia buys mostly minerals and chemicals, as well as machinery parts from South Africa. Trade was slightly in Malaysia’s favour, but there are plans to increase these exports to include military equipment within the next three years, which should balance out trade between the countries. Cooperation between Malaysia and South Africa in terms of social, cultural and science areas has been growing. Malaysia is interested in studying commercial fruit cultivation in South Africa as well as the breeding of animals.

Mr S Rahardjo (Ambassador of Indonesia) saidd that trade between Indonesia and South Africa had reached the U$580 million mark in 2006 and would reach U$ 700 million in 2007. For the first time this year, Indonesia has exported automobiles to South Africa, in a joint venture with Toyota. Indonesia imports minerals, fertilizers, iron and steel from South Africa. He explained that ASEAN has already agreed this year to establish an ASEAN pre-trade area in the year 2010. This pre-trade area will create a big market in South-East Asia for production. Based on this pre-trade area, ASEAN will develop a free-trade agreement with China, Korea, Japan, India, Australia, and New Zealand. ASEAN has also agreed to form this economic community with the aim of creating a single market with the free flow of goods and investment by the year 2015.

Justice Rubin added that free trade is regarded by some sectors of the economy as one-way trade and there is a fear that there will be a loss of jobs and local industries. These fears are real and not imaginary. Singapore does not follow the template approach as followed by many industrialist countries and aspires to reach agreements with the best intentions possible. Singapore has invested in COEGA in the Eastern Cape to the amount of U$1.5 billion. Many more investments would come to South Africa not only from Singapore but from the ASEAN region as a whole.

Discussion

Prof B Turok (ANC) thanked the team for the presentation. He commented that South Africa is in favour of multilateral agreements and that more South-South agreements were necessary as North-South agreements are the norm and have not always been favourable. He suggested that policy dialogue between ASEAN experts and South African experts and the Committee occur.

High Commissioner Jabar agreed that the idea for a policy dialogue is a good one. He noted that this could be beneficial to both countries.

Ambassador Rahardjo responded further that Indonesia and South Africa have established a bi-lateral trade committee in order to exchange views on how trade relations can be boosted.

Ms F Mahomed (ANC) and Mr D Dlali (ANC) noted that the trade balance, which is in ASEAN’s favour, needed to be changed. She asked about the SMME sector and job creation, seeking to know how they are funded and what are the incentives. She also noted that there needed to be an exchange of information about clean fuels such as bio-fuel and solar power.

High Commissioner Jabar explained that, with regard to skills development, the Malaysian government provides ten scholarships a year to train young South Africans in the fields of multi-media and engineering and to date has trained about 60 people. There is also an initiative with Engen, which is 80 percent Malysian owned, to train young people from South Africa. With regard to small business funding from government, he explained that government must fund and help big and small business for job creation and competitiveness worldwide.

Ambassador Rahardjo noted that, with regard to SMMEs, the Indonesian government gives incentives and benefits to SMMEs because they are seen as a fundamental pillar of the economy.

Justice Rubin said that Singapore does train young South Africans in all sectors. The process of change is incremental and it is a question of time and incentives. Areas such as tourism in South Africa must be exploited because the benefits to the economy are potentially great.

Mr Dlali sought clarity on the progress made after the Africa Asia summit in 2005.

Ambassador Rahardjo responded that all Asian and African countries agreed on the new Asia/Africa strategic partnership, through which tangible and feasible programmes would be developed. Indonesia and South Africa work very closely to follow up on this strategic partnership and a meeting has already been held in Durban last year. In July 2007, the ministers of foreign affairs of Asia and Africa will be in Cairo to discuss these programmes to boost cooperation.

A member asked if there were other areas in which these countries interact with South Africa besides trade, such as culture, sport and art. The issue of South Africa’s growing regional integration as part of the Southern African Development Community (SADC) was raised. He asked how ASEAN relates to SADC as a whole.

Justice Rubin responded that it is true that the issue of multi-lateral trade has become a regional one, with SADC becoming increasingly important.

High Commissioner Jabar noted that the Malaysian government is interested in deepening their contact with South Africa in terms of culture, tourism and science and technology. ASEAN countries do provide some technical assistance in this regard.

Mr D Sefularo (ANC) asked how the ASEAN countries managed to grow their economies in a manner that was developmental. He wanted to know what support systems were in place for small business and corporatists.

Justice Rubin responded noted that Singapore does not have natural resources other than people. Singapore first built factories and then set up training schools that switched from humanities based training to technical training. People with the necessary skills were imported from other countries as well. The pillar of Singapore’s economic policy is education, employment and housing. Education is provided for. Over 95 percent of people own their own houses. This is because of the pension fund that was set up. These savings accumulated and were used to build houses for the people, thus mortgages and bank loans became unnecessary.

Dr P Rabie (DA) asked about progress in the establishment of a common free trade plan. He wanted to know, with regard to Indonesia’s agricultural economy, how this affects their relationship with Japan which imports nearly 80 percent of its food and whose tariffs are higher. He also asked if there are any plans afoot for democracy in Myanmar.

Justice Rubin responded that ASEAN was taking a constructive approach about democracy in Myanmar. ASEAN’s pillar is non-interference with other countries’ affairs. ASEAN is actively engaging them though.

Ambassador Rahardjo noted that Indonesia has a special agreement with Japan in terms of trade and that there is no difficulty in this regard.

Ms D Ramodibe enquired about the rate of unemployment in Malaysia, Indonesia and Singapore and about the economic participation of women. How was the textile industry sustained?

Justice Rubin responded that the rate of unemployment in Singapore is about three percent, which is periodic and structural. There was absolute equality and in some sectors there are more women than men. Singapore believes in meritocracy. On the matter of textiles, Singapore was moving away from traditional textiles to more specialised industries. Singapore spent a great deal on research and development

High Commissioner Jabar noted that unemployment in Malaysia is also about three percent, though one has to take into account the number of foreign workers imported into the country.

Ambassador Rahardjo explained that the rate of unemployment in Indonesia is around eight percent and that the government is trying to decrease this. Women participating in the economy is important to alleviate poverty and is the first step to empowerment. Almost 40 percent of small to medium sized businesses are run by women in Indonesia.

Mr L Laubschagne (DA) askled about the regulatory environment in the ASEAN countries. What role did state corporations play and is there a move toward greater or lesser state involvement?

High Commissioner Jabar noted that the Malaysian government is moving away from state involvement.

Justice Rubin commented that the regulatory environment in Singapore was clean with personal tax coming down to about 20 percent from 40 percent. There are strict regulations on money laundering and tax. With regard to the participation of state institutions, he noted that by and large, it is private orientated.

The Chair thanked the delegation and noted that ongoing contact was needed to answer all aspects of the questions.

National Gambling Amendment Bill, 2007: briefing by Department (DTI)

Mr Fungai Sibanda (Chief Director: Regulatory Policy and Legislation, Consumer & Corporate Regulation Division, DTI) explained that the National Gambling Act (2004) required the Minister to introduce into Parliament, within two years of the promulgation date, legislation for the regulation of interactive gambling. A research committee was then established by the National Gambling Board to investigate the implications of the regulation of Interactive Gambling within South Africa. The committee’s research report was subsequently finalised in October 2005 and tabled before the National Gambling Policy Council (NGPC), who resolved that the DTI prepare a draft policy framework and legislation to regulate Interactive Gambling.

The key impact areas highlighted by the report, included the need for competitiveness with global gambling jurisdictions, addiction to gambling, exposure to money laundering and organised crime and the creation of employment (see presentation document for full list). The approach used by the DTI is to introduce interactive gambling by way of amendment to the National Gambling Act as opposed to a separate piece of legislation. The policy on interactive gambling must be part of the broad policy for the regulation of all forms of gambling and be subjected to the general administrative and oversight role of the Board.

In terms of the revised scheme of the Bill, a number of new definitions relating to interactive gambling are included. The scheme would also establish a lawful basis for the provision, regulation and control of interactive gambling within South Africa. An important part of the scheme, which was stressed, was the notion of player protection. The registration of players as well as the establishment of player accounts for payment of monies is vital for player protection.

Mr Sibanda explained that existing provisions would apply to advertising which will carry notice of the dangers of gambling and compulsive gambling. Only licensed interactive gambling providers are permitted to advertise interactive gambling. Interactive gambling licences are to be issued as national licences due to the borderless nature of interactive gambling. These licences include operator and personnel licences, licences for gambling for interactive gambling software and for interactive gambling equipment.

In terms of compliance and enforcement of the Bill, the National Gambling Board is responsible to ensure compliance with the Act and the conditions of licence as well as to supervise and enforce compliance by licensees with Financial Intelligence Centre Act. Inspections of interactive gambling websites and premises are also to be carried out.

With regard to problem gambling, electronic systems for the monitoring and reporting of registered players will be in place. Notices on web sites of interactive gambling providers for voluntary player exclusion and the treatment of addictive gambling will also be used.

The issue of money laundering was also explained. Mr Sibanda noted that the registration of players and the verification of player identity, together with the establishment of player accounts and the verification of nominated accounts, would be in place to combat money laundering. There is an obligation on the interactive gambling provider to report suspicious and illegal activities.

With regard to empowerment, conditions for the awarding of interactive gambling licences will be subject to a commitment to socio economic upliftment and broad based black economic empowerment. Mr Sibanda concluded that interactive gambling would provide certainty and thereby enhance international competitiveness and promote growth in the sector as well as revenue to the fiscus. It would also ensure accountability by the interactive gambling industry and eliminate illegal interactive gambling operations. The Chair asked for these facts, figures and reports to be made available at the next meeting

Discussion

Dr Rabie asked whether the LOTTO was a form of interactive gambling.

Mr Sibanda responded that the National LOTTO is regulated by the Lotteries Act and thus does not form part of gambling, whereas casinos and interactive gambling are regulated by the National Gambling Act to which these amendments are being proposed. The National Lottery and other competitions are regulated by the Lotteries Act.

Mr Nkosi (ANC) asked whether the DTI had a copy of the research report as mentioned.

Mr Sibanda responded that the research report was completed in 2005 and the Department would make it available to the Committee.

Mr J Maake (ANC) sought clarity on the issue of money laundering.

Mr Sibanda responded that money laundering is a way of circumventing formal transaction procedures in terms of the flow of funds. This is usually done to fund organised crime and criminal activities. There are concerns that interactive gambling could promote money laundering and thus the Bill proposes control measures to deal with this issue.

Advocate T Polaki (Board Secretary: National Gambling Board) added that the National Gambling Board works with the Financial Intelligence Centre. There are also other measures in place to combat money laundering such as the Financial Intelligence Centre Act of 2001, which established the Financial Intelligence Centre to combat money laundering. It also imposes duties on institutions in which money laundering could occur.

Mr Dlali and Ms D Ramodibe enquired as to the control mechanisms in place to ensure that addiction to gambling did not occur. He asked if the Department had figures to show about potential employment. Clarity was also sought about television advertisement and SMS competitions and player protection.

Mr Sibanda responded that the National Gambling Act does have provisions that seek to deal with the problem of addiction to gambling. There are control measures and industry initiatives that deal with the social responsibility around problem gambling. The Bill does not propose anything new in dealing with addiction to gambling, but simply makes provision for the case of interactive gambling. With regard to player protection, there is a dispute resolution mechanism and the National Gambling Board is responsible for disputer resolution between members. As interactive gambling is borderless, dispute resolution should be done by the National Gambling Board.

Mr T Marasha (Chief Operating Officer: National Gambling Board) added that in terms of player protection, there are currently processes in place to protect the player firstly from himself, secondly from the casino and lastly, from the public. The Responsible Gambling Programme is designed to protect the punter from himself. Call centres and counselling programmes are in place to protect the punter. Regarding dispute resolution mechanisms, there are cameras in casinos, machines are tested before use and the NGB regularly monitors these mechanisms. Fines for non-compliance are handed out. There is software and technology that is used to monitor SMS competitions systems, and they are audited. All games require a letter of certification. Before a player is allowed to use the game, he/she must have registered personal details in terms of FICA.

Ms M Ntuli (ANC) sought clarity on authorised interactive gambling games and the registration of players. She referred to Slide 14 dealing with socio-economic upliftment and BBBEE requirements and asked about the conditions. She asked if the Department could unpack the issue of sector growth and competitiveness (as stated on Slide 15).

Mr Sibanda responded that interactive gambling was only one form of a very broad sector. Other forms of gambling have already contributed close to fifteen billion rand towards infrastructure and development and growth in the economy and interactive gambling may add to this growth. With interactive gambling, all transactions are monitored and thus problem gambling becomes easily noticeable. 

Advocate Polaki added that the casino industry has created 100 000 jobs. Thus by regulating the industry, more jobs can be created.

Mr Marasha explained that the research report is dated 10 October 2005 and is available on the National Gambling Board Website at www.ngb.org.za. He explained that there are significant contributions by the Gambling Board in terms of social upliftment. Two convention centres were built out of the gambling industry. As at year end 31 March 2004, the contribution of casinos in terms of corporate tax was R681 million, R218 million was PAYE, R720 million was Provincial Taxes, R1 billion was VAT and R70 million was other. As far as employment is concerned, R1.5 billion was paid as wages. Social Corporate upliftment in monetary value amounted to about R87.2 million. The amount paid to shareholders was R456 million. Thus there are a number of contributions by the gambling sector to the fiscus and interactive gambling will further contribute to what is already happening. All casinos would be required to comply with socio-economic upliftment and BBBEE requirements, and this would be extended to all forms of gambling.   

Mr Brian Muthwa (Director: Legislative drafting, Consumer & Corporate Division, DTI) explained that interactive gambling involves gambling on the internet. The regulation of interactive gambling, by the proposed Bill would go a long way to protect the player.

Ms Mpho Mosing (Deputy Director: Regulated Industries, DTI) noted that approximately three million people have access to the internet, which is a very small number when compared to the whole population.

The Chair, Mr Maake and Ms Ntuli were all concerned that important facts, figures and statistics were missing.

Mr S Rasmeni asked when the DTI and NGB would ensure that black ownership occurs in the gambling industry.

Mr Sibanda responded that gambling and interactive gambling had two impacts, one economic and one social. Gambling had the potential for direct and indirect economic impact.

Mr Marasha commented that the gambling sector has contributed to the fiscus and that although there are issues such as addiction, the National Gambling Act and the proposed amendments seek to deal with these issues and provide a safety net for players in the event such issues arise.

Advocate Tlali commented that prohibition versus regulation is at the fore of the debate and that the Department and National Gambling Board are of the opinion that regulation is better as it contributes to the fiscus in the way of taxes and levies. She assured the Committee that compliance was a major factor in terms of regulation

The Chair concluded that the issues of socio-economic upliftment mean very little to people in rural areas, who ultimately are the losers where gambling is concerned. The Department needed to address such issues as well as provide the Committee with the relevant research report, facts and figures at their next meeting.

The meeting was adjourned.