National Gambling Amendment Bill: public hearings day 1

Meeting report

Opening remarks

The Acting Chairperson informed everyone present that the Committee was interested in two specific issues: the creation of a new Regulator to replace the National Gambling Board and procedures addressing the issue of the quorum in the National Gambling Policy Council. He asked presenters to focus on those two issues, although that did not prevent them from commenting on other issues.

Presentation by Hollywood Bets

Adv Anna Annandale, SC, Member of the Durban Bar, represented the Hollywood Group, a licensed bookmaker that traded extensively in seven provinces. She stated that the presentation had been based on the original ­­National Gambling Amendment Bill but she understood that the Committee had recently decided to narrow the focus, as indicated by the Acting Chairperson. Hollywood Bets had responded to the original Bill but had received an amended version but did not understand the status of the document.

She was going to address the proposed replacement of the National Gambling Board (NGB) by the National Gambling Regulator (NGR), the transitional arrangement around that change, the matter of the Gambling Policy Council quorum and Section 27 relating to the electronic monitoring system which the secretariat had identified as one of the foci at the hearings.

Hollywood Bets was concerned that the NGR seemed to be the same as the NGB save for the name and a CEO with extensive powers but no other changes, in which case Hollywood Bets was uncertain in what way the NGB had been revamped. It appeared that the motive for the replacement was the view that the NGB should be a strategic trading entity of the DTI. It was unclear what the advantages were. Hollywood Bets submitted that it was undesirable that such power be vested in one person without the obvious benefits of accountability that arose from decisions taken by a lawfully appointed committee or council. 

More fundamentally, centralising the regulatory power at a national level ignored the constitutional scheme of betting legislation. It was a concurrent national and provincial competence. The proposed section 33 removed the constitutionally recognised power of the provinces in relation to “interactive gambling”.

The Bill proposed that the Gambling Policy Council be permitted to make decisions without a quorum. Hollywood considered section 63A alarming. The perceived practical difficulty of council members being unavailable for meetings could not justify inquorate decisions. The power of the Council was significant. For example, under section 65(4) the NGR would be obliged to comply with directions issued to it by the Council relating to casinos, racing, gambling, wagering or any other matter.

The Amendment Bill and the 19 October 2018 Bill provided for a Central Electronic Monitoring System (CEMS) to cover all betting transactions. That system would have to cover online betting, telephone betting, horse racing and the like. Those different betting platforms operated through their own unique and customised software. It would require a herculean and expensive technological effort to design one central system to monitor all such systems and transactions. Hollywood Bets could only offer gambling on software approved by the provincial Gambling Board and the data was available to the Gambling Board.

Discussion

Adv A Alberts (FF+) asked whether Hollywood Bets had any ideas on a definition of interactive gambling that would help the Committee. He referred to the point on national and provincial competence and asked whether Hollywood Bets had any ideas on how provincial structures could be improved and how national and provincial structures could work together.

Mr D Macpherson (DA) noted that the presenter had queried the need to replace the NGB. He asked if she was aware of the serious governance failures that had taken place when there had been a Board and that the NGB had been under Administration for the past couple of years and so the question was what was a better structure for an entity that needed to enforce regulation in terms of compliance and protection for the consumer. That was what the Bill was trying to achieve. His experience as a Member of Parliament was that Boards were cumbersome, expensive and operationally lethargic, especially in dealing with problems. The rationalisation of Boards had been entirely successful across the Department of Trade and Industry.

He asked what structure would be recommended by Hollywood Bets if a new governance structure to protect the consumer and to drive enforcement was required. There was no Board Chairperson so a transitional arrangement would be difficult but the point of transition was well made. Because there was no Board, what would Hollywood Bets’ recommendation be regarding transitional arrangements?

Mr G Cachalia (DA) said that international jurisdictions such as the United Kingdom had a more open policy in terms of legalisation of gambling whereas jurisdictions such as Australia were more prohibitive in their regulations. Did she have any idea of how international best practice could inform the regulation and appointment of bodies to monitor gambling?

Adv Annandale replied that interactive gambling had been defined in the legislation that had been passed in 2008 to amend the National Gambling Act (Act 10 of 2008) but was never brought into force and Hollywood Bets presumed that the same definition of internet gambling would be used in any other legislation. In the Amendment Act, there was a definition of internet gambling and of internet gaming and, read together, would give something to work with.

Secondly, Mr Alberts had asked about structures as gambling was a national and provincial concurrent competence. The current structure allowed provinces to conduct their own licensing, inspection and monitoring whereas national had only to set standards and develop policy to which the provinces had to adhere. The National Gambling Act provided that and an additional structure was not required. The NGB tried to create uniformity in an area where it was not entirely possible because provinces had certain exclusive competencies. Another structure with the same aim would not help.

Adv Annandale admitted to Mr Macpherson that she had not been aware that an Administrator had taken over the Board and appreciated the information. She understood the need to change the functioning of the regulatory body. DTI had various efficient and functional structures, such as the Competition Commission. A structure akin to that, which had proven effectiveness, was required. It would be a radical departure from what was in the Bill but with the necessary expertise, it would not have the difficulties and cumbersome structure of a board but it would not put all of the power in the hands of one person.

Secondly, there would have to be a transitional provision for the Minister to designate or appoint someone to serve or there could be a suspension of the Amendment Act until a Regulator had been appointed.  Depending on the legislation under which the Board had been suspended, the current Administrator could be appointed for the transitional period.

In response to Mr Cachalia’s question, she agreed that there was a variety of regulatory mechanisms in a variety of jurisdictions but, in the South African context, gambling did not start from a basis of being prohibited. It started from the basis of being a sanctioned activity, sanctioned by the Constitution. The Australian model started from the premise of gambling being a prohibited activity and would not be permissible in the SA context.

Mr Macpherson found it incredible that the consultants were unaware of the Administrator. It led him to ask how good the submissions were because they had been made from the premise that the Board was functioning. How did Hollywood Bets view the functioning of provincial boards? Provinces did not act in the national interest. The Mpumalanga Board issued a licence for a betting product that could be marketed across the country but other boards would not license the product. That suggested that there was clearly a problem with norms and standards. It suggested a need for a national regulator to enforce on a provincial basis. How would Hollywood Bets view that in the light of its reluctance to see a national regulator?

Adv Annandale replied that Hollywood Bets’ experience was that provincial boards were effective. The provincial board in each case normally stated that a licence applied only to the particular province. That did not impinge on the other provinces. Part of the difficulty was that the National Gambling Amendment Act of 2008 had not been brought into force, although it did address that kind of issue. Hollywood Bets had no problem with a national regulator having oversight and managing norms and standards but, in the Bill, the regulator’s duties were in conflict with the functions that were a provincial competence, such as the issuing of licences. The powers of the regulator were too wide.

The Casino Association of South Africa (CASA)

Mr Themba Ngobese , CEO, CASA, said that CASA was concerned about the status of the National Gambling Amendment Act, Act 10 of 2008. That Act was in conflict with the National Gambling Policy of 2016 but it had never been implemented. CASA assumed that the intention was not to legalise interactive gambling as per the policy of 2016 but, at the very least, clarity was required, and at least a provision which repealed the provisions that contemplated interactive/online gambling in the Amendment Act.

The National Gambling Regulator would be institutionally compromised in exercising evaluation and licensing authorities if it were governed by a single individual in that it would be required to interrogate the actions of those authorities which were based on collective decision-making. The difficulties should rather be addressed by ensuring that persons with the appropriate expertise were appointed to the board of the NGB and that it was adequately staffed and resourced.

The National Central Electronic Monitoring System (CEMS) had been established to provide a monitoring system for limited pay-out machines (LPMs) in circumstances where LPM operators did not have the resources to establish their own electronic monitoring system. The primary purpose of CEMS was to monitor the payment of gambling levies and taxes. Casinos had their own electronic monitoring systems as required by provincial legislation. Casinos’ monitoring systems were linked to the provincial licensing authorities (PLAs), which had full access to the content of those systems. CASA submitted that there was no need to develop a new electronic monitoring system for casinos which would involve considerable time and expense. PLAs were currently responsible for monitoring the payment of gambling levies and taxes, and not the NGB.

Discussion

Mr Macpherson asked whether CASA would support interactive online gambling if it were made legal. The Board was corrupt so he did not understand how Mr Ngobese motivated for continued dysfunction. Had the PLAs agreed to his view that the Regulator could simply plug into the data? Why would he want licensees to be able to plug into the data other licensees? What help would that be to the casinos?

Mr D Mahlobo (ANC) saw that CASA objected to certain clauses. It would have been advisable if CASA had proposed amendments, but possibly it was in the written input. Secondly, he noted that CASA was referring to subparagraph (i) about the issues between the policy and the law. Until the law was repealed, it remained the law. Policy did not trump the law. He understood the position of PLAs but the reality was that SA was not a federal state and the national legislation was the over-arching legislation. CASA would not be subject to two different authorities. If there was national legislation, there had to be alignment by the provinces.

Mr Mahlobo asked what the concerns were about the national electronic systems as it still had to be designed and the new system could borrow from the current one. It looked like there was a view to protect CASA’s clients or members. Casinos were in brick and mortar buildings but the fourth industrial revolution meant that online gambling would happen. He used the example of Kodak that had not adjusted and so had become redundant. One could not avoid electronic advances. Everyone had to be ready for it and welcome it.

Mr Mahlobo said that the matter of people not attending the Council meeting was simply an issue of regionalism. If people were pushing a particular agenda, it then made it even more important to look at a national position. What could be done about people who sought to collapse the system?

Mr Ngobese said he needed to clarify a few points as he had been misunderstood. He had always said that CASA would follow government whether it legalised online gambling or not, but if it was outlawed, that had to be enforced. He agreed that it was important to remain relevant. Machines in a casino did not interest 22 year-olds. They were looking for interactive gaming. If casinos did not adapt, they would become extinct so CASA supported online gambling.

Mr Ngobese admitted that his choice of the word ‘dissolution’ was wrong. He had meant that one did not change an institution because it was dysfunctional. One changed the people. He could not say if PLAs agreed to national linking into their systems as he had not had that discussion. He had just wanted to say that there was a system and there was no need to replicate it. There was nothing wrong with a board, as a structure, regulating gambling authorities.

Mr Macpherson noted that Mr Ngobese had suggested that licensees should view other licensees data. What did he mean by that?

Mr S Mbuyane (ANC) commented on the matter of being corrupt. Board members were obliged to attend meetings. What would he do if a member chose, deliberately, not to attend a meeting to sabotage decision-making?

Mr Ngobese stated that Mr Macpherson had misunderstood – he had stated that each licensee should only see its own data. He knew that policy was not law. If the policy said that there would be no internet gambling, then one could assume that was the intention and the way government wanted to go. His written input gave suggestions for amendments, but there had been no time to discuss the suggestions during the hearing.

Mr Ngobese did not believe that PLAs were promoting federalism. He was just saying that provincial authorities had functions. The thinking was that the national body should be an oversight body – that was what the current legislation said. However, the proposed legislation suggested that the national and provincial inspectors would be performing the same role and what could happen was that a casino could be found to have done the same thing wrong by two different inspectors. One body had to be responsible for inspecting and one had to have oversight.

He was only saying that an additional monitoring system was unnecessary. He was not opposed to it. As to the questions asked about provincial gambling boards, he had to say that they were very thorough and he was not opposed to the authorities. They asked personal questions about one’s wife and sister, etc, so he was used to being open. If there was a body that was going to make decisions, there had to be a range of people taking those decisions. The industry could not require provinces to attend meetings. He did not believe that non-quorate meetings had the right to make decisions for the industry.

Mr Macpherson asked how decisions would be taken if one needed a quorum. Each province had a vested interest because the provinces derived income from the industry. At what point did a province’s interest override national interest?  Why a Board rather than a CEO? Boards had been rationalised, e.g. the Credit Regulator, and even financial institutions had not said that they wanted a board and not a regulator. So why was it a problem for the gaming industry to have a regulator? What was the real opposition to having a regulator? Was it a concern about a regulator over-reaching into provincial sphere?

Mr Ngobese noted that he had said that he did not know how to ensure that a quorum could be reached but he was saying that two or three members could not make decisions for the entire gambling industry. The situation was not comparable with the National Credit Regulator because the gambling industry had boards at provincial level and each member brought a different skill and experience to the board. He did not believe that a single person should be able to overturn the decisions of the members of a board.

Goldrush Gaming Group

Adv Barry Roux made the presentation on behalf of the Goldrush Gaming Group.

Adv Roux had been given to understand that there was a need to extend monitoring at a national level because PLAs struggled to collect information. The question was who was going to pay for the new system and where would the funds come from. Goldrush understood that there was a need to monitor PLAs but there was a system in place that had already been approved. The fee paid by the operator for the PLA was six percent. Was the operator going to pay an extra six percent for the national system? Was it true that the provinces were struggling to get information? Had there been a consultation with the stake holders?  He referred to Section 19E(b) and asked what had happened to the consultation process. The policy document stated that the licencees would be paying for a new system when the current system was working and national could just get the code and monitor the system. It was a huge expense behind which there was no rationale other than to pay a contractor to create a new system.

Regarding the quorum of the council, Adv Roux asked why the quorum should be dropped because MECs were too lazy to attend. Three votes out of ten could ensure a decision by the Council and that was unacceptable. Goldrush submitted that the problem should be tackled in ways that did not undermine the constitutional principles.  For example, decisions could be made by a round robin method, or proxy votes might be considered.  Members of the Council could be permitted to appoint an alternate to deal with the problem that they were not always able to attend meetings.

Discussion

Mr Macpherson asked about the quorum. He was not advocating lowering the standard but how did one get around the clearly vested interests of provinces that simply decided not to attend and so collapse the meeting that would affect their positions? Obviously messages were being sent from one MEC to others not to attend in order to collapse the meeting. In the private sector, people would be held accountable for that behaviour but it was harder to hold MECs, who were elected politicians, accountable. Possibly, a round robin which viewed the absence of a province as an abstention might resolve the issue of obtaining a quorum.

He understood that there needed to be monitoring, particularly of LPMs and bingos because they were less regulated than casinos and bookmakers and so there could be an opaque view to what was being generated in those machines. How did one monitor, when the machines were in far flung rural places, what they were actually generating if a person chose not to disclose that information? Those operators would have to pay for the monitoring system, but that was not to say that operators in other forms of gambling did not pay costs.

Adv Roux understood the need to have external regulations in the case of LPMs but, in the case of bingo, all the machines were tested. All bingo operations were large operations. All boards had access to the data on the bingo machines whenever they wanted access to the data. It was not that bingo was not regulated. The bingo regulations were on a par with casinos. If there was a new regulation, all the machines would have to be redesigned. Who would pay for that? If there had been a problem with bingo, one would have to agree, but there was no problem at all with bingo and the machines were accessed to determine what was owed in taxes. The bingo machines were all in large bingo halls. The Gauteng Gambling Board would be able to tell him that the current system worked well.

Gauteng Gambling Board (GGB)

Mr Bheki Nkosi, Chairman, GGB, made a presentation. He was supported by colleagues, CEO Steven Ngubeni and COO Edward Lalumbe.

Mr Nkosi stated that the lack of a quorum in respect of the policy council was an issue of coordination: meetings were not properly organised or coordinated. Meetings were coordinated, cancelled and last-minute arrangements had to be made. If the council could not find a date, it could go for a round robin, but to make a decision without a quorum was undemocratic. Other MINMECS worked. Why did that one not work? There was a need to appoint people who could make the structures work. The Gambling Act had been based on consultation and he was disconcerted to see various clauses in the Bill, about which there had been no consultation.

The GGB proposed that, in order to optimise government resources, the National Gambling Board should be merged with the National Lotteries Commission. The benefits would include effective handling of the conflicts between gambling and lottery and the efficient utilisation of resources.

The National Gambling Board had a range of experts and was a profound body. No individual would have all those skills. It was a growing industry, so why reduce and confine the industry? Regulation by provinces was an extension of regulation by national. National should work with the provincial boards. What was the point of repeating the same thing at national level, hoping to get a different outcome?

Mr Ngubeni spoke to online gambling in South Africa, suggesting that the country should make regulations and not make it illegal. Prior to 1996, gambling was illegal in South Africa and had been characterised by illegal activities. Those illegal activities had been eliminated once gambling had been legalised. He thought that the section on online gambling had been inserted mischievously but the same would occur if online gambling was legislated: illegal online gambling would be eliminated. At the moment, one did not even know who was involved in the illegal online gambling. He did not know if Parliament appreciated the extent of illegal online gambling in the country.

The Acting Chairperson stated that nothing was ever mischievous. It was unparliamentary to say that the section had been inserted mischievously. Such talk would not be allowed in the House and he would not allow that statement in the Committee.

Mr Nkosi stated there had to be a progressive approach to the Bill and consultation with stakeholders.

Mr Ngubeni said that there had been no consultation and he thought that the Bill should be rejected in totality. In particular, he suggested that the clauses relating to duplicating provincial roles should be rejected. A one-man one-show was not democratic.

Discussion

Mr Macpherson stated that the GGB had asked why things should be done differently. He would give them a reason. In 2015, a moratorium had been declared on the licencing of bingo machines but the majority of provincial boards had simply ignored the moratorium. There had been a massive public outcry about bingo machines, and that they were simply slot machines but there was an unbridled rollout across communities. The provincial gambling authorities had simply ignored the roll-out, and the outcry.

Mr Macpherson did not agree with all aspects of the Bill, but it was an opportunity to review the way boards functioned in relation to national. There was an inherent problem with boards. He referred to the ongoing corruption in the KwaZulu-Natal Gambling Board and its tenders for friends, but nothing had been done.

He asked why the GGB had opposed the online gaming two years previously and yet currently it was advocating legislation of online gambling.

Mr Mbuyane asked about the coordination of meetings. What mechanisms were needed for a better coordination of meetings? Could GBB clarify why the council did not meet?

Mr Nkosi said Council meetings were cancelled at the drop of a hat. It was a MINMEC and so the calendar should be set up at the beginning of the year and in consultation with the MECs offices. Several times GGB had had to cancel a flight to Durban at the last minute. Meetings would happen if dates were set and adhered to.

It was an issue of cooperative governance and did not need to be legislated. If other MINMECs could work, why could that one not work? Scandals in KwaZulu-Natal should be dealt with by dismissing or charging people, not getting rid of the structure. One could not create legislation for every scandal.

In respect of the moratorium raised by Mr Macpherson, there was a need to consult the regulators at provincial level. Provinces sometimes did not understand why national made certain decisions. The decision by national had not been explained to the provinces. If a Board could not bring MINMEC to order, how did he think a CEO would be able to do so? It would bring even more chaos.

Mr Lalumbe stated that it was incorrect to suggest that GGB had been against the Private Member’s Online Gambling Bill in 2015. None of the provinces had been invited to make submissions. The industry had tried a ban of online gambling but the ban had not worked. It was time to do things differently. There was a systemic issue with online gambling. Things were evolving and there would be more of the Mpumalanga-type situations. Bets could be taken via telephone and on computer, and even via the cloud. The Committee needed to look at what was happening on the ground and decide how to address it to achieve the required objective.

Mr Macpherson asked if he was justified in ignoring a moratorium because there had not been a meeting. That did not make sense.

The Acting Chairperson reminded Mr Macpherson that it was a public hearing and Parliament wanted to hear the opinions of people on the legislation before Parliament. No one should be held to account in a public hearing. He asked Mr Macpherson to ask a follow-up question if he had one.

Mr Macpherson commented that he thought it was not justifiable to ignore the moratorium because there had not been a meeting. He asked why the GGB had not presented a submission supporting the Bill if, as they said, they had supported it.

Mr Lalumbe stated that the Bill was not open to public comment at the time. He explained that the board worked in an orderly fashion and did not get involved in Bills until DTI invited the board to do so.

Mr Macpherson observed that the GGB was being disingenuous.

The Acting Chairperson put an end to the dialogue, particularly because the hearing did not have a focus on online gambling.

Mr Mahlobo stated that the Committee did not cast aspersions on anyone or any action. The prior comments had been Mr Macpherson’s personal position. It was the people’s parliament and he did not want them to think that they had to defend themselves in a public hearing.

South African Bookmakers Association (SABA)

Mr Sean Coleman, CEO, SABA, stated that SABA had made a 62-page submission with detailed comments. He explained that bookmaking was about buying and selling risk.

SABA believed that the reconfiguration of the National Gambling Board to the National Gambling Regulator was unwise. The regulator would have far wider powers than the current NGB and would impede rather than enhance decision-making. Procedural fairness would cease to exist and that would compromise the capacity of the LGAs. Finding a person to fill the position would be extremely difficult because he or she would have to be free of all involvement with legislation at national and provincial levels. In addition, different ad hoc committees would eliminate consistency and predictability. He could see no reason to interfere with the National Responsible Gambling Programme (NRGP) which was ranked amongst the best programmes in the world. It should be strengthened and extended and supported, even by the National Lottery Board.

The proposed amendment regarding the monitoring was without justification as the CEMS performed exactly the same function for those machines that required tracking. The development of a system that would monitor all aspects of gambling and all gambling modes would be extremely difficult, if not impossible. It was also not clear why it was required and who would carry the costs. At the moment no gaming device was permitted if the device did not comply with the technical standards.

Regarding the quorum at council, there had been reports that the policy council was not effective and tended to work directly with each of the ten CEOs of Gambling Boards. Hence, it was impossible to take a national perspective. SABA submitted that the Council should be disbanded. The proposal to not require a quorum would mean that it would simply make the Council even more dysfunctional. It was inherently incorrect that the Council should be permitted to make decisions with only a couple of members present.

Discussion

Mr Macpherson asked where decisions would be made if the council were disbanded, He believed that if decisions were taken without a quorum, members would start attending because a binding decision would be taken without their presence.

Mr Coleman responded that that might deal with the delinquency of certain members. He had a proposition: why could the National Gambling Board, as a properly established board, not report directly to the Portfolio Committee on Trade and Industry, with a primary focus on establishing national norms and standards in an accountable way? The National Gambling Act did not provide for probity of board members. It spoke to an expectation of standards of behaviour of the members but was deficient in having members of the board go through a rigorous probity process in the establishment of the board. SABA would be prepared to submit a document containing proposals of those norms and standards that the board, or any structure in that position, could address, especially to hold the Council to norms and standards. If the National Gambling Board were accountable to the Portfolio Committee, it could hold the Council and the PLAs to account. Access to databases would allow the NGB to monitor the industry and hold everyone to account.

The Acting Chairperson welcomed the KwaZulu-Natal Gaming and Betting Board (KZNGBB) and requested the presenters to focus specifically on the two items of the National Gambling Regulator and the issue of the quorum.

KwaZulu-Natal Gaming and Betting Board (KZNGBB)

Ms Portia Baloyi, CEO, KZNGBB, was accompanied by the Head of Governance, Risk and Compliance, Jane Stretch, and the Chief Legal Advisor at KZNGBB, Mfanelo Ngwenya.

Ms Baloyi stated that the KZNGBB was concerned about areas of concurrent jurisdiction where clauses challenged the power and authority of the provincial authorities. Although KZNGBB had not been given the opportunity to address some of the things that were in the presentation, it had made a written submission to the DTI. She was concerned about the challenges to the provincial authorities which were in conflict with Schedule 4 of the Constitution. The provincial boards had been given the authority to licence by the Constitution and their own statutes but the amendment suggested putting the provincial licensing process within the national licensing process. It could even require the provincial gambling boards to re-apply to the NGB for a licence.

Ms Baloyi stated that, at the council, the quorum was often not met but if an MEC could not attend for two meetings for very valid reasons, something could be passed without giving him an opportunity to engage. If it was a form of dispute mechanism, what were the powers of the mechanism?  What was the concurrent competence under Schedule 4 of the Constitution? What was the appeal mechanism for a decision made at an inquorate meeting? Allowing a decision to be passed by three votes would also mean that issues that went to the Council would not be properly ventilated.

There were no questions from the Members.

Closing Remarks

The Acting Chairperson thanked everyone for attending the first day of the public hearings.

The meeting was adjourned.