WESTERN CAPE GAMBLING AND RACING BOARDComments on National Gambling Amendment Bill, B 31-2007

PRESENTATION TO

THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY

OF THE NATIONAL LEGISLATURE

on

THE NATIONAL GAMBLING AMENDMENT BILL

AT A PUBLIC HEARING HELD ONWEDNESDAY, 22 AUGUST 2007

WESTERN CAPE GAMBLING AND RACING BOARDComments on National Gambling Amendment Bill, B 31-2007

BACKGROUND:Western Cape Gambling and Racing Board established by the Western Cape Gambling and Racing Act, Act 4 of 1996.Board currently entering its eleventh year of active operation.The Board is responsible for the ongoing licensing and regulation of the casino, limited payout machine (“LPM”), totalisator and bookmaking industries in the province of the Western Cape.Extensive experience on an ongoing basis has brought about focused, effective regulation and legislative reform over the years.

POSITION ON THE PROPOSED REGULATION OF INTERACTIVE GAMBLING (“IG”):Regulation generally preferable to prohibition, PROVIDED THAT:

A proper, credible and constitutionally defensible legal framework has been created for the proposed industry;The material elements of the regulatory relationship between regulator and licensee are taken up with sufficient detail and clarity within that framework;The industry can be feasibly managed within the framework set for its operation, andAll other known pre-requisites for the operation of the proposed industry have been correctly identified, researched and developed, or are in the process of being finalised.

WESTERN CAPE GAMBLING AND RACING BOARDComments on National Gambling Amendment Bill, B 31-2007

RESPONSE TO MOTIVATION FOR BILL FURNISHED BY THE DTI:DTI STANCE #1: The introduction of the IG industry will be more effectively accomplished by amendment to the National Gambling Act than by way of a separate piece of legislation:

COMMENT:National Gambling Act (“the Act”) is predicated on an acceptance that the National Gambling Board (“NGB”) would not have a licensing functionTherefore there is currently no coherent licensing and regulatory regime in the ActA coherent licensing and regulatory regime provides a legal basis for all the primary powers and functions conferred on the regulator in respect of licensing and day-to-day regulation as stipulated by the elected legislatureNo such provisions have been put in place in the current Bill. Effectively all detail as to the manner in which the industry is to be regulated has been left in the hands of a single political functionary.Creates material conflicts, dichotomies and anomalies in Bill and thus in the Act itself.Separate legislation for a separate field (bearing in mind the sea change in the proposed mandate of the NGB) would be essential.Legal opinion procured by the dti takes the matter no further.

WESTERN CAPE GAMBLING AND RACING BOARDComments on National Gambling Amendment Bill, B 31-2007

DTI STANCE #2: Cost of prohibition is high:

COMMENT:No real enforcement costs incurred to date.The Bill contains a significant prohibition on the extent to which SA citizens may engage in IG – therefore enforcement costs should, on the dti rationale, be no less.

DTI STANCE #3: Share in the global IG industry revenue:

COMMENT:Global revenue will be available to be harnessed irrespective of whether the regulation of IG takes place on a national or provincial level.Accordingly, it is of material importance to determine whether IG would be more effectively regulated on a national or a provincial level.

DTI STANCE #4: Wide consultation on Bill, including with provincial Boards:

COMMENT:Degree of and timeframes set for consultation processes consistently inadequate.Extent of shortcomings in Bill comprehensively discussed with dti representatives and suggested that undue haste in its enactment would serve no purpose

WESTERN CAPE GAMBLING AND RACING BOARDComments on National Gambling Amendment Bill, B 31-2007

NATIONAL VERSUS PROVINCIAL REGULATION OF IG:Memorandum drawn up at instance of WCGRB in 1999 –attached as Annexure “A”All material aspects regarding preferred approach advocating provincial, rather than national, licensing and regulation remain unchanged, including:

Existing land-based casinos as preferred IG licenseesNot protectionism, but motivated by considerations of practicality and efficiencyExtent of investment by land-based (billions) vs. IG operators (unlikely to be significant)Extent of ongoing job creation by land-based vs. IG operatorsExtensive experience of provincial Boards in day-to-day regulation vs. none of NGBOverwhelming bulk of required legislation in place provincially vs. virtually none nationallyProbity a known factor in respect of existing licensees vs. completely unknown in respect of possible external or other applicantsExisting regulatory relationships between provincial Boards and land-based operators vs. none between NGB and prospective applicants.Land-based operators technologically adept and capable of setting up systems at short noticeInsignificant changes to national legislation – development of national standards onlyNGB can play significant role in ensuring uniform standards and their utilisation as it has always been intended toEquitable distribution of revenue to various provinces & negotiation of tax ratesOthers prepared to invest in this country on a comparable level would be welcome to apply

WESTERN CAPE GAMBLING AND RACING BOARDComments on National Gambling Amendment Bill, B 31-2007

SHORTCOMINGS OF BILL:Piecemeal treatment of subject matterNo coherent licensing and regulatory regimeMajor anomalies resulting from “copy and paste” approach to lawmaking include:

Inconsistencies in procedural requirements for issue of national licences by NGB and provincial Boards;Provision for licensing of employees by provincial Boards, notwithstanding licensing of the IG operators themselves by the NGB, andAn inherent recognition that centralised regulation by the NGB is doomed to failure in Clause 39 of the Bill (proposed insertion of section 86A) by the delegation of keys aspects of its regulatory functions by the NGB to provincial Boards (see also the explanation for this provision in paragraph 2.10 of the Explanatory Memorandum to the Bill to the effect that “concurrent legislative competence” exists in respect of “interactive gambling”):

Unacceptably wide powers conferred on single political functionary (Minister):

Minister’s power to make regulations (See sections 6A; 6B(1); 6B(2); 11A(1)(b); 11A(1)(c); 11A(1)(e); 11A(2); 14(12)(a)(i) & (b); 15(4)(a); 17(2), (3) & (4); 33(e); 37(3); 38(2A); 40(1)(b) & (c); 40(2) & 87)It should be noted that Parliament itself is not making the relevant laws for all material aspects of the regulation of IG – it will effectively be the Minister – deserved criticism for unconstitutionality (Henry VIII clauses)

WESTERN CAPE GAMBLING AND RACING BOARDComments on National Gambling Amendment Bill, B 31-2007

Unacceptably wide powers conferred on single political functionary (Minister) (Contd):

Proposed section 37A (Clause 23 of the Bill) is an example of a competent delegation of legislative power to an executive functionaryLegal opinion procured by dti takes the matter no further. Addresses the matter by way of a single paragraph, which does not pretend to deal with the Constitutional issues raised at all.

Poor or completely inaccurate drafting:Definitions of:

“interactive gambling equipment” – (superfluous use of the definite article in paragraphs (a) and (b) and lack of clarity as to the meaning of the terminology “result”);“interactive gambling software” – (conflict with definition of “gambling machine”)“interactive provider” – (the inserted words imply that the exception described is legal conduct, which might at a later stage be argued to found an expectation that persons providing such services will be licensed to operate);“registered player” – (meaning of “provisionally registered” is unclear and is not referred to elsewhere in the Bill);

Clause 3 (section 2) – (limitation of applicability of Act to “licensed activities” will emasculate its use for criminal enforcement purposes in the context of illegal operations);Clause 6 (section 4) – (unclear whether the provision is intended to be merely descriptive or permissive);Clause 8 (section 5A) – (remove the “the” in the chapeau to paragraph (b));Clause 9 (section 6A) - (subsection (4) should specify that the relevant claim is a ‘valid’ one)Clause 9 (section 6A) – (unclear as to who will determine whether a “diligent search” has been conducted)

WESTERN CAPE GAMBLING AND RACING BOARDComments on National Gambling Amendment Bill, B 31-2007

Poor or completely inaccurate drafting (Contd):– Clause 11 (section 11A) – (meaning of the proposed subsection (2)(b), to the extent

that it provides for the acceptance of “accounts” by an interactive provider, is unclear and imprecise);

– Clause 13 (section 13) – (subsection (1) – wording of “contrary to this Act” has already caused considerable interpretative problems in the context of the Act itself, as previously predicted and should be reviewed);

– Clause 18 (section 18A) – (paragraph (b) should give a clearer indication of what “adequate supervision” would entail, as currently the section is open to subjective interpretation);

– Clause 20 (section 33) – (subparagraph (a)(v) – wording completely incorrect – substitute “the” with “and”);

– Clause 20 (section 33) – (subparagraph (a)(h) - the reference to “section 43A” is completely inaccurate, as there is no such section. The correct reference should be to section 43(3) – it may be noted that this was communicated to dti representatives on 10 July 2007);

– Clause 31 (section 49) – (reference to “computer or computer software related crime” in the new paragraph (g) is vague and unclear and accordingly probably unenforceable without risk, as the result of its application is nothing less than disqualification to hold a licence);

– Clause 32 (section 50) – (paragraph (j) – as with section 49(g) immediately above), and– Clause 35 (section 57) – (the meaning of the proposed section (4) is unclear – what is

meant by “recording” a probity report?).

WESTERN CAPE GAMBLING AND RACING BOARDComments on National Gambling Amendment Bill, B 31-2007

Lack of comprehension of subject matter:Material conflicts between definitions of “gambling machine” and “interactive gambling software”;Clause 22 (section 37) – (subsection (3) - inappropriateness of providing for the power of the Minister to prescribe licence conditions – these should be imposed and enforced – as well as periodically reviewed and amended in necessary, by the regulator issuing the licence);Clause 22 (section 37) – (subsection (3)(a) – inappropriateness of providing for power of the Minister to prescribe licence conditions in respect of “technical specifications and standards”, which should be developed through co-ordinated initiatives between the regulator, the industry, licensed testing agents and the South African Bureau of Standards;Clause 27 (section 40) – (inappropriateness of requiring Minister to make regulations regarding the investigations to be conducted in relation to “probity, technical competence, industry competitiveness or any other prescribed matters” – investigations are extremely intrusive and thus set up conflicts between the exercise of constitutional rights such as that to privacy and the performance of the investigative functions set forth in the legislation. For this reason, such provisions should be contained in primary legislation and not delegated by Parliament to a single political functionary);Clause 28 (section 43(3)) – (because of the constitutional implications of the exercise by the regulator of the power to suspend or revoke a licence, the legislation should spell out the procedures to be followed when this drastic step is taken);Clause 30 (section 48) – (subsection (6)(a) – it is inconceivable that an interactive national licence might be issued “without conditions”);Clause 39 (section 86A) – (Proposed delegation of powers by NGB to provincial Boards – a prima facie indication that the legislation is ultimately unworkable and that the IG industry cannot be effectively be regulated on national level.

WESTERN CAPE GAMBLING AND RACING BOARDComments on National Gambling Amendment Bill, B 31-2007

• Haste in securing enactment of Bill• Inoperability of industry until the various (numerous) regulations are made• Future susceptibility to constitutional challenge• The fact that the industry will be a new one is no basis for an argument that

it should be nationally regulated – provincial Boards oversaw the development of the entire gambling industry from the inception of its legalisation.

• See previous comments as per Annexures “A”, “B”, “C” & “D” hereto.• In view of wealth of comment already provided by a number of different

bodies, it is questionable whether the National Parliament and the Portfolio Committee have themselves been provided with an adequate opportunity to evaluate the subject matter of the Bill to the extent required to ensure mature and informed deliberations on the passing of this crucial legislation.

• WCGRB committed to an outcome which secures the interests of the country and all its citizens, and enhances South Africa’s already hard-earned respected status as a credible jurisdiction, as well as recognising the interests of industry stakeholders.

WESTERN CAPE GAMBLING AND RACING BOARDComments on National Gambling Amendment Bill, B 31-2007

MANY THANKSfor

YOUR ATTENTION

Western Cape Gambling and Racing BoardSeafare House, 68 Orange Street, Gardens, CAPE TOWN

TEL: (021) 480-7400 – FAX: (021) 422-2603 – WEBSITE: www.wcgrb.co.za