Western Cape Nineteenth Gambling and Racing Amendment Bill: consideration of submissions

Finance, Economic Opportunities and Tourism (WCPP)

11 September 2020
Chairperson: Ms D Baartman (DA)
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Meeting Summary

Video: Youtube

Western Cape Nineteenth Gambling and Racing Amendment Bill

The Western Cape Provincial Treasury briefed the Committee on the amendments to the Western Cape Nineteenth Gambling and Racing Amendment Bill [B1 – 2020] in a virtual meeting.

The Committee went through the Bill on a clause-by-clause basis.

The Western Cape Provincial Treasury indicated that there were certain fees prescribed that the Board could collect in order to be self-sufficient; these were the operator fee as well as the exclusivity fee. The exclusivity fees were based on the location of casinos across different municipal jurisdictions across the province. With the expiration of these fees, the Board became more reliant on transfers from Provincial Treasury. Having the fees payable directly to the Board will help defray the Board’s operational costs.

Provincial Treasury said the current amendments were not related to the rollout of gambling or gambling taxes, but rather ensuring that the Board’s activities related its regulatory activity.

Members wanted clarity on the impact of having the fees payable directly to the Board. How would this impact the province’s ability to control or decide how those funds are used?

Members asked if smaller role players in the industry had been considered when the amendments were proposed. They also wanted to know why all the amendments were not consolidated, instead of dealing 

The Western Cape Provincial Treasury briefed the Committee on the amendments to the Western Cape Nineteenth Gambling and Racing Amendment Bill [B1 – 2020] in a virtual meeting.

The Committee went through the Bill on a clause-by-clause basis.

The Western Cape Provincial Treasury indicated that there were certain fees prescribed that the Board could collect in order to be self-sufficient; these were the operator fee as well as the exclusivity fee. The exclusivity fees were based on the location of casinos across different municipal jurisdictions across the province. With the expiration of these fees, the Board became more reliant on transfers from Provincial Treasury. Having the fees payable directly to the Board will help defray the Board’s operational costs.

Provincial Treasury said the current amendments were not related to the rollout of gambling or gambling taxes, but rather ensuring that the Board’s activities related its regulatory activity.

Members wanted clarity on the impact of having the fees payable directly to the Board. How would this impact the province’s ability to control or decide how those funds are used?

Members asked if smaller role players in the industry had been considered when the amendments were proposed. They also wanted to know why all the amendments were not consolidated, instead of dealing 

Meeting report

Deliberations on the written and oral submissions received on the Western Cape Nineteenth Gambling and Racing Amendment Bill [B1 – 2020]

The Chairperson opened the virtual meeting, welcoming everyone. She asked if the Committee Members had any questions, for the Department, on the Bill.

Mr A van der Westhuizen (DA) requested that the Chairperson lead the discussion.

The Chairperson recommended that the Committee should either go through the Bill clause-by-clause or go through the submissions document.

Mr van der Westhuizen recommended going through the Bill clause-by-clause and then going through the submission document.

Clause one

Mr van der Westhuizen said that the motivation for this clause is to ensure the Board is self-funding, as the current Board is heavily subsidised by the Provincial Treasury. He asked how the paying of the fees directly to the Board would help the Board.

The Chairperson asked if the fees payable to the Board will be ring-fenced. Would the entire amount be ring-fenced or only a portion thereof? Where would the rest of the money go if not ring-fenced?

Mr Anthony Phillips, Acting Deputy Director-General: Fiscal and Economic Services, Western Cape Provincial Treasury, indicated that there were certain fees prescribed that the Board could collect in order to be self-sufficient; these were the operator fee as well as the exclusivity fee. The exclusivity fees were based on the location of casinos across different municipal jurisdictions across the province. With the expiration of these fees, the Board became more reliant on transfers from Provincial Treasury. Having the fees payable directly to the Board will help defray the Board’s operational costs.

The Chairperson wanted to know about the expired fees. Are the fees in the Bill there to ensure that the expired fees are paid? Who decides how the money will be spent since there is a ‘changing of the accounts’ to which the fees are payable?

Mr van der Westhuizen repeated his question, wanting clarity on how paying the fees to the Board will make it more self-sufficient.

Ms Claire Horton, Economist, Western Cape Provincial Treasury, responded that it is an abnormality that the Board does not retain the fees. The intention of the clause is to ensure the Board is able to retain those fees in addition to the fees it already collects. Currently, the Board would collect the fees and hand them over to Provincial Treasury. Provincial Treasury would then transfer funds to back to the Board. The clause eliminates the need for the fees to flow via Provincial Treasury.

With regards to who controls how the monies are spent, she said that this is still approved by the responsible Minister.

Mr van der Westhuizen still wanted clarity on the advantage of paying the fees directly to the Board. Does this give the Board an advantage? Would this increase the Province’s income from gambling?

Ms Horton said the proposed amendments have nothing to do with taxes and the rollout of gambling. The intention is fund the Board’s activities with regard to its regulatory activity.

Clause two

The Chairperson wanted to know if this was a previous expired fee that is being brought back.

Mr Phillips clarified that the current legislation does not properly define the Casino Operator Fee, hence the insertion of this clause.

Clause three

Mr van der Westhuizen asked if it was best practice to include fees in legislation. He said that he asked this because other province would put the figures in regulations instead of the main legislation. The main concern was that money has a time value and there is always the risk of inflation.

He also asked about the rate applicable in respect of debts owed to the state. He reckoned that the rate was very high. How does is relate to the turnover or profits of the Gambling Operators? He also requested a breakdown how the exact figures were arrived at. He also wanted to know the rationale behind limiting the number of machines instead of a tariff per machine.

Ms N Nkondlo (ANC) asked if the Department can provide a context of the viability of the costs, especially taking in to account the current economic climate.

The Chairperson asked how the ranges of fees were decided on. She also wanted to know what happens when a licensee is unable to pay the fees due to the impact of COVID-19.

Mr Phillips responded that one of the biggest cost drivers for the Board it its personnel, and the cost has grown at a rate higher than the consumer price index. He said that the Minister of Finance publishes the cost of debt owed to the state, which includes a more realistic figure with regards to what the figure should be. The Province had been granted 3 000 LPM machines. The two operators that will be rolling out these machines are Tsogo Sun and Sun International, with 1 500 machines each.

Ms Horton responded that a review of the Act will consider bringing of figures in regulations instead of the Act. She said the Act does include an automatic inflationary adjustment in terms of debts owed to the state. She also said Gross Gambling Revenue for the Western Cape was much higher than the national average, indicating higher activity on LPM machines, and that operators are able to pay higher fees.

Mr van der Westhuizen asked why the Western Cape would charge more fees if there is more activity on the LPM machines. He wanted to know why the province did not follow Gauteng’s example when it came to tariffs. Has the Western Cape done an impact study?

Ms Nkondlo asked if the values used in calculating the fees and costings were justifiable, especially in a recovering economy.

The Chairperson asked who assigns the 3 000 machines. Who are the operators? Where can one find this information? She also wanted to know how an individual with a few machines would be charged. Would it be on the low or high end of the range?

Mr Phillips explained that the amount of machines and licenses for casinos is determined nationally. However, the exact number of 3 000 for the province was decided by the Provincial Legislature. He said there are five licenses for casinos across the province.

Ms Horton also responded that the Western Cape has similar regulations to Gauteng. However, the Gauteng Board is fully funded with a budget of about R190 million. She also said that an eight percent levy is imposed on all gambling taxes collected. The Western Cape has a different stance; all gambling taxes are spent on social and economic expenditure for the province.

She said that an individual operator would not have to pay the fee as this would be paid by the root operators.

Mr van der Westhuizen wanted to know to what extent small players were being encouraged to participate in the sector. He said that he feared that the amendments might be in danger of being found unconstitutional.

Mr Phillips responded that the decision to allow and not allow other role-players rests with the two license-holders.

Part B: Clause three

Mr van der Westhuizen asked why the figures were linked to a monetary value of the casino development instead of floor space, for example. He also asked the Department to explain why revenue or turnover is not used to determine fees.

Mr Phillips responded that the figures were based cost of developing the biggest casino at the time.

Ms Horton said that the current method of determining fees ensures more certainty, as opposed to basing a fee structure on Gross Gambling Revenue (GGR).

The Chairperson sought clarity on whether these amendments would have the net effect of having the Caledon Casino paying the same amount as Grand West Casino, in fees? She said that she based her question on an appeal on how GGR is calculated, that is currently pending.

She wanted to know if the Province would still be able to use gambling taxes on social programmes or if it will no longer exist as a result of this clause.

The Chairperson also wanted to know if the Board was too big or if it had to become big in order to carry out its functions.

Ms Horton said that Caledon Casino would not be paying the same as Grand West Casino. Figures have been provided to show how the fees were calculated. She also said that the Board was not too big and it was also the most efficient in the country. With regards to the size of the Board, she said that the Board has no direct control on how big the establishment is, nor the compensation of employees.

Mr Phillips said the gambling taxes go into a Provincial Revenue Fund, and can then be redirected to social programmes.

Clause four

There were no comments on clause four.

Clause five

Mr van der Westhuizen asked why all the amendments were not being handled simultaneously instead of so many amendments.

Mr D Mitchell (DA) reiterated Mr van der Westhuizen’s view of consolidating the amendments in the future.

Ms Horton agreed with Members’ sentiments regarding the number of amendments. She said that additional amendments became necessary after publishing the 19th amendment. The extensive comments that were received necessitated a 20th and 21st amendment.

Deliberations on submissions and inputs received

The Chairperson asked whether totes and bookmakers were considered in the Bill.

Ms Horton said that they are considered but not at present.

Adv Romeo Maasdorp, Legal Advisor, Western Cape Provincial Parliament, said that Ms Horton’s response shows that the totes (totalisers) and bookmakers need to pay fees for being players in the industry. Excluding them is not convincing nor is it persuasive. He said that in his view it is not sound to legislate selectively. He said the Bill currently has arbitrariness about it.

Ms Miller, Legal Advisor, Department of the Premier, said it is not necessary for totes and bookmakers to be included as long as the Department can link the differentiation to purpose.

Ms Horton said that the LPM Operators and Casino Operators comprised the majority of the work of the Board and hence the need for the proportional share of the Board’s operating costs.

Adv Maasdorp said that the proportionality of the contribution of the big role players is not a sound basis for exclusion from the Bill.

The Chairperson proposed that Adv Maasdorp and Ms Miller each provide legal opinion regarding the inclusion and/or exclusion of totes and bookmakers from the Bill.

Adv Maasdorp requested a timeframe of when the legal opinion would be due.

The Chairperson recommended 01 October 2020.

The Committee unanimously resolved that the Department of the Premier as well as the Western Cape Provincial Parliament will submit legal opinions on the matter, and the Committee will deliberate on the legal opinions on 07 October 2020.

Mr van der Westhuizen wanted to know if the Department could provide the financial situation of the industry. He also requested a table or summary of fees collected over the last couple of years.

The Chairperson said the Board had requested that the quorum for a meeting be a majority of members appointed from time to time. She asked the Department if this was best practice/improvement.

Mr Phillips said that the legislature has recommended groups of three that will fill their posts until May 2021; the Board will be quorate. He said it seems the request predates the recommendation.

The Chairperson made a correction that it was groups of five, not three.

She then excused the officials from the meeting.

Committee Resolutions

Members wanted the rationale for some of the “cliffs” in the numbers related to the fees payable per machine.

Members also requested historic figures in terms of the various fees levied for the last ten years. They also requested Gross Gambling Revenue information.

Other Committee Business

Members considered their oversight visit week in November 2020.

The meeting was adjourned

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