National Gambling Board 2020/21 Quarter 4 performance

Meeting report

Opening remarks
The Chairperson welcomed the National Gambling Board and Ms Nontombi Matomela, Acting Chief Operations Officer (COO) at the Department of Trade, Industry and Competition (dtic), asking Ms Matomela to introduce the National Gambling Board (NGB).

In terms of Rule 158, the Secretary informed the Committee of a decision taken by the Chairperson outside of the meeting. Minister Patel, Minister of Trade, Industry and Competition, had requested an extension of the time to consider the remitted Bill. The Chairperson had, consequently, cancelled the meeting of 31 August 2021 and amended the agenda for 1 September 2021.

The Chairperson added that he had consulted the parties represented in the Committee.

Presentation by the National Gambling Board (NGB)
Ms Caroline Kongwa, Administrator, NGB, informed the Committee that there had been a decline in gambling during 2020/21 due to Covid-19 and the lockdowns. However, the situation had improved in the Fourth Quarter 2020/21. The NGB achieved its sixth consecutive clean audit in FY2020/2021. It was the sixth successive clean audit in seven years for the NGB while under Administration. 92% of the NGB’s budget had been spent during the financial year, whilst generating a surplus of R1.3 million. No fruitless, wasteful or irregular expenditure had been incurred during the FY2020/2021 and internal controls continued to operate effectively throughout the financial year.  Payments to eligible creditors were made within 30 days. Of an expected budget of R183 million, NGB had spent R180 million. The financial position of the NGB reflected a positive bank balance of R49.9 million, which included confiscated unlawful gambling winnings amounting to R5.6 million as well as retained earnings from previous financial periods.

An economic analysis had been conducted in an attempt to monitor the industry and, over time, the NGB had noted a dominance of large player casino operators, especially in respect of the bingo sector, although there was no evidence of abuse of positions of dominance. However, it did hinder entry for SMMEs and transformation of the industry as required by the Broad-Based Black Economic Empowerment legislation. Section 53 of the National Gambling Act (NGA) allowed the Board to use licensing as a tool for economic development that fostered black economic empowerment from the inception of the licensing process and the matter was under consideration. The NGB was looking into that as a way forward.

(See Presentation)

Discussion
Mr W Thring (ACDP) stated that the ACDP opposed all forms of gambling because of the impact that gambling had on the community, but the ACDP did recognise that the NGB had a social responsibility to up its game in addressing the social ills caused by gambling, particularly by those who suffered from obsessive compulsive gambling. There were many such people in the communities and homes were broken by individuals who had that compulsion to gamble. The ACDP would like to see a greater commitment to assisting those in need of help as a result of a gambling addiction.

Mr S Mbuyane (ANC) appreciated the clean audits. For the past few years, the NGB had been managed by an Administrator while waiting for legislative certainty. He asked about the National Gambling Bill that was in the NCOP but could not get sufficient support from the provinces as provinces had differing gambling laws passed at provincial level. What was the intention in respect of the Bill? To what extent was there a misalignment of provinces in terms of the provincial laws, especially as the Gambling Council did not meet because it did not quorate when it met? Online gambling was illegal and it seemed that most illegal gambling currently taking place was online. Did the NGB have sufficient teeth to deal with the matter of illegal gambling? As it was the responsibility of the NGB to monitor laws in the provinces, was the NGB intending to intervene in the provinces where there was illegal gambling?

The Chairperson posed some of the questions raised by the Committee Research team. What had been the impact of reduced activity in the gambling industry on jobs during the Covid-19 pandemic? What had been the reason for the overspend of R748 572 in administrative expenditure? Where had the R137.3 million ‘Other Income’ come from? A moratorium had been placed on the filling of the CEO position pending the establishment of the National Gambling Regulator. What other areas of the NGB operations were affected by the delay? The NGB had conducted a capacity-building workshop with the National Credit Regulator in the fourth quarter. How would that improve the functioning of the NGB or the industry? Had there been an increase in online gambling during the lockdown? What had been the impact of the lockdown on illegal gambling in the country?

Mr M Cuthbert (DA) asked about monitoring the compliance of internet cafes. He understood that many were actually venues for online gambling but they were not necessarily licensed and did not fall within the legal prescripts. What was the NGB doing to find out where those illegal environments were and to ensure they were dealt with by law and order as the establishments were actually highly illegal. What was being done to ensure that if there were gambling, it was done in a legal manner and contributed to economic revenue?

Mr Z Burns-Ncamashe (ANC) noted the awareness programmes conducted with partners before lockdown, but he was aware of the consequences of people who became addicted to gambling. Often that resulted in the disintegration of families and communities. Did the NGB conduct awareness programmes in specific wards in rural communities in rural provinces? He noted that, in towns, community members were expected to pay money to have access to information but access to information had to be free, as per the Constitution. The state and its organs had to ensure that citizens had access to information. Had the NGB given free information about gambling addiction and if not, were there any plans to do so?

Mr D Macpherson (DA) was aware that Ms Kongwa had commenced the job six years previously, probably assuming that it would last only six months, and she was still there. He noted the dereliction of executive duty as far as the NGB was concerned. That stemmed from the ‘feeble and pathetic’ attempt by the dtic to introduce a piece of legislation in the previous Parliament that he had warned would only lead to the inability to constitute a proper board, as was indeed the case.

He said that the Committee needed to put together a functioning NGB as the dtic was unable to do so. The dtic had been trying to take away powers from the provinces. He had warned the dtic that the provinces would kill the Bill. He welcomed the fact that the NCOP had effectively put the kibosh on the Bill. It was the first time that the NCOP had ever done so and the dtic still had egg on its face.

Mr Macpherson asked Ms Kongwa where the criminal charges were that had been laid against the previous board for wholesale theft, looting and corruption. The former Minister, Rob Davies, had refused to give updates on the case or even the names of those who had been criminally charged. Where were the case numbers and how far was the matter?

In respect of the NGB’s ability to combat illegal gambling, he asked how much money had been confiscated, how many arrests had been made and how many successful prosecutions there had been for  illegal online gambling. He knew that the answer was either none at all or very little. To continue to ban online gambling was crazy and it simply meant that profits were being made offshore. SA was losing out on taxes while SA punters continued to gamble overseas. Even provinces agreed that online gambling should be made legal.

Ms Kongwa responded to the questions but indicated that she required further details to answer certain questions and would respond to those in writing.

She agreed that there were various models to address irresponsible gambling and the NGB had looked into those models. In other jurisdictions, such as Canada, government ran programmes and registered compulsive gamblers as having an illness. In SA, a non-profit organisation managed that aspect of the industry. It was funded by 0.01% of gross gambling revenue from licensees; the contribution to the non-profit organisation was a condition of the gambling licence. The provincial gambling board sat on the board of the organisation and every mode of gambling had a representative on that board. The organisation offered specific support programmes and dealt particularly with obsessive compulsive gambling. There was, however, more that government could do. One of the draft Bills had proposed that the NGB took on that responsibility so that it could do more. The NGB should manage the balance between revenue generation and the negative impact that caused social ills.

Ms Kongwa assured Mr Mbuyane that it would be possible to undertake a research project looking into the alignment of gambling laws between provinces and the NGB. There had been various amendments to provincial legislation but it was the mandate of the NGB to keep the Gambling Policy Council informed of legislative changes to ensure that provincial legislation was aligned with government’s national transformation agenda. The Policy Council existed to align proposed changes in national or provincial policy or legislation. NGB could embark on a project to inform the Council how alignment should be managed.

She explained that the NGB monitored the provincial boards but it was the responsibility of the provincial gambling boards to manage illegal gambling. NGB had established inter-governmental fora and set up meetings with NatJoints (a security structure comprised of the police, the army and intelligence). The NGB team had started working on forums with provincial commissioners and was ensuring that legislation was intentional on what a gambling offence was. Arrests were the responsibility of SAPS and prosecution was responsibility of the National Prosecution Authority (NPA). The NGB worked closely with both organisations. She did not have the actual figures regarding arrests and successful prosecutions but would supply details in writing. Provinces provided information on efforts made and workshops on illegal gambling were held collaboration with an NGO.

Responding to the question of whether the NGB had sufficient mandate to tackle online gambling, Ms Kongwa stated that the matter was addressed in the draft Gambling Bill. It was proposed there that the NGB have the same authority as provincial boards so that instead of its current monitoring mandate, the NGB could be intentional. Intervention in illegal gambling had been indirect because the NGB did not have the mandate, but the NGB was involved.

Ms Kongwa informed Mr Cuthbert that, over the years, the NGB had monitored internet cafés and had held meetings with the Film and Publication Board that registered internet cafes but law enforcement had discovered that some were not really internet cafes. However, the server was not held at the café and so there was no evidence of illegal gambling. NGB had had discussions with the Department of Communications. Legislation was needed to deal with such illegal gambling but they were considering taking a health and safety approach to curb internet traffic and the dtic needed to consider the possibility.

In respect of the impact of information awareness, she admitted to Mr Burns-Ncamashe that the NGB had not worked with traditional leaders in the past as it had not been a particular focus and the Board would have to plan specifically for such meetings in the future. She could, however, provide information on the specific areas where the roadshows had been conducted.

Ms Kongwa said she would respond to Mr Macpherson about criminal charges dating back to 2014 in writing. Charges had been laid against a former official of the NGB who had destroyed documents while certain equipment had gone missing at the time. It was a sensitive matter, so she wanted to provide accurate information. In 2014, she was appointed as the Administrator, pending the establishment of the National Gambling Regulator. The NGB would be guided by the Minister in respect of such a change but, in the interim, the NGB had not been impacted. It was seven years that day since the NGB had been put under administration and a moratorium put on the CEO position, but the NGB had not been affected because the authority vested in her as the Administrator had been sufficient to ensure that the NGB was functional.

She explained that the capacity-building workshop with the National Credit Regulator (NCR) was a result of research in which it was found, e.g. in the Eastern Cape, that individuals borrowed money or used social grants to gamble. It was an intervention to deal with the monetary aspect of gambling and debt management. She would have to provide further details in writing.

Ms Kongwa added that she would need to revert in writing with details on the increase in online gambling.

Ms Yvonne Gwenhure, Economic Researcher, NGB, provided information on the impact of the pandemic on jobs in the industry, which as a leisure industry had suffered under the lockdown. Curfew times and social distancing had had a real impact on the operability of the industry even after the hard lockdown was lifted. Statistics showed a decline in employment between the pre-Covid financial year and 2020/21. The casino industry had shed 4 000 jobs in past financial year.

Ms Kaveshka Mackerduth, CFO, NGB, addressed the concern about the under-expenditure of R748 000 relating to lease expenditure. In terms of GRAP (Generally Recognised Accounting Practice) standard requirements, it was an accounting entry and not an actual expenditure. It was straight-lining of the lease. The principle behind the straight-lining of the lease was that the actual lease payments varied over the ten year lease period owing to annual increases, but the standard required an indication of what the lease cost would be if evenly spread over the ten-year period of the lease. That value was compared to the actual cost in a year and that gave one the annual lease cost. Normally the straight-line would show over-expenditure on the lease at the beginning of the lease period and under-expenditure towards the end of the lease term because of the escalation in the course of the lease period. GRAP then required one to make a journal entry and that was the R700 000 that the Committee saw as lease expenditure.

She referred to the under-collection of R40 million income which was for Limited Pay-out Machine (LPM) revenue. That revenue could not be finalised at the end of the fourth quarter. It was only finalised in April and May of the new financial year, so the variance between budgeted and actual had been reduced by the date of the submission of the 2020/21 annual financial statement when the full revenue had been realised. The final under-collection from the LPM industry was only R2 million, but it had to be remembered that the original budgeted amount was only an estimation of the LPM revenue.

Ms Bawinile Ngcocbo, Senior Inspector for Enforcement, NGB, expanded on the CEO’s response to the questions on illegal gambling. Illegal gambling was being reported to law enforcement but it had been discovered that it was a challenge for law enforcement as many officers simply did not understand the gambling environment. The NGB had approached NatJoints for a priority committee to address illegal gambling. That committee had been set up in 2018. It was co-chaired by the NGB and the SA Police Service (SAPS). That had led to the establishment of provincial structures consisting of law enforcement agencies involved in addressing illegal gambling. It was not a common space and very complex for many. The committees included the National Prosecuting Authority (NPA) and various branches of SAPS including the detectives division, visible policing and the Hawks. Cases of illegal gambling were investigated but when the cases went to court, there were challenges in terms of technicalities so NatJoints set up alternate operating procedures for prosecuting illegal gambling.

Ms Ngcocbo stated that they had achieved a number of successes in convicting internet cases but she admitted that many cases were withdrawn and so there was now training of personnel in the provinces. A major problem was that during raids on internet cafes, the server was often switched off and then it was impossible to provide evidence of the illegal gambling that had taken place. They now had specific operating procedures to prevent that happening. She added that the Asset Forfeiture Unit had also had success in confiscating property in the internet gambling cases but she would provide statistics in writing.

Ms Matomela concurred with the response by the Administrator regarding the CEO: the intention had been to make an appropriate appointment once the draft Gambling Bill had been gazetted. She agreed that the NGB had been under administration since 2014 but assured the Committee that it was never the intention of the dtic to allow the administration to run for so long; the intention had been to allow for the Bill to proceed and then for the changes to be made as per the legislation. The dtic was currently waiting for the legislative process to unfold.

Mr Macpherson was disappointed with Ms Kongwa that the information around prosecutions and anything to do with online gaming was not available and would have to be given later in writing. There had never been a time when the Committee had not wanted to drill down into illegal online gaming. He had expected that the Administrator would come prepared with that information and she should, in any event, have the information at her fingertips. The NGB and the dtic had previously said that there was no need to license online gambling as they had extraordinary monitoring tools at their fingertips and were able to deal with illegal online gambling as and when it happened. If that were the case, they would have all the information at their fingertips. Likewise, the NGB should have the information regarding and progress of the prosecution of those who had gutted the NGB at its fingertips. As long as he had known Ms Kongwa, he had asked the same questions and he hoped that one day he would receive the answers. The fact that the officials had to go and find the information said to him that the NGB had no capacity to manage online gambling. He was concerned about that.

He took issue with the NGB’s belief that it needed to centralise enforcement of licensing and taxation. The NGB had still not realised that such a proposition would never pass through the NCOP as the provinces would never ever give up their exclusive rights to enforce and tax gambling. He was surprised that the NGB still saw that as the way forward. It was not the long arm of the law. The NGB should be drawing up progressive policies around gambling and looking at creating frameworks to create certainty for investments and looking to protect consumers through legislation and regulation. The NGB’s view was misguided. It was a tragedy that the NGB had reduced the Committee oversight meeting session to questions and answers in writing.

Mr Mbuyane welcomed the proposal to provide some answers in writing but he was concerned about the lack of involvement of the dtic. It was not acceptable to the Committee that the NGB had been under an administrator for seven years. He was concerned about the misalignment of the NGB and asked what could be done while awaiting the legislation that was before the NCOP. What was happening about the bookmakers who were taking advantage of the national lottery? Only three provinces were urban in nature and most were rural. If the NGB had not worked through the traditional leaders, then most people in SA had not received information about the challenges around gambling. He recommended that the NGB went to the rural provinces to spread awareness. He also recommended that the NGB ensure that the non-profit organisations were adequately funded to deal with the scourge of gambling practices that were causing social ills.

The Chairperson stated that having the information at the fingertips was important but he agreed that the information had to be verified before presenting it to the Committee, so he was happy that that the Administrator provided details in writing. He noted the concerns of Members.

Ms Matomela noted the comments.

Ms Kongwa noted and appreciated the guidance and advice regarding education and awareness and the need to adopt a more impactful approach in promoting awareness and education to address social ills. As well as noting the comments on law enforcement, the NGB would do more where there was room to do so. She noted Mr Macpherson’s advice regarding policies, the protection of consumers and the protection of investments in the industry. As a dtic entity, those were good areas for the NGB to work on. The input would be considered in the course of the NGB’s upcoming annual strategic and performance planning sessions for the following year. It was quite opportune that the NGB was currently engaging in that process. She would respond on specific issues, particularly the criminal case, although she was trying to be sensitive regarding personal information in that regard.

Minutes
The minutes of 11, 12, 17, 18 & 20 August 2021 were read and adopted unanimously without amendments or objections.

Committee Programme
The Chairperson stated that the Minister had requested additional time to submit the dtic responses on the remitted Bills and Parliament was awaiting the results of the court application regarding the local government elections before finalising its programme for the quarter. That had resulted in changes to the Committee Programme.

The Secretary presented the revised programme for the Committee, which was adopted by the Committee. He stressed that the parliamentary programme was not final and any changes could result in further changes to the Committee programme.

Committee Programme:
7 September – Briefing by the National Consumer Tribunal on its fourth quarter financial performance and non-financial performance for the 2020/21 financial year;
Briefing by the National Consumer Regulator on its fourth quarter financial performance and non-financial performance for the 2020/21 financial year;
Consideration of the first draft of the report on the fourth quarter financial performance and non-financial performance of the dtic.

8 September - Briefing by the National Metrology Institute of South Africa (NMISA) on its fourth quarter financial performance and non-financial performance for the 2020/21 financial year;
Briefing by the South African National Accreditation System (SANAS) on its fourth quarter financial performance and non-financial performance for the 2020/21 financial year.

14 September – Briefing by the Companies Tribunal on its fourth quarter financial performance and non-financial performance for the 2020/21 financial year;
Formal consideration of the first draft of the report on the fourth quarter financial performance and non-financial performance of the dtic.

15 September - Briefing by the dtic and the BBBEE Commission on its equity equivalent programme/scheme and on the BBBEE activities over the past financial year.

21 September -  Briefing on the Master Plan for the Steel and Metal Fabrication Sector.

22 September – Briefing by dtic on Trade Policy or an update on Trade Negotiations.

28 September – Briefing by the National Consumer Tribunal and the Competition Tribunal on outcomes of matters considered by the Tribunal;
Consideration of the first draft of the Budget Review and Recommendations Reports (BRRR). Consideration of minutes. Consideration of Committee’s fourth quarter programme.

30 September – Formal consideration of the Budget Review and Recommendations Reports (BRRR).

1 October – Response from the dtic and Adv Charmaine van der Merwe, OCLS, on the submissions received on the Copyright Amendment Bill (CAB) and the Performers’ Protection Amendment Bill (PPAB).

5 October – Briefing by the Office of the Auditor-General on audit outcomes as it relates to the dtic and its entities;
Briefing by dtic on its  2020/21 Annual Report for Financial and Non-Financial Performance and  first Quarter Financial and Non-Financial Performance for 2021/22.

6 October - Deliberations on submissions received regarding the CAB and PPAB.

8 October - Deliberations on submissions received regarding the CAB and PPAB.

12 October - Deliberations on submissions received regarding the CAB and PPAB.

13 October - Deliberations on submissions received regarding the CAB and PPAB;
Consideration of the first draft of the Budget Review & Recommendations (BRR) Report.

15 October – Consideration of the first draft of the Budget Review & Recommendations (BRR) Report.

Constituency period: 15 October 2021 to 1 November 2021.

Concluding remarks
The next meeting would be held on 7 September at 9:00. The National Consumer Tribunal and the National Consumer Regulator would each present its fourth quarter financial performance and non-financial performance for the 2020/21 financial year and, consideration of the first draft of the report on the fourth quarter financial performance and non-financial performance of the dtic.

The Chairperson thanked Members for their attendance.

The meeting was adjourned.