Gambling Board, Lotteries Board, Micro Finance Regulatory Council; Commission for International Trade & Administration: annual r

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
15 May 2002
GAMBLING BOARD, LOTTERIES BOARD, MICRO FINANCE REGULATORY COUNCIL; COMMISSION FOR INTERNATIONAL TRADE & ADMINISTRATION: ANNUAL REPORT

Chair: Dr R.H Davies (ANC)

Documents Handed Out:
 

Micro Finance Regulatory Council presentation
National Gambling Board presentation
National Lotteries Board presentation
Commission on International Trade and Administration presentation

SUMMARY
These five bodies were invited to report on their progress and challenges over the past year: The National Gambling Board presentation provided an overview of its services, important policy underlying gambling in South Africa, the demystification of gambling and a snapshot of gambling in the country. Amongst the challenges facing the Board are creating a predictable and credible investment climate as well as continually looking at how to maximize the benefits and minimize the costs of gambling.

The National Lotteries Board presentation reflected on relationships that they have with Uthingo, the Lotto operator as well as the Central Application office. They also touched on the National Lotteries Act, which ensures the establishment of the board amongst other things. Challenges for include the decline in personal disposable incomes, rapid growth of the cellular phone industry and interest on micro-loans.

The Micro Finance Regulatory Council spoke on its mandate, its powers and philosophy; operational stock take, bank card & pin, crises or shake-out and strategic challenges which include amongst others micro-enterprise and housing finance, innovation in SMME & housing finance.

The Commission on International Trade and Administration (CITA), currently known as the Board on Trade & Tariffs (BTT) provided an overview of their formation and role within the Southern African Customs Union as well as strategic thrust, the offerings and why CITA has been established to replace BTT.

MINUTES
National Gambling Board presentation
The CEO of the Board, Mr Sfiso Buthelezi, highlighted the services and products provided by regulation. These include keeping gambling crime-free and the protection of the vulnerable and children as well as adding on infrastructural developments through the licensing process. BEE (Black Economic Empowerment) compliance is also a central part of their strategy. He went on to talk about important policy underlying gambling in the country. This includes the concurrent functioning of national and provincial administrations, the effective regulation of the industry and the promotion of responsible gambling which he noted is an area being tackled not only by South Africa, but globally as well.

In speaking on the demystification of gambling, he pointed out that smoking, alcohol and gambling have a bad perception and that the morality argument is always going to be raised. The challenge for governments is therefore to find an optimal balance. Gambling, globalisation and technological advancement should go hand in hand. Mr Buthelezi talked about prohibition versus regulation and noted that prohibition is not an option because it had failed dismally prior 1994 with about 150 000 illegal machines in existence. Prohibition is difficult to enforce and does not protect the public against gambling. Lastly, it offers no infrastructural development as does regulation. Prohibition leads to bad practices including money laundering and drug trafficking.

Mr Buthelezi provided a snapshot of gambling in the country: 28 operational casinos and 3 additional licences have been awarded, 2 major horseracing companies: Gold Circle Racing Company and Phumelela Gaming.

Looking at gambling's score card, he noted that on the balance sheet, there is R12 billion in new investments, 50 000 direct and indirect jobs have been created and 43% of equity is held by BEE in casino companies.

Turning to the cost of gambling, he pointed out that a national study released in November 2001 revealed that:
- less than 10% of South Africans gamble at casinos,
- 52% of those with no education don't gamble at all,
- 57.7% did not want gambling to be banned whilst 20.4% favoured it's banning.
The Board's response has been to form the South African Advisory Council on Responsible Gambling. The Chair of the National Responsible Gambling Trust, Dr Vincent Maphai, who is an independent, has been confirmed.

He then analysed South African spending patterns since 1995 and finally looked at challenges. These include creating efficiency in the regulatory structures by simplifying it from the current 11 pieces of legislation and enhancing co-operative governance thus avoiding costly litigation between and amongst organs of state.

National Lotteries Board
Mr Sershan Naidoo, a senior official from the Board, outlined the structure of the national lottery and its operations which was established by the National Lotteries Act. Its functions are to advise the minister on the issuing of licences and on the percentages allocated to good causes as well as the protection of players amongst others.

Highlights to date include 165 millionaires have been created since the launch, the biggest jackpot winner won R24, 9 million, and each province has produced at least one millionaire. Attitudes towards the Lotto indicate that there is a very positive attitude toward playing it and many people separate it from conventional gambling.

Challenges to the industry were the decline in disposable income, the rapid growth of the cellular industry, an anti-gambling sentiment and micro-loans interest.

The National Lotteries Distribution Trust Fund (NLDTF) is administered by the board and contributions are made in such areas as welfare, sports and recreation, arts and culture. So far R439 million has been raised for this purpose. He provided a table giving the breakdown of the contributions.

He went on to talk about responsible gambling and noted that the Act provides that the interests of the player are protected. The licencee has to support the monitoring of the social impact of the lottery and the establishment of support structures for those with gambling difficulties. He pointed out that statistics from their study show that 67.7% of South Africans play the Lotto regularly as in once a week. There are about 5500 problem gamblers in the country. A National Lottery Responsible Gambling Committee has been set up to address the issue. The future of the lottery points to the establishment of more online products, sports pools, increased accessibility, more effective distribution and more responsible participation.

Discussion
Mr Lockey (ANC) asked the NGB about the Sun International Casino in Durban which is operating from a temporary place. Was this not a burden on the licensee to finish building quickly and to the tourism industry in general?

Mr Rasmeni (ANC) asked the NGB about if their achievements were in line with the national objectives? He asked the Lotteries Board how efficient the application office is in administering the applications.

Ms Ntuli (ANC) noted that job creation in the gambling industry was given as 50 000 direct and indirect jobs. She asked the NGB how many jobs are direct and how many indirect, what type of jobs are these and are they sustainable? On issue of BEE, what is the participation rate and where does it come from? She asked the NLB what sports had received contributions from the trust fund.

Dr Davies asked if anyone had done a comparative analysis of the effect of the R 11 billion spent on gambling on the country's GDP? He also raised concern about the marketing of the lottery as it made it seem easily winnable such that low-income earners seem to spend more money on the lottery whilst their plight does not improve.

Ms Mahomed (ANC) asked the NLB what educational programmes they have embarked on to educate the public about the lottery. She asked the NGB what criteria are used for awarding the licence for casinos as you find some of these in low-income areas like the Grand West in Cape Town whereas they are supposed to be in middle to high-income areas.

Mr Sfiso Buthelezi, the NGB CEO, pointed out that with respect to the Sugar Mill casino in Durban, that indeed they are using a temporary site. When they move into their premises depends on the provincial gambling board and the provincial government. The NGB can only advise but not dictate on these issues.

Regarding what achievements are there, he pointed out that these are highlighted in slide 12 of the presentation. Mr Rasmeni clarified by pointing out that specifically issues like infrastructural development and BEE are what he wants to know. Mr Buthelezi pointed out that he had alluded to the convention centre at the Cape Town Foreshore as an example of infrastructural development; BEE issues have been addressed herein by the 43% stake of BEE consortium in casino licences awarded.
On the issue of spending patterns, he noted that the board currently has contracted a study to determine these and they can only comment on the matter after the study has been completed.
Regarding educational programmes, the Chairperson of the Board, Mr Chris Vismer pointed out that these are in place and include rehabilitation programmes for those adversely affected/addicted to gambling.

Mr Naidoo, from the NLB, in response to the question of funding sports, said that the money mostly goes to the development of sports in the previously disadvantaged areas as well as catering for sports for the disabled. Regarding the application office, he pointed out that they are efficient and have been responsible for the awarding of the main lottery licence and various other smaller lotteries. On the question of educational programmes he referred to the responsible gambling programme as a centrepiece in this regard. Finally on the issue of low income overspending in the Lotto, he pointed out that this is indeed a problem which the programme on responsible gambling seeks to resolve.

Micro Finance Regulatory Council (MFRC)
The CEO, Mr Gabriel Davel, presented. See Powerpoint presentation.

Commission for International Trade and Administration (CITA)
The Chair of the Commission, Mr Tshidiso Montona, and Ms Nomonde Maimela, the deputy chair, presented. Mr Montona, in his overview of CITA, noted that this is a statutory body established by the CITA Act that will replace the Board on Trade and Tariffs (BTT). It will focus on sustainable economic development within the auspices of the Southern African Customs Union (SACU).

Ms Maimela noted that CITA is yet to be established and will become a reality after the relevant parliamentary process has been completed. The strategic thrust of CITA will be to promote and support sustainable growth in industry and agriculture as well as agro-processing. The Commission also seeks to focus on employment, investment, international competitiveness and exports. CITA's functions include the administration of customs tariffs such as tariff reductions and rebates, trade remedies, tariff based development programmes, rebate permits and certificates.

She pointed out that the sole purpose of the tariffs is to promote local businesses which are of a high international standard and are able to compete on the global stage. Trade remedies ensure that international trade occurs on a fair footing. She also reflected on the importance of CITA and noted that the institutional development of SACU demands that an institute such as CITA exists to improve efficiency and effectiveness.

Discussion
Mr Bruce (DP) asked the MFRC what their regulatory brief is and from where does it come. To what degree is the banking industry being undermined by the micro-lending market? To what degree can this be said to have contributed to the demise of Saambou?

The Chair asked CITA if the CITA Bill is on time to be finalised and whether this would enable the proposed meeting with the NEDLAC Trade and Industry Chamber in June?

Mr Rasmeni (ANC) asked CITA about the flooding of the market with counterfeit goods, would they say this is part of 'dumping' or have they come through the proper channels? He noted that this is the case with some medicines as well.

Ms Ntuli (ANC) asked MFRC about borrower education and debt counselling. How do they conduct this and where? She asked if the National Loans Register covers the rural areas as well? CITA was asked as to what their strategy is on job creation?

Mr Montona, CITA Chairperson, pointed out that the bill is still in the process of being finalised before it is taken through the whole parliamentary process. With regard to counterfeit goods, he pointed out that there is relevant legislation on intellectual property and medicines. There is a division within the DTI which works with the department of health to make sure that contraventions of the Montreal Agreement are dealt with accordingly.

On the question of employment creation, Ms Maimela pointed out that this is managed indirectly in the sense that anti-dumping legislation ensures that the dumping of inferior imports is stopped thereby protecting local industry from illegitimate competition.

Mr Peter Setou, Manager Education and Communications at the MFRC, noted that they deal with borrower education though various ventures such as newspapers adverts and call-in radio programmes which have been broadcast by most of the public radio broadcasters plus via public service announcements to educate people through national broadcasters such as ETV and SABC TV. Part of their strategy has also been to target employers so that they can become a support structure in the campaign on awareness about borrowing and debt.

Mr Davel pointed out that the National Loan Register is national and covers all areas in the country. Every micro lender has to be in there - however, since this is still new, it will take some time. He pointed out that their brief is reporting to the DTI and also a range of stakeholders such as the Financial Services Board and Micro Lenders Association.

Ms Ntuli (ANC) asked why micro-lenders only help people earning a salary. How do you help people who have ideas but have no guarantee and need the finance?

Mr Davel noted that one should not underestimate the fact that even salaried people have not been able to access loans in the past. He added that he would like to see a change in the requirements where next-of-kin could help those who are not working with their loan applications. He agreed that these loan agreements have finance sector requirements and that this needs to change in order to accommodate those without a regular income.

Meeting adjourned.