1. The South African gambling
industry and its regulation
Presentation of the Portfolio
Committee on Trade and Industry
10 August 2011

2. Gambling Review Commission
Members
Mr. Clement Mannya
Dr. Stephen Louw
Prof. Sphiwe Nzimande
Ms. Adheera Bodasing
Ms. Astrid Ludin
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3. Gambling Review Commission
Terms of Reference
 A holistic review of the industry since 1996
 Assess social and economic impact of the industry, taking into account
 Who gambles
 Gambling addiction and problem gambling,
 Youth gambling,
 Effectiveness of measures to mitigate negative effects of gambling.
 Assess the proliferation of the gambling in South Africa, taking into
account
 Legal and illegal gambling activities;
 Technological developments;
 Viability of roll-outs of new activities (such as animal racing, person-to-person
betting, etc.);
 Expansion of already existing gambling activities.
 Determine whether regulatory bodies are effectively achieving legislative
objectives
 Benchmark with other jurisdictions on best-policy approaches
 Recommend policy positions
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4. Gambling Review Commission
The process
Activities Timeframes
Appointment of Commissioners and Ministerial
briefing
December 2009
Desktop research and site visits January – February 2010
Public hearings/engagements March – April 2010
Further research and report writing May – June 2010
Initial draft report 30 June 2010
International study trip July 2010
First complete draft of report 30 July 2010
Limited stakeholder engagement August 2010
Submission of final report September 2010
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5. Gambling Review Commission
The Approach
 Evaluated the evolution of the industry since 1996, its social impact, the
regulatory framework and possible new forms of gambling.
 Assessed evolution of industry and its regulation against objectives set out
by the Wiehahn Commission:
 The protection of society from the over-stimulation of latent gambling
through the limitation of gambling opportunities;
 The protection of players and integrity and fairness of the industry through
the strict control and supervision of the industry;
 The uniformity and harmonization of policy and legislation at all levels of
government and across provinces through minimum norms and standards and
co-operation and co-ordination;
 The generation of revenue and taxes for provincial government and for good
causes;
 The economic empowerment of the historically disadvantaged;
 The promotion of economic growth, development and employment
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6. Gambling Review Commission
Conceptual framework
Model Objective Promotion Product variety Payout
Revenue Maximise
government
revenues
Few restrictions Unlimited Low
Consumer Maximise consumer
welfare
Truth-in
advertising
restrictions
Unlimited High
Sumptuary Accommodate
existing demand
while discouraging
excessive
involvement
Informational
messages and
warnings
Limited Low
Other gambling
modes
Lottery
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Policy implied in Wiehahn Commission (and implemented subsequently) combined
different approaches for the lottery and for other gambling modes.

7. Findings
Gambling industry
Gambling is a mature, well
established industry.
Industry has doubled its turnover
between 2001 and 2009. This must
be seen in the context of the
industry coming off a low base in
1996.
 Industry offers direct
employment to 59,958 (86% comes
from the casino industry) and
through casinos has made
substantial infrastructural
investments.
Despite the maturity of the
industry, an entrenched illegal
component remains in place.
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8. Findings
Gambling industry
 Casinos and lottery are established,
popular forms of gambling.
 Lottery accounts for 12% of revenue
and 48% of taxes.
 Bingo, LPMs and Betting are struggling
(or have struggled).
 Betting and Bingo are sectors under
pressure internationally due to
competition from other forms of
gambling, esp. on-line. Requires
modernisation and complementary
forms of gambling revenues. RSA
therefore consistent with international
trend.
 Although LPMs are doing well
elsewhere. Particular constraints in the
SA market explored further
* Figure only includes transfers to funding for good causes;
Increases to R1,923 million if VAT is included, making total %
age 56% 8
Gambling
mode ‘09
% GGR
R’ mill
% Taxes
R’mill
Casinos 74% 13,501 41% 1,247
LPMs 4% 669 3% 77
Betting 9% 1,640 7% 200
Bingo 1% 127 1% 15
Total 88% 15,921 52% 1,539
Lottery 12% 2,208 48% 1,442*
Total 18,129 2,981

9. While there are limits imposed on
number of casinos, casinos are
growing in size, esp. with regard to
slot machines.
This must be contrasted to an LPM
rollout of 5,300 over 10-year period
and 1,200 EBT over 3-year period.
 Shows that LPM industry is under
pressure and is facing competition
from other slot machines.
EBT’s present unplanned and unfair
competition to both LPMs and casinos
– not subject to the rigorous
requirements for LPMs or casinos.
International experience shows
need for Bingo halls to have additional
revenue sources for viability, but place
strict limit on number of machines and
payouts that are permitted.
RSA still has relatively low no of slot
machines per population.
9
No of Casinos No of Tables
No of Slot
Machines
2004-5 2008-9 2004-5 2008-9 2004-5 2008-9
Eastern Cape 3 4 46 57 1,555 1,766
Free State 3 4 24 34 547 830
Gauteng 5 7 270 323 5.650 8,742
KwaZulu-Natal 5 5 119 124 3,077 3,303
Limpopo 2 2 18 22 397 524
Mpumalanga 3 3 39 44 1,071 1,137
North West 5 4 85 78 2.398 1,730
Northern Cape 1 2 9 15 212 398
Western Cape 4 5 90 103 2,574 3,776
Total 31 36 700 800 17,481 22,206
Findings
Gambling industry

10. Findings
Social Impact
 Gambling and income are correlated: the
lower the income, the less gambling takes
place.
 People on lower incomes tend to gamble
on lottery and scratch cards.
 Small segment of lowest income group
also frequent casinos – to be examined
further by casinos.
 More gambling occurs where more formal
gambling opportunities exist and incomes
are higher.
 Problem gambling appears to have
stabilised since 2005 at 4.8%.
 For low-income groups, it is mostly
associated with informal gambling – a
rising trend.
 Internationally, RSA problem gambling is
higher than European levels and around
the same as other middle-income
countries (Singapore, Hong Kong).
 While there are no immediate grounds for
concern about levels of problem
gambling, we cannot be complacent and
need to reinforce existing policy measures
and education, treatment and prevention.
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11. Findings
Social Impact
 No underage gambling crisis in South
Africa, but a troubling and possibly
growing trend.
 Of great concern are reports that some
youth in impoverished areas claim that
they gamble in order to buy basic
necessities and pay schools fees.
 Illegal gambling and underage gambling
appears to be linked, with dice being
played most frequently. Dice associated
with criminal elements.
 Another concern is that minors are getting
significant access to the lottery.
 School education programme of NRGP to
be welcomed – outreach will be critical.
 Regulatory measures aligned with
international practice –could be
enhanced, but may not be necessary at
this stage; need to be implemented more
effectively and should be monitored
through mystery shopping independently
performed.
 Problems for treatment and education:
 No overarching strategy to guide different
role players.
 No funding for independent research and
treatment organsiations.
 Lack of clarity on effectiveness of the
lottery programme.
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12. Findings
Regulatory Framework
 NGB and NLB have struggled to fulfill key
parts of their mandate
 NLB: grant-making and distribution.
limited attention to sports pools.
 NGB: oversight and ensuring uniformity.
 NGPC not effective in resolving disputes
or reaching agreement on policy matters,
due to different motivations of provincial
and national government.
 PGBs largely effective at monitoring
compliance.
 Mixed evidence on enforcing illegal
gambling.
 Varying efficiencies among regulators;
 Revenue maximisation mandates, not
strong on assessing social impacts.
 Well regulated and respected jurisdiction.
 High levels of day-to-day compliance.
 Entrenched illegal industry in areas –
continuous enforcement required.
 Inefficiencies in the system and greater
targeting of resources desirable.
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13. Conclusions
 Policy of managed expansion of gambling
has been effective, as we have avoided
excesses apparent in jurisdictions such as
Australia and UK
 Limits on gambling opportunities effective
in areas where imposed, but creeping
proliferation where there are no limits
(EBTs, no of Bingo halls, no of slot
machines and tables at casinos).
 Limits on gambling opportunities has
contained social impact.
 Industry has generated substantial tax
revenues (R15.3 bn in provincial tax
revenues and R1.9 bn for good causes and
taxes) and employment with 56,958 direct
jobs created, mostly from casinos
(51,317), then Betting, LPMs, Bingo.
 Incidence of problem gambling steady since
2005, but we are in the same category as
other middle-income countries (higher than
Europe) – 4,8% for RSA as opposed to 0.6%
for UK.
 Impact of legal gambling on poor not very big
(only lottery) but growing illegal gambling
cause for concern.
 Regulatory measures adequate, but to be
implemented more rigorously – esp.
maintaining distinction between public places
and gambling venues.
 Overall, there is no immediate need for
concern regarding social impact, but also no
space for complacency – continued vigilance
required.
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14. Conclusions
 PGBs disregard national norms and
standards, resulting in inconsistencies
across provinces.
 NGB and Policy Council not effective in
ensuring consistency, adherence to
national norms and standards or
resolution of disputes.
 National gambling policy on gambling
undermined by some provincial licensing
decisions (e.g. casino tables, EBTs).
 Lottery’s revenue maximisation mandate
undermined by conflicting policy impetus
and by enduring problems with
distribution of funds.
 Need for professionalised grant making to
overcome enduring problems with speed
of distribution of funds.
 Overall, Wiehahn objectives have been
substantially met and policy approach has
been successful, but need for vigilance
and tightening of some controls.
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15. Recommendations
Overall policy
 Commission believes that existing models
and approaches should be continued -
sumptuary approach for gambling,
revenue model for lottery.
 On the basis of sumptuary model, existing
demand for certain activities should be
satisfied, allowing for the limited
introduction of new activities and the
deepening of existing activities.
 Clear limits to be set for all gambling
activity:
 Maintain existing limits for casinos and
LPMs.
 Introduce new limits for bingo halls,
tables, seats and slots at casinos and bingo
halls, sports pools.
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16. Recommendations
Existing forms of gambling
Casinos
 Casino CSI to be benchmarked against
other sectors – also to include
contributions to NGRP in that calculation.
 Introduce 5-yearly license review, which
will consider license conditions, social
impact, BB-BEE, harm minimisation
efforts.
 Maintain destination approach and
distinctions between public and private
spaces.
Bingo
 EBTs to be removed and medium-stake
slots to be permitted; consideration for
other sources of gambling revenue eg.
Poker.
 Clear limits on number of licenses per
province and limits on number of gaming
machines permitted in each venue.
Bingo
 Provincial rollout strategy to be developed
(like LPMs).
 Same principles should apply as to casinos
with separate entrances.
LPMs
 Allow for medium-stake slots in some
venues.
 Otherwise increase max payout slightly.
 Iron out inefficiencies at provincial and
local level – recommend development of
licensing guidelines, as in UK.
 Reduce requirements for PDI sites in low-
income areas – not viable and socially
undesirable.
 Decisive action against illegal slots and
EBTs.
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17. Recommendations
Existing forms of gambling
Horseracing and betting
 Ownership of race courses and tote to be
split.
 Funding model for race courses to be
reviewed (tote, bookmakers and on-line
operators).
 Closing down and relocation of race
courses to be considered.
 Integration with other forms of gambling
e.g. medium-stake slots or LPMs.
 Industry structure to be holistically
reviewed – current simple regulatory.
Lottery
 Current revenue maximisation model to
be continued.
 Amend legislation to define sports pool
more clearly and to remove any ambiguity
about the responsibility – need to develop
this aspect of gambling more.
 Grant-making to be professionalised.
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18. Recommendations
New forms of gambling
Dog racing
 There appears to be limited, localised
demand for the activity.
 Major animal rights concerns relate to the
over breeding and retirement of animals.
 Even in jurisdictions with a well regulated
sector such as the UK, over-breeding,
retirement and traceability of the animals
remain issues.
 Commission therefore does not believe
dogracing should be legalised.
 Need to enforce a prohibition.
 A set of requirements for a regulatory
regime are proposed, should the Minister
decide to legalise the industry.
Bushracing
 The key issue in respect of bush racing
appears to be the regulation of actual
races and the treatment of animals by
owners.
 Breeding and traceability issues are
already dealt with through the
horseracing regulation.
 Commission of the view that regulation of
bush racing as an activity could be
considered (UK model):
 Informal nature retained by allowing for
limited number of races from certain
venues per year – occasional licenses.
 Races to be notified to local authority and
to NSPCA.
 Fee to be paid to NSPCA to cover costs.
 Only licensed betting operators may take
bets.
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19. Recommendations
New forms of gambling
Fafhee, dice and cards
 Further research to be conducted into
Fahfee, cards and dice to allow better
understanding;
Poker
 Propose licensing of poker tournament
organisers.
 Licensed operators should be able to run
poker tournaments, organised by licensed
organisers.
 In addition, occasional licenses should be
issued by local authorities for hosting of
tournaments at non-gambling venues
such as restaurants for a limited number
of times e.g. once a month.
 Rules for poker and rake should be
regulated – should apply equally to land-
based and on-line poker games
 Standalone poker houses should not be
permitted.
On-line gambling
 Prohibition is not effective anywhere –
quick action is required before illegal
operators become too entrenched and
have no incentive to become licensed.
 Regulation to be national and to be
broadened beyond interactive gambling
to include on-line betting, betting
exchanges, on-line poker and other forms
of mobile gambling.
 Licensing framework to be introduced
with limits on initial licenses (Italy put
initial limit at 200 as opposed to our 10).
 Advertising should be linked to license
and must be strictly enforced.
 Clear enforcement mechanisms, that
include a bigger role for banks, to be
considered.
 Measures to require identity checking and
limits for play by punters should be
mandatory.
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20. Recommendations
Social impact
 National strategy for responsible gambling
to be developed by national and
provincial government, regulators,
industry and civil society.
 Industry funding to be based on
budgetary requirement of strategy.
 Funding for independent treatment
organisations in partnership model with
NRGP (beyond existing network).
 Fund for independent research – through
independent panel under NRGP or
another institution.
 Consider creating single industry
programme (incl. lottery).
 Retain voluntary nature of programme.
 Prevention of entry of minors and self-
excluded persons from gambling premises
to be more tightly monitored by
operators.
 Advertising to be monitored at an
overarching level, as it is critical to
sumptuary model.
 Advertising for lottery to be retained, but
some alignment with other gambling
advertising rules could be explored
(advertising critical to the model).
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21. Recommendations
Regulatory framework
 Need for clearer delineation of roles of
national and provincial government.
 Provincial role: licensing and regulation of
land-based gambling activities within
framework of national norms and
standards; introduce requirements for
compliance with norms and standards to
be audited and to be submitted to
provincial and national legislatures.
 National role: licensing and regulation of
lottery, sports pools, on-line gambling,
national registers and CEMs.
 Propose that national regulators be
combined, with administration of NLDTF
transferred to an independent grant-
making body.
 New role for Policy Council: only policy
discussion, including matters relating to
limits imposed on gambling modes; no
decision-making.
 Local authorities: issuance of occasional
licenses, zoning and business licenses.
Guidelines for licensing to be issued and
training and awareness campaigns to be
planned in from beginning.
 Parliament to have oversight role over
national policy, with PGBs accountable to
national legislature regarding compliance.
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22. Current framework
Licensing &
regulation
Oversight &
harmonisation
Policy
NLB NGB
NGPC
dti
PGBs
Proposed framework
Licensing &
regulation
Oversight &
harmonisation
Policy
NGB & NLB
Parliament
NGPC
dti
PGBs
Local gov’t
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Recommendations
Regulatory framework

23. Thank you
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