Issued by: North West Communication Services
SPEECH BY M.J. KUSCUS, NORTH WEST MEC FOR FINANCE AND ECONOMIC AFFAIRS DURING THE DEBATE ON THE NORTH WEST CASINO GAMING AND BETTING AMENDMENT BILL,
29 OCTOBER 1996.
In the past 30 years, gaming has evolved internationally from an illegal activity to a major growth industry. In various jurisdiction throughout the world, a wide variety of gaming industries have been created for the purpose of stimulating tourism, bolstering regional or local economies, creating jobs and employment opportunities and generating tax revenues.
Despite this, government leaders have remained sceptical about the overall economic and social effects of gaming on society. Issues of immorality, crime and problem gambling have remained unresolved in policy makers' concerns and decisions, as have the true and enduring positive economic impacts. Thus, as gaming has spread, so has the variety of approaches to organise, contain and regulate the industry.
In South Africa, it has been agreed by Cabinet that the gaming industry ought to be organised and regulated in such a way as to promote the interests of the country as a whole, and in particular, to secure the RDP goals of:
- Reducing poverty - Generating ecleast advantaged - Encouraging appropriate new investment.
It has also been agreed that the responsibility for awarding licences and regulating the industry is the task of provincial government, and it is their corresponding legislative right to determine what taxes and fees, after VAT, must be paid.
POSSIBLE POLICY GUIDELINES.
It will be necessary for North-West to articulate broad policy guidelines:
- that its gaming industry should comply with international standards. - that optimum economic benefit for the province should be obtained, - that possible negative social impacts as a consequence of the gaming should be minimised. - that there will be transparency and integrity in the selection and - regulation of gaming licences in the province.
A POSSIBLE GAMING POLICY APPROACH.
North-west will also need to specify the aims and objectives attendant upon its regulation of a provincial gaming industry.
To promote economic development and investment with concomitant job creation and skills enhancement/training.
To create access to economic opportunity for those previously disadvantaged to stimulate the development of facilities for the community.
To generate revenue through taxation for the province.
To promote the growth and development of compatible industries, especially through SMMEs, in tandem with the gaming industry.
To ensure the development of tourism, in conjunction with neighbouring provinces.
KEY ECONOMIC ASSUMPTIONS.
Recently passed government legislation means that the business of operating casinos in North-West will not be governed by ordinary business principles, as the number of licences to operate legal casinos in the province has been limited to a maximum of five.
Cabinet has therefore decided that gaming is to be restricted, rather than be deregulated or prohibited, in the public interest, as with alcohol and tobacco. By restricting entry to the industry, Government has made a presumption of an exceptional public interest in such restrictions, and it is important that the North-West Provincial Government quantify and meet this public interest.
Restrictions on entry through licenced operators are a regular feature of gaming everywhere, and if effective, generate excess returns which can be captured by the provincial government.
However, there can be no presumption of excess returns, given competition from other gambling (racing, lotteries, scratch cards, future football pools, illegal casinos etc.) And the industry should be regarded, to all intents and purposes, as a highly-competitive sector of the entertainment and leisure industries.
There is the real danger, given current public perceptions; that the industry will be over-capitalised and that losses, rather than excess profits, will lead to casino failures - as has happened internationally through over-capacity and excessive licensing.
It is common cause that provincial government - especially that of North West envisage important, developmental infrastructural economic benefits through gaming licences. In particular, correctly sized and located casinos have the potential to inject very substantial investment into the province, creating growth, employment and wealth, especially in the leisure, construction, service, and allied industries, as well as financial support in the public interest in community projects and facilities.
This type of investment is wholly and directly compatible with this province's RDP objectives.
Illegal casinos- and, for the matter, limited licence casinos - require very limited investment, create few employment opportunities, offer none of the positive, broader economic benefits associated with a major development in the leisure and hospitality industry, and therefore also contribute little - if anything - to the nation's or province's RDP agenda.
Illegal and limited licence casinos themselves will make no pretence about contributing to the infrastructural development mix, and on the contrary, can have the negative effect of discouraging major investors in the industry, given the finite size of the market and reduced returns as a consequence of high capital expenditure.
Given the existing competition in the gaming market from racing, illegal casinos, scratch cards and other forms of gambling, and the likely introduction of lotteries, sports betting, and pools, investor confidence is already under threat.
It can be seen, therefore, that illegalities cannot contribute to the upliftment of a given province to the same extent as would a single operator of equivalent slot capacity.
There are those who would argue that the transformation of "illegal" operators, into limited licences preserves employment in the leisure industry and would assist in economic empowerment of small and medium sized entrepreneurs. This is fallacy.
With over 150 000 illegal slot machines, but paying little or no tax, and the illegals constitute and industry of comparable size to Sun International's total gaming operations nationwide.
And yet, in contract, Sun International has created 15 000 director and 30 000 additional indirect jobs, pays over R600 -million annually in salaries and benefits, contributes more than R00-million in tax, and has created in excess of R2000-million in economic value for the country.
Limited human resources, and other priorities in law enforcement have led to the ongoing existence of illegal casinos and the ongoing supply of gambling equipment to these illegal casinos by international gambling equipment suppliers.
Most of the illegal operations and equipment are concentrated in the major metropolitan areas, and primarily in Gauteng and KwaZulu-Natal. North West has however not escaped this phenomenon and illegal operations are currently mushrooming in Potch, Klerksdorp and Rustenburg. We will have to eradicate illegal operations swiftly and effectively.
If this is not achieved:
- The illegal casinos will be entrenched and illegal outlets will continue to proliferate. - The illegal casino industry will continue to serve as a conduit for a range of criminal activities, including drug trafficking, prostitution and money laundering. - The objects of developing the province's tourism potential and infrastructure, and creating additional resources for provincial tax revenue, will be undermined.
Serious investors would opt out of new casino projects due to insufficient opportunities to generate commercially acceptable returns on sizable investments.
The North-West Gambling and Betting Act has been enacted and the Gambling and Betting Board is in the process of formation.
The maintenance of clean gaming administration requires effective systems for the monitoring and policing of the industry and efficient means for the prosecution of offenders.