THE NATIONAL GAMBLING AMENDMENT BILL, 2007 Briefing to the Portfolio Committee on Trade and Industry 8 August 2007

IG in SA Estimated 3.5 million people have access to the Internet and only a small percentage of these will access gambling sites (niche market) Cost of telecommunications high Reports indicate that a number of South Africans visit foreign IG websites daily Global IG industry has grown from US$2.2bn in 2000 to about US$9.2bn and is expected to reach US$18bn by 2008 (Interactive Gambling Report, 2005), there are implications for South Africa

Objectives Protection of players Revenue to the fiscus Retain spend on IG within the country Policy rationale: -Cost of prohibition high -Share in the global IG industry revenue

Introduction The National Gambling Act, 2004 (“the NGA”) requires the Minister to introduce into Parliament, within two years of the effective date, legislation for the regulation of interactive gambling (IG) A research committee was established by the National Gambling Board (NGB) to investigate the implications of the regulation of IG within the Republic The research report was finalised in October 2005, and tabled before the National Gambling Policy Council (NGPC), which recommended an enabling legislation Draft Bill was approved by Cabinet in December 2006 and published for comment on 18 December 2006

Approximately 20 written submissions were received Intro cont. Approximately 20 written submissions were received Issues raised by stakeholders included: Licensing, location of server, money laundering, player protection, problem gambling etc Most of these issues were incorporated in the revised Bill Bill submitted to State Law advisors by end of June 2007 and certified on 13 July 2007

Bodies and stakeholders consulted included: Intro cont. Bodies and stakeholders consulted included: The National Gambling Board Provincial Licensing Authorities National Treasury South African Reserve Bank South African Revenue Services Casino Association of South Africa Industry role players National Responsible Gambling Programme Problem Gamblers Anonymous

Background The key impact areas identified by the report included: Protection of vulnerable persons; Addiction to gambling; Exposure to money laundering and organised crime; Competition within local gambling industry; Cost of regulation and monitoring

Approach To introduce IG by way of an amendment to the NGA as opposed to a separate piece of legislation Policy on IG recommended that IG should form part of the broad policy for the regulation of all forms of gambling and be subjected to the general administrative and oversight role of the Board, rather than creating a separate regulatory authority for IG Existing regulatory regime i.t.o the NGA largely applies to all forms of gambling including IG

Scheme of the Bill Definitions of new terms Provision of IG games Player protection Advertising Licensing Compliance and enforcement Problem gambling Money laundering Empowerment Taxation

Provides for authorised IG games, systems and methods Provision of IG games Establishes a legal basis for the provision, regulation and control of IG within the Republic Provides for authorised forms of electronic communication for purposes of IG Provides for authorised IG games, systems and methods

Player protection Registration of players Establishment of player account for payment of monies Prohibit South Africans from engaging in IG activities provided by providers not registered in the Republic Method of payment of wagers and prizes to players and remittance to foreign players and external companies Strict probity of providers Provider not allowed to extend credit to a player Dispute resolution The license condition of provider must be displayed on website

Advertising Existing provisions w.r.t advertising in NGA apply to IG, e.g. advertisement to carry notice of dangers of addictive and compulsive gambling Only licensed IG providers are permitted to advertise IG The Minister to prescribe the content which may be reflected on the IG website

- operator licences; and Licensing IG licences to be issued as national licences due to the borderless nature of IG IG licences include: - operator licences; and - employee licences (key employees, management staff and Directors/shareholders); Licencing/testing and certification of: IG software IG equipment Manufacturers, suppliers, and maintenance providers of IG equipment Capital maintenance regime: Maintenance of capital regime is a rule which insists that paid-up capital may be diminished or lost in the course of the company’s trading but assumes that persons who deal with, and give credit to a company, naturally rely upon the fact that the company is trading with a certain amount of capital already paid and they are entitled to assume that no part of the capital which has been paid into the coffers of the company has been subsequently paid out, except in the legitimate course of its business. Solvency liquidity This is a rule which allows a company to make a distribution as long as it can satisfy the two requirements that The company’s assets are equal to or exceed its liabilities (Solvency); and The company is able to pay its debts as they fall due in the ordinary course of business (Liquidity).

Compliance and enforcement NGB is responsible to: - ensure compliance with the NGA and conditions of license; - supervise and enforce compliance by licensees with FICA etc. - conduct inspections w.r.t IG websites and premises where IG equipment and software is located NGB may revoke or suspend IG licences for non-compliance The server to be located in South Africa NGB may delegate some of its enforcement and compliance powers to the Provincial Licensing Authorities (PLAs)

Players must set limits on accounts Problem Gambling Electronic system for the monitoring and reporting of registered players Players must set limits on accounts Providers to audit playing patterns and behaviour Self-diagnosis system Notice on website of IG provider w.r.t: - voluntary player exclusion - treatment of addictive gambling (National Responsible Gambling Programme) Solvency and liquidity Test A company satisfies the solvency and liquidity test at a particular time if, considering all reasonably foreseeable financial circumstances of the company at that time – (1)          the company’s total assets equal or exceed its total liabilities; and (2)          it appears that the company will be able to pay its debts as they became due in the course of business for a period of – (a) 12 months after the date on which the test is considered; or (b) in the case of a distribution, 12 months following that distribution.

Money laundering Registration of players and verification of player identity Players from selected countries that comply with FATF or designate organization Establishment of player account and verification of nominated accounts Regulating the method of payment to the provider, e.g. credit card method of payment Obligation on IG provider to report suspicious and illegal activities Provision for control systems to be prescribed

Conditions for awarding of IG licences subject to commitment to: Empowerment Conditions for awarding of IG licences subject to commitment to: - socio-economic upliftment - BBBEE requirements Registration process in terms of new law The Application must complete and lodge a Notice of Incorporation and prepare the only governing document of the company, which is a Memorandum of Incorporation. The memorandum does not have to be lodged with the Commission, unless the company is widely-held. A lot of current forms are done away with in terms of the new Bill (for example, CM5, CM2, CM 22, CM29, CM31, CM44, CM46 and CM47).

- provide certainty and thereby enhance; Conclusion Regulation of IG will: - provide certainty and thereby enhance; - provide revenue to the fiscus; - ensure accountability by IG industry; - eliminate illegal IG operations; - protection of players; and - provide for effective and transparent licensing. Existing regime for name reservation and registration Currently, a company or a CC cannot be registered and incorporated before the self standing process of name reservation has been completed (by means of CM5). In addition a whole number of other documents are required, i.e. Memorandum and Articles (CM5 and CM44) which must be certified by Notary Public. Notice of Registered office (CM22) List of Directors, Officers and Auditors (CM29) Auditor’s Consent Form (CM31) Application for Commencement of Business (CM46) Sufficiency of Capital Form (CM47)

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