BROAD-BASED BLACK ECONOMIC EMPOWERMENT BILL [B42 – 2012] Ref: B-BBEE 2013/8A BROAD-BASED BLACK ECONOMIC EMPOWERMENT BILL [B42 – 2012]   Presentation by Themba Ngobese, Chief Executive Officer of the Casino Association of South Africa to the PARLIAMENTARY PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY 15 March 2013

Broad-Based Black Economic Empowerment Bill [B42 – 2012] INTRODUCTION Thank you to the Committee for the invitation to present today. We will deal with two issues that CASA views as of concern, and which are more fully dealt with in the CASA submission which was conveyed to the Committee on 01 March 2013. We assume that all members of the Committee will therefore be familiar with the contents of the CASA submission . ABOUT CASA CASA is a voluntary association which represents licensed casino operators in South Africa. CASAs members operate 35 of the 37 licensed casinos in South Africa. Our members have to date invested in excess of R30 billion in infrastructure leading to the development of world class entertainment destinations incorporating more than 7800 hotel rooms, road upgrades, convention centres, tourist attractions, theme parks, sports facilities, restaurants and eventing facilities, and have played a major role in the revival of the arts through theatres, museums and the development of new cinema complexes. CASA members have created in excess of 52 000 direct jobs, many of which give employment to people with no previous work experience, in addition to B-BBEE shareholding structures that are the envy of traditional industries struggling to transform. This excludes indirect jobs created in addition to the above direct jobs.

Broad-Based Black Economic Empowerment Bill [B42 – 2012] ABOUT CASA (cont...) CASA members have also contributed in excess of R50 billion to GDP in terms of economic multipliers and invested in excess of R80 million per year in community social investment. They have established an internationally recognized responsible gambling programme with a budget of more than R14 million per year. In the financial year 2011/2012 alone, our members accounted for more than R1.8 billion in Provincial Gambling Taxes and VAT which, together with Company Tax, contributed more than R5 billion to Government revenues. Government has an effective 39.39% share of the ‘value-added’ to the economy by the casino sector and as such it is the largest de facto stakeholder in the casino industry.

Broad-Based Black Economic Empowerment Bill [B42 – 2012] ON THE B-BBEE AMENDMENT BILL, 2012 Our members embraced and actively pursued BEE even prior to the promulgation of B-BBEE legislation in 2003. They made commitments on BEE as part of the casino licensing process in the late 1990s. As recently as in 2009, CASA addressed an open letter to the Minister for Trade and Industry expressing the commitment of the casino industry to achieve an overall Level 4 rating in terms of the Codes of Good Practice on B-BBEE by 2010. We are pleased to advise that this target has not only been achieved, but materially exceeded, to the extent that an overall Level 2 rating has now been achieved. CASA wishes to record that we support the broad objectives that the Amendment Bill purports to promote. Amongst others, the Amendment Bill aims to “Align the [B-BBEE] Act with other legislation impacting on B-BBEE and with the codes of good practice.” Having said the above, we are concerned with certain provisions in the Amendment Bill which do not support the above objective. In particular, we are concerned with Subsection 9(6) read together with Subsections 10(2) and (3).

Broad-Based Black Economic Empowerment Bill [B42 – 2012] Subsection 9(6) This proposed subsection empowers the Minister, if requested to do so, to permit organs of state or public entities “to specify qualification criteria for procurement and other economic activities” which exceeds those which appear in any Codes published by the Minister in terms of Subsection 9(1). In the gambling industry, this implies that each of nine (09) provincial licensing authorities (“PLAs”) and the National Gambling Board (“NGB“), in their capacity as public entities, may request the Minister to “permit” them to specify any criteria in relation to B-BBEE (to apply to the holders of gambling licences) which are more onerous than the requirements of the Codes of Good Practice on B-BBEE (“the Codes”) (whether in their present or their proposed revised form). The consequence of the above is that gambling licence holders (in this case, CASA members) face the prospect that different PLAs and the NGB will seek to determine their own individual “qualification criteria” pursuant to Subsection 9(6), which may potentially result in no fewer than ten (10) different sets of requirements or criteria with which gambling licence holders in different provinces must comply. The above will certainly go against the stated objective of alignment and uniformity in the application of national government policy on B-BBEE.

Broad-Based Black Economic Empowerment Bill [B42 – 2012] Subsection 9(6) (cont ...) In practice, the PLAs have: construed Section 10 of the Act as conferring upon them the authority to impose conditions on the casino licences issued by them, to the effect that all licence holders should attain defined B-BBEE Contributor Level Statuses within fixed periods of time. The difficulty in the context of conditions of this nature is that the casino licence may be suspended or even revoked entirely if the specified B-BBEE related targets are not met within the stipulated timeframes, and in many cases this may occur as a result of factors entirely beyond the control of the licence holder, such as the transfer of shareholding, particularly in instances where the licence holder is the subsidiary of a listed company. seen fit to impose additional B-BBEE related licence conditions, over and above the requirements of the Codes. Examples of this are that, in the context of preferential procurement, the gambling licence holder should procure a certain specified percentage of its goods and services from entities within the relevant Province and/or entities in which shareholding by PDIs equals or exceeds a stipulated minimum. The difficulty with such a condition is that if CASA members are required to allocate defined percentages of their procurement spend to PDI owned businesses or local businesses, there is a significant risk that their own B-BBEE contributor statuses will drop significantly in the context of preferential procurement, unless those suppliers have themselves achieved high B-BBEE ratings, which will in turn negatively affect their ability to reach the various B-BBEE ratings stipulated by the PLAs. The ongoing imposition of mutually irreconcilable conditions in relation to B-BBEE by PLAs (which add to the requirements of the Codes) materially undermines the ability of CASA members to attain the objective of truly broad-based, holistic BEE, in all its facets, in the manner intended by the national government, and stipulated in the Codes. In addition, the overriding objective of achieving uniformity as across governmental bodies in relation to B-BBEE will continue to be sacrificed.

Broad-Based Black Economic Empowerment Bill [B42 – 2012] Subsections 10(2) and (3) We fear that the overarching objective of uniformity in the application of national government policy on B-BBEE will similarly be lost if the required degree of clarity is not provided regarding the above provisions. In this regard, we advise that, in conjunction with their licensed casinos, CASA members operate hotels, resort properties, timeshare facilities, restaurants and conferencing and other tourist facilities, as part and parcel of the integrated resorts required to be put in place in order to qualify for their casino licences. The implication of the proposed Subsections is that it may be argued that the tourism-related components of casino developments should be measured only against the requirements of the Tourism Sector Code. This will create significant difficulties for CASA members, as the various PLAs require CASA members to be evaluated against the generic scorecard set up by the Codes. Additionally, in the event that the tourism components of the relevant businesses were required to be separated from the casino components for the purposes of B-BBEE compliance, CASA members would find themselves subject to no less than three (03) different reporting obligations to be satisfied to two different entities, namely one report to the Tourism Sector Council on compliance with the Tourism Sector Code, another to the relevant PLAs in respect of compliance with the generic scorecard, and a third, also to the PLAs, in respect of compliance with the BEE related conditions of licence which have been imposed by those PLAs, over and above the provisions of the Codes.

Broad-Based Black Economic Empowerment Bill [B42 – 2012] Subsections 10(2) and (3) (cont …) CASA submits that this cannot be in the interests of the uniformity sought to be achieved by the enactment of the Bill. Moreover, an enforced separation of the various components of the affected businesses would pose significant practical challenges to CASA members and the day-to-day operation of their businesses. Based on the above, CASA would request that fresh consideration be given to Subsections 10(2) and (3), in an attempt to recognise the unique business offerings provided by CASA members, which effectively straddle different business sectors.

Broad-Based Black Economic Empowerment Bill [B42 – 2012] CONCLUSION We are greatly concerned with the provisions of Subsection 9(6) read together with Subsections 10(2) and (3). CASA respectfully submits that the enactment of the proposed Subsections will simply perpetuate (and multiply) the difficulties described above. This will also materially undermine the ability of CASA members to attain the objective of truly broad-based, holistic BEE, in all its facets, in the manner intended by the national government, and stipulated in the Codes. In addition, the overriding objective of achieving uniformity as across governmental bodies in relation to B-BBEE will continue to be sacrificed. For all of the reasons set out above, CASA hereby respectfully proposes the withdrawal of Subsection 9(6) read together with Subsections 10(2) and (3). Alternatively, we propose an exemption for the thirty five licensed casino premises from the application of Subsection 9(6) read together with Subsections 10(2) and (3). THANK YOU!