The Socio-Economic Impact of Gambling Regulation Presentation at GRAF – 28 August 2018 GAMBLING Socio-Economic Impact Gambling Regulation Presenter: Ms Estelle Jonkheid (Snr Manager; Research & Information)

CONTENT Mandate and role of the NGB Benefits of gambling Negative impact of gambling Current status of gambling in South Africa Challenges Addressing the challenges Conclusion

Mandate and role of the NGB

Mandate and role of the NGB The NGBs mandate is to promote and support the development of a fair, transparent, competitive, sustainable, responsible and efficient gambling industry in order to: Promote quality and sustainable livelihoods in communities Serve the needs of historically disadvantaged persons Promote reintegration of persons who are addicted to gambling into families and communities for quality livelihoods Set appropriate conditions for responsible gambling business Conduct education, awareness and research on gambling harms and benefits Combating illegal gambling and problem gambling in conjunction with provincial gambling regulatory authorities

Mandate and role of the NGB Gambling is a concurrent legislative competency between national and provincial government Compliance monitoring is one of the fundamental pillars of NGB’s functions to regulate gambling NGB commissions regular research to determine the socio-economic impact of gambling (legal and illegal modes)

Mandate and role of the NGB Gambling regulation needs to create a balance between revenue generation and protection of the public, particularly vulnerable persons, while taking cognisance of and supporting Government’s developmental priorities, and specifically the Nine - Point plan in terms of: Encouraging private-sector investment (gambling industry) Unlocking the potential of SMMEs, cooperatives, townships and rural enterprises (i.e. corporate social investment programmes & gambling licenses to individuals/consortiums, small and medium businesses)

Benefits of gambling

Social benefits of gambling

Social benefits of gambling Form of recreation and entertainment – often in a safe environment Form of game play – humans use games to enhance their lives Social benefits (e.g. new social groups and friends) Corporate social programs – giving back to the community The legal gambling industry is well-regulated to protect punters Access to national and provincial regulators for assistance Education and information through awareness programs/roadshows Various ways to report fraudulent and illegal gambling activities Punter protection, free counselling, access to rehabilitation programs and access to an exclusions register

Economic benefits of gambling Stimulates the local economy and contributes to government revenues (taxes/levies), Gross Domestic Product, investment and employment GGR: GGR increased by 8.8% to R26,0 billion in FY2016, by 3.8% to R27,0 billion in FY2017, and by 6.7% to R28,8 billion in FY2018 Taxes/levies: Collection of taxes/levies increased by 11.9% to R2,8 billion in FY2016, decreased by 1.0% to R2,97 billion in FY2017, but increased by 5.7% to R2,9 billion in FY2018 GDP: 0.81% (2017) [contribution national economy] Gambling promotes investment (infrastructure) Creation of employment in gambling industry (± 30 000 direct jobs as at 31 March 2018

Economic benefits of gambling Enhancement of public services (taxes used for education, roads, health schools, infrastructure and development in communities, services to the public, etc) Increase in regulatory and infrastructural costs and value Increase in property value (e.g. around a casino) Potential for punter/player to win money Gambling attracts tourism and results in more money for local areas

Economic benefits of gambling Economic empowerment of the historically disadvantaged (B-BBEE) Gambling enterprises are measured in terms of the generic score card and more specifically, the following: Ownership, Management Control, Employment Equity, Skills Development, Preferential Procurement, Enterprise Development and Socio-Economic Development. Based on the information submitted by PLAs, the average B-BBEE status or level of the South African gambling industry as at 31 March 2018 was as follows – these levels have improved since FY2016/17and show general compliance Average B-BBEE level for casino operators: 1.8 Average B-BBEE level for totalisators: 4 Average B-BBEE level for LPM operators: 2.8 Average B-BBEE level for bingo operators: 2.9

Economic benefits of gambling

Economic benefits of gambling

Economic benefits of gambling Out of the total percentage of GGR generated in FY2017/18 per mode, casino GGR is steadily decreasing as a result of growth in other sectors

Economic benefits of gambling

Economic benefits of gambling DIRECT EMPLOYMENT PER PROVINCE AND MODE, FY2018   PROVINCE FY 2018 Gambling mode Gauteng Wes-tern Cape KwaZulu-Natal Mpuma-langa Lim-popo North West Nor-thern Eastern Cape Free State TOTAL Casinos 5 491 2 307 2 497 729 254 763 248 863 713 13 865 Totalisators 205 15 1 456 79 22 123 13 75 80 2 068 Book- makers 528 159 2 747 955 457 809 5 29 118 5 807 LPMs 138 2 966 98 150 510 53 23 218 4 185 Bingo 468 N/A 294 125 213 108 1 462 Regulators NGB PLAs 26 70 77 54 83 19 48 76 497 Total 6 856 5 517 7 162 2 115 1 551 2 044 308 1 341 1 016 27 910

Negative impact of gambling (legal and illegal)

Negative impact of gambling (legal & illegal) Money spent on illegal gambling is also lost to the economy Problem gambling & addiction and impact on the economy, family and society (e.g. disrupts personal / family / financial / employment relations), financial problems such as debt and bankruptcy, divorce, lost productivity, crime (such as theft and fraud), depression and suicide Illegal gamblers have the highest risk of becoming problem gamblers Cost to counselling, treatment and rehabilitation Under-aged gambling & minors participating in gambling Crime-related activities (e.g. money-laundering) Risks (other addiction) associated with problem gambling such as drugs, alcohol and sexual abuse

Negative impact of gambling (legal & illegal) Punters in illegal gambling activities are unprotected Less affluent (employed, suffering poverty and/or low income) may be vulnerable to gambling, including illegal gambling modes such as fahfee / mo-china / cards / dice Social challenges as a result of problem and illegal gambling Unlawful winnings associated with illegal gambling activities Consequences if caught when participating in illegal gambling modes (e.g. court, fine, jail and confiscated winnings) Many millions of rand in state resources spent on the criminal justice system (i.e. investigation and prosecution)

Negative impact of gambling (legal & illegal) Unfair competition created by illegal enterprises and operators and reduced government revenue in the form of tax contributions The estimated monetary flows associated with illegal (online) gambling in South Africa impact the economy with regard to employment and GDP (FY2016): Total loss in value add of R1,9 billion for the economy as a whole per annum. This includes a direct impact of R972 million and an indirect impact of R972 million. This is less than 0.01% of the total annual GDP for South Africa Total loss of 3,785 employment opportunities in the legal gambling industry based on employment in casinos (841) and employment in related services such as retail outlets and restaurants (2,945). This equates to 5.9% of the total employed persons in the casino industry of the country

Negative impact of gambling (legal & illegal) Reports from the South African Responsible Gambling Foundation, amongst others, indicates that gambling creates huge social challenges as a result of problem and illegal gambling

Where does this leave gambling regulators? The question arises – is gambling economically and socially beneficial to the country against the negative socio-economic impacts of gambling? Are regulators currently successful and efficient in managing the socio-economic impact?

Current status of gambling

Current status of gambling In South Africa, four modes of gambling are legal, namely casinos, bingo, limited payout machines (LPMs) and betting on horse racing and sporting events Gambling under these modes, using licensed operators, is regulated Any gambling activity that is not one of these four, or is one of the four but not offered by a licensed operator, is illegal Advertising any unlawful / unlicensed gambling activity is prohibited and punishable (S15 NGA) Licensing of all gambling activities is conducted by Provincial Licensing Authorities

Current status of gambling Variable FY2017 As at 31 Mar 17 FY2018 As at 31 Mar 18 Number of operational casinos 38 Number of operational slots (casinos) 23 697 25 195 Number of operational tables (casinos) 907 976 Number of operational gambling positions (casinos) 33 249 35 929 Operational totalisator outlets 456 382 Operational bookmakers 266 284 Operational bookmaker outlets 515 542 Operational Limited Payout Machine (LPM) site operators 2 188  2 211 Operational LPMs 11 502 11 896 Operational bingo outlets 37 50 Operational bingo positions 6 497 8 520

Current status of gambling Variable FY2017 Total FY2018 National gambling statistics: Turnover R 372 987 955 104 R 389 799 128 064 GGR R 26 958 161 784 R 28 763 259 881 Taxes/levies R 2 743 112 930 R 2 898 984 519

Gambling prevalence - 2017 Gamblers : 30.6% of South Africans Non-gamblers : 69.4% Comparison with NGB survey (SA) Gamblers 2005 : 49.8% Gamblers 2009 : 34.9%

Participation in gambling - 2017

Problem gambling in South Africa - 2017 5.8% of gamblers regarded as gamblers at high risk of problem gambling Profile of problem gamblers: Less affluent segment of population 44.3% reported no income or monthly income less than R2 000 56.3% secondary school qualifications 42.3% unemployed Include also middle to high income earners

Current status quo of gambling Effective oversight function over PLAs Countrywide gambling awareness campaigns – provided by the dti and the NGB, to educate the public about gambling especially legal vs illegal modes of gambling, symptoms of problem gambling, how to gamble responsibly, where to report fraudulent and illegal gambling activities, and where to get assistance with problem gambling South African Responsible Gambling Foundation (SARGF) - programmes to educate the public, as well as rehabilitation programs and counselling services

Current status quo of gambling Illegal gambling operatives register – blacklisting of illegal operators once their illegal status is confirmed so that they are not considered in future licence applications Excluded persons register – register of persons not permitted to gamble due to problem gambling (one can apply for self-exclusion) National Registers (e.g. machines and devices, information sharing, probity, National Central Electronic Monitoring System (NCEMS)) and national gambling statistics database Unlawful winnings are confiscated – winnings obtained through illegal gambling is forfeited to the State

Current status quo of gambling Regulatory environment: February 2016 – Cabinet approved the National Gambling Policy, which will bring new changes to the gambling regulatory environment May 2016 - The National Assembly rejected the Remote Gambling Bill, which sought to legalise online gambling in SA 2018 - The draft National Gambling Amendment Bill of 2016 was introduced to and approved for tabling in Parliament It is proposed that improved provisions be included in the legislation to deal more effectively with illegal gambling

Challenges affecting the impact

Challenges affecting the impact The public is unaware / unsure of the difference between legal and illegal modes of gambling, consequences of illegal gambling, gambling legislation, and how to get assistance with regard to problem gambling The mushrooming of illegal gambling (i.e. online as a borderless industry, server-based and other illegal gambling modes) South African financial institutions are the most used mediums of exchange between an online gambler and illegal online operators – contributing to participation in illegal online gambling

Challenges affecting the impact Illegal (and specifically online) gambling is also not regarded as a high priority offence and the environment is difficult to monitor as a result of limited support from and collaboration between various role-players Lack of uniform procedures Insufficient resources at regulators to effectively enforce and control illegal gambling Electronic bingo terminals not properly regulated Cost burdens to approach the High Court for forfeiture orders in terms of unlawful winnings

Challenges affecting the impact Changes in trends relative to GGR: Substantial increased in betting on sport (bookmakers), and to a lesser extent LPM and casino sectors, whilst negative growth (GGR) perceived in bingo sector (FY2016/17 to FY2017/18) Potential impact of the 4th industrial revolution (advanced technology such internet, smart phones and watches, wireless sensor networks, cyber physical systems, large data analytics, cloud technologies, artificial intelligence, internet-connected objects, cryptocurrencies, skins & e-sports betting, virtual reality, augmented reality, speed of technological breakthroughs, hand-held devices, self-service terminals, biometrics, facial recognition, nano technology, gamblification of gaming, increased data speeds, new games to attract younger punters, games of skill, increased accessibility and convenience) on the current and future regulation of gambling Slow transformation i.t.o. Broad-Based Black Economic Empowerment

Addressing the challenges

Addressing the challenges Law to enable mass monitoring of online traffic to identify gambling related activities and gambling by minors, as well as prohibiting illegal operators from offering online gambling services to the South African public Improved provisions in legislation to gather and consolidate intelligence with regard to illegal gambling and to blacklist illegal operators Bilateral and multilateral agreements to allow enforcement across the South African borders – regulators also need to work together Strengthen the capacity to prohibit and combat illegal gambling

Addressing the challenges A national collaborative approach to combat and suppress illegal gambling – involvement of all gambling regulators to gather information, conduct inspections, investigate cases, cooperate with law enforcement agencies and act against illegal operators  Efficient confiscation of unlawful winnings and forfeiture thereof Successful prosecution of illegal operators to send a strong message Ongoing information to the public (and problem gamblers) about the toll free line, exclusions register, and rehabilitation and treatment programs (collaborative efforts amongst all regulators, PLAs, SARGF and the dti) Informing the public about the NGB tip-off line and where to report fraudulent and illegal gambling activities  

Addressing the challenges Regulation of electronic bingo terminals (EBTs) based on outcome of research Reduce the costs burden for forfeiture unlawful winnings (currently via High Court application) Staying abreast of new technology (e.g. research, interaction), software, tools, type of games, profile of new emerging (illegal) gamblers and the socio-economic impact on current legalised modes of gambling

Addressing the challenges Ongoing research to determine the following: Socio-economic impact of legal and illegal gambling Transformation and growth in the gambling industry Impact of Electronic Bingo Terminals on traditional bingo, casino and Limited Payout Machines sectors Potential impact of the 4th industrial revolution on the current and future regulation of gambling

Conclusion The South African gambling industry is a legitimate and well-regulated industry, that not only contributes significantly to the economy of the country, but also provides a number of social and economic benefits Ongoing and efficient oversight over PLAs, feedback and ongoing interaction to ensure compliance in the gambling industry

Conclusion Combatting of illegal gambling is gaining momentum and stakeholders’ cooperation in multi-task teams emphasise law enforcement activities as priority areas Updating and maintenance of several registers and databases ensure that NGB remains the nodal point of national gambling related information relative to various matters such as machines and devices, probity, exclusions, NCEMS, illegal operatives and national gambling statistics

Conclusion NGB ensures that the implementation of its Strategic, Annual Performance and Business Plans ensures the effective achievement of annual targets as per its mandate as dictated by the NGA NGB perceive itself as successful in managing the socio-economic impact of gambling regulation and addressing challenges

Conclusion The outcome of various research projects currently embarking on, will provide much needed insight into the way forward and how to advise the Minister in terms of the current and future regulation of gambling in South Africa

CLOSURE Ms Estelle Jonkheid Gamble legally and responsibly! Presenter: Snr Manager: Research & Information National: +271000 33475 E-mail: info@ngb.org.za Web:  www.ngb.org.za Address:  420 Witch-Hazel Avenue Eco-Glades 2, Block C, Eco-Park, Centurion, 0144