THE NATIONAL GAMBLING AMENDMENT BILL, 2007 Presentation to Select Committee on Economic and Foreign Affairs 21 February 2007

Recommended policy option support regulating IG: Objectives Considerable number of South Africans participate in IG with international online gambling sites Recommended policy option support regulating IG: Cost of prohibiting high (e.g policing) Protection of players Loss of revenue to the fiscus

Introduction The National Gambling Act, 2004 (“the NGA”) requires the Minister to introduce into Parliament, within two years of the effective date, i.e. 1 November 2004, 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).

Introduction cont. The NGPC resolved that the Dti prepare a draft policy framework and legislation to regulate IG. Draft Bill was approved by Cabinet in December 2006 Bill published for comment on 18 December 2006, closing date for comments was 12 February 2007

The key impact areas identified by the report included: Background The key impact areas identified by the report included: Competitiveness with global gambling jurisdictions; Flow of funds; Employment; 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.

Compliance and enforcement Problem gambling Money Laundering Scheme of the Bill Definitions Provision of IG games Player protection Advertising Licensing Compliance and enforcement Problem gambling Money Laundering Empowerment

Insertion of a number of new definitions relating to IG including: - IG equipment and software; - registered player; - nominated account; - player account; - ensure consistency with definitions in the Electronic Communications and Transactions Act (ECTA).

Provides for authorised IG games, systems and methods Provision of IG games Establishes a lawful basis for 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

Registration of players Establishment of player account for payment Player protection Registration of players Establishment of player account for payment of monies Payment of wagers and prizes to players Remittance to foreign players and external companies Dispute resolution

Advertising Existing provisions i.r.o 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 - personnel licences (key employees and management staff); Licences for gambling devices IG software 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 licence; - supervise and enforce compliance by licensees with FICA etc. - conduct inspections i.r.o IG websites and premises where IG equipment and software is located NGB may revoke or suspend licences i.r.o IG for non-compliance NGB may delegate it’s enforcement and compliance powers to the Provincial Licensing Authorities (PLAs).

Self-diagnosis system Notice on website of IG provider i.r.o: Problem Gambling Electronic system for the monitoring and reporting of registered players Self-diagnosis system Notice on website of IG provider i.r.o: - 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.

Registration of players and verification of player identity Money laundering Registration of players and verification of player identity Establishment of player account and verification of nominated accounts Obligation on IG provider to report suspicious and illegal activities Provision for control systems to be prescribed

Conditions for awarding of IG licenses subject to commitment to: Empowerment Conditions for awarding of IG licenses 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; international competitiveness; - 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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