1. PRESENTATION TO THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY - HORSE RACING AND BETTING NATIONAL GAMBLING BILL (B48 – 2003) September 18, 2003

2. BACKGROUND Horse racing dates back to the times of ancient Greeks and Romans However, thoroughbred racing has its origins in England during the 16th century Introduced to South Africa in 1797 Only form of legalized gambling in SA (excl “TBVC”) until 1994

3. BACKGROUND(Cont) Until the the corporatisation of horse racing during 1997, it was run by clubs. Clubs constituted by horse owners and trainers Benefits accrued to clubs and their members. Betting subsidized clubs

4. BETTING DEVELOPMENT Totalisator and fixed-odds (bookmakers) –On-course mechanical tote –Off-course tote - 1972 (limited betting hours) 1991 (all day betting) –Telephone betting - 1974 –Out of province - 1984 ( Equine flu, led to national fixtures being developed )

5. STAKEHOLDERS Breeders Owners Trainers Grooms Jockeys Farriers Veterinarians Tack merchants Farmers Liverymen Feed merchants

6. STAKEHOLDERS (Cont.) Horse racing & Totalisator operators Regulators (Jockey Club of SA, etc) Transport operators Event managers Caterers and other participants, who are all dependant on the industry

7. NEW GAMBLING ERA Since 1998 betting income has declined considerably –Cellular phones, etc –Illegal gambling –Casinos and Bingo halls –Lottery –Global competition – mainly Internet sites

8. Turnover 1994 - 2002

9. CYCLE OF DECLINE Declining media interest Declining betting turnovers Poor attendance Deteriorating facilities Drop in stakes and sponsorship Reduced return to owners Reduced field size Declining contribution to racing activities Fewer horses bought and owned

10. NEW GAMBLING ERA (Cont.) Provincial Governments intervened Operations restructured, consolidated and corporatised –Phumelela Gaming & Leisure Ltd (“PGL”) –Gold Circle Transformation initiated Betting taxes reduced Turnaround effected PGL listed on JSE

11. TOTALISATOR BUSINESS Supports the whole Racing Industry –Revenue source –80 000 to 100 000 jobs (Direct & Indirect) Properly licensed and regulated

12. TOTALISATOR BUSINESS(Cont.) How we operate –Branches –Agencies –Telephone –Internet (424 cf 8000 Lottery)

13. The horse racing industry only accounts for 11% of the Gross Gaming Revenue in the gambling market, yet it accounts for more than 50% of the jobs!!

14. KEY STRATEGIC OBJECTIVE To Reduce Levels of Cash Branches – Only Cash Betting –High incidence of crime Telephone Betting – Deposit Accounts –18 % of business –Convenience –Cashless operation (minimize risk of robbery) –14000 Active users (only 200 granted credit)

15. KEY STRATEGIC OBJECTIVE To Reduce Levels of Cash Telephone Betting (cont.) –Customer obtains record of transactions & can analyze his performance –No Queues or Crowds

16. PROBLEM GAMBLING Low incidence in horse racing < 3% of problem gamblers* Not impulse gambling Call centers –Credit, deposits –Not aimed at poor people, contrary to the Lottery *National Responsible Gambling Programme Quarterly Report

17. PROBLEM GAMBLING(Cont.) Call centres(cont.) –Telephone –DSTV decoder –Incidence of bad debts negligible

18. EFFECTS OF S13 OF BILL ON THE BUSINESS Restrictions on deposit and credit –Call centres closure –Loss of turnover –Punters will turn to other activities = encourage betting on overseas + illegal internet sites

19. EFFECTS OF S13 OF BILL ON THE BUSINESS (Cont.) Restrictions on deposit and credit (cont.) –Job losses(direct) –Shrinkage of the business (18%) = further job losses (direct & indirect) –Domino effect on the industry –Reduced tax contribution –Undermine economic empowerment initiatives –Revert to cycle of decline

20. EFFECTS OF S14 OF BILL ON THE BUSINESS Monitoring excluded persons –Impractical to implement with our multiple outlets –However, easy to monitor on cashless operation Telephone betting = monitor accounts

21. OTHER MATTERS Open Bet –Level playing field Gambling machine –No such thing as a totalisator machine Standard for Gambling Premises –Understand timeline limitations

22. CONCLUSION We believe that a balanced regulatory environment, taking cognisance of all the above matters and based on rational national norms and standards, will be beneficial to all stakeholders.

23. CONCLUSION (Cont.) We believe that while regulation must be in the best interest of the public, measures aimed at protecting the public or any interest group must be supported by empirical research and not be arbitrary.

24. CONCLUSION (Cont.) This industry is a major contributor to employment, empowerment initiatives, the national and provincial fiscals and to the economy in general.

25. CONCLUSION (Cont.) We support measures aimed at effectively curbing any negative social effects of gambling.