Gambling sector is taking no chances with its future

With the bulk of the casino licences being awarded, there is now a shift towards stabilising the industry, and determining its future economic and developmental impact. Engineering News features reporter Laura Franz speaks to National Gaming Board chairperson Chris Fismer about the impact of such trends as Internet gambling Chris Fismer What are the latest developments in the South African gambling industry?

The focus has been on the process of shifting from the awarding of casino licences to other segments of the industry, particularly limited-payout machines – that is, machines based outside casinos – and also research into the requirements and regulations of Internet gambling. Both these sectors are less bricks-and-mortar and more electronics.

Not that the awarding of licences is no longer considered important. With the bulk of the licences being awarded, there has been a shift towards stabilising the industry, and determining its economic impact.

What has the gambling industry proved to be worth to South Africa in the past year? At this stage it is still difficult to determine what the value is, but this is broadly twofold.

Firstly, it is slowly but surely bringing an illegal industry under the umbrella of legalised gambling, which means control by the fiscus, and therefore the proper payment of taxes and levies, which was totally disregarded by the illegal industry. We have seen a far greater efficiency in tax collection in the country over the last few months.

Secondly, the building of casinos has boosted the construction industry in the short to medium term.

Other industries, such as information technology and electronics, have also benefited from the establishment of these new casinos with regard to gaming equipment.

As far as job creation is concerned, the question of how many new jobs are created by legalised gambling remains a debatable issue.

Yes, it creates jobs in the construction phase, and yes, it creates jobs with the establishment of the venue, but on the macro level the question has been asked as to whether the gambling industry takes away jobs from other centres in the leisure industry.

A new casino may take people away from an existing casino in an area. The board is in the process of researching the exact nature of this displacement. Overall, it is my impression that there is a positive effect in terms of job creation in the gambling sector, and that more jobs have been created than have been lost.

The pattern existed previously that we had mainly resort casinos which required that people travel, whereas the tendency is now that a casino has to survive within an area with a 50 km radius.

If one’s market is not within this area, then the casino will not survive.

This new pattern has been catered for by the right sizing of the projects, whereby investors have to be careful to determine what market they will have within that close proximity, and then size their projects in terms of that.

Unfortunately, one of the factors that worked against proper sizing was the competitive licensing process, whereby people were trying to create the impression that their bids were bigger and better than their competitors.

Bigger and better is not always in the long-term interest of a casino’s survival in that limited market, but there has been a more realistic approach from investors and provincial gaming boards in judging this criteria.

To date, how many of the 40 allotted licences have been awarded? More or less 20 of the licensed casinos are already up and running of the 30 licences that have been awarded. The remaining ten licences are in the process of being awarded.

It is hoped that, by the end of next year, 30 of the 40 licences will constitute casinos that are up and running.

Unfortunately, some of the provinces are way behind in terms of the process, and in some cases it is doubtful whether others will issue their full quota of licenses, including Gauteng, Mpumalanga, the Northern Province, and the Eastern Cape.

You have stated that the percentage of the population comprising a well-established gambling culture totals only 1%. Has this figure increased in any way in the last year? Research that is being conducted on our behalf consists of before-and-after baseline studies for casinos opening in particular provinces.

After a casino has been established, the study has to be conducted again some time further on, for behavioural patterns can, unfortunately, only be determined after a year or two.

The only province that has had a legal gambling industry established for a sufficient time is Mpumalanga, which has had three casinos operating for the last two years.

Although Gauteng’s industry has just been established, I am quite sure that there will be a higher percentage of people that gamble than there was before.

One already sees a substantial increase in the marketing of gambling products in Gauteng, because the gambling environment here is more competitive than any other province in the country.

Residents in this province can exercise a choice as to whether to go to the Sundome, Caesars, or Carnival City, because they are all more or less in the Johannesburg area.

The increase in the marketing of these casinos will definitely have an effect on the increase of the percentage of people spending some of their disposable income on gambling.

Does the target market comprise only that percentage of the population that can afford to gamble, and exclude the bulk that cannot? No, we can try and direct the market, but in the end you cannot regulate the market entirely.

What you can do is set broad parameters that will assist in this regard.

For example, the prevention of underage gambling. As most casinos are upmarket and expensive venues, they generally allow people with a certain standard of living to use the facilities.

Furthermore, even with the close proximity of casinos in Gauteng, it still requires travelling, and therefore you must be able to afford that kind of travelling.

One factor that interests the board in particular is the availability of credit on casino premises.

We are investigating the enforcement of stricter controls in this regard, because casinos should not grant credit to members of the public.

Even the availability of automatic teller machines on the premises could lead individuals to spend far more money on the spur of the moment than they had intended to.

What other issues is the National Gambling Board researching at present? Most of the studies in progress in the provinces are investigating the before-and-after effect of casinos.

The consumer analysis of people frequenting casinos; who goes there in terms of gender, age, income bracket, time of day, type of machines or tables preferred, and so on.

These results will eventually be made public, even though the casinos are already doing a lot of their own research in order to maximise their profits.

The aim with our research is to inform ourselves of the impact of gambling in so far as this information will affect future policy decisions.

The question as to whether there are any other regulatory restrictions that we should consider if there is a negative effect of gambling of any kind is one that is answered often by this research.

For instance, we are busy evaluating the marketing and advertising of casinos.

Is a stricter code of conduct necessary, perhaps in line with tobacco advertising, whereby consumers are warned about the negative effects of gambling? Casinos are quick to tell you how many millionaires have been made in the last month or so, but they omit the fact that some people have possibly been bankrupted during this time.

I am concerned about this, especially the situation in Gauteng, bearing in mind the intense competition going on here.

The board will not be making any policy decisions until we have some well-researched data on our hands, though.

How strictly is South Africa’s gambling industry legislated compared to the US or Europe, for example? It is more or less on a par with these countries, because most of the models that we have followed in the regulatory environment originate from the US, Western Europe, and Australia.

The US has had its first federal investigation into the gambling industry, indicating greater federal involvement in policy formation and stricter control.

Australia appears to have the most liberal environment with regard to gambling.

What are some of the considerations that the provincial boards take into account when awarding licences? The basic philosophy of the licensing process is that the government is providing an exclusive opportunity to an organisation to make a lot of money within a particular geographical area.

In return, the government requires a development commitment from the organisation.

Naturally, the government has considered all financial guarantees and the basic probity of the organisation.

The development contribution of the company would include the hotels, conference facilities, sporting facilities, and other entertainment facilities, but also other empowerment initiatives, such as the provision of jobs and the upliftment of employees.

What are some of the trends in the South African gambling industry? The gambling industry is an ever-changing and tremendously flexible market, especially in South Africa.

Lately, there has been a huge growth in Internet gambling, a phenomenon which has changed the gambling environment as we know it completely.

It offers a person a ‘virtual’ casino right in their living room, but how popular it will be in this country remains to be seen. The one thing we know for sure is that, since we cannot put a stop to it, we have to find ways and means of providing a level of consumer protection and consumer guarantees.

Governments could provide certain guarantees as to the standards of the gaming offered in exchange for a substantial fee to be paid by the operators. Until recently, consumers have been hesitant to participate in on-line gambling, but there has been a sudden increase in the acceptance of this form of gambling.

The certification of particular sites by the relevant gambling regulator seems to be the most significant factor in the public’s acceptance of Internet gambling.

There are already a number of South African Internet gambling sites up and running.

What is the board going to be focusing on in the next year? The top of the agenda at the moment is the introduction of limited-payout machines – an industry worth some R3-billion a year. A total of 50 000 machines will be distributed around the country in lots of five machines. These machines will be connected to a central electronic monitoring system that covers the whole country, and will be giving regulators, fiscus, and operators a proper handle on the industry.

Secondly, we will continue with the roll-out of casinos. Of importance is the issue of Internet gambling, which needs to be sorted out.

From there on, we will continue our research efforts in order to fine-tune and adapt the regulatory environment, and achieve our policy goals.


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