Developers are taking a gamble on casino licences

The chips are piling up as players go for the really big one—casino complexes on our doorsteps. Although the Gambling Board, which will draw up new legislation, has not yet been appointed, investors are already placing their bets, spending vast sums and clinching deals for proposed casino complexes.

Sun International boss Sol Kerzner has wasted no time in acquainting himself with Eastern Transvaal premier Matthew Phosa.
A R400-million development including a casino, which will turn Middelburg and Witbank into one enormous metropole and provide a stop-over for holiday- makers en route to the Kruger Park, is in the offing.

Further developments proposed by the Sun King means the fun won’t stop there. A casino development is also proposed for Hazyview, right on the game parks doorstep. Phosa says the Waterval Boven town council is negotiating with another company for the establishment of a casino there. And Gallagher Estates in Midrand may at last draw the crowds and fill its wasted spaces if a proposed casino goes ahead.

If the Three Cities Hotels group has its way, Johannesburg’s Carlton Centre will soon be bursting with slot machines. The group has come up with an ambitious development plan which includes an enormous conference centre in the Skyrink building upgrading of the Carlton Hotel, a casino with some 800 slot machines and 40 gaming tables and a skybridge linking everything together.

The proposal is sitting with the Justice Department, which has yet to appoint the Lotteriess and Gambling Board. In terms of the Lotteries and Gambling Board Act of 1993, which will come into effect when the government decides the time is right a board will set up to draw up new legislation and regulate the industry.

The regions will, in terms of the constitution, have the power to issue gambling licences, but the board will lay down criteria for them. It will be up to the regions to determine whether contenders comply with the criteria.

The board will comprise a chairman—rumoured to be Professor “Sas” Strauss, who played a pivotal role in the Howard Commission which made recommendations to the government on newgambling legislation—officers from the finance, justice, health and welfare departments; a representative from each region; and six others with experience in business, social welfare and development.

The Justice Department is under strong pressure to get moving on the issue. According to one source, Justice Minister Dullah Omar wants “nothing to do with gambling”, and has handed the hot potato to his deputy, Chris Fismer. Meanwhile, shady small-time gambling operations are springing up everywhere and will not be easy to close down.

But according to gambling expert and attorney Grant Kaplan, all the horse-trading and public statements about proposed casinos “is totally out of line. Regions are nowhere near ready to legislate in terms of gambling”. In his view, regional governments are naive about the gambling industry, and a much broader national picture needs to be sketched before local deals are clinched.

“Things are very unclear at this stage. I’m not saying don’t plan, but just don’t expect to get licences.” The scenario was a complex one, Kaplan said. Furthermore, there was the problem of foreigners. “Big international investors are just waiting to come in. There will be a financial rape of the country, and at this point there is no protection against this.”

Phosa counters, however, that Kaplan “should not be so arrogant. We are fully aware of all the procedures, and I have followed the Howard Commission closely.” He had already held discussions with PWV Premier Tokyo Sexwale on co-ordinating efforts to attract tourists. “Such co-operation must take place among all regions,” Phosa said.

“It is up to the national players to set the norms and standards, but in the meantime we must prepare. We have to show vision in the tourism industry.” Stringent conditions for investment prescribed by the Reconstruction and Development Programme—such as the participation oflocal business people, the creation of jobs and social upliftment programmes—would guard against the exploitation of the country by foreign investors, says Phosa.

Gambling investors were criticised recently in Finance Week for “holding a gun to the head of government” by waving development projects as a carrot for gambling licences and for tarnishing city centres with gaming halls. Three Cities Hotels chairman Russell Stevens, who described the casino part of the proposed Carlton Centre development as a “second string to the bow, but an important one” in relation to the proposed conference centre, defended the proposal.

“It is highly unlikely that Johannesburg could have a conference centre of that order unless there was a casino,” he said. He defended controlled gambling facilities in metropolitan areas. “The man on the street cannot afford to travel to luxury resorts 100km out of town. People should have the right to gamble where they want to.”

Sol no longer the sole operator
The game will still be up for both the elephant and the ants of the gambling industry. Regions will soon have the power to grant licences to investors queuing up to offer the best deal, and Sun International will lose its monopoly. Similarly, small-time operations will no longer be able to justify their existence by finding yet more loopholes in the soon-to-be repaced Gambling Act of 1965. Now they will need licences.

According to Eastern Transvaal premier Matthew Phosa, Sun International will have to stay on its toes if it wants to land the proposed Witbank-Middelburg deal. Although negotiations with Sol Kerzner were progressing well, “competition is very, very stiff”, said Phosa.

“There are many others who want to come in, particularly international companies. Already some Austrians have come with a counter-proposal. And after all, this is a free enterprise system and we should open up. If others come with a better offer, we’ll listen.

Attorney Grant Kaplan adds: “Sun International has big trouble on its hands. As soon as the new legislation is in place, they ‘ll have to compete along with everyone else.” While novelties such as dog racingn and bingo halls were likely to become a feature of the new South Africa, most small-time private casinos, which brought in an estimated R100-million. were likely to go under, Kaplan predicted.

Although legislation could provide for the smaller players to form syndicates and to be granted licences, most licences would go to “the bigger guys, like Karos Hotels”, he said. Three Cities Hotels Russell Stevens argued against the blanket granting of licences to small-time operators. “If you give to one, you must give to everyone. This would make tax-collection very expensive.

Furthermore, the criminality that develops from small-time operations is a known fact. “In bidding for licences, people should be able to offer investment that generates revenue which can be taxed by the state. The development should attract tourism and have a beneficial effect on the community.”

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