Gambling’s main players revealed their hands this week, but they’ll have to wait for the referee to call the game. Stefaans Brummer reports
WITH only a week left for submissions on the future of gambling, the main players are caught in a flurry of posturing and positioning to carve as large as possible a slice of the multibillion-rand industry.
This week the Southern Sun Group went public on a deal with a black business consortium to boost its bid for the limited number of casino licences expected to be issued next year, and a slanging match broke out between Southern Sun and its main rival, Sol Kerzner’s Sun International, with accusations of “monopoly” levelled in both directions.
Sun International, which has an effective monopoly on legal casinos with 18 licensed operations in the former TVBC states, says it, too, is talking to black groups about a possible joint venture. Curiously, the Gaming Consortium, the black group that has joined forces with Southern Sun, rejected earlier — reportedly lucrative – – offers from Sun International.
Meanwhile, a host of smaller players, including an estimated 1 500 “illegal” casinos countrywide, are standing impatiently on the sideline, waiting for the referee to level the playing field and call a new game.
The referee, in a sense, is Professor Nic Wiehahn, appointed chairman of the Lotteries and Gambling Board last month. The board is charged with making sense of the host of conflicting positions on gambling and will make recommendations to Justice Minister Dullah Omar.
Wiehahn this week said an “enormous quantity” of submissions had been received from individuals and institutions as diverse as churches, professional bodies, broadcasters and parastatals. “This reflects the strong feeling that the nation wants the thing in the clear, and wants order in the industry.”
The deadline for submissions to the board is September 30. Oral testimony is to be heard in October and November.
The board plans to submit an interim report to Omar on October 3 and a comprehensive report, including draft legislation, in January, Wiehahn said, adding that the industry’s sheer size and possible benefits to the economy warranted thorough investigation. Rough estimates indicate an annual turnover of R20-billion to R30-billion and 80 000 to 100 000 jobs created directly and indirectly.
The announcement by Southern Sun and the Gaming Consortium — a partnership between the National African Federated Chamber of Commerce (Nafcoc) and the Foundation for African Business and Consumer Services (Fabcos) — may be regarded as something of a masterstroke in the race for a sizeable share of that turnover. Their war cry — “black economic empowerment” — is almost certain to raise the sympathies of the new government.
Nafcoc president Joe Hlongwane said: “This partnership is not about enriching a few black individuals; it will bring about black economic empowerment to its fullest extent.”
Fabcos secretary general Joas Mogale said equity and revenue earned from the partnership would be held in trust for the benefit of consortium members and, hopefully, the trade union movement.
“Bringing in organised labour will increase their independence and reduce their reliance on foreign and state funding. This trust fund will also enable us to provide real benefits to disadvantaged communities.”
A spokesman for the trade union federation Cosatu, involved in earlier discussions with the Gaming Consortium, said it was “unlikely” Cosatu would join because gambling was a speculative, rather than productive, industry and was not consistent with reconstuction and development aims. It is understood, however, that Cosatu’s investment arm, the Cosatu Holding Company, may still consider joining the venture.
Southern Sun and the Gaming Consortium will form a Casino Holding Company, with equal shareholding by both groups. It will apply for casino licences nationally. A Casino Management Company, also with equal shareholding, will be formed to harness specialised casino expertise, while a property company will be set up by Southern Sun to finance the facilities and lease them to the joint venture. The Gaming Consortium will later be able to buy into the property company, using profits from the venture.
A source close to the Gaming Consortium said it had had earlier discussions with Sun International, but there had always been negotiations on at least two fronts.
He said the consortium never took the Sun International proposition seriously, as the company had been considered unlikely to get many casino licences in addition to the 18 it already held.
But the fact that the consortium had been negotiating with Sun International strengthened its bargaining position with Southern Sun, he added. “It was not just a sham, but in reality the value for the consortium lay in Southern Sun. It was a sound commercial decision.”
Southern Sun chief executive Ron Stringfellow went on the offensive against Sun International this week, saying his group wanted a “levelling of the playing field”.
He charged that despite Sun International’s insistence that new licences be awarded only to “reputable” companies with casinos linked to tourist resorts, only three of Sun International’s operations — Sun City, the Wild Coast Sun and the Fish River Sun — complied fully with those criteria.
Sun International MD Peter Bacon struck back, saying Stringfellow’s comments were “remarkable” as Southern Sun was owned by the “monopoly” South African Breweries and because Stringfellow, who also served on the board of Sun International, had a conflict of interest.
Bacon said his company was not a monopoly as it had to compete against about 1 500 “illegals. We’ve invested substantial amounts of money in the tourism industry and marketed South Africa around the world. We’ve done a lot more than Southern Sun has in this particular area.”
He said he was “not unduly concerned” by the competition, and that he was also talking to black groups. He would not name them.
The battle lines are drawn over who will get what slice of the cake, but just how big the cake will be when new legislation is introduced next year remains to be seen. Wiehahn emphasised that the board had taken no position yet. It was not tied to the findings of the Howard Commission, which in March last year recommended that only 10 casino licences be awarded countrywide.