Justin Pearce
MPUMALANGA launched its provincial gaming board on Wednesday, putting itself months ahead of the other provinces.
The result is Mpumalanga expects to issue its first casino licences by March next year, says Andre Wilsenach, the board’s chief executive.
Most other provinces are talking of issuing licences in the first half of next year, but are going to have to move fast to catch up with Mpumalanga.
Wilsenach outlined the province’s plan which is likely to be the blueprint for how other provinces set about issuing casino licences: from this week, the board will invite proposals from prospective investors. Investors are certain to be consortiums which will be able to show experience in the gambling business as well as a measure of black South African investment and a commitment to community development above plain profiteering, in line with the national act.
The provincial board will assess the first round of proposals on the basis of financial viability and the experience of the investors, eliminating some and asking others to submit more detailed proposals. >From this shortlist will be chosen the preferred investors, who will be subjected to a thorough probity investigation before being granted the licences.
Wilsenach says the province will let the market determine where the province’s four casinos are to be sited. To ensure a spread of casinos around Mpuma-langa, the province has been divided into four zones, and one licence will be issued in each.
In addition to large casinos, the national act provides for licences to be issued to smaller operators, for example someone who wants to have a few gaming machines in a bar. Mpumalanga is to deal with these licences only after the licencing process for casinos is well under way.
The Constitution puts control over gambling in the hands of the provinces. Central government legislation provides a framework in which the provinces may operate, allocating 40 gambling licences to the various provinces. It is up to each province to pass legislation on how the industry will be regulated within its borders.
The original worthy recommendation of the Wiehahn report on the casino industry, that the bulk of the licences be granted to the poorer provinces, has given way to hard economics, with wealthy Gauteng getting six licences, more than any other province. The Western and Eastern Cape, KwaZulu-Natal and the North West have five each; the Free State and Mpumalanga four; and the Northern Cape and Northern Province three licences each.
But according to a report by researchers at Ernst and Young, casino revenue is still going to be much more thinly spread in the poorer provinces. For instance, the Northern Cape, with three out of 40 casinos, is likely to account for only 1% of South Africa’s gambling revenue, while Gauteng with its six casinos will account for 47% of revenue.
The regulated environment for gambling in South Africa has been welcomed by foreign investors. Christian Neuberger of Casinos Austria said “the solid legal framework in South Africa” with its checks against corruption provided confidence for investors which was often lacking in African countries. The need to bring local investors on board was not a deterrent, Neuberger said, since it is normal for foreign investors in the gaming industry to form local partnerships.
He warned though that “the closing down of illegal casinos is a basic requirement” for the success of the legal casino industry. Up to now the police in the various provinces have taken an inconsistent approach to illegal casinos. There are estimated to be 70 000 gaming machines in illegal casinos nationwide, concentrated mostly in the large cities. One problem has been the doubtful constitutional status of provisions in the old Gambling and Lotteries Act, which grants sweeping powers of arrest and prosecution against anyone found on premises where gambling is taking place.
In the Witwatersrand Supreme Court this week, the Gaming Association of South Africa, which represents the illegal casino operators, argued Gauteng casinos should be allowed to continue operating until the passing of provincial gambling laws will give them a chance to go legal.
As the provinces pass their legislation, the war on illegals is likely to become a priority. KwaZulu- Natal’s act already provides for a 10-year prison sentence without the option of a fine for an unlicenced casino operator who does not shut up shop after a 30-day warning.