The David Gleason Column
South Africa is regularly castigated in financial and commercial circles as being a country which pays scant regard to the essential processes of good corporate governance.
We are too often oblique, it is said, when it comes to reporting frankly and truthfully and we pay lip service to consistent transparency.
So I was really fascinated when someone (who has an axe to grind, of course, which means I must step with caution) drops on my desk the annual report of an United States-based company seeking to do big business here.
The company is Century Casinos, registered in Denver, Colorado, and listed on Nasdaq (which means it has successfully traversed the hoops and jumps of the much-feared US Securities and Exchange Commission).
Century is a comparatively modest owner and operator of casinos. Over calendar 1998 it produced a net profit of $1,9-million (off revenue of $19,5-million and a capital base excluding goodwill of $19,4-million).
But what particularly demands attention is the bullish view taken by its executives of the company’s prospects in South Africa. And I have to take issue with its portrayal of events here on at least two counts.
First off, Century is involved as the putative operator of a casino to be developed and operated by a local company called Silverstar (if, that is, Silverstar succeeds in efforts to acquire a casino licence (see The David Gleason Column, July 2 to 8).
Rhino Ramada was awarded the sixth and last licence to be issued by the Gauteng Gambling and Betting Board. This came at the end of a long argument between the board and the Gauteng Executive Council, whose job it is to approve (or reject) the board’s findings.
When the council finally “concurred”, Silverstar went to court. The judge found he couldn’t fault the board’s processes but also couldn’t understand how the executive, whose own minutes revealed a distinct bias towards Silverstar, suddenly made the jump to concur with the board’s recommendation in favour of Rhino. He required a rethink.
At its very last meeting, the old executive promptly changed its collective mind. What this means is that, more than three years after the process began, the sixth Gauteng licence remains unissued. And what you can be sure of is that Rhino will now go back to the courts and the legal game will be on again.
But this leaves begging the issue of Silverstar. If Rhino falls out (perhaps, in the end, because of problems associated with its proximity to the famous Sterkfontein Caves), does that mean Silverstar gets the licence?
Century thinks so. It told shareholders through its annual report that “Silverstar is optimistic that its application will now be given proper consideration”.
Apart from implying that everything that’s happened up to now was improper, it also thinly suggests that Silverstar is home and dry.
But is it? Not according to the gaming board’s chief executive Jacques Booysen.
Asked to respond, Booysen bluntly describes the Century view as a “misstatement”.
He added: “Silverstar’s application isn’t on the table.”
So what seems to stretch out now is a lot more litigation. Rhino will seek to take the council on review. If it loses, it will probably go to the Appeal Court. When that’s over (18 months or more?), it may still be that the board can’t issue the licence.
Its choice then is between shelving it or inviting a completely new round of tenders from all parties.
Century’s man in South Africa, executive director James Forbes, disagrees.
He contends that the board has already set a precedent by reversing an earlier decision (to award a licence in Pretoria) to fall in line with the view propounded by the executive. If it can do it once, it can do it again, says Forbes.
“What this proves,” he adds, “is that the process is dynamic not static. There’s neither justification for cancelling the award (of the sixth licence) or putting it out to open tender.”
Century’s second involvement in this country is in the Northern Province where the annual report says: “In addition, Century has been selected as the casino management company for a proposed development in Pietersburg . authorities have given no indication when the licences for this province will be awarded.”
But what the report doesn’t say is that the preferred bidder, announced last year by the Northern Province Gaming Board, was the Thobela consortium. Century’s involvement is instead with Great North Resorts which has instituted legal action against the board.
I’m not sure where all this leaves Century. Certainly not in the optimistic position portrayed by its managers.
It is involved in a lot of litigation, all of which comes on top of the R15-million which Forbes says it has spent in this country.
Perhaps it is just Century’s misfortune to be at the cutting edge of ground-breaking judicial findings.
But it doesn’t look as though its shareholders will get a quick return for its efforts.