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1CURRENT STATUS OF TRANSFORMATION AND GROWTH IN THE GAMBLING INDUSTRY 2020 |

CURRENT STATUS OF TRANSFORMATION AND GROWTH IN THE SOUTH AFRICAN GAMBLING INDUSTRY


CURRENT STATUS OF TRANSFORMATION AND GROWTH IN THE SOUTH

AFRICAN GAMBLING INDUSTRY

Research ReportDate: March 2020

4 | CURRENT STATUS OF TRANSFORMATION AND GROWTH IN THE GAMBLING INDUSTRY 2020

TABLE OF CONTENTS

Abbreviations ................................................................................................................................................ Iii

Explanatory Notes ......................................................................................................................................... Iv

Chapter 1 : Introduction ................................................................................................................................. 1

1.1 Introduction ....................................................................................................................................................1

1.2 StudyRationaleandObjectives ......................................................................................................................2

1.3 ResearchDesign ..............................................................................................................................................3

1.4 MethodologicalApproach ..............................................................................................................................4

1.5 LimitationsoftheStudy ..................................................................................................................................6

1.6 ReportOutline ................................................................................................................................................7

Chapter 2 : Policy Rationale ............................................................................................................................ 8

2.1 TheConstitutionoftheRepublicOfSouthAfrica,1996(108of1996) .........................................................8

2.2 NationalGamblingAct,2004(7Of2004) ......................................................................................................8

2.3 TheBroad-BasedBlackEconomicEmpowermentAct(B-BBEE)andCodesofGoodPractice .....................9

2.4 ThePromotionofEqualityandPreventionofUnfairDiscriminationAmendmentAct,2002 (Act52of2002) ............................................................................................................................................12

2.5 TheCompetitionAct,1998(Act89of1998) ...............................................................................................13

2.6 NationalGamblingPolicy,2016 ....................................................................................................................13

2.7 NationalGamblingAmendmentBill,2018 ...................................................................................................14

2.8 EmploymentEquityAct,1998(Act55of1998) ...........................................................................................15

Chapter 3 : Economic Participation and Transformation in the South African Gambling Industry ................... 16

3.1 Introduction ..................................................................................................................................................16

3.2 DefiningTransformation ...............................................................................................................................16

3.3 TransformationinTermsofShareholding/Ownership .................................................................................18

3.4 TransformationinTermsofEmploymentEquity ..........................................................................................44

Chapter 4 : Qualitative Analysis .................................................................................................................... 59

4.1 TransformationPolicies/StrategiesandEnforcementMeasures .................................................................59

4.2 TransformationConditionsperGamblingMode ..........................................................................................59

4.3 StatusofTransformation...............................................................................................................................61

4.4 ChallengesPreventingIndustryTransformation ..........................................................................................62

4.5 RoleofPLA’sInIndustryTransformation ......................................................................................................62

4.6 RoleofNGBinIndustryTransformation .......................................................................................................62

4.7 RoleofLicenseesinIndustryTransformation ..............................................................................................62

4.8 BenefitsofTransformation ...........................................................................................................................63

4.9 CompliancewithTransformation/BBBEELegislation ...................................................................................63


4.10MeasurestoEncourageHDIParticipationintheGamblingIndustry ..........................................................63

4.11ChallengesImpedingIndustryGrowththroughTransformation .................................................................63

4.12BarrierstoEntryforHDIParticipation ..........................................................................................................64

4.13PotentialMeasuresstoStimulateEconomicParticipationofHDI’sintheGamblingIndustry ...................64

4.14ConcludingRemarks .....................................................................................................................................65

Chapter 5 : Economic Contribution of the Gambling Industry ........................................................................ 66

5.1 Introduction ..................................................................................................................................................66

5.2 OverallGamblingIndustry ............................................................................................................................66

5.3 CasinoSector ................................................................................................................................................66

5.4 BettingonSportandHorseracingSector .....................................................................................................67

5.5 LPMSector ....................................................................................................................................................67

5.6 BingoSector ..................................................................................................................................................68

5.7 MultiplierCalculations ..................................................................................................................................69

Chapter 6 : Case Studies ............................................................................................................................... 70

6.1 Introduction ..................................................................................................................................................70

6.2 Broad-BasedBlackSocio-EconomicEmpowermentCharterfortheSouthAfricanMining andMineralsIndustry,2017 .........................................................................................................................70

6.3 TourismB-BBEESectorCode,2015 ..............................................................................................................75

6.3 Findings .........................................................................................................................................................81

Chapter 7 : Concluding Remarks and Recommendations ............................................................................... 83

7.1 Introduction ..................................................................................................................................................83

7.2 SummaryofFindings ....................................................................................................................................83

7.3 ConcludingRemarksandRecommendations ...............................................................................................89


ABBREVIATIONS

B-BBEE Broad-BasedBlackEconomicEmpowerment

EBTs ElectronicBingoTerminals

EC EasternCape

FS FreeState

FY FinancialYear

GDP GrossDomesticProduct

GGR GrossGamblingRevenue

GIS GeographicInformationSystems

GP Gauteng

KZN KwaZulu-Natal

L Limpopo

LPM LimitedPayoutMachine

MP Mpumalanga

NC NorthernCape

NCEMS NationalCentralElectronicMonitoringSystem

NGA NationalGamblingAct

NGB NationalGamblingBoard

NW NorthWest

PLAs ProvincialLicensingAuthorities

Qrt Quarter

RO RouteOperator

RTP ReturntoPlayer

SA SouthAfrica

SO SiteOperator

the dtic TheDepartmentofTrade,IndustryandCompetition

TO Turnover

WC WesternCape


EXPLANATORYNOTES

TERM EXPLANATION

Broad-Based Black Economic Empowerment (B-BBEE)

Broad-BasedBlackEconomicEmpowerment isthesustainableeconomicempowermentofallBlackpeople

Bingo Bingomeansagameplayedinwholeorinpartbyelectronicmeansthatisplayedusingcardsorotherdevices;thataredividedintospaceseachofwhichbearsadifferentnumber,pictureorsymbol;andwhicharearrangedrandomlysuchthateachcardorsimilardevicecontainsauniquesetofnumbers,picturesorsymbols;inwhichanoperatorcallsordisplaysaseriesofnumbers,picturesofsymbolsinrandomorderandtheplayersmatcheachsuchnumber,pictureorsymbolonthecardordeviceasitiscalledordisplayed;andtheplayerwhoisfirsttomatchallthespacesonthecardordevice,orwhomatchesaspecifiedsetonnumbers,pictureorsymbolsonthecardordevice,winsaprize.

Black people AgenerictermwhichmeansAfricans,ColouredsandIndians-(a) whoarecitizensoftheRepublicofSouthAfricabybirthordescent;or(b) whobecamecitizensoftheRepublicofSouthAfricabynaturalisation-

i. before27April1994;orii. onorafter27April1994andwhowouldhavebeenentitledtoacquirecitizenship

bynaturalisationpriortothatdate.

Bookmaker Abookmaker, bookie or turf accountant is a personor organization that takes bets onvariouseventsorcontingenciessuchashorseracing,football,rugbyunionormarriages,births,names,divorcesandeveninextremecasesdeath,etc.atagreeduponodds(fixedodds). A bookmaker may be licensed to operate on or off-course, that is at licensedpremises,otherthanaracecourse.

Casino Acasinoisafacilitywhichislicensedtohouseoraccommodatecertaintypesoflicensedcasinostyleslotsandtablegamblinggames.

Employment (direct) Key(licensed)andothergaming(licensed)employees

Gambling machine/ slot machine (used interchangeably)

Aslotmachine, informallyknownasafruitmachine, isacasinogamblingmachinewiththree ormore reels which spin when a button is pushed or a handle is pulled (oldermechanicaltypes).Theseslotmachinesarealsoknownasone-armedbanditsbecauseoftheoneleveronthesideofthemachine(thearm)andbecauseoftheirabilitytoleavethegamerpenniless(bandit).Themachinepaysoffbasedonpatternsofsymbolsvisibleonthefrontofthemachinewhenitstops.Slotmachinesarethemostpopulargamblingmethodincasinosandconstituteabout80%oftheaveragecasino’sincome.

Gross Gambling Revenue (GGR)

GrossGamblingRevenueisdefinedastheRandvalueofthegrossrevenueofanoperatorintermsofturnoverlesswinningspaidtoplayers.


TERM EXPLANATION

Historically Disadvantaged Individual (HDI)

ASouthAfricancitizen-(a) who,duetotheapartheidpolicythathadbeeninplace,hadnofranchiseinnational

elections,priortotheintroductionoftheConstitutionoftheRepublicofSouthAfrica,1983(ActNo110of1983)ortheConstitutionoftheRepublicofSouthAfrica,1993(ActNo200of1993)('theInterimConstitution");and/or

(b) whoisafemale;and/or(c) whohasadisability:ProvidedthatapersonwhoobtainedSouthAfricancitizenshiponorafterthecomingtoeffectoftheInterimConstitution,isdeemednottobeanHDI.

Horse racing Horseracingisthesportinwhichhorsesandtheirridestakepartinraces,typicallywithsubstantialbettingontheoutcome.

Licensed (all modes and outlets)

Licensediswhenapersonorcompanyisinpossessionofavalidlicense,registrationcardor certificate allowing him/them to offer approved gambling activities within licensedpremisestoover18yearoldpersons.

Limited Payout Machine (LPM)

Limitedpayoutmachinesmeansagamblingmachine/slotmachineoutsideofacasinoinrespectoftheplayingofwhichthestakesandprizesarelimited.

Route Operator (RO) RouteOperator is a juristic personwhich is licensed to ownor operate limited payoutmachines,maintainandeffectthecollectionofmoneyandpayingoftaxesandleviesinrespectofallmachinesunderitslicense.

Site Operator (SO) SiteOperatorisanaturalorjuristicpersonlicensedtomanagelimitedpayoutmachinesownedbyarouteoperatoronhislicensedpremises(alsoknownasasite)andtomakethemavailabletobeplayedbymembersofthepublic.

Table game In casinos, the term table game is used to distinguish games such as blackjack, craps,rouletteandbaccaratthatareplayedonatableandoperatedbyoneormorelivedealerslikeacroupierorpokerdealer.

Taxes/levies GamblingtaxleviedbyandcollectedbyProvincialLicensingAuthorities

Totalisator/ Pari-Mutuel betting (used interchangeably)

Totalisator is the name for the automated pool betting systemwhich runs pari-mutuelbetting,calculatingpayoffodds,displayingthem,andproducingticketsbasedonincomingbets.Pari-mutuelbetting isabettingsystem inwhichallbetsofaparticular typeareplacedtogetherinapool;taxesandthe“house-take”areremoved,andpayoffoddsarecalculatedbysharingthenetpoolamongallthewinningbets.

Turnover (TO) Turnover is the randvalueofmoneywagered.This includes“recycling”whichrefers toamountsthatarestakedonmorethanoneoccasion.“TO”inthefixedodds/bookmakingenvironment is,however,different fromother formsofgambling in that theamountofmoneycrossingthetableisNOTseenasturnover,becausetheamountofmoneystaked/wagered/betonaneventisreturnedtotheplayershouldtheplayerwinthewager/bet,soatruedescriptionofturnoverinfixedodds/bookmakingparlanceismoneywageredminusthestakeswageredonwinningbets=fixedodds/bookmakingturnover.


CHAPTER 1

INTRODUCTION

1.1 INTRODUCTIONSince the inception of democracy in 1994, the maineconomic objectives of government have been jobcreation, the elimination of poverty and the reductionof inequality. In an effort to address these inequalitiesandtodriveeconomictransformation,theSouthAfricangovernmentembarkedonacomprehensiveprogrammetoprovidealegislativeframeworkforthetransformationof South Africa’s economy. In 2003, the Broad-BasedBlack Economic Empowerment (B-BBEE) Strategy waspublished as a precursor to the B-BBEE Act, No. 53 of2003.ThefundamentalobjectiveoftheActistoadvanceeconomic transformation and enhance the economicparticipation of black people in the South Africaneconomy. The Act provides a legislative framework forthe promotion of B-BBEE, empowering theMinister ofTradeandIndustrytoissueCodesofGoodPracticeandpublishTransformationCharters,andpavingthewayfortheestablishmentoftheB-BBEEAdvisoryCouncil.

InMay2015,theCodesofGoodPracticewasamended,reducing the number of compliance elements tofive, namely ownership, management control, skillsdevelopment, enterprise and supplier developmentandsocio-economicdevelopment.Theamendedcodesfurther identify priority elements on which companiesshouldconcentrate:ownership, skills development and enterprise and supplier development.

A B-BBEE scorecard was issued as a Code of GoodPracticeintermsoftheforthcomingenablinglegislation.Thecodeallowsforameasureofflexibilityinorderthatit can be adapted to the particular circumstances ofspecific sectors or enterprises,while at the same timebringingameasureof standardisation to thedefinitionandmeasurementofBEE.Inparticular,itisthemandateof government to apply BEE criteria, as set out in thescorecard,wheneverit:

• grants a licence to engage in a specific regulatedeconomicactivity,forexample,gamblingormining

• grants a concession to a private enterprise tooperate an asset or enterprise on behalf of thestate

• sellsanassetorastate-ownedenterprise• entersintoapublic-privatepartnership• engagesinanyeconomicactivity

In a 2002 report by TIPS (Trade and Industry PolicyStrategies)titled“TheChallengeofTransformationwithinthe Regulatory Environment of the Gambling IndustryThe Role within the Southern African Environment” itwasstatedthatanumberofparticipants(andso-calledbeneficiaries of the economic empowerment agenda)at the National Gambling Conference in 2002 statedveryclearlythatempowermentfailedwithinthegamingindustryandthatparticipationinthemainstreamoftheindustry remain limited and sparse. The challenges ofskills, technology and high capital investments forcedmostofthekeyrole-playerstobefromtheglobalarenawith lesserparticipationof localplayers in the industrythrough the empowerment initiatives. This conferencewas however hosted before the 2003 B-BBEE Act and2007 Codes of Good Practicewere published and thatnotable changes have been effected in the gamingindustryoverthepast18years.

Thedriversofaregion/industry’seconomictransformationcan be very diverse, and can include, amongst others,improved governance, strong economic growth,employmentexpansion(directandindirect),stronglocalandforeigninvestment,andpolicyreformsundertakeninearlystagesoftransformation.

In an extract from National Treasury’s 2017 BudgetReview,itisstatedthat“Growthwithouttransformationwouldonlyreinforcetheinequitablepatternsofwealthinherited from the past. Transformation withouteconomic growthwould be narrow and unsustainable.Government’s objective is not merely to transferownershipofassetsoropportunitiestocontractwiththestate:itistochangethestructureoftheeconomy.Broad-basedtransformationshouldpromotegrowth,mobiliseinvestment, create jobs and empower citizens. Itmustcreatenewresourcestosupportsocialchange,includingassets and livelihoods for themajority, and strengthenSouthAfrica’sconstitutionalfoundations.”

The above relates to transformation in general andwas not aimed specifically at the gambling industry. Itwouldneverthelessbeimportanttoconsiderthedriversof growth in the gambling industry. It is on this basisthat it is important to understand what drives growthin the gambling market. A holistic understanding oftransformationandgrowthwithintheexistingregulated


modesofgamblinghasnotbeenassessedintermsoftheCodesofGoodPractice.

1.2 STUDY RATIONALE AND OBJECTIVES

The rationale for the study is to ultimately advise theMinister on the current status in the South AfricanGambling Industry in termsof Transformation (B-BBEE,inclusive of growth (continuous improvement in sector of gambling mode productivity), shareholding andemployment.Themainaimoftheresearchistodetermineorreflectthecurrentstatusintermsofeconomicgrowth,transformationandeconomicparticipationofHistoricallyDisadvantaged Individuals (HDI’s) and women in theSouth African gambling industry (excluding NationalLottery).

Thepurposeofthisreport istoassisttheNGBandtheMinisterofTradeandIndustrytounderstandthecurrentsituationwithintheSouthAfricanGambling Industry intermsoftransformation(inclusiveofgrowth).Ultimately,thisreportisaimedataddressingthefollowingaspects:

1. Determine the current shareholding in terms oflicensedoperators–allregulatedmodes,includingmanufacturing and testing laboratory operations,impact of mergers and acquisitions within thegambling industry and identify possible dominantroleplayersandpractices;

2. Determine the current economic benefit to HDIlicensees/HDIoperators/HDIowners;

3. Determine the current levels of transformationin terms of B-BBEE contributor levels from 2000to the promulgation of the B-BBEE Act in 2003and reaching of set targets based on the sectoragreementtoreachlevel2by2015(i.e.whatentitieshaveendeavouredtocomplytotheserequirementsandwhatwerethechallenges,alsoconsideringthefuture taking into account the amended B-BBEEcodes and identification of licensees who arecomplying or not, and what are the challenges,takingintoaccounttherequirementsofB-BBEEActandCodesofGoodPractice,theNGASection45(2)(b)(ii)andSection53(1)(a)(i);

4. Determine the current economic participationof HDI’s and women in the regulated gamblingindustry;

5. Determine barriers to entry into the gamblingindustry (gambling operators, manufacturers andtesting laboratory operations – as referred toabove);and

6. Determine current contribution to the GrossDomestic Product (GDP) with years of interestspecified (FY2000/01 to FY2017/18), and formalemploymentpositionsbrokendownasfollows:

- Total direct employment includingemploymentmultiplierspermode(e.g.directjobsperRand spentat thevariouselementsofthehorseracingvaluechainfrombreeding,training, courses, operators, governance,breeding,betting,bookmakers),

- Indirecttotalemployment,and- Taxes and contribution todirect and indirect

householdincome.

1.3 RESEARCH DESIGNAs emphasised by the background information andstudy rationale, the current status of transformationandinclusivegrowthwithintheSouthAfricanGamblingIndustryremainsunknown.Broad-BasedBlackEconomicEmpowerment (B-BBEE) isaneconomicandastrategicobjective of the South African Government. However,the gambling industry, to date, does not have its owntransformation charter or industry code, and gamblingoperators are thus measured in terms of the GenericScorecardandCodesofGoodPracticeaspublishedbythe dtic. TheNGB thusmonitors the industryperformancein terms of contributor levels for each province pergamblingmode,basedontheinformationsubmittedbythePLAs.

Even though it was previously stated at the 2002National Gambling Conference that the industry wasnotconsideredtobetransformedatthatpointintime,thisstatementhasnotbeenofficiallytestedandrevisedin the interim. And it is on this basis that the primaryobjectiveoftheinvestigationistomeasuretheextenttowhich the gambling industry has transformed over thepast18years.

For thepurposesof thisstudy,and inkeepingwiththestudyobjectives,transformationinthegamblingindustrywill bemeasured on (a) the inclusion of black people1 1 Africans,ColouredsandIndians-(a)whoarecitizensoftheRepublic

ofSouthAfricabybirthordescent;or(b)whobecamecitizensoftheRepublicofSouthAfricabynaturalisation-before27April1994;oronorafter27April1994andwhowouldhavebeenentitledtoacquirecitizenshipbynaturalisationpriortothatdate.


in ownership/shareholding structures of entities; and(b) on the participation of black people1 inmanagerialoccupationlevels.

The key research questions that need to be addressedare:

• Hasthegamblingindustrytransformed?• Towhatextentareblackpeople1benefittingfrom

shareholding and ownership in the gamblingindustry?(i.e.ownership)

• Towhatextentdoblackpeople1participateinthegambling industry? (i.e. economic empowermentandemploymentequity)?

• Does the gambling industry adhere and conformto the current B-BBEE Act and Codes of GoodPractice?

• Giventheoutcomeof theabove,howshouldtheNGBideallyrespond?

1.4 METHODOLOGICAL APPROACHThisreportissubmittedasthefinaldeliverableinafive-phasedapproach(seefigure).

This report consitutes a final comprehensive researchreport which includes aspects from the first fourdeliverablereports.

Figure 1.1: Methodological approach

STEP 1: PROJECT INITIATION

PHAS

E 1

Inception/preliminary

workshop

• Preliminaryworkshopandfinalisationofresearchproposal,studyobjectivesandgoalsandprojectplan• Obtainsecondarydatasourcesandcontactetailsofstakeholders• Investigatedataavailiability,andfeasibilityofdatacollectionmethodologiesDeliverable: Inception Report with Updated Project Plan

STEP 2: GAMBLING INDUSTRY STATUS QUO

PHAS

E 2

• Desktopresearchandliteraturereview:Reviewavailablesecondaryinformationandwhereapplicableverifywith/obtainfromPLAs

• QualititativeandQuantitativeresearch:Interviewswithkeystakeholdersandarepresentativesampleoflicensees/operators/owners

Deliverable: Status Quo Report

STEP 3: ECONOMIC ANALYSIS

PHAS

E 3

Interviews w

ith PLAs &

key stakeholders

• QualitativeandQuantitativeanalysisofobjectives(growthandtransformation)andunintendedimpacts• Determinethechallengesfacedbythegamblingindustry• ForecastingandmodellingoffutureestimatesandexpectationsDeliverable: Draft Economic Analysis Report

STEP 4: ANALYSIS REPORT & RECOMMENDATIONS

PHAS

E 4

• Consolidatestatusquoandimpactanalysisreports• Summariseoverallanalysisandprovideconclusivefindings• RecommendationsDeliverable: Draft Comprehensive Research Report

STEP 5: STAKEHOLDER WORKSHOP

PHAS

E 5

Stakeholder w

orkshop• Presentfindingsandrecommendationstostakeholdertoobtainfinalinputandcomments

STEP 6: REPORT FINALISATION & PROJECT CLOSE-OUT Close-out M

eeting

• Amenddraftreportwithcommentsobtainedfromworkshop• Close-outmeetingDeliverable: Comprehensive Research Report and recommendations


PHASE1

STEP 1: PROJECT INITIATION

The purpose of the first step was to start the projectthrough an inception meeting/preliminary workshopwhere specific goals, objectives, and the projectapproachwereagreedupon.Adetailedinceptionreportwassubmittedoutliningtheagreed-uponscopeofworkand secondary objectives, milestones and timeframes,methodologicalapproachanddatacollectionmeasures,project management aspects and organisation of theevaluation(keyintervieweesandagencies,keyevaluationquestions, performance criteria, etc.), reporting, actionpoints,etc.

PHASE2

STEP 2: STATUS QUO OF THE LEGAL GAMBLING SECTOR

Thepurpose of this stepwas todetermine and reportonthecurrentstatusofthelegalgamblingindustry,withspecificreferencetobingo,casinoandLPMsectors,andto understand the trends and impact of trends withinthisindustry.Thisstepincludedadesktop reviewofallpossible secondary information and data to develop aquantitative understanding and status quo of the legalgambling industry in South Africa. Existing/availableand applicable research reports and information wereidentified, and were obtained from the relevant role-players. These included various research reports andaudited statistics from theNGB, statistics and researchfromindustryassociations,annualreports,statisticsandresearchreportsfromthevariousPLAs,andwellasotherpubliclyavailableresearchonthegamblingindustry.

Inadditiontothescopeofwork,casestudieswerealsoundertaken to understand how other industries andcountries are promoting transformation and ensuringinclusive growth. Benchmark comparisons weremade,where possible, to determine the most competitiveapproach/policies taking into consideration supportprovided,andother.

In addition, interviews were also conducted with keystakeholders and role-players (including all PLAs andindustryassociations)toobtainabetterunderstandingofthecurrentsituationinthegamblingindustrybasedonqualitative information;andalso tofill anyquantitative

gaps that might exist within the existing secondaryinformation.

Theoutcomeofthisstep,andthefirstphasedeliverable,wasaStatusQuoReport,basedonthedesktopresearchandqualitativeinterviews.

PHASE3

STEP 3: IMPACT ANALYSIS

Thepurposeofthisstepwastoundertakeaqualitativeandquantitativeanalysisoftheobjectsandunintendedimpactsandtodeterminethechallengesthatwerefacedby the industry.This stepalso included forecastingandmodellingoffutureestimatesandexpectations.Thedataobtainedfromthepreviousstepwasanalysedusingbothgenerally acceptedqualitative andquantitative analysistechniques.

The quantitative analysis was guided by the researchobjectivesanddesignoftheprojectandcomplementedbythequalitativeanalysis.

The outcome of this step was an economic impact analysis report, including future expectations andestimatesandpotentialimpacts.

PHASE4

STEP 4: ANALYSIS REPORT & RECOMMENDATIONS

This step involved consolidating information relative tothe status quo as well as quantitative and qualitativeresearch. The aim was to have conclusive findings onwhetherthegamblingindustryhastransformedandhasexperiencedinclusivegrowth.

Recommendationsweremadebasedontheoutcomeoftheanalysisonwhatpotentialmeasures/policydirectivescan be implemented by the NGB to ensure rapidtransformationoftheindustry.

PHASE5

STEP 5: STAKEHOLDER WORKSHOP

The purpose of this step was to present and discussthe draft results and draft report with the ProjectTeamthroughaworkshopwherespecificresultsof theresearchobjectiveswerediscussed,andimprovements/suggestions/ recommendations/ feedback/ input wereconsideredandtakenintoaccount.


STEP 6: REPORT FINALISATION AND RECOMMENDATIONS

Thepurposeofthisstepwastodevelopacomprehensivefinal report, with infographic maps and charts; and tofinalisetheprojectthoughaclose-outmeetingwiththeclient.

Thefinal deliverable, and last phasedeliverable,was afinal Comprehensive Research Report with conclusivefindingsandrecommendations.

1.5 LIMITATIONS OF THE STUDY● Availabilityofstatisticsandinformation:

- Detailed statistics regarding employmentequity were not available per mode or perprovince.PLAswereaskedtoassistwithadatacollection process for each of the provinces,buteventhisroutewasunsuccessful.

- Employment Equity statistics obtainedthrough the Department of Labour wereonly available for companies who employ50 ormore staffmembers or whose annualturnoverismorethansetdowninSchedule4oftheEmploymentEquityAct.

- EmploymentEquitystatisticsobtainedthroughtheDepartmentofLabourcouldnotbebrokendown intoaprovincial split,ascertainmajorcompanies, suchas Tsogo Sun,would reportonanationalbasis.

- EmploymentEquitystatisticsformulti-purposecompanies, such as Tsogo Sun, includesemployment statistics across all functions,suchascasino,hotel,resort,etc.

1.6 REPORT OUTLINEThe remainder of the report comprises the followingchapters:

• Chapter2:PolicyRationale• Chapter3:EconomicParticipationand

TransformationintheSouthAfricanGamblingIndustry

• Chapter4:QualitativeAnalysis• Chapter5:EconomicContributionoftheGambling

Industry• Chapter6:CaseStudies• Chapter7:ConcludingRemarksand

Recommendations


CHAPTER 2

POLICYRATIONALE

This chapter provides a synopsis of relevant policydevelopment and legislationon a national governmentlevel. TheChapterplacesemphasison theapplicabilityof thesenationalpolicies, legislationandtheirstrategicalignment to the growth and transformation of thegamblingindustryinSouthAfrica.

2.1 THE CONSTITUTION OF THE REPUBLIC OF SOUTH AFRICA, 1996 (108 OF 1996)

The Constitution is the absolute supreme law ofSouthAfrica; any law or conduct inconsistentwith theConstitution is deemed invalid, and the obligationsimposed by it must be fulfilled. The Constitutionassented in 1994 identifies the ability of theprovincialgovernmentstolegislateonmatterswithinthefunctionalareas of ‘casinos, racing, gambling and wagering’,excludinglotteriesandsportspools.

The Constitution provides in Schedule A Part 4 that aprovincial legislature shall be competent tomake lawsfor the province with regard to casinos, gambling andwagering;andempowersParliament tomakeprovisionin an Act of Parliament for the promotion of uniformnorms and standards applying generally throughoutthe Republic with regard to casinos, racing, gamblingand wagering; and further states that it is necessaryto determine national economic policy and to preventprovinciallawsfrommateriallyprejudicingtheeconomicinterestsofotherprovincesandtheRepublicasawhole.Hence theestablishmentof theNationalGamblingAct(Act33of1996)whichwasrepealedbythecurrentNGA,2004(Act7of2004).

The Constitution further seeks to address historicinequalities in section 9 (equality clause) by statingthat everyone is equal and that no-one should bediscriminated against, directly or indirectly, in terms ofrace, gender, sex, pregnancy, marital status, ethnic orsocial origin, colour, sexual orientation, age, disability,religion,conscience,belief,culture,languageorbirth.

The Constitution, as absolute supreme law of South Africa, drives transformation through the equality clause and it seeks to address historic inequalities. It furthermore provides for uniform norms and standards within the gambling industry.

2.2 NATIONAL GAMBLING ACT, 2004 (Act 7 of 2004)

TheNationalGamblingActof1996madeprovisionsforthe regulation of gambling activities and promotion ofuniform norms and standards in relation to gamblingthroughout the country. It gave definitions to differentgambling notions, described how the 40 gamblinglicencesshouldbedistributedamongtheprovincesandprovided informationon liability. ItalsoestablishedtheNGBasanorganisation responsible for the supervisionand regulation of the gambling industry. This changein legislation saw the establishment of legal casinos, anationallotteryandotherformsofgambling.

TheNationalGamblingAct of 1996was later repealedby theNationalGamblingAct 7of 2004 (theAct). TheNationalGamblingAct,2004(Act7of2004)islegislationthatwasadoptedfortheuniformregulationofgamblingactivities in South Africa. The Act has the followingmandates:

• To provide for the coordination of concurrentnationalandprovinciallegislativecompetenceovermatters relating to casinos, racing, gambling andwagering

• Thecontinuedregulationofthosemattersforthatpurpose to establish certain uniform norms andstandards applicable to national and provincialregulation, and licensing of certain gamblingactivities

• The creation of additional uniform norms andstandardsapplicablethroughouttheRepublic;andincidentalthereto

TheNGAstatesinPartE,Section(53)that:

(1) When considering an application for a licence,other than an employment licence, or whenconsidering an application for the transfer of alicence,aprovinciallicensingauthority—(a) mustconsiderthecommitments,ifany,made

by the applicant or proposed transferee inrelationto—(i) blackeconomicempowerment;or(ii) combatingtheincidenceofaddictiveand

compulsivegambling;


(b) must consider the potential socio-economicimpact on the community of the proposedlicence;and

(c) may impose reasonable and justifiableconditions on the licence to the extentnecessary toaddress thematters referred toinparagraphs(a) and (b).

(2) At least once every year after the issuance of alicence other than an employment licence, theprovincial licensing authority that issued thatlicence—(a) must review the commitments considered

in terms of subsection (1)(a) and theachievements of the licensee in relation tothosecommitments;and

(b) may impose further or different reasonableand justifiable conditions on the licence tothe extent necessary to address themattersreferredtoinsubsection(1)(a) and (b).

The National Gambling Act, 2004 (Act 7 of 2004) thus prescribes black economic empowerment as a consideration for regulators when issuing/transferring a license, but does not prescribe any targets/minimum requirements.

2.3 THE BROAD-BASED BLACK ECONOMIC EMPOWERMENT Act 53 of 2003 AND CODES OF GOOD PRACTICE

TheBroad-basedBlackEconomicEmpowermentActof2003(Act53of2003)istoestablishalegislativeframeworkforthepromotionofblackeconomicempowerment;toempower theMinister to issue codes of good practiceandtopublishtransformationcharters;toestablishtheBlackEconomicEmpowermentAdvisoryCouncil;andtoprovideformattersconnectedtherewith.

The objectives of this Act are to facilitate broad-basedblackeconomicempowermentby:

• promoting economic transformation in order toenablemeaningfulparticipationofblackpeopleintheeconomy

• achieving a substantial change in the racialcomposition of ownership and managementstructuresandintheskilledoccupationsofexistingandnewenterprises

• increasing the extent to which communities,workers, cooperatives and other collectiveenterprises own and manage existing and newenterprisesandincreasingtheiraccesstoeconomicactivities,infrastructureandskillstraining.

This act was promulgated in to law in 2003 during atime inwhich the implementation of BEEwas facing acritical stage especially regarding theway inwhich theprivate sector approached economic transformationandempowerment.Therefore,thegazetteoftheCodesofGoodPractice (CoGP) inFebruary2007wasadirectresponsetotheneedforredefiningempowermentfromanarrow-basedtowardsabroad-basedapproach.

Although a nationwide consultative process with keystakeholderswereundertaken,thereleaseoftheCodeswasprecededbythereleaseoftheDraftCodeswhichwereextensively published for public comments and inputs.Despite this, certain aspects of the Codes presentedcertain interpretation challenges given the various andoftencontestedinterestsintheimplementationofBBBEE.SincetheCodesaregenerallyavehicleandmechanismthroughwhichvariousempowermentobjectivesare tobe achieved, the underlying provisions, principles andmeasurementtoolswillalwaysbesubjectedtoavarietyofscrutinyanddebate.Toacertainextent,thisresultedinthedelayinimplementingB-BBEEasmanycompaniesarguedthattheywerereceivingconflictingadviceaboutthetrueintensionsoftheCodes.Inviewofthis,the dtic released an interpretive guide that sought to furtherexplain certain provisions and principles and providemoreguidanceaboutthetrueintentionsoftheCodes.

The interpretive guide however presented morechallenges than was envisaged. Not only was its legalstatusa subjectof legal challengebycertainsectorsofstakeholders,somecontentsoftheguidealsopresentedevenmoreuncertaintiesandconfusion.This continuedtothreatenthecredibilityoftheCOGP.

The Act was positioned as soft legislation with noconsequences for non-compliance, and therefore hadto be strengthened to ensure effective and consistentimplementationandreportingacrosstheeconomy.It isonthisbasisthattheB-BBEEActof2003wasamendedin2013byAct46of2013.ThepurposeofamendingtheActwere:

• ToaligntheActwithotherlegislationimpactingonB-BBEEandwiththecodesofgoodpractice


• To establish the B-BBEE Commission to monitorandevaluateB-BBEE

• Todealwithnon-complianceandcircumvention

• To give effect to government policy aimed atreducinginequality,defeatingpovertyandcreatingemployment.

The Amended Act and CoGP significantly changed themanner in which B-BBEE status/levels are calculated,as the number of B-BBEE points required to achieve aparticularB-BBEElevelhasbeenincreased.Thechangesbetweenthe2007Codesandthenewlyamended2013Codesaresetoutinthetablebelow.

Table 2.1: 2007 B-BBEE Codes vs 2013 B-BBEE Codes2007 B-BBEE Codes 2013 Amended B-BBEE Codes of Good Practice

Element Weighting Element Weighting Compliance TargetOwnership 20points Ownership 25points 25%+1voteManagement control

10points Management control

15points (50%to88%)

Employment equity

15points - - -

Skills development

15points Skills development

20points(Actualscorecardoutof25points,i.e.5bonuspoints)

6%ofpayroll

Preferential procurement

20points - - -

Enterprise development

15points Enterprise and Supplier development

40points(Actualscorecardoutof44points,i.e.4bonuspoints)

Preferentialprocurement(PP)=80%Supplierdevelopment(SD)=2%(NPAT)Enterprisedevelopment(ED)=1%(NPAT)

Socio-economic development

5points Socio-economic development

5points 1%ofNPAT

Based on the overall performance of a Measured Entity using the Generic Scorecard and Qualifying EnterpriseScorecard(aspertheamended2013Codes),aMeasuredEntitywillreceiveoneofthefollowingB-BBEEstatususeswiththecorrespondingB-BBEErecognitionlevel:

Table 2.2: B-BBEE Recognition Levels

B-BBEE StatusQualification (points scored on the Generic Scorecard) B-BBEE

Recognition Level2007 B-BBEE Codes 2013 Amended CodesLevelOneContributor ≥100points ≥100points 135%

LevelTwoContributor ≥85but<100points ≥95but<100points 125%

LevelThreeContributor ≥75but<85points ≥90but<95points 110%

LevelFourContributor ≥65but<75points ≥80but<90points 100%

LevelFiveContributor ≥55but<65points ≥75but<80points 80%

LevelSixContributor ≥45but<55points ≥70but<75points 60%

LevelSevenContributor ≥40but<45points ≥55but<70points 50%

LevelEightContributor ≥30but<40points ≥40but<55points 10%

Non-CompliantContributor >30points >40points 0%


The most significant amendment for purposes of thepresentdiscourse is thatSection10 (2013AmendmentAct, Act 46 of 2013) now mandates organs of stateandpublicentitiestoapplytheCodeswhen, inter alia,determiningcriteriafortheissuingoflicensesandotherauthorisations foraneconomicactivity in termsofanylaw.Thisisasignificantdeparturefromtheprescriptsofthe2003B-BBEEAct,whichonlyrequiredorgansofstatetotaketheB-BBEEActintoaccount“asfarasreasonablypossible”.ItprescribesthattheB-BBEEActshallprevailintheeventofaprovisionofthesaidActbeinginconflictwithotherlegislation.Italsoprovidesforthecancellationof any contract entered into by an organ of state orpublicentitywhere itwasawardedonaccountof falseinformation relating to the B-BBEE status of the othercontractingparty.(LCF,2014).

The B-BBEE Amendment Act, 2013 (Act 46 of 2013) mandates organs of state and public entities to apply the Codes of Good Practice and Generic Scorecard for determining criteria for the issuing of licenses, thereby encouraging transformation.

2.4 THE PROMOTION OF EQUALITY AND PREVENTION OF UNFAIR DISCRIMINATION ACT, 2000 (ACT 4 OF 2000), AS AMENDED

The Promotion of Equality and Prevention of UnfairDiscriminationAmendmentAct, 2002 (Act 52 of 2002)(also referred to as the Equality Act) endeavours tofacilitatethetransitiontoademocraticsociety,unitedinitsdiversity,markedbyhumanrelationsthatarecaring,compassionate,andguidedbytheprinciplesofequality,fairness, equity, social progress, justice, human dignityandfreedom.TheobjectivesofthisActare:

(a) To enact legislation required by Section 9 of theConstitution;

(b) To give effect to the letter and spirit of theConstitution,inparticular–(i) Theequalenjoymentofallrightsandfreedoms

byeveryperson;(ii) Thepromotionofequality;(iii) The values of non-racialism and non-sexism

containedinSection1oftheConstitution;(iv) The prevention of unfair discrimination and

protectionofhumandignityascontemplatedinSections9and10oftheConstitution;

(v) Theprohibitionofadvocacyofhatred,basedon race, ethnicity, gender and religion,that constitutes incitement to cause harm

as contemplated in Section 16(2)(c) of theConstitutionandSection12ofthisAct;

(c) Toprovideformeasurestofacilitatetheeradicationof unfair discrimination, hate speech andharassment, particularly on the grounds of race,genderanddisability;(d) To provide for procedures for the

determinationof circumstancesunderwhichdiscriminationisunfair;

(e) Toprovideformeasurestoeducatethepublicandraisepublicawarenessontheimportanceofpromotingequalityandovercomingunfairdiscrimination,hatespeechandharassment;

(f) To provide remedies for victims of unfairdiscrimination, hate speech and harassmentandpersonswhoserighttoequalityhasbeeninfringed;

(g) To set out measures to advance personsdisadvantagedbyunfairdiscrimination;

(h) To facilitate further compliance withinternational law obligations including treatyobligations in terms of, amongst others, theConventionontheEliminationofAllFormsofRacial Discrimination and the Convention oftheEliminationofAllFormsofDiscriminationagainstWomen.

ThisActdoesnotapply,however,toanypersontowhomandtotheextenttowhichtheEmploymentEquityAct,1998(Act55of1998)applies.Section7oftheactstatesthat no person may unfairly discriminate against anypersononthegroundofrace,includingSection7(b)theengagementinanyactivitywhichisintendedtopromote,or has effect of promoting exclusivity, based on race;and Section 7(e) the denial of access to opportunities,includingaccesstoservicesorcontractualopportunitiesfor rendering services for consideration, or failing totake steps to reasonably accommodate the needs ofsuchpersons.Sections8and9furtherelaboratesontheprohibitionofunfairdiscriminationbasedonthegroundsofgenderanddisabilityrespectively.

The Promotion of Equality and Prevention of Unfair Discrimination Act, 2000 (Act 4 of 2000), as amended, promotes transformation in that it prohibits unfair discrimination against persons based on especially race, gender and disability – across the entire value chain of the gambling industry, as is evident and highlighted by the case of Maharaj vs Gold Circle (Pty) Ltd2.

2 MaharajvGoldCircle(Pty)Ltd(AR616/16)[2017]ZAKZPHC47;[2018]1AllSA760(KZP)(23September2017)


2.5 THE COMPETITION ACT, 1998 (ACT 89 OF 1998)

This Act is responsible for the establishment of aCompetitionCommissionresponsiblefortheinvestigation,control and evaluation of restrictive practices, abuseofdominantposition,andmergers. Italsohasthedutyof establishing a Competition Tribunal responsible toadjudicatesuchmatters.Finally,itisresponsiblefortheestablishment of a Competition Appeal Court and forrelatedmatters.

The purpose of this Act is to promote and maintaincompetitionintheRepublicinorder:

• To promote the efficiency, adaptability anddevelopmentoftheeconomy

• Toprovideconsumerswithcompetitivepricesandproductchoices

• To promote employment and advance the socialandeconomicwelfareofSouthAfricans

• To expand opportunities for South Africanparticipationinworldmarketsandtorecognisetheroleofforeigncompetitionintherepublic

• Toensurethatsmallandmedium-sizedenterpriseshaveanequitableopportunitytoparticipateintheeconomy

• To promote a greater spread of ownership, inparticular to increase the ownership stakes ofhistoricallydisadvantagedpersons

The Competition Act promotes transformation especially in regards to the greater spread of ownership by increasing ownership stakes of HDIs; as well as combating excessive concentrations of ownership by opening the economy to greater ownership by all South Africans and Small and Medium-sized Enterprises.

2.6 NATIONAL GAMBLING POLICY, 2016

The National Gambling Act, 2004 is premised on theNationalGamblingPolicy,2016. It is throughthepolicythattheoutcomeoftheworkoftheNGBmanifestsbytheeffectandqualityofitsadviceandrecommendations,amongstothers,mattersofnationalpolicyandlegislativechanges relating to gambling. The policy is premisedpartlyontheGamblingReviewCommission(GRC)Report,reportsfromParliamentontheGRCReport,stakeholderengagement,benchmarksandexcursionconducted.

The Wiehahn Commission set principles, whichbecame the yardstick for the national gambling policyas enshrined in the National Gambling Act. The policyobjectiveswereanalysedtodetermineiftheyhadbeenachievedandifnotidentifyanygapsthatstillexist.Theresults raised a concern that the achievements havenot improvedtherepresentationson theownershipbypreviouslydisadvantagedand femalepersons. Progresswasreportedtobemainlyontheemploymentandseniormanagementpositions.

There are key policy proposals that are intended toenhancethecurrentlegislativeframework,thefollowingarethekeyelementsoftheseproposals:

• Regulatory structuresand frameworkwhich looksattheeffectivenessofthecouncilandtheroleoftheNGB

• Theeffectiveregulationofcasinos

• AwellregulatinglicensingprocessforLPMs

• TheneedtocreateanationalframeworktoregulateEBTs

• Statutory regulation of betting by horse racingoperatorsandbookmakers

• Provisionsconcerningtheunlawfulwinningtrust

• RecommendationthattheNGRmakeprovisionforsocialimpactminimisation

• Responsibility towards penalties of perpetualtransgressors in respect of illegal gambling (i.e.onlinegambling)

• Economic and employment benefits within thegamblingsector

• Nointroductionofnewformsofgambling

The Policy document states that all forms of gamblingoperators must comply with the Employment EquityAct, the Labour Relations Act, the Basic Conditions ofEmploymentActandtheB-BBEEActandCodes.

The Gambling Policy promotes transformation in that it calls for a conducive environment to be created for new role players to enter the industry to promote transformation within the gambling industry and that all associations must be recognised and must be given an opportunity to affiliate with the regulatory bodies where possible. It states that all provinces must strive for harmonious implementation of employment and economic equity legislations.


2.7 NATIONAL GAMBLING AMENDMENT BILL, 2018

ThisBillhasbeenestablishedwiththeintentiontoamendtheNationalGamblingAct,2004 (Act7of2004),soastoamendcertaindefinitions; to transfer the regulationofbetsonnationallottery,foreignlottery,lotteryresultsandsportspoolstotheNationalLotteriesCommission;toprohibitdogracingandbetsondogracing;tostrengthentheregulationofcasinos,limitedpay-outmachinesandbingo;toprovidefortheprocedurefortheforfeitureofunlawfulwinningstotheNationalGamblingRegulator;toprovidefortheregulationofthehorseracingindustry;toprovideforbroad-basedblackeconomicempowermentinthegamblingindustry;toprovidefortherepositioningoftheNationalGamblingBoardasaNationalGamblingRegulator; to enhance the powers and duties of thegamblinginspector;toprovideforcertainnewoffences;toprovidefortransitionalarrangements;andtoprovideformattersconnectedtherewith.

TheAmendment Bill proposed the insertionof Section53AafterSection53:

“Promoting broad-based black economic empowerment in the gambling industry”

53A. (1)All participants in the gambling industrymust achieve the broad-based black economicempowermenttargetsinthegamblingindustrytoadvance the objectives of the Broad-Based BlackEconomic Empowerment Act, 2003 (Act 53 of2003),ascontemplatedinthesaidAct.

(2)Provincial licensing authorities must imposethe broad-based black economic empowermenttargetsaslicenceconditions.

(3)Aprovinciallicencingauthoritymaysuspendorwithdrawalicenceintheeventofnon-compliancebyanypersonwithlicenceconditionssetintermsofsubsection(2).”.

The National Gambling Amendment Bill promotes transformation through the addition of the Clause dealing specifically with promoting Broad-Based Black Economic Empowerment in line with the Broad-Based Black Economic Empowerment Act.

2.8 EMPLOYMENT EQUITY ACT, 1998 (ACT 55 OF 1998)

The Employment Equity Act emanated from therecognition that as a result of apartheid and otherdiscriminatory laws and practices, there are disparitiesin employment, occupation and income within thenationallabourmarket;andthatthosedisparitiescreasesuchpronounceddisadvantagesforcertaincategoriesofpeoplethattheycannotberedressedsimplybyrepealingdiscriminatorylaws.

ThepurposeoftheEmploymentEquityActistoachieveequityintheworkplaceby-

(a) Promoting equal opportunity and fair treatmentin employment through the elimination of unfairdiscrimination;and

(b) Implementing affirmative action measuresto redress the disadvantages in employmentexperienced by designated groups, in orderto ensure their equitable representation in alloccupationalcategoriesandlevelsintheworkforce.

Theeliminationof unfair discriminationandpromotingequal opportunity applies to all employees andemployers,whileaffirmativeactionmeasuresapplyonlytodesignatedemployers,meaning-

(a) Apersonwhoemploys50ormoreemployees;(b) Apersonwho employs fewer than50 employees

but has a total annual turnover that is equal orabove the applicable annual turnover of a smallbusinessintermsofSchedule4oftheAct;

(c) Amunicipality, as referred to in Chapter 7 of theConstitution;

(d) An organ of state as defined in section 239 ofthe Constitution, but excluding local spheres ofgovernment, the National Defence Force, theNationalIntelligenceAgencyandtheSouthAfricanSecretService;and

(e) An employer bound by collective agreement intermsofsection23or31oftheLabourRelationsAct,whichappointsitasadesignatedemployerintermsofthisAct,totheextentprovidedforintheagreement.

The Employment Equity Act promotes transformationin that it seeks to promote equality, eliminate unfairdiscriminationinemployment,aimstoachieveadiverseworkforce broadly representative of the country’speopleaswellaspromotingeconomicdevelopmentandefficiency.


CHAPTER 3

ECONOMICPARTICIPATIONANDTRANSFORMATION IN THE SOUTH AFRICAN GAMBLING INDUSTRY

3.1 INTRODUCTIONThepurposeofthisChapteristoobtainanunderstandingof the current levels of transformation and economicparticipationofHDIsintheregulatedgamblingindustry.TheWiehannCommissionReportintroducedsettargetsforthesectortoreachLevel2statusby2015.However,inadditiontotheB-BBEELevelcompliance,theGamblingBill of 2016 states the following: “It is important forB-BBEEcompliancetonotonlyensurelevelcompliancebut to ensure that there is significant participation ofhistorically disadvantaged individuals.” This statement/requirementassetout intheGamblingBill iscurrentlynot being focused on, with gambling operations onlybeingexpectedtoreportontheir levelcomplianceandnotondetailedemploymentfigures”.Thisisaconcernsasthisopensupopportunitiesforfrontingpractices.

However,theEmploymentEquityActemploysaffirmativeactionprovision toemployerswhoemploy50ormorestaffmembersorwhoseannualturnoverismorethanthatsetdowninSchedule4oftheAct.Thestatisticsreflectedin the remainder of this section have been obtainedon this basis (employment equity reports) through theDepartment of Labour. These statistics are used as arepresentationofthecurrentstateoftransformationandeconomic participation by Black Employees and BlackFemaleEmployeesinthegamblingindustry.

3.2 DEFINING TRANSFORMATIONThe main aim of the research (as outlined in Chapter1 Section 2) is to determine and reflect the currentstatusintermsofeconomicgrowth,transformationandeconomic participation of Historically DisadvantagedIndividuals (HDI’s) and women in the South Africangamblingindustry(excludingNationalLottery).ThetermsHDI andBEE (BlackEconomicEmpowerment) areusedinterchangeablyintheindustry–forexample,operatorsare required to report on B-BBEE levels to regulators,

but yet somePLA license conditions specify targets forHDI inclusion inownershipstructuresandoccupationallevels.

It is therefore important to firstly understand thedifferencebetweenHDIandB-BBEE,toultimatelyderivea definition of transformation for the purposes of thisstudy.

“Historically Disadvantaged Individual (HDI)3” aredefinedbythePreferentialProcurementPolicyActasaSouthAfricancitizen-

(d) who,duetotheapartheidpolicythathadbeeninplace,hadnofranchiseinnationalelections,priortotheintroductionoftheConstitutionoftheRepublicofSouthAfrica,1983(ActNo110of1983)ortheConstitutionoftheRepublicofSouthAfrica,1993(ActNo200of1993) (‘the InterimConstitution”);and/or

(e) whoisafemale;and/or(f) whohasadisability:

Provided that a person who obtained South AfricancitizenshiponorafterthecomingtoeffectoftheInterimConstitution,isdeemednottobeanHDI.

The problem with this definition from the PreferentialProcurementRegulationsisthatitisverybroad.Almostthe only people who are not defined as historicallydisadvantaged are adult white males. HDI’s receiveconsiderable preference when government contractsare awarded. In May 2010, the government began toput inplacenewprocurementrulesthatwouldchangethe definition to include only black people and toreducefrontingbycompanies– fromtheretheB-BBEEAmendment Act and Codes of Good Practice. TheseCodesarecurrentlybeingusedbygamblingoperatorstoreportonB-BBEElevels.

3 AsdefinedbythePreferentialProcurementPolicyFrameworkAct,2000(ActNo5of2000)


“Broad-Based Black Economic Empowerment4”meanstheviableeconomicempowermentofallblackpeople,in particular women, workers, youth, people withdisabilities and people living in rural areas, throughdiverse but integrated socio-economic strategies thatinclude,butarenotlimitedto-

(a) increasingthenumberofblackpeoplethatmanage,ownandcontrolenterprisesandproductiveassets;

(b) facilitating ownership and management ofenterprisesandproductiveassetsbycommunities,workers, co-operatives and other collectiveenterprises;

(c) humanresourceandskillsdevelopment(d) achieving equitable representation in all

occupationalcategoriesandlevelsintheworkforce;(e) preferentialprocurementfromenterprisesthatare

ownedormanagedbyblackpeople;and(f) investment in enterprises that are owned or

managedbyblackpeople.

“Black people1” isagenerictermswhichmeansAfricans,ColouredsandIndians-(c) whoarecitizensoftheRepublicofSouthAfricaby

birthordescent;or

4 AsdefinedbytheBroad-BasedBlackEconomicEmpowermentAct(Act53of2003)andamendedbyAct46of2013

(d) whobecamecitizensoftheRepublicofSouthAfricabynaturalisation-i. before27April1994;orii. on or after 27 April 1994 and who would

have been entitled to acquire citizenship bynaturalisationpriortothatdate.

For thepurposesof thisstudy,and inkeepingwiththestudyobjectives,transformationinthegamblingindustrywill bemeasured on (a) the inclusion of black people1 in ownership/shareholding structures of entities; and(b) on the participation of black people1 inmanagerialoccupationlevels.

To investigate the transformation in managerialoccupation levels, the employment equity figures ofa sample of companies in each of the four gamblingsectors were analysed in terms of compliance to theManagementControlScorecardStatementintheCodesofGoodPractice.

The following table represents the criteria used forderiving a score for Management Control under thisstatement:

Measurement Category and CriteriaWeighting

pointsCompliance

Targets2.1 Board participation2.1.1Exercisablevotingrightsofblackboardmembersasapercentageofallboardmembers

2 50%

2.1.2Exercisablevotingrightsofblackfemaleboardmembersasapercentageofallboardmembers

1 25%

2.1.3Blackexecutivedirectorsasapercentageofallexecutivedirectors 2 50%

2.1.4Blackfemaleexecutivedirectorsasapercentageofallexecutivedirectors 1 25%

2.2 Other executive management2.2.1Blackexecutivemanagementasapercentageofallexecutivedirectors 2 60%

2.2.2Blackfemaleexecutivemanagementasapercentageofallexecutivedirectors 1 30%

2.3Seniormanagement

2.3.1BlackemployeesinSeniormanagementasapercentageofallseniormanagement

2 60%

2.3.2BlackfemaleemployeesinSeniormanagementasapercentageofallseniormanagement

1 30%


3.3 TRANSFORMATION IN TERMS OF SHAREHOLDING/OWNERSHIP

3.3.1 CASINO SECTOR

The controlling shareholders for operational casinos inSouthAfricaasat31March2019areTsogoSunHoldings/

Hosken Consolidated Investments (14 casinos), SunInternational(13casinos),PeermontResorts(8casinos),London Clubs International (1 casino), Northern CapeCasinoConsultants(1casino),andBillionGroup(1casino)and African Pioneer Gaming (Pty) Ltd (1 Casino). Thecontrolling shareholders for the 9 operational casinos,are reflected by name, as well as the names of eachshareholder’s casinos and the respective number ofcasinospershareholder,asinthetablebelow.

Table 3.1: Number of casinos per controlling shareholder (FY2018/19, as at 31 March 2019)Controlling

shareholdersName of Casino

Number of casinos

TsogoSunHoldings/HoskenConsolidatedInvestments

HemingwaysCasino(EC),SuncoastCasino(KZN),BlackRockCasino(KZN),GoldenHorseCasino(KZN),GoldfieldsCasino(FS),TheRidgeCasino(Mpum),EmnotweniCasino(MP),CaledonHotelSpaCasino(WC),CasinoMykonos(WC),GardenRouteCasino(WC),Montecasino(GT),GoldReefCityCasino(GT),SilverstarCasino(GT),GrandOasisCasino(NC)

14

SunInternational BoardwalkCasino(EC),WildCoastSun(EC),SibayaCasino(KZN),WindmillCasino(FS),Naledi(FS),FlamingoCasino(NC),MeropaCasino(L),GrandwestCasino(WC),GoldenValleyCasino(WC),SunCity(NW),CarouselCasino(NW),TimeSquare(GT),CarnivalCity(GT)

13

PeermontGlobal UmfoloziCasino(KZN),FrontierInnandCasino(FS),GracelandHotelCasino(MP),KhoroniHotelCasino(L),MmabathoPalmsCasino(NW),RioCasino(NW),EmperorsPalace(GT),ThabaMoshate(L)

8

LondonClubsInternational

EmeraldSafariResort(GT) 1

NorthernCapeCasinoCunsultants

DesertPalaceHotelResort(NC) 1

BillionGroup MayfairCasino(EC) 1

AfricanPioneerGaming(Pty)Ltd

QueensCasino(EC) 1

Total 39

Source: Gambling Sector Performance South Africa, National Gambling Board, 2019

Measurement Category and CriteriaWeighting

pointsCompliance

Targets2.4 Middle management2.4.1BlackemployeesinMiddlemanagementasapercentageofallmiddlemanagement

2 75%

2.4.2BlackfemaleemployeesinMiddlemanagementasapercentageofallmiddlemanagement

1 38%

2.5 Junior management2.5.1BlackemployeesinJuniormanagementasapercentageofalljuniormanagement

1 88%

2.5.2BlackfemaleemployeesinJuniormanagementasapercentageofalljuniormanagement

1 44%

2.6 Employees with disabilities2.6.1Blackemployeeswithdisabilitiesasapercentageofallemployees 2 2%


During FY2017/18, the JSE-listed black empowermentinvestment holding company, Hosken ConsolidatedInvestments (HCI) increased its beneficiary interestin Tsogo Sun securities by 7.75%, taking its totalshareholdingto51.18%inthecompany,thusgivingitanoutrightmajorityvoteintheaffairsofthegaming,hotelandentertainmentgroups.

Towardstheendof2017,HCIalsoannouncedthatitwasconsolidatingitsgamingassetsunderTsogoSuninaR2.1billiondealthatwouldseethehotelandentertainmentgrouptakeoverNiveusInvestmentsgamingmachineandbingohallbusiness.

The following illustrations provide a summary of themajorityshareholdersofthefollowingkeyplayersinthecasinosector:

• SunInternationalLtd• TsogoSunGamingLtd• PeermontGlobal(Pty)Ltd• KatLeisure(Pty)Ltd• Teemane(Pty)Ltd• DesertPalaceHotelResort(Pty)Ltd• AfrisunKZN(Pty)Ltd• MeraldSafariResort(Pty)Ltd


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tto,

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is A

dria

an

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n G

ray

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ernm

ent E

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la T

rust

Dr N

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n, H

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n

Mr P

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on

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ence

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nala

m, J

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END:

100


Illus

trati

on 3

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hare

hold

ing

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ctur

e fo

r Tso

go S

un G

amin

g Lt

d

Ow

ns a

nd o

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tes t

he

follo

win

g So

uth

Afric

an

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nos:

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onte

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ity C

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ino

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ino

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ty) L

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ion

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) Ltd

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ty) L

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ents

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Mr S

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rust

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ul C

ambo

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r Ger

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s Kirs

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iam

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Ow

ns a

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uth

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ty)

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ty) L

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ty) L

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trati

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Illus

trati

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END:

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Illus

trati

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LEG

END:

100


It isevidentfromtheillustrationsthattheshareholdingand ownership structures are extremely complex andsharesare typically vested in companiesandcorporatestructures. In thecaseof listedcompanies, thegreaterpercentageofsharesaretypicallytradedwithontheopenmarket, leaving a small percentage as ordinary shares.Duethecomplexityoftheseshareholdingstructures,itis

legallyacceptabletoanalyseshareholdingandownershipin terms of the B-BBEE Codes of Good Practice andGenericScorecard,whichprovidescompositeindicatorstomeasuretransformation.

ThefollowingtableoutlinesthescoresobtainedintermsoftheGenericScorecardforeachcasinooperatorasat31March2018.

Table 3.2: Casino Operators’ Generic Scorecard Achieved Scores

Hold

ing

Com

pany

Out

let

Ow

ners

hip

(Wei

ghtin

g =

25)

Man

ager

ial C

ontr

ol

(Wei

ghtin

g =

15)

Skill

s Dev

elop

men

t (W

eigh

ting

= 20

+5

bonu

s)

Ente

rpris

e &

Sup

plie

r De

velo

pmen

t (W

eigh

ting

= 40

+4

bonu

s)

Soci

o-ec

onom

ic d

evel

opm

ent

(Wei

ghtin

g =

5)

Tota

l

B-BB

EE L

evel

Sun International (including subsidiaries)

GrandwestCasinoandEntertainmentWorld

27 12,59 14,45 28,07 8 90,11 3

GoldenValleyCasino 27 10,74 14,92 40,04 8 100,7 1

Boardwalk 27 10,67 17,19 Not disclosed

7,03 100 3

WildCoastSun 21,62 7,67 12,05 15 5 92,73 2

WindmillCasino 26,14 12,12 17,11 33,29 8 85,6 2

NalediSunHotelandCasino

Not disclosed

Not disclosed

Not disclosed

Not disclosed

Not disclosed

Not disclosed

Not disclosed

MeropaCasino 25,48 15,25 21,22 32,21 8 102,16 1

TimeSquareCasino Not disclosed

Not disclosed

current status of transformation and growth in the … · 2020. 6. 24. · horse racing horse...

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