phumelela gaming and leisure trade & industry pc presentation

Phumelela Gaming and Leisure

Trade & Industry PC Presentation

Review of National Gambling Legislation

MPHO RAMAFALO

Agenda

- INTRODUCTION & BACKGROUND

- SOCIO-ECONOMIC IMPACT OF LEGALISED GAMBLING

- IMPACT OF MISLEADING ADVERTISING

- REGULATION OF CROSS-BORDER GAMBLING

- EFFECTIVENESS OF THE CURRENT REGULATORY

ENVIRONMENT

- INTERACTIVE GAMBLING

- Q&A

2

Phumelela Gaming & Leisure Limited

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INTRODUCTION & BACKGROUND

Phumelela is licensed to operate *horse racing & totalisator in *Eastern Cape, *Free State, *Gauteng, Limpopo, Mpumalanga, *Northern Cape & North West

5 racecourses & allied training centres in 4 *provinces (contributing to staging approximately 250 race meetings annually)

Over 230 betting shops (TAB branch & agency network) in seven provinces

2 Call Centres in Eastern Cape & Gauteng

Betting website (www.tabonline.com)


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INTRODUCTION & BACKGROUND - Cont

Phumelela commingles its horse racing & sports betting totalisator pools with Gold Circle in SA

Gold Circle operates in KZN & Western Cape

Phumelela & Gold Circle also have interest in fixed odds (bookmaking) through their shareholding in Betting World (Pty) Ltd

Phumelela & Gold Circle are the core of the horse racing industry, employing tens of thousands of people (both directly & indirectly)

Jointly own the intellectual rights, including the broadcasting of horse racing through Tellytrack, a DStv channel


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INTRODUCTION & BACKGROUND - Cont

Phumelela continues to expand its international presence, capitalising on its simulcast products & coverage, as well as strong technological platform that allows for international commingling pools

Phumelela, through its jointly controlled operation, Phumelela Gold Enterprises (PGE), a partnership between Phumelela and Gold Circle:

Owns a majority share in Phumelela Gold International Limited, a company incorporated in The Isle of Man (IOM)

Owns the exclusive worldwide broadcasting rights to 30 of the UK racecourses (outside UK & Ireland)

Operates a television studio that broadcasts live horseracing audio, visual & data from South Africa, UK & other international racecourses to betting shops & private subscribers worldwide


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Target Market Demographics

There are 2.2 million adults in South Africa who are interested in horse racing and 1.5 million regular punters with the following profile:

82% Black 62% Male 60% are between the ages of 18 - 34 years 50% of punters are LSM 6 - 7 Concentrated mostly in Gauteng, followed by KZN, Free State and Western

Cape

Source: TGI 2008


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Horse Racing Punters Demographics

Male Female

0

20

40

60

80

100

Black White Coloured Indian

0

5

10

15

20

25

30

35

LSM 1 LSM 2 LSM 3 LSM 4 LSM 5 LSM 6 LSM 7 LSM 8 LSM 9 LSM 10

0

5

10

15

20

25

30

35

18 - 24 yrs 25 - 34 yrs 35 - 44 yrs 45 - 64 yrs 65 yrs +

Source: TGI 2008


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The Popularity of Horse Racing Globally

Globally, more than 100 million racing fans attend events across the world and US$100 billion is gambled globally on horse racing at Tote outlets.

COUNTRY ANNUAL ATTENDANCE

Japan 14 500 000

United Kingdom 5 900 000

Australia 1 900 000

Hong Kong 1 850 000

France 1 700 000

Ireland 1 400 000

South Africa 1 000 000

New Zealand 1 000 000

United Arab Emirates 120 000

Source: Economic Impact of British Racing Report, Deloitte 2006; Phumelela data


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Quantifying Local Horse Racing’s Annual Global Reach

Nearly 1 million people attend the 400+ SA races

+100 million contacts occur off-course

Local media assets result in an additional 224 million points of contact

LOCAL

GLOBAL

SA races are broadcast to +40 countries globally

This creates 2.5 billion contacts with consumers each year

2.8 billion+ contacts annually

Source: Phumelela and Gold Circle Information


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Comparative Reach Analysis

Rugby

Local Interest

Cricket

Football

Sport Global Interest

2 500 000 000 fans

270 million actively involved

207 member unions

60 000 000 fans

115 member unions

11 319 000 fans

15 515 hours TV coverage

9 389 000 fans


Horse Racing

2 240 000 fans

4 380 hours TV coverage100 000 000 fans

80 member unions

9 519 000 fans


1 165 000 000 fans

104 member unions

Source: TWSM Report; BMI Sporttrack Reports


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Geographical Spread of Local Race Meetings

Western Cape87 race meetings

KZN114 race meetings

Gauteng65 race meetings

Eastern Cape66 race meetings


Northern Cape35 race meetings

Free State69 race meetings

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Vertically Integrated Model

Staging of thoroughbred racing events : Phumelela

Domestic Totalisator Betting : TAB

International Totalisator Betting : PGE

Fixed Odds Betting : Betting World

Domestic Broadcasting : Tellytrack

International Broadcast : Racing International


Group Brands

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Divisional Structure

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BranchesAgents

RacecoursesTelephone betting

InternetWAP

International comminglingBetting World


TurffonteinVaal

KimberleyArlingtonFairview

Randjesfontein

TellytrackLocal Broadcast

International Broadcast (RUK)Computaform

Computaform ExpressTAB Win

Racing ExpressTab Express

BETTING(Tote and Fixed

Odds)RACING

CONTENT(TV, Web and

Print)

PHUMELELA GAMING AND LEISURE

SOCIO-ECONOMIC IMPACT OF LEGALISED GAMBLING

Employment, Ownership & BBBEE Although totalisator betting operations (including the operation of horse racing)

account for the less than 10% market share of the gambling industry, it is responsible for the generation of tens of thousands of jobs in the industry, directly & indirectly

Phumelela has a level A Empowerdex BBBEE rating, with 50.23% black ownership

Directly employs 2 000 people Taxation &Fees

The sector contributes significantly to the fiscus, with Phumelela having contributed over R 160 million in national & provincial taxes in the year ended 31 July 2009 (approximately R 200 million prior year). This does not include the various license fees payable to provincial gambling boards.

Phumelela Gaming & Leisure Limited15

SOCIO-ECONOMIC IMPACT OF LEGALISED GAMBLING - Cont

Regulated & Responsible Gambling

Regulation & Compliance The industry is highly regulated, with emphasis on player protection& the

various gambling boards are strict in enforcing compliance National Responsible Gambling

Phumelela, like most operators in the industry, contributes a percentage of their gross gambling income to the National Responsible Gambling Programme (“NRGP”) & implements various NRGP initiatives aimed at detecting & limiting the potential negative effects of problem gambling. NRGP figures indicate that the sector compares favourably to the global trends on problem gambling


IMPACT OF MISLEADING ADVERTISING

Advertising is done in accordance with the national & provincial regulations on advertising aimed at ensuring that people are protected from misleading advertising


EFFECTIVENESS OF THE CURRENT REGULATORY ENVIRONMENT General

The gambling industry is South Africa is probably one of the most regulated globally, but needs to be reviewed to ensure a balanced approach - taking into account the commercial aspects of the operations as well

Efficiency

The current regulatory environment is less efficient with 9 provincial gambling boards & a national gambling board

All with different standards & little cooperation


EFFECTIVENESS OF THE CURRENT REGULATORY ENVIRONMENT - Cont Efficiency (cont)

This tends to significantly increase the costs of doing business &compliance overall

Unnecessary, cumbersome & inefficient processes

Phumelela has to deal with all provincial, mostly with different requirements & standards throughout

Some provinces still regulate betting on the old ordinance, as their legislation has never been updated & this makes it even more difficult to operate properly in those provinces

Different gambling tax, levies & fees regimes (e.g. different rates, on different revenue basis, excessive fees & tax rates in other provinces, etc).


EFFECTIVENESS OF THE CURRENT REGULATORY ENVIRONMENT - Cont


Tax rates by province

Province Tax Rate

Gauteng 6.5% on Take out

Mpumalanga 2.5% on Turnover

Limpopo 3.5% on Turnover

North West 6.5% on Take out

Eastern Cape 10% on Take out

Northern Cape 8 % on Take out

Free State 3 % on Turnover

Kwazulu Natal 1.5% on Turnover

Western Cape 6.0% on Take out

EFFECTIVENESS OF THE CURRENT REGULATORY ENVIRONMENT - Cont (Unfair) Competition

Overbearing regulation leads to lost opportunities & unfair competition

For instance, the totalisator is required to submit new rules for approval by the gambling boards prior to introducing any new product & these tends to take a very long time to consider

Bookmakers & the lottery are not subjected to this requirement

Lottery can also open outlets anywhere, anytime


EFFECTIVENESS OF THE CURRENT REGULATORY ENVIRONMENT - Cont (Unfair) Competition (cont) – Open Bet

Bookmakers currently allowed to offer the so-called “open bet”, that is, offering bets which were not “fixed odds” or using totalisator’s results & dividends as a basis for determining payouts

This has effectively allowed them to “unlawfully” compete with the totalisator & utilize the totalisator’s intellectual property without due consideration

The open bet is estimated to cost the totalisator & horse racing approximately R 200 million nationally


EFFECTIVENESS OF THE CURRENT REGULATORY ENVIRONMENT - Cont (Unfair) Competition (cont) – Open Bet

This means that bookmakers do not adequately contribute to horse racing, while weakening the totalisator’s ability to fund horse racing

Every R100 bet on the totalisator yields R20 on average for horseracing, of which about R6 goes directly into stakes (prize money for horse owners)

In the normal course, a R100 fixed-odds bet with a bookmaker yields R2.70 for horseracing. This assumes a 10% profit for fixed-odds operators with them retaining R10 of every R100 wagered with them. Of the assumed R90 left over, R84.60 is returned to customers, with R2.70 for provincial taxation & R2.70 to horseracing in some provinces

Open betting has also contributed to significant decline of totalisator revenue in Germany over past ten years.


INTERACTIVE GAMBLING

The delay in licensing & regulating interactive gambling may mean that South African operators have lost significant ground

South Africans are already patronising available interactive gambling sites elsewhere

Some of the proposed regulation on interactive gambling may render South African websites unattractive

For instance, the proposed player registration process is too onerous compared to other jurisdictions.


Thank You

Questions and Answers

MPHO RAMAFALO

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phumelela gaming and leisure trade & industry pc presentation

Documents

horse racing industry

horse racing totalisator

broadcasting of horse

racing fans

phumelela gold enterprises

international racecourses

sagold circle

uk racecourses