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The emergence - PPT Presentation

of online gambling and its impact on existing modes of gambling with specific reference to South Africa 11 July 2016 Presenter Mrs Caroline KongwaHankanga CONTENT Introduction and legal South African legislation ID: 605242

online gambling south illegal gambling online illegal south impact africa internet activities industry legal national social enterprises gamblers economic

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Slide1

The emergence

of online gambling

and its impact on existing

modes of

gambling; with specific reference to South Africa

11 July 2016Presenter: Mrs Caroline Kongwa-HankangaSlide2

CONTENT

Introduction (and legal South African legislation)

Online gambling globally

Online gambling in South Africa (overall trends and

challenges)Illegal gambling in South Africa (economic impact)Illegal gambling in South Africa (social impact)

Online and illegal gambling (problem gambling)Regulation and way forwardQuestions and comments Slide3

INTRODUCTION

The National Gambling Act 7 of 2004, makes provision for the following

authorised gambling activities:

Gambling games at casinos (slots and tables)Betting and wagering on horse racing and sport (also through the internet)

BingoLimited payout machines

Lotteries and associated schemes are authorised by the National Lotteries Commission of South Africa

Illegal, and by implication online gambling, is defined as any gambling

activity that is not authorised in the legislation. Unlawful

gambling activities are contemplated in Chapter 2, Part B,

of the National Gambling Act 7 of 2004 Slide4

INTRODUCTION

Online

gambling is defined in the legislation as

an interactive game played

or available to be played through the mechanism of an electronic agent accessed

over the internet other than a game that can be accessed for play only in licensed premises, and only if the licensee of any such premises is authorised to make such a game available for play

The

Department of Trade and Industry and the South African government

are firmly

for

the prohibition of

online gambling

from a regulatory stance (National Gambling Policy,2016), as it exacerbates the regulatory costs,due to its ease of accessibility and unmonitored environment. Additionally,there is a significant lack of capacity to regulate theindustry. Slide5

INTRODUCTION

NGB is mandated by the National Gambling Act 7 of 2004, to conduct

research to determine the socio-economic impact of gambling in South

Africa NGB commissioned research during 2015 to determine the socio-

economic impact of illegal, and especially online, gambling in South Africa, as well as the NGB’s role to combat illegal gambling We are happy to share the latest research findings with you!

Slide6

INTRODUCTION

The contribution the legal gambling industry is making to South Africa (SA)

is, unfortunately, threatened by that of a mushrooming and shadow

industry and illegal gambling activities operated by unlicensed operators, primarily through online platforms

Other traditional forms of illegal gambling (excluding online) are Fafi, dice, card games, betting on animals, illegal casinos and slot machines - often

found in areas regarded as low levels of socio-economic welfare, high unemployment, poverty and low levels of economic activity – often in places disconnected from urban areas such as townships and rural

c

ommunities characterised by low levels of enforcement

The majority of online gamblers are young technologically advanced

individuals, accessing the internet using portable devices.

Four out of ten households in SA have access to the internet using mobile phones (Stats SA, 2014)Slide7

INTRODUCTION

But

what

IS

the impact of illegal and especially online gambling

operators on existing modes of gambling in South Africa in terms of revenue, unfair competition and increased challenges

associated with problem gambling?

And how does South Africa address this challenge?Slide8

ONLINE GAMBLING – GLOBALLY

Online gambling activities have grown substantially and become very popular since the early 1990’s

2016 (

Globally):

3,640 listed sites 1,155 site owners Operation in 127 jurisdictions

442 payment methods

[Source: Casino City, 2016]

Popular games: Online casinos, poker rooms and sportsbook.

New games are emerging such as betting exchanges,

tournaments and spread betting and poker

Some countries that have prohibited online gambling

are China, Greece, Hungary, Lithuania, Luxemburg and some US (excluding online poker in three states) Slide9

ONLINE GAMBLING – GLOBALLY

C

ountries that regulate online gambling (e.g. Germany, UK, France and Canada) generated between US$1.81

billion to US$3.65 billion during

2015. However, China and some states of the US, have completely prohibited online gambling but generate the highest revenues based on their regulated modes of gambling

Growth in online gambling has been much associated with and connected to the digital revolution, the creation of online payment mechanisms, online search engines, advertising and social media platforms

Online gambling represents a lucrative enterprise and has a fraction of the

start-up costs associated with traditional land-based or destination approach gambling activities

The barriers to entry for online gambling are significantly

less than for land-based casinosSlide10

ONLINE GAMBLING – GLOBALLY

The progress of technology and rapidly declining costs have increased

people’s access to technology and the internet and therefore their propensity to engage in online gambling

The development of specialist gambling software has increased customer experiences and complimented it with the rise of internet payment

mechanisms The main participants of online gambling are the operators, the punters, the countries in which they are situated, and the financial institutions that process the transactions

Perhaps the dominant factor to the growth of online gambling is

that the future adult population would have been the first

generation to grow up with technology and millions of people

across the globe are familiar and accustomed to the internet Slide11

ONLINE GAMBLING – GLOBALLY

Arguments for the prohibition of online gambling:

The anonymity of the internet will allow underage gamblers to participate in online gambling

The convenience, high-speed and accessibility of online gambling may exacerbate problems with pathological gamblers

The anonymity provided by the internet and the lack of accountability thereof

may allow criminal activities to flourish (unscrupulous

operators, rigging games and cover for money laundering)

Online gambling erodes a country’s sovereignty in terms of rules

and regulations governing society by making gambling accessible to anyone with a device and internet connection Government is unable to protect the rights of consumers that engage in online gambling Online gambling activities compete with traditional, land-based casinos – impact on jobs and taxes contributed by the traditional gambling sector Slide12

ONLINE GAMBLING – GLOBALLY

Arguments for the regulation of online gambling:

Internet gambling is already in existence and growing at a rapid rate where many governments are focussed on the roll-out of ICT infrastructure that will increase accessibility to this form of gambling.

Many schools use ICT to educate children, and combined with social media, exposure to and participation in online gambling can be expected to continue. A continuation of the prohibition stance will mean the government must enforce the law, which will be

challenging If

internet gambling cannot be effectively prohibited through enforcement, then a more sensible approach to

mitigate

the potential

downside

of this activity is to

regulate it. This would provide government with the power to monitor these activities while extracting some sort of benefit in the form of license fees, etc Slide13

ONLINE PROFILE

[Majority]

ILLEGAL

PROFILE

[Majority]

FemaleGenderMale

Young (18 – 34 years)

Age

Young to middle-aged

(25

– 39 years)

African

Race

AfricanTwo dependentsDependantsTwo dependents

High to semi-skilled

Occupation

Low/unskilled

Middle

to high income

Income

Low to middle income

Main motivation to gamble: TO BOOST INCOME

Substantial growth in online gambling seems inevitable,

especially with increasing access to the internet in

most households

ONLINE GAMBLING IN SOUTH AFRICA

Overall trends & challengesSlide14

ONLINE GAMBLING IN SOUTH AFRICA

Overall trends and challenges

Approximately 96 online gaming sites accept participants from South

Africa

(Casino City, 2016)Evidence suggests that about 75.4%

(age 18 to 34) of average South African online gamblers are young, technologically advanced individuals, who mainly access the internet using portable devices

Most people play slot machines and bet on sport, horse racing

and other contingencies

Overall, most people play for short periods at average frequencies

of 1-3 times a week

Male gamblers gravitate towards casino table type games and betting,

while females are attracted to games such as bingo and casino slots Slide15

96% of respondents in

a NGB

survey had access to the internet via their mobile devices

Most of the respondents have observed e-gambling advertisements in digital form, either through emails, SMSs or websites, as well as social media applications such as Facebook and Twitter

Financial institutions are also unsuspecting or involuntary role players because they process some of these transactions. These institutions have the capability to determine the nature of the transactions, as well as to block/limit their processingA large percentage share of the sample was unsure of the laws regulating online gambling, however, a much higher proportion are aware of support programmes

The size of

the SA regulated gambling industry tax base is slowly

being eroded

by the

fast growing online gambling sector

ONLINE GAMBLING IN SOUTH AFRICA

Overall trends and challenges Slide16

Online

gambling

has become

a faceless adversary for regulators due to its borderless nature and modus operandi, making regulations and law enforcement even more difficult and challenging

The main drivers/enablers of online gambling are: Marketing of e-gambling,

Social media (as a platform and marketing tool)

Financial

institutions that transact the

payments, deposits and pay outs

More control

measures are required as the environment is quickly expanding and the associated consequences may be exacerbated by the unmonitored nature of the activity

ONLINE GAMBLING IN SOUTH AFRICAOverall trends and challenges Slide17

A big challenge is that combatting online gambling requires a multifaceted approach. Often illegal

gambling activities are linked to other organised crimes such as poaching and human

trafficking

This shadow industry brings with it unfair competition and creates other threat areas for the broader economy such as job sustainability within the regulated gambling industry because

over time, as revenues decrease, the industry will be forced to shed jobs (direct and indirectly). In turn this will impact on the South African Government’s objective, as set out in the National Development Plan (NDP), to create 5 million jobs by 2030

As revenues continue to erode this industry, the gambling industry’s contribution to Corporate Social Responsibility initiatives

are

likely to decline. Hence, reducing the contribution to

social

and educational programsONLINE GAMBLING IN SOUTH AFRICAOverall trends and challenges Slide18

Unfair competition

created by illegal enterprises negatively affects legal

enterprises in terms of their ability to generate revenue. Legal gambling enterprises have to fulfil a number of different conditions before operating licenses are granted. Illegal gambling outfits do not adhere to the rules, regulations and standards governing the industry, and thus face no

restrictions in terms of the areas they operate in and the price which they can charge for gambling. This translates in reduced government revenue in the form of tax contributions by legal gambling enterprises.

The Casino Association of South Africa (CASA) estimates the total tax

loss

due to illegal gambling activity equalled R110 million

for the 2014/2015 financial year

ILLEGAL GAMBLING IN SOUTH AFRICAEconomic impact Slide19

ONLINE GAMBLING IN SOUTH AFRICA

Economic impact

Legal

enterprises which face competition from illegal enterprises often have to undertake cost cutting measures to remain

profitable.

Reducing

staff numbers

is often one of the first avenues that are pursued for reducing

costs

In

addition, people employed in illegal enterprises do not enjoy the basic provisions of a fair and equitable workplace as contained within the relevant legislation. Illegal enterprises often take advantage of their employees through low

wages, poor

working conditions and almost no economic benefits Many transnational criminal networks use illegal gambling, mostly online gambling, as a mechanism for money

laundering and other criminal activities (i.e. animal

poaching, trafficking of counterfeit merchandise, drugs

and people) Slide20

ILLEGAL GAMBLING IN SOUTH AFRICA

Economic impact

The

estimated monetary flows associated with illegal

(online)

gambling in South Africa impact the economy in the following ways with respect to employment and GDP:

Total

loss in v

alue add (the total contribution of the gambling industry to the SA economy) of

R1.9 billion for the economy as a whole

per annum.

This includes a direct impact of R972

million

and an indirect impact of R972 million. This is less than 0.01% of total annual GDP for South Africa Total loss of 3,785 employment opportunities in the legal gambling industry based on employment in casinos (841) and employment in related services such as retail outlets

and

restaurants

(

2,945).

This

equates to 5.9% of the

total employed persons

in the

casino

industry

of

the

country

Slide21

ILLEGAL

G

AMBLING IN SOUTH AFRICA

Social impact

Many

of the illegal gambling modes are targeted at lower income earners. These consumers, often desperate to make ends meet or earn extra income, are loured into playing. The consequence is that many of them end up spending the little income that have and are forced to borrow money to either fund their gambling habits or to take care of themselves

Consumers that participate in illegal gambling do not enjoy the same rights and protection as those that participate in legal gambling due to the legality of the operator.

Many punters that have gambled in illegal establishments and won a substantial amount of money have been refused payment. Further, many of the games

offered

by illegal operators are not always based

purely

on chance or skillSlide22

ILLEGAL

G

AMBLING IN SOUTH AFRICA

Social impact

Illegal

gambling impacts society at large through its impact on social resources, both in terms of what is spent on enforcement with regard to prohibiting illegal gambling activities, and also what is lost on account of these activities

Many millions of rand in state resources are expended on crime intelligence activities relating to the investigation and prosecution of illegal gambling

operators

Social resources

are lost due to legal operators (either private gambling enterprises or the National Lottery) having to cut spending in terms of social investment and the funding of good causes.

In

some instances, funding through these means exceeds traditional

funding

sources from the state. Therefore, a reduction in funding sourced from legal gambling activities can have a significant impact on many social causes Slide23

ILLEGAL

G

AMBLING IN SOUTH AFRICA

Problem gambling

The evaluation

framework in the research study used

three variables to determine the number of possible problem gamblers; namely

time

allocation (20%),

control

levels (50%),

and

expenditure (30%) described as the proportion

of income spent on gambling, to determine whether an individual is a possible problem gambler, or at risk of becoming pathological gamblersThe results based on the evaluation framework to identify problem gamblers revealed that in terms of online gambling there are no pathological gamblers as most peoples’ income remains unchanged (many are middle to high income earners) and debt does not increase. Slide24

PROHIBITION AND WAY FORWARD IN SOUTH AFRICA

Currently, any form of online gambling happening on unauthorised sites

in South Africa is expressly prohibited and is a criminal offence. Those

contravening the Act not only face imprisonment, but also hefty fines.

This prohibition also applies to unlicensed online sports betting and

bingo

operations

Winnings from prohibited activities are forfeited and placed in a trust

account as stipulated by the National Gambling Act. The winnings are forfeited to the State.Slide25

RECOMMENDATIONS TO MANAGE THE IMPACT OF ONLINE GAMBLING

Legislation

:

Amend current laws to ensure terminology is substituted for online; laws should shift focus to enforcement and assign more resources; and laws should outline uniform criteria for processes and duties so that gambling regulators can concentrate more on enforcement

Institutional capacity

:

Capacitate regulators and ensure they have the tools needed to combat online gambling; assign all regulators peace officer powers and assign them legal authority to conduct raids; create gambling-specialised courts and appoint and train prosecutors aligned to gambling related casesSlide26

RECOMMENDATIONS TO MANAGE THE IMPACT OF ONLINE GAMBLING

Collaboration mediums

:

Constituting

forums which include representatives from the regulators and all other significant agencies that support the enforcement of illegal gambling; inter-link national databases or repositories of information so that all relevant parties are able to access them from any web capable device and they are able to update them

Advertising:

Set advertising standards to ensure that exposure is limited and penalties are adequate to discourage operators

Awareness

:

Create awareness campaigns that run constantly on

some form of media to inform the public about gambling legislation and its penalties; as well as problem gambling, its consequences and treatment optionsSlide27

Research is to see what

everybody else has seen,

and to think what

nobody else has thought!

Albert Szent-Gyorgyi QUESTIONS AND COMMENTS

Presenter: Mrs Caroline Kongwa-HankangaAdministrator National: 01000 33475E-mail: ckongwa-hankanga@ngb.org.za Web: 

www.ngb.org.za Address:  420 Witch-Hazel Avenue, Eco-Glades 2, Block C, Eco-Park, Centurion, 0144