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
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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