A Foundation for I-Gaming in South Africa

A 242-page report published in October 2005 by South Africa's National Gambling Board and mandated through a schedule of provisions in the National Gambling Act of 2004 will likely serve as a foundation for a regulatory model for Internet gambling.

The 2004 Act obligated the board to establish an interactive gambling policy committee to compile the report within one year of its enactment in late 2004. The committee first assembled in early 2005, composed of representatives from the Department of Trade and Industry, the National Treasury, the National Prosecuting Authority, the Department of Communications and the National Gambling Board, as well as provincial licensing authorities and gambling industry advisors.

Mpande Advisors was recruited as a consultant to assist with the research and compilation of the report, but the Committee remained the ultimate decision-maker on policy direction.

Methodology

A large part of the research for the report came from an in-depth analysis of the strengths, weaknesses and outcomes of 10 regulatory models around the world: Alderney, Antigua and Barbuda, Australia, Costa Rica, Gibraltar, Isle of Man, Kahnawake, Malta, the United Kingdom and the United States.

Public opinion on interactive gambling was obtained by placing invitations in major South African newspapers. The country's gaming organizations were also requested to submit opinions, as were the CEO's of provincial gaming boards. A questionnaire was also distributed to 10 of the world's largest online gambling operators, although it appears that only six replied. Representatives of the online gaming industry also submitted several pages of opinion to the committee, including the Association of Remote Gambling Operators (which has since merged with the Interactive Gaming, Gambling and Betting Association to form the Remote Gaming Association), Betfair, BMM Testlabs, and eCOGRA.

All the opinions and responses as well as the lengthy jurisdictional analysis, plus impact areas outcomes, are appended in the report's final 197 pages.

After all the data was compiled, the committee set upon the task of establishing the guidelines for its regulatory model.

Proposed Framework

The Interactive Gambling Policy Committee believes the three main objectives behind South Africa's regulatory model should be the protection of South African citizens and other players, the preservation of South Africa's reputation in the world community as an upstanding and responsible global citizen and the promotion of a successful interactive gaming industry in South Africa.

The committee has also proposed that a single regulatory body be responsible for providing, administering, and enforcing policy guidelines. The National Gambling Board is the entity the committee believes should take on these responsibilities. This aspect of the committee's suggestions resembles the regulatory framework that has taken effect in the United Kingdom, where a newly created Gambling Commission has become the administering and enforcement entity.

South Africa's regime would also be a "free-market" international one in which its licensees would not be restricted from accepting bets from citizens of any particular country, regardless of the legal status of the country where the gambler resides. The committee would also like to adopt the notion that "gambling takes place at the location where and at the moment when the wager is accepted."

To remain consistent with existing legislation, the Committee has taken the view that the interactive gaming regulations should exclude lotteries because they fall under a separate national Act and horseracing and sports betting, which are regulated at the provincial level.

The committee does not wish to put an initial limit on the number of remote gambling licenses to be issued, its reasoning being that "any single site is accessible to an unlimited number of players at any one time," and "such a restriction would have limited bearing on the extent or intensity of interactive gambling activity that takes place among South African citizens."

All operators and key personnel would require licenses under the committee proposed model, including the CEO and decision makers who report to the CEO, the company's nominee, other designated decision-makers within the company, and directors and shareholders with more than a 10 percent stake in the company. Licenses will only be granted to companies that are registered in South Africa and whose sole business is operating an interactive gaming business. Software providers will also require a license that will be subject to a probity test.

What Next?

Mandisi Mpahlwa, South Africa's minister for the Department of Trade and Industry, of which the National Gambling Board is a part, will now consider the report of the committee. He has a period of one year to introduce legislation to Parliament that would regulate interactive gambling in South Africa.

Click here to view the National Gambling Board's Report on the Regulation of Interactive Gambling.