Piggs Peak - A Unique Operation

Offering online gaming since 1998, Swaziland-based Piggs Peak Casino is a rare gaming company in that it not only offers both land-based and Internet-based gambling services in the jurisdiction that licenses it, but also pays levies and taxes in that jurisdiction.

The company has been operating its traditional bricks-and-mortar casino since 1988 in Swaziland, an independent kingdom on the eastern border of South Africa. Piggs Peak Casino is part of a hotel, but a separate company, Orion, operates the hotel. Pigg's Peak and the hotel company have an operators' agreement between them, a sort of arrangement that is common in a lot of African countries.

In 1998, the Swaziland government granted Piggs Peak an extension to its gaming license that permits the company to offer gambling services online. Soon after receiving the license extension, PiggsPeak.com became one of the first online casino operators to launch with Microgaming software.

PiggsPeak.com has since also launched a poker room using software from Microgaming's PrimaPoker, but Piggs Peak's poker players are not aggregated into the massive PrimaPoker network.

Piggs Peak's poker room must stand alone because the company may only provide gaming to residents of nations that are part of the Rand Common Monetary Area, which includes Swaziland, South Africa, Namibia and Lesotho. Because of the currency exchange control regulations in the Rand Common Monetary Area, Piggs Peak may not pay customers in any currency other than the rand, so only customers who are based in the area, or have bank accounts there, can use Piggs Peak's online gaming services.

While other casinos exist in Swaziland, Piggs Peak is the only one that has been granted an extension to operate online.

"The online operation has been very successful; we've been very happy with it," Piggs Peak Managing Director Howard Berchowitz said. "Obviously the Internet market in this region of the world is certainly behind in connectivity, but in the last couple of years Internet connectivity has improved quite dramatically, and it has been a major part of our business."

Although its Internet connectivity may not be as pervasive as other parts of the world, the Rand Common Monetary Area is certainly not immune to the poker bug. Piggs Peak Casino has begun hosting periodic events called the All Africa Poker Tournament, and the last two events awarded prized money over 2 million rand (US$292,000). The next event, to be held in August, will award more than 2.25 million rand ($328,000) in prize money.

Piggs Peak's license extension allows the company to offer any form of gambling over the Internet, but at the moment, the company offers only casino gaming and poker.

"We've been looking at launching a sports book, and have looked at doing a relationship with some of the big operators," Berchowitz said, "but because of our currency situation, it is very difficult for me to tie-up with an offshore operator. Sports book operating is not our game; we don't know it. There must be a fair market here, but I don't know it, and there isn't an operator here that I can tie up with."

Because Piggs Peak's license for online operations is an extension of its land-based operation, the company pays the same gaming levy on gross wins and normal company taxes on casino profits that it does in its brick and mortars casino.

"We reckon that we are one of the few online operators in the world that currently pay taxes because most of the online operators are licensed offshore in tax-free jurisdictions," Berchowitz said.

For the moment, there is no telling how Piggs Peak's online operations would be affected if South Africa were to enact a regulatory regime for online gambling, which it has undertaken to do (albeit at a very slow pace).

South Africa's National Gambling Board in October 2005 published a 242-page report that will likely serve as the foundation for the country's regulatory model. The board conducted an in-depth analysis of the strengths and weaknesses of 10 of the world's I-gaming regulatory models and solicited public opinion from interested parties at home and abroad before issuing its report.

The board's conclusion was that single regulatory body should be responsible for providing, administrating and enforcing policy guidelines--similar to the situation with the U.K. Gambling Commission and that the board is the entity best suited to serve this role. The board has also advised that "free-market" international regime in which licensees would not be restricted from accepting bets from citizens of any particular country would be optimal, and it does not wish to put an initial limit on the number of remote gaming licenses on offer.

Mandisi Mpahlwa, South Africa's minister for the Department of Trade and Industry, is considering the report and has until October to introduce legislation to Parliament that would regulate remote gambling in South Africa.