Market Focus: South Africa

For many years, all forms of gambling except betting on horseracing was banned in South Africa. Horseracing itself was only exempted from this ban because at the time it was perceived to be a skill game, rather than one which relied on an element of chance or luck. Despite this ban, many forms of gambling continued to flourish for many years illegally.

Following the end of apartheid, South Africa began a period of democratisation and renewal under which new laws and institutions were created to support the newly enfranchised black population.  As part of these efforts, the four independent homelands (Transkei, Bophuthatswana, Venda and Ciskei) were reintegrated back into the greater South African political framework and given constitutional dispensation to continue legalised gambling.

Another area addressed as part of these efforts was the legalisation and regulation of gambling, which began with the very first National Gambling Act (1996). The National Gambling Act set out the main parameters for licensing and regulation, establishing the National Gambling Board (NGB) as what would later become the body responsible for all oversight of gambling in the country. However, at the time of the act, the NGB held no regulatory powers with its main purpose being to ensure the growth of consistent regulatory standards across South Africa.

As part of the constitutional dispensation and to ensure that no province would be economically disadvantaged, the South African government recognised the authority of individual provinces to legislate on matters relating to ‘casinos, racing, gambling and wagering’, effectively giving them licence to start their own regulatory regime. Because of the economic benefits to the fledgling nation, the provinces duly obliged, leading to the creation of nine separate gambling jurisdictions each with their own set of rules.

Population: 56.7 million

GDP per capita: $6,160.73 USD

Internet penetration: 64.64%

President: Cyril Ramaphosa

Principal regulatory body: National Gambling Board and individual provinces

Online regulation

In 2004, the existing National Gambling Act was replaced by an updated version, which had three distinct aims: to provide greater clarity on what constituted licensed regulated gambling and by doing-so establish co-ordination of the legislation process taking place provincially at a national level. The third and final aim of the updated NGA was to establish the legislative process for the licensing and regulation of so-called interactive gambling by the National Gambling Board.

The 2004 version of the NGA defines interactive gaming as “a gambling 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 such premises is authorised to make such a game available for play.”

Games included under the NGA include online casino, poker, slots and bingo. Sports betting and tote betting are not classified as gambling games for the purposes of interactive gaming and therefore not included under the act but are regulated and licensed at state level under existing land-based sports betting licences. However, in a strange dichotomy there is no national licensing regime in place for online casinos, poker, betting exchanges and bingo. The only licensing for these interactive games exists at state level.

Tote betting licence holders are subject to a 6% withholding tax on the total winnings that they are required to obtain from bettors. Once obtained, a percentage of these funds is redirected to fund the development of the wider sector. Although it varies between provinces, sports betting licence holders generally pay tax at 6.5% of gross gaming revenue.

Licensing

Under current rules any company incorporated in South Africa may apply for a sports betting licence if the wider requirements of the Broad Based Black Economic Empowerment (BBBEE) legislation, first enacted in 2003, are satisfied. These rules are designed to empower the previously disadvantaged black population by redistributing business ownerships and management representation.

Licences are available to both individual employees and companies, subject to certain factors, the presence of which, in any part of the assessment process, can result in individuals being disqualified from operating online betting.  All individuals under the age of 18, politicians, individuals connected with the NGB, or those who have been convicted for fraud are barred from becoming licensed individuals.

Applications can take between three months and one year, subject to the size of the business, the profile of the individual, and the provincial gaming authority involved. The application process (and cost) varies between province, but most require businesses to publicly advertise their application once it has been made.

Restrictions

Under section 11 of the 2004 act, “a person must not engage in or make available an interactive game except as authorised in terms of this Act or any other national law”, while the advertising of illegal gambling sites is also prohibited. Individuals found to be in breach of this legislation can receive a fine of up to ZAR10m together with up to 10 years in prison. The question of whether this legislation applies to offshore operators has been the subject of much debate in South Africa, most notably with the Casino Enterprises case, when a Swaziland-based operator was deemed to be targeting citizens in the South African province of Gauteng.

After a lengthy legal dispute between Casino Enterprises and the National Gambling Board, the matter was finally settled by the South African Supreme Court. The Court ruled that although the NGA exclusively referred to the conduct of South African operators, Casino Enterprises had broken the NGA by allowing its games to be accessed by South African punters.

Although South Africa does not operate an ISP blocking regime, its financial payments system is controlled to block payments made to foreign operators and to stop payments being made from international sites to South African individuals without prior authorisation being obtained.

But for Yahaya Maikori, partner at Law Allianz, the most frustrating situation for any operator “is ensuring as a national operator that your advertising doesn’t infringe local marketing rules and guidelines”. Playing this out, a lack of central body regulating advertising allows a variety of marketing messages to be sent out under the auspices of whatever provincial licence that operator is licensed in.

Maikori cites examples where some provinces insist on problem or underage warnings being part of the advert while others do not. “Some have controls on who can see the adverts while others are not controlled – eg. some gambling ads can be seen by anyone from 6-90 years old. Yet you may not run an advert in Gauteng based on an approval from the Western Cape Gambling Board,” he adds.

Reform

Politicians in South Africa have been reluctant to expand the purview of gambling, largely due to high numbers of problem gamblers in the country. However, the lack of expansion, coupled with continued questions about the role that the National Gambling Board plays in regulating the South African industry, have necessitated a revision of the existing National Gambling Act.

The National Gambling Amendment Act 2018 (NGAA) is the culmination of more than 10 years of debates in the South African parliament and wider industry. To put this into perspective, it was first introduced in 2008 as a means of providing for the legalisation and regulation of egaming, before pushback from land-based operators and financial authorities forced a parliamentary rethink.

However, Maikori believes one of the main reasons politicians wanted a national regulator was “the failure and corruption that they had with the Northern Cape Gambling Board, and certain other corrupt practices that were exposed at other boards. However, in truth that was no different to anywhere in the entire country at any state-owned enterprise.”

Designed as a way of strengthening the industry, the amended act shifts regulatory powers from the National Gambling Board to the new National Gambling Regulator, improving administration at the National Gambling Policy Council and widening the scope of the National Central Electronic Monitoring System to monitor all forms of gambling activity for the first time.

However, as much as this act contains enabling legislation, the government came under fire for stopping short of greater egaming legalisation for the sake of expediency. But did they miss a trick?

For egaming consultant Mark McGuinness, the NGAA “isn’t the finished article, and nor should it be, it’s a good starting point and a framework in which all stakeholders can learn, debate and move forward on”. And for McGuiness this represents the start of a path to a smoother regulatory regime.

The South African market may not be as mature as its European counterparts, as it is still in its growth phase, but with the expansion of mobile and internet services exploding across Africa the possibilities for this market are self-evident.