Presentation to the Select Committee on Economic Affairs

1

• Presentation to the Select Committee on Economic
  Affairs

2
Agenda

• The LPMASA
• The LPMASA Industry
• Industry objectives and outcomes
• Concerns
• Suggested solution

3
Introduction to LPMASA

• Representative body for licensed route operators
  of limited payout gaming machines in South
  Africa, and
• Includes representatives from manufacturers,
  bingo operators and observers from the national
  monitoring system.

4
Role of the LPMASA

• Represent and promote the interests of the LPM
  industry (route and site operators/premises
  owners).
• Establish and maintain close co-operation with
  the National Gambling Board, Provincial Gambling
  Authorities, National Government and Provincial
  Governments.
• Give regular input and participate in all
  processes relevant to the LPM industry at local,
  provincial and national levels.
• Provide relevant professional services to its
  members and other LPM stakeholders.

5
LPM industry structure

• To provide LPMs for play in sites approved by a
  provincial licensing
• authority, subject to the following prescribed
  limitations
• Number of LPMs capped at 50,000 nationally with
  set limits for each province and three-phase roll
  out process
• Only 5 LPMs per site
• LPMs must be secondary activity to primary
  business of site
• Sites must meet specific prescribed criteria
• Maximum stake of R5,
• Maximum win R500 with no Jackpots
• Minimum Return to Player at 75
• Sites with up to 40 LPMs possible with special
  motivation and only with National Gambling Board
  approval for each site.
• Stakeholders Government - National and
  Provincial Route Operators Site Operators
  Monitoring Service Providers Other Service
  Providers Players Other Customers Wider
  Community

6
LPM Policy and Legislative framework

• Governments policy objectives and framework
  designed to
• safeguard community against adverse effects of
  gambling, and
• prevent over stimulating latent demand for
  gambling
• Legislative framework provides for three discrete
  components operating in synergy, i.e. casinos,
  LPMs and bingo.
• Limits imposed on number of casinos in the
  country and number of gaming machines (LPMs)
  outside casinos, with traditional (paper) style
  bingo as only alternative.
• National Gambling Act provides for a protracted
  clearly delineated 3-phase roll out of LPMs to
  minimise potentially detrimental socio-economic
  impact posed by proliferation of LPMs.
• First phase of roll out currently being
  implemented, after five-year delay, allowing for
  initial phase of LPMs to be rolled out in the
  provinces.

7
Non-Financial objectives

• Sensitivity to governments policy objectives
  through responsible corporate behaviour aimed at
  protecting the vulnerable and preventing over
  stimulating latent demand for gambling.
• Comply with national and provincial gambling laws
  and rules.
• Comply with SA National Standards for machines
  monitoring system
• All LPMs connected to a central monitoring system
• Maintain commercial viability and protect
  government revenue stream
• Encourage investment
• Increase employment opportunities
• Empower small and micro enterprises
• Formalise businesses in the sector
• Eliminate illegal market
• Enhance premises in the entertainment
  hospitality industry
• Supplant an existing unregulated and illegal
  industry
• with a legal industry subject to regulatory
  capture

8
Emerging industry outcomes

• In 5 provinces where operative
• 2,755 LPMs operating (9,000 LPMs licenced)
• R 404 750 000 Direct capital investment over an
  eight year period
• R 131 534 000 Total contribution to economy
  through initial annual licence fees, provincial
  gambling tax, VAT monitoring fees over an eight
  year period
• 6,672 Direct indirect employment
  opportunities
• R 450,000,000 Gross Gaming Revenue since
  inception of the industry
• R20,000 Average return per month to each site
  owner in KwaZulu-Natal and Western Cape
• R12,000 Average return per month to each site
  owner in Eastern Cape and Mpumalanga

9
Concerns

• Introduction of 300 new type of gaming
  (casino-style) terminals in bingo halls in
  Gauteng with no limits on stakes or winnings and
  jackpots permitted.
• Bingo gaming terminals mimic games of chance
  (typically found in casinos) using bingo as a
  guise.
• Technical description of new bingo gaming
  terminals blurs lines between definitions of a
  game of chance and electronic or technological
  aid for the game of bingo.
• Wholesale introduction of these new gaming
  terminals into bingo halls to replace
  traditional bingo seats has potential to create
  mini-casinos through the replacement of some 3
  734 seats in 8 bingo halls in Gauteng alone.

10
Concerns

• Governments carefully crafted gambling policy
  and laws being circumvented by this.
• Governments socio-economic concerns, around
  which its gambling policy is framed, potentially
  under threat.
• No socio-economic impact assessment done to
  evaluate potential negative impacts on society
  and the vulnerable.

11
Concerns

• Negative impact on intended synergy between the 3
  industry components (casinos, LPM industry
  bingo).
• No legal and policy framework in place for these
  bingo gaming terminals as is the case with the
  casino and LPM industry.
• Approval process and standards for the bingo
  gaming terminals inconsistent with those applying
  to casinos and LPM industry (subject of pending
  litigation).

12
Suggested solution

• The National Gambling Policy Council and the
  National Gambling Board be requested to develop
• a national policy with due regard to
  socio-economic concerns, and
• national norms and technical standards to clarify
  explicitly the technical and theoretical
  difference between gambling devices that are
  electronic, computer or technological aids for
  the playing of bingo and those that are
  electronic facsimiles of casino-style gambling
  machines and fall into the definition of gaming
  machines, to avoid unintended establishment of
  mini-casinos.
• Until the above has been finalised and included
  in the national and provincial gambling laws,
  provincial gambling boards should not licence any
  bingo terminals, electronic machines or devices
  for the playing of bingo and should not approve
  any applications for bingo licences on that
  basis.