PRESENTATION SECOND QUARTER PERFORMANCE REPORT: 1 July – 30 September 2015

1. PRESENTATION SECOND QUARTER PERFORMANCE REPORT: 1 July – 30 September 2015 PORTFOLIO COMMITTEE ON TRADE & INDUSTRY 11 November 2015 Cape Town Presenter: Ms Caroline Kongwa (Accounting Authority)

2. CONTENT • Executive summary • Gambling Sector Performance • Research Results on Gambling Prevalence and Problem Gambling • Performance against business plan • Progress on actions in the risk register • Report against post audit implementation plan • Financial report • PFMA and Treasury regulation compliance checklist /calendar • Conclusion

3. EXECUTIVE SUMMARY • There were 17 Targets that were to be reported against in the entity’s Annual Performance Plan 2015/2016 in Quarter 2 and 100% of the targets were achieved. • The NGB continues to play an important role in the curbing of unlicensed gambling activities particularly online gambling. • Through the use of the Entity’s register for illegal gambling operatives, the NGB in collaboration with the law enforcement agencies, have identified online gambling syndicates in Gauteng and are in the process of securing arrests. • The NGB maintains its leading role in Project with the HAWKS. • The NGB has successfully performed evaluations and compliance monitoring of four (4) Provincial Licensing Authorities (PLAs), namely: Gauteng, KwaZulu-Natal, Northern Cape and North West. • The NGB gathered national gambling statistics and information about the performance of the South African legalised gambling industry from all Provincial Licensing Authorities (PLA’s). • The NGB has conducted research called the Khayabus on prevalence of gambling and problem gambling. This is a follow up study that was conducted to determine and track gambling behaviour over time from April 2011 to April 2015.

4. FY 15 ANNUAL AUDITED GAMBLING SECTOR PERFORMANCE Casino’s account for the highest percentage contribution of total GGR at 72.1%, with Betting at 14.5% followed by LPM’s at 8.7%.

5. FY 15 AUDITED GAMBLING SECTOR PERFORMANCE Gauteng is the highest contributor to GGR at 42.4%, followed by KZN at 18.4% and Western Cape at 15.8%.

6. Q1 GAMBLING SECTOR PERFORMANCE Casino’s account for the highest percentage contribution of total GGR at 71.9%, with Betting at 15.9% followed by LPM’s at 8.8%.

7. Q1 GAMBLING SECTOR PERFORMANCE Gauteng is the highest contributor to GGR at 41.2%, followed by KZN at 18.8% and Western Cape at 15.8%.

8. NCEMS LPM SECTOR PERFORMANCE Kwa-Zulu Natal accounts for the highest distribution at 23%, followed by Gauteng at 21% and Western Cape at 17%. Northern cape has in the month of October effected its first distribution.

9. NCEMS LPM SECTOR PERFORMANCE • Limpopo is closest to reaching 50% of its total allocation at 36% (or 72% of provincial allocation) followed by the Eastern Cape at 28% (or 55% of provincial allocation). The total National rollout stands at 22% (or 44% of provincial allocations). • NGB in terms of reg. 13 of National Gambling Regulations 2004, is required to conduct a social economic (LPM industry) impact study for Minister consideration prior to Phase 2 rollout.

10. RESEARCH RESULTS ON GAMBLING PREVALENCE AND PROBLEM GAMBLING • Summary of the main trends are as follows: • Gambling participation has increased from 14.3% to 15.3%; • National lottery participation has increased from 77.0% to 78.9%; • Illegal gambling has seen a significant decrease from 41.0% to 17.5%; • 54.4% of gamblers may be considered as “no risk”, a significant increase from 43.4%; • 9.9% of gamblers may be regarded as “problem gamblers”. This is down from 20.2%; • Illegal gambling has the highest risk of people becoming problem gamblers; • There is a slight increase in gambling across both genders of South African gamblers; • More coloured South Africans are participating in gambling, an increase to 19.8% from 11.3%; • The ages groups 25 and older all show an increase in gambling participation; • Problem gambling has decreased from 3.1% to 1.8% for those gamblers earning R1 to R2 999; and • Both metro and non-metro problem gamblers have decreased.

11. RESEARCH RESULTS ON GAMBLING PREVALENCE • Those who participated in gambling activities (including the national lottery) between April 2014 to April 2015 were more likely to be male than female, between 35 – 49 years old, and regionally appeared to be more prevalent in Gauteng and among the highest income groups. • Participation in the national lottery remained the most popular choice (78.9%) in terms of gambling. (refer to graph below) • Illegal gambling accounts for 17.5% of gambling activities participated in – this is the second highest gambling mode. (refer to graph below)

12. RESEARCH RESULTS ON GAMBLING PREVALENCE • The has been a decline in incidence of gambling at casinos, buying of scratch cards, participation in lucky draws, betting on horse racing and sport, playing on LPMs and bingo • Overall gambling modes reflect buying national lottery tickets is the only mode to show an increase in incidence since November 2012 – up from 77.0% in November 2012 to the current 78.9%. Based on the data, the percentage of participants in 45 year and older age category, and the male gender category, continued to grow steadily. • Although a decline was recorded in participation in legal and illegal modes of gambling since November 2012, the prevalence of participation in illegal gambling as at April 2015 at 17.5% and is alarming.

13. RESEARCH RESULTS ON GAMBLING PREVALENCE • 93% of the South African population are at no risk with regard to gambling, compared to just over half of South African gamblers (54.4%) who are at no risk with regard to their participation in gambling activities; and • Only 1.5% of the South African population are at high risk (or regarded as problem gamblers) with regard to gambling, compared to 9.9% of South African gamblers who are at high risk (regarded as problem gamblers) with regard to their participation in gambling activities.

14. RESEARCH RESULTS ON PROBLEM GAMBLING The decrease in the proportion of South African adults and the South African gambling population falling into the high risk (problem gambling) risk category from November 2012 to April 2015 has been balanced by a corresponding increase in the percentage of the South African gambling population and gamblers who are not at risk. Refer to graph below.

15. RESEARCH RESULTS ON PROBLEM GAMBLING • Underage gambling: Gambling in South Africa (including the buying of national lottery tickets) is illegal under the age of 18. • Incidence of gambling among 15 – 17 year olds remains low, although the data shows a slight increase since November 2012 (from 2% to 4%). The gambling activity that 15 – 17 year olds are most likely to take part in is the buying of national lottery tickets, which is also the most preferred form of gambling.

16. CHALLENGES Key challenges Proposed action Collaborating with the dti in participating in the public outreach and initiatives organised by the dti. Capacitating the organisation in mission critical areas such as compliance generally, prevention and detection of illegal gambling as well as enforcement. The NGB continues to liaise with the banks in an attempt to obtain source documents for the confiscated suspected unlawful winnings. • Capacity constraints impacts on our ability to effectively reach out as broad as possible to sections of our communities when doing public awareness and education. • The Legal Skills in the NGB are scarce and this presents a major challenge in the regulatory environment within which NGB operates. • The NGB Trust which existed as a separate entity was de-registered and all confiscated winnings were transferred into an NGB-owned separate bank account. The NGB is experiencing challenges allocating the confiscated winnings due to inadequate documentation.

17. PERFORMANCE AGAINST APP - Compliance

18. PERFORMANCE AGAINST APP- Compliance cont…..

19. PERFORMANCE AGAINST APP- Stakeholder Liaison and Advisory Services

20. PERFORMANCE AGAINST APP - Stakeholder Liaison and Advisory Services

21. PERFORMANCE AGAINST APP– Corporate Services

22. SUMMARY PROGRESS ON ACTIONS IN THE RISK REGISTER

23. REPORT AGAINST POST AUDIT IMPLEMENTATION PLAN • 34 audit findings were received for the 2014/15 financial period, 24 were resolved, 10 in progress as at 30 September 2015. • 134 audit findings received during the 2013/14 financial period, 131 were resolved, 3 in progress as at 30 September 2015.

24. FINANCIAL STATUS AND PERFORMANCE • NGB has spent 32%of its annual budget as at the end of Q2. • Cash balance of R24.4 million is on hand. This balance includes confiscated winnings amounting to R4.7 million. Variance Analysis for Key Areas of Expenditure • The positive variance of R1, 933,678 on Personnel Costs is attributable to unfilled vacancies • The positive variance of R839, 986 on professional fees is due to an unspent allocation on the socio-economic impact of illegal gambling in South Africa.

25. COMPLIANCE CALENDAR FOR THE FIRST QUARTER: 1 JULY 2015 – 30 SEPTEMBER 2015

26. COMPLIANCE CALENDAR FOR THE FIRST QUARTER: 1 JULY 2015 – 30 SEPTEMBER 2015

27. CONCLUSION • 100% of the annual performance targets were achieved. • Balancing of the socio economic impact of gambling versus growth in the gambling industry through effective compliance monitoring of PLA’s continues to be of priority. • The NGB will continue to monitor the market conduct and market share. • Multi-disciplinary law enforcement agency to combat illegal gambling has been strengthened. • NGB will continue to double its efforts with regards to curbing illegal gambling. Illegal operatives register has been formulated. • Through strengthened stakeholder relations there has been success in areas of concurrent jurisdiction. • The financial position of the entity has been stabilised and 32% of the budget has been reported as spent with plans to spend NGB’s full allocation by year end. • NGB has reported a decrease in audit finding from 134 to 34. There has been improvement regarding management of internal controls relating to prevention of irregular expenditure. • Cost containment measures have been implemented with regards to travel.

28. Thank you 420 Witch-Hazel Avenue Eco-Glades 2, Block C, Eco Park, Centurion Telephone: 0100033475 Facsimile: 0866467150 info@ngb.org.za