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. 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. Introduction to LPMASA

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 • Government’s 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 government’s 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 LPM’s 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 • Government’s carefully crafted gambling policy and laws being circumvented by this. • Government’s 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.