CASINOS EYE LEGAL ONLINE GAMBLING JACKPOT IN SOUTH AFRICA

Internet

The legalisation of online gambling in SA in the near future is expected to send gaming and entertainment companies into frantic jostling for position. An amendment to the National Gambling Act looks likely to be passed into law in the next few weeks, making it legal for casino operators to offer lucrative online gambling services in the country, and to advertise in the South African media. The National Gambling Amendment Bill of 2006 proposes the licensing of operators offering online gambling.

Internet casinos use software downloaded by players, who buy credits to play through bank deposits or credit cards.

Wendy Rahamin, senior associate at Werksmans attorneys, says interested parties will have until February 12 to comment on the proposed legislation before the bill is tabled in Parliament. If passed into law, the National Gambling Board will publish regulations and an invitation for interested operators to apply for licences, a process likely to be completed before mid-2008.

The new legislation states that all computer servers have to be located in SA, and players will need to register their personal details to be permitted to play.

Currently, South Africans are allowed to bet in online sports books, which are located inside the country. In reality, people have been gambling online, whether it is legal or not. Gamblers in SA have access to the Piggs Peak Casino, Silversands Casino and African Palace online sites, which operate from Swaziland, Cyprus and The Netherlands respectively.

The popularity of online gambling has grown phenomenally and, according to the Economist, there are an estimated 3300 online gambling websites in existence, up from 400 on 1999. Some $12bn worth of bets were placed online last year, half of which are thought to have been placed by Americans. Online gambling was outlawed in the US in the second half of last year, when that country's congress passed a bill to prevent banks and credit-card companies from processing payments to online gambling companies, sending the stocks of online gambling companies plummeting.

SA's attitude has been more progressive, and in line with the European preference to regulate the industry and benefit through tax revenue. Land-based casinos in SA paid R2,1bn in gaming taxes in 2005, of which government received 37%. Gross gambling revenue in all forms of gaming rose to R11.5bn in 2005-06, up from R9.9bn during the previous period.

However, regulating players' access to online gambling has proved to be incredibly difficult, as the recent case of Casino Enterprises, which runs the Piggs Peak hotel and casino in Swaziland and an online gambling site, has illustrated. Casino Enterprises last year made an application for a court order to declare its internet gambling operations in SA legal.

Howard Berchowitz, MD of Piggs Peak, says that as the group operates from its land-based casino in Swaziland, and pays taxes and a gaming levy on its online gambling and land-based activities to the Swaziland government, "we consider our internet licence to be an extension of our land-based licence".

Berchowitz says that as far as he is concerned, any online gambling through the Piggs Peak website "is happening in Swaziland", and players are therefore not contravening the Gauteng Gambling Act.

Pretoria High Court judge Willie Hartzenberg disagreed, and granted the Gauteng Gambling Board a declaratory order banning online gambling that was not defined as bookmaking in the province. Berchowitz has filed for leave to appeal the decision.

When asked whether he thinks the decision could have a detrimental effect on any future applications for an online gambling licence in SA, he says he hopes to initiate a dialogue between the gambling boards of SA and Swaziland through the Gambling Regulators Africa Forum, a regulatory board for the Southern African Development Community.

Anthony Puttergill, deputy CEO of resort and gaming group Peermont Global, which operates the Emperors Palace and Grace Land casinos, says it is likely the majority of SA's land-based casino operators will apply for online licences once the practice is legal.

He says those who have already been operating online casinos have been "a source of frustration" to others in the industry. "We would also have liked to run an online operation, but we had too much to lose if we broke the law."

Anticipated revenue from online gambling in SA is expected to be small compared with that of land-based casinos because of limited internet access but Puttergill says internet penetration rates are set to grow, and the online sphere is "an important space to operate in and establish a presence".

Business Day