In contrast to the United States government’s criminalisation of online gambling, the South African government is legalising the industry in an attempt to regulate and control it.
Online gambling – said to be worth millions — is currently illegal in South Africa, but the Department of Trade and Industry has given a draft amendment Bill (which will allow for the licensing of online casinos in South Africa) to the Cabinet for approval.
The draft Bill will be available for public viewing by the end of October, said Brian Muthwa, director of legislative drafting for the department. He said that hopefully the new law will be passed by the end of the first quarter of 2007.
The draft Bill is based on a report conducted by the National Gambling Board (NGB), which stated that there is a need to license and regulate online gambling in South Africa.
Control systems to identify problem gambling, money laundering or any other criminal activities will be provided for in the regulations.
„Because there is no effective legislation existing, it was decided to outlaw internet or interactive gambling until effective regulation had been put in place,“ said Astrid Ludin, deputy director general of the consumer and corporate regulation division in the department.
„We do not believe outlawing will stop [interactive] gambling, therefore it is better to regulate it,“ said Ludin.
Online gambling makes up about 5% of the global gambling industry and is estimated to be valued at USD 22,7-billion, according to Christiansen Capital Advisers, a US-based service that provides gambling and entertainment industry analysis.
Brick-and-mortar casinos in South Africa paid ZAR 2,1-billion in gaming taxes and VAT in 2005, of which the government received 37%.
So why wouldn’t the South African government want to legalise online gambling if it means obtaining taxes from such a wealthy and growing sector of the gambling industry.
Chief executive officer of the NGB, Thibedi Majake, agreed, saying the legalisation of online gambling would mean a new revenue source for the government in the form of taxes and levies.
The South African law against online gambling prohibits „any natural or juristic person from offering or engaging in interactive gambling unless authorised by the Act or any other law in force within the Republic“.
„Our interpretation of the Act is that any person who is gambling online through [internet casinos] is contravening the Act and should be dealt with accordingly,“ said Ludin.
But legal or not, a thriving online gambling industry already exists in South Africa and they’re not exactly hiding. It’s almost impossible to miss the flashy pop-up casino advertisements that occupy so much space on local sites like the Mail & Guardian Online, News24, iol and Ananzi.
Piggs Peak Casino, Silversands Casino and African Palace, three popular online gambling websites that cater for South Africans, spent over ZAR 10- million on online advertising in 2005/06.
Silversands Casino spent ZAR 5-million to advertise their internet games online, according to Rina Erasmus, a consultant for Nielson Media Research.
Piggs Peak spent ZAR 4,9-million, while African Palace spent ZAR 800 000, according to Nielson Media Research.
The marketing director of African Palace, who wished to remain anonymous, said African Palace had spent about ZAR 3,6-million on online advertising.
He said the online gambling industry in South Africa is growing rapidly. „It’s only set to get bigger. It will grow tenfold in the next five years … there wouldn’t be a company spending millions on advertising if it wasn’t worth it,“ he said.
The three internet casinos (which operate from other countries like Swaziland, Cyprus and The Netherlands, and over which South African law has no control) were reluctant to tell the M&G online the number of members they had because it would give confidential information to their competitors.
Despite the amount of money they manage to spend on advertising, Piggs Peak and Silversands insisted that the industry was small.
„Online gambling is not a huge industry in South Africa because people have limited access to the internet and worldwide, land casinos are always more popular,“ said Wendy Graaf, marketing manager for Piggs Peak (which has been an online casino for eight years).
Although she wouldn’t say how many gambling members belonged to Piggs Peak internet casino, she said it wasn’t even a fraction of a million.
Marsha du Preez, marketing manager of Silversands, also said Silversands did not have thousands of members in South Africa. „It’s more like hundreds.“
Although a South African online gambler is „contravening the Act“ by using internet casinos like Piggs Peak, Silversands or African Palace, nothing is being done to arrest online gamblers because it is impossible to arrest gamblers in the privacy of their own homes, said Majake.
Peter Collins, executive director of the National Responsible Gambling Programme in South Africa, said that even if „people are gambling with offshore companies the police won’t raid their houses at 3am and try to stop them“.
He also said that the new US Bill, which wiped out USD 7-billion from a USD 12-billion industry, would not stop online gambling in America.
„Making online gambling illegal in the US will do exactly what prohibition has done in cases of prostitution … it would go on underground, it would be controlled by organised crime instead of a regulated body.“
It’s also illegal in South Africa to advertise internet casinos „above the line“, which means on television, radio and in print. Online advertising is legal because there are no geographical jurisdictions on the internet.
But once online gambling is legalised, so will the advertising. The manner and form of interactive-gambling advertising will be prescribed „to protect society against the over-stimulation of gambling“, said Muthwa.
The legalisation of internet casinos may have negative consequences, said Du Preez. „If it is legalised then any Joe Soap could open up a casino and sometimes that’s not always such a good thing,“ she said.
Newly licensed South African internet casinos will mean trouble for Piggs Peak, Silversands and African Palace.
Majake said new South African online casinos will take their cue from the brick-and-mortar casinos where there is „a culture of integrity“.
Graaf said it would be costly to move operations from Swaziland to South Africa, so whether or not online gambling is legalised in South Africa, it makes no difference to Piggs Peak.
But while online casinos that offer games such as blackjack, poker, roulette and online slots might only be legalised this year, online sports betting has been legal for two years.
In fact, the situation for an online sports better in South Africa is the exact opposite to that of an online poker player. It’s illegal for South Africans to place sports bets on overseas websites.
Hilton Hasson, website manager of Betting World (a South African-based sports betting website), said that bookmakers pay ZAR 100-million in tax a year to the South African government.
Hasson said that they would also benefit if interactive gambling was legalised because other international betting websites offer poker, which they plan to offer once it is legalised.