AKANI FAIREST CAPE (PTY) LTD

We act for Akani Fairest Cape (Proprietary) Limited. Our client instructed us to draft the written submissions concerning the proposed amendment to the National Gambling Act No.33 of 1996 which follow.

In the submission the proposed amendment is criticised for the following reasons:

1. The amendment is inconsistent with the preamble of the National Gambling Act. Far from creating norms and standards the proposed amendment creates specifically identified exceptions to the norms, standards and ground rules set out in the National Gambling Act;

2 The extension of the time period within which any State financial interest must be withdrawn from the gambling sector in those specific instances where the State in fact has a clear financial interest in the gambling sector damages Government credibility and undermines Government policy;

3. The intended retroactive amendment of a Statute to benefit, inter alia, specifically named organisations, including private companies, is:

3.1 a serious breach of the principle of legality and the rule of law;

3.2 a contravention of the right to equal protection and benefit of the law;

as enshrined in the Constitution.

The problems highlighted could undermine the integrity of the Legislature and create precedent for possibly more serious abuses of legislative power in the future.

It is further submitted that the retrospective application of the proposed amendment prejudices those who have conducted business and made investments on the basis of the law as it exists

The possibility that the retrospective amendment Could create uncertainty and undermine investor confidence both in the gambling sector and in the economy as a whole has not been properly considered by the drafters of the proposed amendment. This should be thoroughly considered by the Honourable Members of the Portfolio Committee for Trade and Industry

SUMMARY

1.The fundamental problems of the Gambling Matters Amendment Act No.36 of 1999 are exacerbated and brought into sharp focus by the latest proposed Gambling Amendment Bill.

2. Both the Gambling Matters Amendment Act and the proposed Gambling Amendment Bill are aimed specifically at protecting the State's financial interest, and the financial interest of private sector State partners such as Sun International in the gambling sector. Any State financial interest in the sector obviously creates a conflict of interest, as the State can not be both a player and a referee.

3. The proposed amendment Bill is inconsistent with both the Constitution and the stated intention of the National Gambling Act set out in its short title and preamble for the following reasons:

3.1 far from providing uniformity by establishing norms and standards the proposed Amendment Bill creates specifically identified exceptions to the norms, standards and ground rules set out in the National Gambling Act;

3.2 the intended retroactive amendment of a Statute to benefit specifically named organisations by the extension of established and agreed time frameworks captured in legislation is a serious breach of the principle of legality and the rule of law as enshrined in the Constitution;

3.3 retroactive legislation which singles out for special treatment particular organisations infringes section 9(1) of the Constitution which guarantees the right of everyone to equal protection and benefit of the law.

4. The amendment thus uses legislative intervention and manipulation as a tool to achieve financial interest for specific State owned entities and their private sector partners unrivalled since the adoption of the Interim Constitution.

6. The precedent set by the possible adoption of the proposed amendment will also create the opportunity for future serious abuses of legislative powers by Parliament and Provincial Legislatures.

BACKGROUND

7 Section 13 of the National Gambling Act provides for the "General policy underlying gambling in South Africa". Prior to the commencement of the Gambling Matters Amendment Act on 30 April 1999, the Act provided that from 10 May 1999 the State or any organisation with which the State is concerned could not have any financial interest in any gambling activity.

8. The provisions of the National Gambling Act therefore created a clear time framework for the withdrawal of any State financial interest in the gambling sector and set the ground rules for participation in the gambling sector. New investors from within South Africa and from abroad entered the South African gambling sector on the basis of the legislation as it stood.

9. The original provision of the National Gambling Act as set out above was consistent with the report of the Lotteries and Gambling Board, which preceded the passing of the National Gambling Act.

10. The report placed great emphasis on the need to ensure that the State had no financial interest in private gambling activities. That report underlined that:

"the government's involvement in other lotteries, gaming and wagering should be excluded. Its functions should be limited to authorisation, control and regulation for the purpose of maintaining law, order and fairness in the industry"

11. Hence the report recommended that:

"…legislation shall exclude the central and provincial governments and parastatal bodies from holding shares or other forms of power in the gambling industry excluding the national lottery."

12. Following the passing of the Gambling Matters Amendment Act the National Gambling Act was amended to vary the time framework for the withdrawal of any State financial interest:

"…(ii) in the case of any organisation the founding law of which is administered by the provincial sphere of government and the shares of which may only be disposed of by the national sphere of government or with the consent or approval of that sphere of government, from a date determined by the Minister by notice in the Gazette;"

The intention of the formulation above was to provide the State an additional period to withdraw any financial interest from the defined category. The date referred to in the subsection was declared as 10 May 2003. It was hoped and intended that the amendment would exclude the North West Development Corporation (Pty) Limited from the prohibition of State financial interest in gambling activities. In fact this was not the case.

13. The proposed further amendment to section 13(1)(f) of the National Gambling Act now proposes that the period for the withdrawal of State financial interest be postponed:

"in the case of the North- West Development Corporation (Pty) Limited, the Transkei Development Corporation Development Corporation Limited and Ciskei Peoples Development Bank Limited or any company or corporation into which any of those entities may have been converted, or any organ of State or any organisation with which the State is concerned to which those entities have transferred an interest in gambling activity from a date determined by notice by the Minister in the Gazette;.."

The intention is, this time in specific terms, to exclude the North West Development Corporation (Pty) Limited, and similar organisations from the prohibition against State financial interest in gambling activities.

CONSTITUTIONAL STATUS

14. Under the Constitution, both National and Provincial government are competent to pass laws pertaining to casinos, gambling and related activities.

15 Section 146 of the Constitution applies to the situation where there is a conflict between national laws and provincial laws.

15.1 Section 146(5) provides that generally, where both Provincial and National government can pass laws, (such as with regard to casino's etc.), Provincial legislation prevails over national legislation.

15.2 Logically, the situations in which the Constitution provides that National Legislation will prevail should be used as a guideline for what the scope of national legislation should be, particularly in sectors where extensive Provincial legislation exists.

15.3 According to the provisions of section 145(6) National legislation prevails over provincial legislation when the National legislation applies uniformly with regard to the country as a whole, deals with a matter that, to be dealt with effectively, requires uniformity across the nation, and the national legislation provides that uniformity by establishing;

(i) norms and standards;

(ii) frameworks; or

(iii) national policies.

16. The preamble to the National Gambling Act is consistent with these provisions of the Constitution in that it makes reference to the constitutional competence of the National legislature to make provision for the promotion of uniform norms and standards applying generally throughout the Republic with regard to casinos, gambling and wagering. Certain provisions of the National Gambling Act may fulfill this function. This is not true, however, of the amendments, or the proposed amendment to the National Gambling Act.

OBJECTIONS TO THE AMENDMENT ACT AND AMENDMENT BILL

17. The proposed amendment does not fulfil the criteria referred to above of the Constitution or the stated intention set out in the preamble to the National Gambling Act.

18 Far from providing uniformity by establishing norms and standards, frameworks or national policies, the delay of the date upon which the disqualification as a result of State financial interest takes effect creates exceptions to the norms and standards set in respect of those defined organisations such as the North West Development Corporation (Pty.) Limited.

19. The exceptions, moreover, do not apply uniformly across the nation.

20. The proposed Amendment Bill is not even couched in general terms as was the National Gambling Amendment Act. The proposed Amendment Bill specifically singles out the North West Development Corporation (Pty) Limited, the Transkei Development Corporation Limited and the Ciskei Peoples Development Bank Limited for preferential treatment

21. By intention and in effect, the window period within which National and certain Provincial governments may divest itself of their financial interests in gambling activities benefits only a small and distinct class of legal entities and their private sector partners.

22. Far from providing norms, standards and national policies, the further delay to the disqualification of entities in which the State has a financial interest undermines such norms, standards and national policies. It waters down the principle at the heart of section 13(1)(f) of the National Gambling Act that there should be no conflict between the duty of the State to control and regulate gambling and a state financial interest in the gambling activities of a particular entity.

23. The retroactive amendment of a statute, specifically to ensure that organisations in which the state has a financial interest, and therefore that their subsidiaries and partners are able to bid for private casino licences in competition with other firms in the private sector, is a serious breach of the principle of legality and the rule of law enshrined in the Constitution.

24. Retroactive legislation which singles out for special treatment particular organisations in which the State has a financial interest in order to allow such organisations to compete for casino licences in the private sector, which licences are awarded by an organ of State, violates the guarantee of equal protection and benefit of the law and equality before the law enshrined in Section 9(1) of the Constitution. Section 9(1) provides:

"Everyone is equal before the law and has the right to equal protection and benefit of the law"

25. The uncertainty created by retroactive legislation aimed at benefiting specifically identified entities should be carefully considered. The possible message which the proposed amendment Bill could send out is that investors and business should not to rely on legislation as it stands, because the State will not hesitate to make retrospective amendments.

26 The retrospective application of the proposed Amendment Bill should be distinguished from the retrospective application of legislation aimed at fighting crime. Here we are dealing with the amendment of legislation which is meant to fairly regulate a sector of the economy. The amendment will directly benefit the State financially because of the State financial interest in the gambling sector. This will arise as a result of the 49,9% shareholding of the North West Development Corporation (Pty) Limited (which is wholly owned by the North West Provincial Government) in Sun International (South Africa) Holdings (Pty) Limited. There is no clear direct benefit to the public itself.

27 The proposed amendment Bill appears to be aimed at benefiting specific private sector companies at the expense of international investors. This may contribute to the undermining of the business and investment confidence in South Africa.