CULEMBORG EMPOWERMENT CONSORTIUM

My submission regarding the Gambling Matters Second Amendment Bill is on behalf of the black economic shareholders of the Culemborg consortium who is participating as a contender for the Western Cape gambling licence. 50 percent of the equity in Culemborg is owned by ordinary black people of the Cape, including workers, unions, small businesses, and community organisations representing the unemployed, the destitute and disadvantaged. The rest of the equity in Culemborg is owned by foreign investors who represent some of the most influential, prominent and successful companies in their fields of interest in the world.

The issues to be addressed regarding the Bill in this submission are about the ethics and fairness of what is being proposed, as well as the long and short term economic consequences of these amendments should it be promulgated.

What has up to now been regarded as a simple technical amendment, will unfortunately have serious consequences for local and foreign business communities and equally importantly for a massive number of empowerment constituents in the Cape. For three years foreign and local businesses have toiled together with a wide range of empowerment partners and jointly invested several hundred million rand in a tender process regulated by national and provincial legislation. The late and hasty amendment to the governing legislation will not only result in foreign investors losing confidence in the integrity and transparency of tender processes in this country, but all the work done by the local communities would have been in vain. The reason being is that one company stands to directly benefit from these amendments, to the unfair detriment of all other participants.

The proposed amendments will regulate on behalf of the province to ignore the rule of solvency which always has been an integral and central part of the tender process. Such radical intervention can hardly be regarded as a technical amendment. It will furthermore allow a government agency to participate in gambling licences while it previously expressly forbade it to do so. The constitutionality of these amendments must be seriously doubted. The integrity of the process, which worldwide is a highly regulated one, is also put in serious doubt by these amendments.

It has been stated to this Committee that thousands of jobs are to be lost if the amendments do not pass. What is the reality, however? The Northwest Development Corporation (Pty) Ltd is primarily a passive investor in other companies. It is currently under judicial management and it's equity stakes can easily be sold to other investors. The number of permanent jobs at stake cannot possibly weigh up against the tremendous harm to be caused to the goodwill and the international reputation of our national government, should it be perceived by the international arena that it was interfering in a tender process to benefit a local company. Such interference will place South Africa in the league of "banana republics" shunned by the outside world and with their economies crumbling as a result.

The message which is furthermore sent to local businesses and the empowerment groups and unions in South Africa is a damaging and negative one of preferential treatment to serve vested interests, to the point of directly and retrospectively intervening in a tender process. The massive number of future sustainable jobs to be created by foreign and local investment must surely be more important than those of one failed development corporation. It must also be noted that the local company to benefit from the proposed amendments, has one of the worst track records regarding dismissals and retrenchments imaginable.

It has also been stated to this committee that the government stand to loose R1 billion if the amendments are not passed. What is the reality, however? Even under the most favourable circumstances, Northwest Development Corporation will experience a net present value shortfall of in excess of R200 million To achieve this most favourable of positions, government will have to further invest heavily in the Corporation. According to a BOF Securities Report on SISA and Sun International Holdings, the disposal of the SISA Holdings stake by the Development Corporation will result in a shortfall of R600 million, without taking into consideration debt restructuring and other investments.

The real question however is to value the permanent damage to local and foreign investor confidence in this country if the processes of tender cannot be trusted anymore. Foreign investment alone amounts to several billion rand per annum and results in thousands of permanent jobs. Our first task is to diligently safeguard against a gradual erosion of the rules of fairness and transparency in all our tender processes in government and business alike.

The price to be paid for interference in these processes will far exceed that of the loss by the Northwest Development Corporation. What is totally unacceptable is the very notion of a government agency to be bailed out of it's financial predicament through the intervention of central government in a tender process where local and foreign businesses are involved, as well as several million empowerment beneficiaries.

In conclusion, the fact that legislation governing an important tender process is to be amended to benefit a specific company, can do irreparable damage to the image of this country. The proposed amendments may seem to be of a technical nature, but the consequences are far reaching. My urgent plea to the Portfolio Committee is to refer these amendments back to the Department of Trade & Industry to reinvestigate the consequences which will flow should the proposed amendments be implemented. Alternatively, the amendments can be referred directly to the Constitutional Court for its opinion regarding the legality of the proposed Bill.