COSATU
SUBMISSION ON THE
NATIONAL GAMBLING AMENDMENT BILL
SUBMITTED TO THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY
22 AUGUST 2007
2. The economic impact of gambling
2.1 The cannibalisation impact.
2.2 Additional public expenditure
3. The Social impact of gambling
4. Consequences of legalising interactive gambling
5. COSATU’s position on the Bill
COSATU welcomes the opportunity to
comment on the National Gambling Amendment Bill. COSATU believes that before amending
the National Gambling Act of 2004, government should have undertaken proper
research that would investigate the impact of gambling on the poor[1].We are opposed to any form of legalisation of gambling. We view gambling as a self-destructive vice that does a lot of harm to society. It gives
false hope and promises to people that they can escape the misery of poverty, instead often plunging them into
debt and deeper poverty.
Instead of directing resources to productive investment, gambling takes
away from the poor to the rich. It promotes greed. John Maynard Keynes once said that the only people who win
from
gambling in the long term are those who
operate the gambling. The Bill states its aim to “regulate”
interactive
gambling. However, the Bill effectively promotes it.
COSATU calls on the Committee to
reject the Bill. As discussed below, there are various economic and social
problems associated with gambling, and we do not believe that government should
be facilitating new forms of gambling likely to lead to its proliferation.
Instead, COSATU believes that government should be more strongly regulating the
gambling industry and in particular combating interactive gambling that is
currently occurring, in line with the existing National Gambling Act of 2004.
There are five major negative impacts of gambling on the economy: the cannibalisation
impact; additional public expenditure; debt; savings; and money laundering.
2.1 The
cannibalisation impact. The so-called cannibalisation effect
refers to the reduction in the economic activity of other activities when a new activity comes to a community, resulting in
shifts in residents’ expenditures from the previous economic activities to the new one. Expanding gambling activities will
lead to reduction in consumption of some goods and services. This will result
in job losses. Unlike the cannibalisation effect in other economic activities, the resulting net job
loss in the case of interactive gambling will be significant since
interactive gambling does not create a significant number of jobs. For example the introduction of the lotto
negatively affected spending on many sectors such as retail. Poor people redirect their
consumption away from other areas, including food, clothing and health because
of gambling.
2.2 Additional
public expenditure.
Regulating
interactive gambling will require additional public expenditure. The additional public expenditure
will counter the tax revenue that may be generated from legalising gambling.
Regulating and supervising interactive gambling will be costly. Monitoring interactive gambling
equipment and software should require specialised skills and technology. There are also costs that will go with monitoring
registered websites. The additional public expenditure
required is not socially productive (although it would be necessary), as it
does not directly lead to an improvement in people’s lives. In this case public expenditure
would be effectively subsidising the interactive industry.
2.3 Debt. Chronic gamblers tend to fund their
addiction through borrowing or savings. Crippling debt is one of the most
common outcomes of a gambling problem. Gambling can lead to people being short of money to spend on
other things. At the farthest end of the scale, problem gambling can lead to serious debt and bankruptcy. The fact that online
gambling uses credit cards makes it even more difficult to curb severe debt. Leading financial institutions in the
Debt and bankruptcy resulting from
gambling increases the
cost of credit throughout the economy. This
means that online gambling could be problematic not only for the individuals
directly involved, but also from a broader macroeconomic perspective.
2.4 Savings. Gambling accounts for an
ever-increasing share of household expenditure Increased expenditure on gambling is funded by a run-down in household savings. Problem gambling among the elderly
can also erode their retirement savings; this segment of the population tends
to have higher savings as well as being more dependent on these savings. Savings in
2.5 Money
laundering is one of the negative
externalities that could result from legalised interactive
gambling. Money laundering involves physical
movement of funds derived from illegal activities into a form that is less
suspicious to law enforcing authorities. These proceeds from crime are introduced to the traditional or non-traditional financial institutions
or the retail economy. It is not easy to curb money
laundering because of the diversity of its forms, participants, and settings.
It can involve respectable institutions unwittingly providing services to customers who participate in dubious activities. A large number of money laundering cases
involve movement of funds across national border. Interactive gambling can be a
useful vehicle for money launderers.
The social impact of gambling can
range from productivity loss, bankruptcy, crime, suicide, illness, abuse,
divorce and separation, social services and treatment costs. The social impact of gambling is not confined
to the problem gambler. It most certainly affects others such as
spouses, children, extended family members or close friends.
The
history
of gambling is that of a stigmatised behaviour that has passed through numerous
cycles of guarded acceptance and prohibition. The recent spread of gambling in
3.1 Problem
gambling.
Pathological
gambling is a progressive disease that
devastates not only the gambler but everyone with whom he or she has a
significant relationship. Studies on the impact of gambling
found a strong correlation between greater availability of gambling and
pathological gambling.[3] The Bill will increase the numbers of pathological gamblers.
Some of the consequences of problem
gambling – even if not at a pathological stage – at the personal level can
include an increased level of depression and anxiety, impaired judgement,
reduced tolerance with other people, and loss of self-respect. Negative effects
on work and study can include poor performance, high absenteeism, lower
productivity, and unemployment or difficulty in maintaining employment.
Research has found that effects on interpersonal relationships can include
physical and emotional abuse, family and relationship breakdown, and exposing
children to greater risk of experiencing physical distress.
3.2 Crime.
There
is positive correlation between crime and gambling. Gambling addicts resort to
criminal activities in order to finance their habit. Theft, robbery and fraud
are some of the things that problem gamblers sometimes engage in.
Gambling is also a haven for
organised criminal syndicates. Gambling operators usually refuse to acknowledge
this for fear of losing wealthy clients. Anti-money laundering laws provide
some constraint but are not 100 percent effective. In addition to money laundering,
experience in other countries suggests that criminal syndicates are often
involved in the actual operation of gambling as well.
While gambling
brings various social and economic problems, as discussed above, there are
specific problems associated with interactive gambling. The nature of
interactive gambling makes it more difficult to control or moderate, either by
the individual gambler, the casino, or others. It is more difficult to control
how much money is spent when someone is just sitting at a computer using credit
cards, than when one is actually in a casino spending hard cash. The fact that
someone can be engaged in more than one interactive gambling game simultaneously
also makes it more likely that spending will get out of control. Further, internet
gambling is doubly addictive, given research that suggests that the Internet
can be addictive itself.
In interactive
gambling it is also much more difficult to regulate who participates. Under-age
people will be able to participate in interactive gambling – whether through
cellphones or the internet – much more easily than in conventional casinos
where patrons can be physically screened for their age. Even if controls are
put in place to regulate the age of interactive gamblers – for example through
a registration system – this will be very easy to bypass (for example through
access to the identity number of an adult). One example of
poor enforcement is the failure of blocking children’s access to pornography
using cellphones. Further, the system at conventional
casinos where a gambler with problems – for example a pathological gambler or
someone who has neglected their children at a casino
– can be physically banned from the casino, will be much more difficult to
enforce when it comes to interactive gambling. A registration
system that gathers personal and financial information is also likely to be
vulnerable to misuse (for example identity theft and scams).
Decriminalising online gambling will
increase the number of online gamblers. Even though the number of people
currently participating in online gambling may be relatively small, the
enabling of legalised online gambling is likely to increase this number.
The big players in the casino
industry will enter the interactive gambling market if this
is legalised. This is because online gambling
requires less investment than conventional casinos. Even
though the brick and mortar casinos are an undesirable social
activity, they do have some positive economic benefits. Benefits of physical casinos are job creation and linking to other
productive economic sectors such as tourism and retail.
Legalising interactive gambling can
also bring in international players who will simply dominate the industry. This
is not the type of investment that
The legalisation of gambling will
also have implications for provincial revenue[4]. Licensing gambling contributes
significantly to provincial revenue.
Since interactive gambling will be licenced by the national authority,
provincial licensing authorities will lose given that online gambling will
displace some expenditure in casinos.
COSATU recognises that there is interactive gambling
that is taking place, irrespective of the fact that the current Act is prohibiting interactive gambling. It has been unable to proliferate because of criminalisation. The Bill would be likely to lead to
an increase in interactive gambling with the associated economic and social
problems. We therefore (not withstanding our general opposition to legalising gambling) call upon government to enforce the
existing legislation instead of encouraging the activity. COSATU calls on the
Committee to reject the Bill. Instead, we would like to see stronger oversight
of the existing legislation. We also call for strengthening of the existing
legislation in particular regarding advertising, as discussed above. There
should be stronger regulation of advertising of interactive gambling hosted by
companies registered in other countries but targeting the South African market.
Section 36 (d) on Amendment of section 57 of the principal Act where the
Board is tasked with “monitoring the performance of interactive
gambling sector”. The DTI needs to provide some
information on how performance will be measured
e.g. the number of jobs created versus turnover. We also need clarity on Section 39 which
deals with delegation. Delegating the board’s powers suggest poor enforcement
capacity.
COSATU proposes strict regulation of
promotion of interactive gambling by advertising, similar to regulations
governing tobacco advertising. Advertising gambling services increases gambling
addiction. Restrictions of advertising gambling should not be restricted to
interactive gambling, but all forms of gambling. South African websites or
media advertising gambling should be penalised.
In
The most prominent interactive
gambling providers that are catering for South African gamblers are registered
in
COSATU is opposed
to the expansion of legalised gambling. We believe that the government should be moving in the direction of
reducing this social ill. Gambling has a
lot of negative economic implications.
Revenue that the state will collect from legalising
gambling will be countered by the cost of
regulating and monitoring interactive gambling.
Legalising interactive gambling will not create jobs. Instead it will displace expenditure from
other sectors of the economy. This will result in net job losses.
COSATU is thus making an urgent call to the Committee
to reject the Bill. The Bill would result in the proliferation of interactive
gambling, which has strong negative economic and social consequences. We acknowledge
that the problem of interactive gambling
occurring with foreign registered gambling enterprises needs to be dealt with. However, legalising
interactive gambling in
[1] COSATU Special CEC in
December 2001 called upon the government to commission a study on the impact of
the gambling on income distribution, poverty, addictive
gambling and social cohesion after the introduction of the Lotto.
[2] http://www.oag.state.ny.us
[3] Lesieur, H & Custer, R. Pathological Gambling: Roots, Phases
and Treatment. Annals of the
[4] COSATU is opposed to
raising income through licensing casino whether it is the national or
provincial government. Gambling affects
the poor the most since they use a larger proportion of their income gambling. Revenue from the gambling is tantamount to
regressive taxation.
[5] http://www.zdnet.com.au