Internet gambling in SA is not only illegal, it's also not particularly big next to other forms of gambling, such as the national lottery, casinos and bingo. But this looks set to change.
Online gambling will become legal if trade & industry minister Mandisi Mpahlwa accepts the recommendations of the national gambling board. In a report on the regulation of interactive gambling released last month, the board has recommended that Internet gambling be legalised.
Online gambling in SA remains the preserve of a relative few - those who have regular access to the Internet. Only one in 10 households has a fixed telephone line and, of 361 calls made to a hotline operated by the national responsible gambling programme in the three months to end-September, only two related to Internet gambling.
This could change fast. Local gambling operators are salivating at the opportunities that legalisation of Internet gambling might offer.
If Mpahlwa opts to legalise Internet gambling, SA companies stand to profit from an industry that is enjoying rapid growth. The industry was worth US$3bn/year in 2001 and had grown to more than $8,2bn/year in 2004, according to research firm Christiansen Capital Advisors. The market is expected to triple to almost $25bn/year by 2010.
National gambling board CEO Thibedi Majake says there was little option other than to recommend that online gambling be legalised. "It's a phenomenon that is almost unstoppable," he says. He admits that SA punters are already placing bets online, and there's little that can be done to stop them.
The board's report says that legalising online gambling will address several issues: local gamblers will have legal protection; it will prevent "criminal influence and exploitation" in the industry; and it will promote the development of an interactive gambling industry in SA.
If Mpahlwa gives the go-ahead, legalisation could take place quite quickly. Majake says no new gambling legislation would be necessary . The only requirement would be new regulations to govern it.
Ernie Joubert, CEO of gaming and hotel group Peermont Global, says he has long supported legalising Internet gambling. He says it's "disappointing" that it has taken so long for government to legalise it.
However, Joubert says the board's proposals make sense. Operators will pay an annual licence fee of R150 000. Also, proposed licensing conditions are not out of step with those imposed on land-based casinos. Joubert says the proposals amount to a "free-for-all" as there are no prohibitive licence fees or obligations for anyone wanting to start an Internet gambling business.
Other regulations will apply: online operators will have to comply with the Financial Intelligence Centre Act (Fica); they will have to submit to monitoring of their systems by the gambling board; and they will have to pay a 2% tax on gambling revenue.
These stipulations are not scaring off prospective operators. UK-based group Betfair is keen to expand its SA operation, which provides horse-racing information, into online betting.
Betfair SA public affairs manager Richard Rumbelow says the board's recommendations are "very fair and reasonable" and go some way to attracting the "right type" of international gambling company to invest in SA.
Majake and Rumbelow both say that, given SA's rapidly growing call-centre infrastructure, the country is well placed to provide back-office support for Internet gambling operators wanting to set up operations here.
This, coupled with the board's recommendations, could help establish SA as one of the leading destinations for Internet gambling .
Despite these developments, Peermont Global's Joubert does not see Internet operators taking business from land-based casinos. If anything, Joubert expects online gambling to bring more people into casinos because they will get a taste for gambling on the Internet .
Joubert plays down fears that Internet gambling can be used to launder money from criminal activity. Land-based casinos already have to comply with Fica and stringent licensing conditions designed to counter money-laundering. It is easy to apply the same conditions to Internet operators, he says.
Majake agrees. He says punters will have to submit their credit card details, which can easily be verified.
Even SA's low level of PC penetration shouldn't hold back the market for long, especially as more competition and regulatory intervention drive down telecom prices and improve access. Cellphones, in particular, offer enormous potential to the industry. Rumbelow sees the ubiquity of cellphones as a means to growing interactive gambling.
In fact, gambling over cellphones is already happening, says Peter Collins, executive director of the national responsible gaming programme. SMS messages asking people to call a number to enter a lottery are a form of illegal gambling, he says.
