PRESENTATION TO THE PORTFOLIO COMMITTEE ON TRADE AND

PRESENTATION TO THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY- HORSE RACING AND BETTING NATIONAL GAMBLING BILL (B 48 – 2003) September 18, 2003

BACKGROUND • Horse racing dates back to the times of ancient Greeks and Romans • However, thoroughbred racing has its origins in England during the 16 th century • Introduced to South Africa in 1797 • Only form of legalized gambling in SA (excl “TBVC”) until 1994

BACKGROUND(Cont) • Until the corporatisation of horse racing during 1997, it was run by clubs. • Clubs constituted by horse owners and trainers • Benefits accrued to clubs and their members. • Betting subsidized clubs

BETTING DEVELOPMENT • Totalisator and fixed-odds (bookmakers) – On-course mechanical tote – Off-course tote - 1972 (limited betting hours) 1991 (all day betting) – Telephone betting - 1974 – Out of province - 1984 ( Equine flu , led to national fixtures being developed )

STAKEHOLDERS • Breeders • Owners • Trainers • Grooms • Jockeys • Farriers • Veterinarians • Tack merchants • Farmers • Liverymen • Feed merchants

STAKEHOLDERS (Cont. ) • Horse racing & Totalisator operators • Regulators (Jockey Club of SA, etc) • Transport operators • Event managers • Caterers and other participants, who are all dependant on the industry

NEW GAMBLING ERA • Since 1998 betting income has declined considerably – Cellular phones, etc – Illegal gambling – Casinos and Bingo halls – Lottery – Global competition – mainly Internet sites

Turnover 1994 - 2002

CYCLE OF DECLINE Poor attendance Deteriorating facilities Declining contribution to racing activities Drop in stakes and sponsorship Declining media interest Declining betting turnovers Reduced field size Reduced return to owners Fewer horses bought and owned

NEW GAMBLING ERA (Cont. ) • Provincial Governments intervened • Operations restructured, consolidated and corporatised – Phumelela Gaming & Leisure Ltd (“PGL”) – Gold Circle • • Transformation initiated Betting taxes reduced Turnaround effected PGL listed on JSE

TOTALISATOR BUSINESS • Supports the whole Racing Industry – Revenue source – 80 000 to 100 000 jobs (Direct & Indirect) • Properly licensed and regulated

TOTALISATOR BUSINESS(Cont. ) • How we operate – Branches – Agencies – Telephone – Internet (424 cf 8000 Lottery)

The horse racing industry only accounts for 11% of the Gross Gaming Revenue in the gambling market, yet it accounts for more than 50% of the jobs!!

KEY STRATEGIC OBJECTIVE To Reduce Levels of Cash • Branches – Only Cash Betting – High incidence of crime • Telephone Betting – Deposit Accounts – 18 % of business – Convenience – Cashless operation (minimize risk of robbery) – 14000 Active users (only 200 granted credit)

KEY STRATEGIC OBJECTIVE To Reduce Levels of Cash • Telephone Betting (cont. ) – Customer obtains record of transactions & can analyze his performance – No Queues or Crowds

PROBLEM GAMBLING • • Low incidence in horse racing < 3% of problem gamblers* Not impulse gambling Call centers – Credit , deposits – Not aimed at poor people, contrary to the Lottery *National Responsible Gambling Programme Quarterly Report

PROBLEM GAMBLING(Cont. ) • Call centres(cont. ) – Telephone – DSTV decoder – Incidence of bad debts negligible

EFFECTS OF S 13 OF BILL ON THE BUSINESS • Restrictions on deposit and credit – Call centres closure – Loss of turnover – Punters will turn to other activities = encourage betting on overseas + illegal internet sites

EFFECTS OF S 13 OF BILL ON THE BUSINESS (Cont. ) • Restrictions on deposit and credit (cont. ) – Job losses(direct) – Shrinkage of the business (18%) = further job losses (direct & indirect) – Domino effect on the industry – Reduced tax contribution – Undermine economic empowerment initiatives – Revert to cycle of decline

EFFECTS OF S 14 OF BILL ON THE BUSINESS • Monitoring excluded persons – Impractical to implement with our multiple outlets – However, easy to monitor on cashless operation • Telephone betting = monitor accounts

OTHER MATTERS • Open Bet – Level playing field • Gambling machine – No such thing as a totalisator machine • Standard for Gambling Premises – Understand timeline limitations

CONCLUSION We believe that a balanced regulatory environment, taking cognisance of all the above matters and based on rational norms and standards, will be beneficial to all stakeholders.

CONCLUSION (Cont. ) We believe that while regulation must be in the best interest of the public, measures aimed at protecting the public or any interest group must be supported by empirical research and not be arbitrary.

CONCLUSION (Cont. ) This industry is a major contributor to employment, empowerment initiatives, the national and provincial fiscals and to the economy in general.

CONCLUSION (Cont. ) We support measures aimed at effectively curbing any negative social effects of gambling.