When pro­vin­cial bound­aries were re­drawn, a North West casino sud­denly found it­self in Gaut­eng, lead­ing to a dis­pute over the lost rev­enue

Financial Mail - - IN GOOD FAITH - @carmel­rickard

No luck was in­volved last week when trade & in­dus­try min­is­ter Rob Davies won a case brought against him by casino own­ers — just hard work and dili­gence while weigh­ing a par­tic­u­larly con­tro­ver­sial de­ci­sion.

The Casino As­so­ci­a­tion of SA (Casa), rep­re­sent­ing the in­ter­ests of casino own­ers, chal­lenged the award­ing of a fifth casino li­cence to West be­came part of Gaut­eng.

In 1996 a max­i­mum na­tional limit of 40 casi­nos was set, in­clud­ing six in Gaut­eng and five in the North West. But in 2004 the Na­tional Gam­bling Act gave the min­is­ter of trade & in­dus­try the power to de­cide the num­ber.

When the bound­ary be­tween Gaut­eng and the North West was re­drawn in 2006, the Morula Sun “moved” from the North West to Gaut­eng — tak­ing key rev­enue with it. The then min­is­ter of trade & in­dus­try re­sponded by main­tain­ing the num­ber of na­tional li­cences at 40, in­creas­ing the num­ber al­lowed in Gaut­eng from six to seven and re­duc­ing the num­ber in the North West from five to four.

The North West fought the de­ci­sion, say­ing it needed an­other li­cence so it could still have five casi­nos gen­er­at­ing funds for its cof­fers. The prov­ince com­mis­sioned a re­port that found R267m in po­ten­tial gam­ing rev­enue was ei­ther be­ing spent in other prov­inces or not be­ing spent at all.

How­ever, Casa ar­gued that an ex­tra casino would “sim­ply cut the [na­tional] gam­bling rev­enue into smaller slices, to the detri­ment of its mem­bers”.

For some years, meet­ings of the Na­tional Gam­bling Pol­icy Coun­cil — a body chaired by the min­is­ter and in­clud­ing mem­bers of the ex­ec­u­tive coun­cils of the prov­inces re­spon­si­ble for casi­nos and other forms of gam­bling — heard sub­mis­sions from the two sides.

A spe­cial Gam­bling Re­view Com­mis­sion was ap­pointed by the min­is­ter of trade & in­dus­try.

Its 2011 re­port con­sid­ered the neg­a­tive so­cioe­co­nomic as­pects of gam­bling. It also noted that gam­bling is a “vi­tal gen­er­a­tor of rev­enue, job cre­ation and in­fra­struc­ture de­vel­op­ment”. In 2005, for ex­am­ple, the North West casi­nos gen­er­ated R49m in gam­bling levies — the sec­ond-big­gest source of pro­vin­cial “own rev­enue”.

Casa’s view, how­ever, was that grant­ing any ad­di­tional li­cence for the North West would open the flood­gates for sim­i­lar de­mands in other prov­inces.

“This would have an ex­tremely neg­a­tive ef­fect on in­vestor con­fi­dence and the sta­bil­ity of the casino in­dus­try,” it said.

When Davies ul­ti­mately awarded a fifth li­cence to the North West, the casino as­so­ci­a­tion went to court, claim­ing the min­is­ter had made the de­ci­sion with­out ad­e­quate re­flec­tion.

Min­is­ter did the right thing

Af­ter a close ex­am­i­na­tion of the process that led to the min­is­ter’s de­ci­sion, the North Gaut­eng High Court con­cluded that the min­is­ter’s ob­jec­tive was “con­sis­tent with jus­tice and in the public in­ter­est”.

The North West lost con­sid­er­able rev­enue when the Morula Sun “moved”, and “it was only right that some means be found to com­pen­sate for its loss”, Tuchten said.

Opting for a fifth li­cence for the North West was a ra­tio­nal de­ci­sion that fol­lowed sev­eral years of de­bate on the is­sue in the Na­tional Gam­bling Pol­icy Coun­cil, and thor­ough and painstak­ing con­sul­ta­tions con­ducted by the min­is­ter.

Though Casa lost its chal­lenge, the court made no costs or­der, say­ing the as­so­ci­a­tion had not acted in­ap­pro­pri­ately in bring­ing the re­view or in the way it con­ducted its lit­i­ga­tion.

Will Casa ap­peal? I wouldn’t put my house on it.

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