First Italy and now South Africa? Italy announced a week ago that online gambling will be legal and regulated come January 1st 2007. Now South Africa is trying to pass a law which would make internet gambling legal. This does more than boggle my mind. It leaves me with loads of questions regarding the future of online gaming in the US as well. If these countries, which had made online casinos, poker rooms and sports books illegal, had changed their minds, perhaps the United States could change theirs some day as well?

I'm getting ahead of myself here. Let's focus on what is happening in South Africa. Right now online gambling is illegal and the South African Department of Trade and Industry is trying to change that. They have given a draft amendment Bill aimed at allowing for the licensing of online casinos to the Cabinet for approval. Brian Muthwa, director of legislative drafting for the Department of Trade and Industry, hopes the new law will be passed by the end of the first quarter of 2007.

Of course, just because he hopes that the bill will pass does not mean that it will. The bill is based on a report conducted by the National Gambling Board (NGB), which obviously has its own agenda. According to their research there is a need to license and regulate online gambling in South Africa. It will be interesting to see whether the politicians agree. As sports books have been legal for the past two years, most likely the law will pass without a hitch. South Africans are allowed to bet in online sports books which are located inside the country. Off-shore sports books are illegal. The new proposed legislation will not change that fact.

To their benefit the bill covers the most important bits of internet gambling. The legislation requires that systems be in place which will identify problem gambling, money laundering or any other criminal activities. If the industry is well regulated then everyone will benefit from the new legislation.

Astrid Ludin, deputy director general of the consumer and corporate regulation division in the department agrees with the idea of legalization after regulation. "Because there is no effective legislation existing, it was decided to outlaw internet or interactive gambling until effective regulation had been put in place. We do not believe outlawing will stop [internet] gambling, therefore it is better to regulate it," said Ludin.

The South African law currently bans "any natural or juristic person from offering or engaging in interactive gambling unless authorised by the Act or any other law in force within the Republic".

Ludin commented on the current state of the law, "Our interpretation of the Act is that any person who is gambling online through [internet casinos] is contravening the Act and should be dealt with accordingly."

Financially it would be to South Africa's benefit to make internet gambling legal. According to Christiansen Capital Advisers, a US-based service that provides gambling and entertainment industry analysis, online gambling makes up about 5% of the global gambling industry. Last year land-based casinos in South Africa paid R2,1-billion in gaming taxes and VAT and the government received 37% (R777-million). An additional 5% would give the government R38,8-million in taxes.

The fact of the matter is that South Africans are already spending their money at internet casinos, poker rooms, and sports books regardless of whether they are legal or not. Legalizing and regulating the industry is merely a formality which will allow them to collect taxes. It's about time the country takes some money from the companies who make so much from their citizens.

The marketing director of African Palace, an internet casino which caters to South Africans, said the online gambling industry is growing rapidly. "It's only set to get bigger. It will grow tenfold in the next five years ... there wouldn't be a company spending millions on advertising if it wasn't worth it."

Internet gambling in South Africa is in its early stages, much like online gambling was in the United States nine years ago. According to Wendy Graaf, marketing manager for Piggs Peak, "Online gambling is not a huge industry in South Africa because people have limited access to the internet and worldwide, land casinos are always more popular." As internet access becomes more common, usage of the internet for gambling will spread.

What I find most interesting about this bill is the fact that it is supported by Peter Collins, executive director of the National Responsible Gambling Programme in South Africa. Collins realizes that even if "people are gambling with offshore companies the police won't raid their houses at 3am and try to stop them."

"Making online gambling illegal in the US will do exactly what prohibition has done in cases of prostitution ... it would go on underground, it would be controlled by organized crime instead of a regulated body."

In the United States all responsible gambling programs or programs for people with gambling problems support banning all internet gambling. It will be interesting to see if Collins predictions are correct about the US, which brings me back to what I said in the beginning, perhaps the US will change their mind about banning the industry.

If the new bill passes into law internet casinos and poker rooms will be able to advertise on television, radio and in print. According to Muthwa the method of advertising allowed will be controlled, "to protect society against the over-stimulation of gambling."

If the amount that sports books pay to the South African government is any indication of how popular internet gambling could be in SA then the government will be making a lot more than R 38,8-million extra a year. According to Hilton Hasson, site manager of South African-based sports betting website Betting World, bookmakers pay R100-million in tax a year to the South African government.

Experts speculated that internet gambling was reaching its peak in the United States when it was banned. For the rest of the world online gambling is still in its infancy, thanks to a lack of internet access. Having the regulations in place as online gambling grows makes controlling the industry an easier process.

Posted on: October 19, 2006

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