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NRGP

National Gambling Board

South African Responsible Gambling Foundation

Gambling - Overview

BlackboardBy the end of this Unit you will be able to:

  • Scope & history
  • Policies & legislation
  • Advantages of legalized gambling
  • Disadvantages
Scope of this Module:

In this Module we will be looking at a range of important social and technical issues using gambling as a didactic vehicle. The issues explored include Law, Economics, Mathematics, Statistics, Finance and Psychology. The module comprises five parts and starts by considering some policy issues regarding gambling, in particular the legislation regarding Casinos. This will be covered in Unit 1 in which we look at some of the arguments for and against legalising and establishing Casinos – both social and financial. In Unit 2 we will look at the mathematics upon which gambling is based and learn something about the concept of probability. In addition you will do a Case Study of setting up a Dice Game for a school fete, and the key financial issues involved in running a gambling operation for profit. In Unit 3 we will continue on this theme by taking an in-depth analytical look at the way a slot machine operates and how technological improvements have led to a very sophisticated machine which can allow players to fine-tune their entertainment experience with respect to their risk profile. In Unit 4, we will examine the issue of problem gambling. This will involve examining the concept of addiction and the debate around what comprises the psychology of addiction as well as how statistical surveys can be used to measure the prevalence of problem gambling. Finally, in Unit 5 we will describe what is involved in bidding for a casino license and how an entrepreneur would formulate a financial feasibility study for such a venture. In summary, then we will be dealing with:-

  • Policy and Legal issues
  • Social Implications
  • The Maths and Statistics of Gambling
  • Psychological Implications and prevalence surveys
  • Financial feasibility study for setting up a Casino

Introduction: What is Gambling?

In this module we are going to be looking at issues associated with gambling.  Before we do this, we need to be very clear about what exactly we are discussing. Generally we all know that the word gambling implies taking some sort of risk. The gambling industry in South Africa has grown enormously in recent years and many people hold very strong views on gambling. So let us look at a clear definition:-

The National Prevalence Study of 2006 undertaken by the National Centre for the Study of Gambling, states the following:-

We have followed the standard definition of gambling as an activity where:

  • two or more parties place at risk something of value (the stakes)
  • in the hope of winning something of greater value (the prize)
  • where the outcome depends on the outcome of events which are unknown to the participants at the time of the bet (the result).

In other words, people bet (usually money) with the hope of winning something (usually money) without being aware of what the outcome will be.

Read through the definition above very carefully as we will be basing what we say about gambling in this Module, on this definition.

 

Overview

Fact File:   Short History of Gambling

The exact origin of gambling is unknown. The Chinese recorded the first official account of the practice in 2300 B.C., and it is generally believed that gambling has been present in almost every society since. From the Ancient Greeks and Romans to Napoleon's France and Elizabethan England, history is rich with tales of exploits based on the games of chance. At the height of the Roman Empire, lawmakers decreed that all children were to be taught to gamble and throw dice. One Roman emperor even designed his carriage to allow dice games while on the way to his official duties. The French are credited with inventing playing cards in 1387, and in 1440 Johann Gutenberg of Germany printed the first full deck of cards.

Many present-day gambling games are incarnations of previous games. The French working class of the sixteenth century became adept at the Egyptian game of roulette, while Napoleon took interest in the card game now known as blackjack or twenty-one. The basis for modern poker games is believed to have originated from a combination of ancient influences including Persian, Italian, and English games of chance. Further refinements to poker include betting techniques introduced by the French and the concept of bluffing developed by the British.

Adapted from: www.jobmonkey.com/casino/html/brief_history.html

 

For a very detailed and extremely interesting look at the history of gambling in the USA, take a look at these videos below. Click on the thumbnail to view the video in a pop-up window. Close the pop-up when finished.

 

 


Gambling is often portrayed as very glamorous

Glamorous portrayal

 

Screen shot of a 3x5 Video-Slot Machine Display

Slots

 

Casinos are often housed in very luxurious extravagant buildings

Monte Carlo Casino

Casino in Monaco, gambling capital of Europe

Topic 1:- Policies and legislation regarding Casinos

Since 1996, gambling in South Africa has been legislated and regulated. This does not mean that there was no gambling before then. Under the old Apartheid government, from the 1970’s, there were Casinos in the ”homelands” (areas that were supposedly ruled by local African people but which in reality were strictly controlled by the governing SA Nationalist Party). These casinos were legal under the law of these homeland governments but set up close to the SA borders. This led to the somewhat absurd situation where South Africans could drive a few miles into a ”homeland” and gamble to their heart’s content, just as they could also view pornography, and then return to South Africa where gambling (and pornography) was illegal! The prohibition of gambling in South Africa reflected the paternalistic but cynical approach of the Nationalist Government towards controlling entertainment in much the same way as they restricted freedom of expression via censorship. The government followed a dual policy of a puritanical approach within the borders of the country but simultaneously turned a blind-eye to the flaunting of these laws within easy borderless access in the “homelands”.

The most well known of these homeland Casinos was Sun City in the ”homeland” of Bophuthatswana, a few hours outside Johannesburg. Other casinos located in Bophuthatswana close to the lucrative Johannesburg-Pretoria market were The Carousel and Morula Sun; all these casinos were owned and run by Sun International (SA).

At the advent of democratic government in 1994, the homelands and their laws were dismantled. In this period of legislative limbo before new gambling laws were formulated in a democratic SA, an estimated 2000 illegal Casinos were believed to be operating within South Africa, this despite the fact that all gambling, other than horse racing, had been declared illegal by the 1965 Gambling Act.

Sun City today is still a flourishing Casino where many
international entertainment and sporting events are held
.

Sun City

 

By 1996, the situation was such that, in addition to the former homeland-casinos, other numerous illegal gambling enterprises had sprung up and there was a clear need for a proper gambling regulatory structure to be enacted in SA. Moreover, the odds in illegal gambling enterprises were almost always worse than under a legalised gambling regime.


Consider the following newspaper article which
appeared in the Sunday Times of 21st September, 2008.

Click on the image below for a larger readable version

Odds improved with legislation

 

Fact File:
Read what the National Gambling Board says in this regard on its website:

"The vote by the people of the Republic of South Africa for the democratic order on 27 April 1994, made a compelling case for the transformation of all the government institutions to address the inhuman imbalances and inequalities which were institutionalised in the name of Apartheid. The National Gambling Board (“Board”), established in 1998 to nationally regulate the gambling industry, was no exception and processes were put in place to transform and reform gambling in South Africa."

In 1996 the National Gambling Act was passed. As with all Acts, this Act went through certain stages in order to become law.  The start of a new Act is often in the form of a discussion paper which is called a Green Paper. This may be debated and discussed at various levels and by various stakeholders. It will then proceed to the stage of being drafted as a Bill. The Bill will then be tabled, or presented, in Parliament, often by the Minister responsible for the area which the Bill addresses. There are several more debating and discussion levels that will be gone through, until, finally, the Bill is accepted or rejected by the majority in Parliament. If accepted, it will become an Act, which is then published, or promulgated in the Government Gazette. (Based on: www.pmg.org.za/parlinfo/sectionb3)

According to the World Casino Directory:

The National Gambling Act of 1996 recognized the maturity of each individual citizen in South African and respected their decision and freedom of choice and eliminated widespread illegal gambling and its harmful consequences. After the adoption of the Act, the implementation brought in a lot of regulatory authorities, a structure of provisions that made the industry a highly regulated economic sector in the country and the establishment of casinos which were considered as some of the best managed ones in the world

(see www.worldcasinodirectory.com/africagamblinglaw.htm)

In 2004, this 1996 Act was repealed and replaced by the new SA National Gambling Act published in the Government Gazette in August 2004. The stated purpose of this Act is:

“to provide for the co-ordination of concurrent national and provincial legislative competence over matters relating to casinos, racing, gambling and wagering, and to provide for the continued regulation of those matters; for that purpose to establish certain uniform norms and standards applicable to national and provincial regulation and licensing of certain gambling activities; to provide for the creation of additional uniform norms and standards applicable throughout the Republic; to retain the National Gambling Board; to establish the National Gambling Policy Council; to repeal the National Gambling Act, 1996; and to provide for matters incidental thereto” (from preamble to Act)

According to the Department of Trade and Industry the main function of the 2004 Gambling Act is as follows:-

“The National Gambling Act defines the regulatory framework in South Africa, for instance, it limits the number of casinos that can be licensed to 40. There are provincial gambling boards in each of the nine provinces. These boards are responsible for issuing casino licenses.”

www.thedti.gov.za/thedti/ngbsa.htm

In addition to strictly regulating gambling activities, the law also makes provision for the implementation of Black Economic Empowerment (BEE) and the establishment of facilities to assist with problem gambling (a topic which we will cover in more detail later).

The regulation of gambling in the Republic was expected to enhance the national policy of reconstruction and development of our country. One of the policy objectives underlying the regulation of gambling in the Republic is that the industry must leverage direct fixed investments, contribute towards the process of Broad-based Black Economic Empowerment, create jobs and promote tourism. These were conditions precedent before gambling licences were issued.

You will note that mention has been made of the National Gambling Board above. In 1996 the Gambling Board of South Africa was established to oversee the implementation and compliance of gambling legislation. On its website, it describes itself as follows:

Fact File:
The National Gambling Board was established in terms of the National Gambling Act, Act No 33 of 1996 which was repealed on 01 November 2004 by the National Gambling Act, 2004, (Act No 7 of 2004) ('the Act').

The Act makes provision for the oversight of matters relating to casinos, gambling, betting and wagering and promotes uniform norms and standards in relation to gambling throughout South Africa.

It ensures uniformity, harmonisation and integrity of the gambling industry in South Africa, by enforcing compliance with National Gambling Act and ensuring compliance with other relevant legislation. We do this through:
  • the creation and establishment of uniform norms and standards
  • the creation and establishment of uniform (harmonised) rules and regulations
  • conducting oversight evaluations of the performance of provincial licensing authorities
  • evaluating the issuing of national licenses by provincial licensing authorities
  • evaluating the compliance monitoring of licensees by provincial licensing authorities
  • evaluating the compliance monitoring of licensees by provincial licensing authorities
  • assisting provincial licensing authorities to ensure that unlicensed gambling activities are detected
  • monitoring socio-economic patterns of gambling activity in the Republic
  • conducting research on addictive/compulsive gambling and the socio-economic impact of gambling

Adapted from www.ngb.org.za

We can see from this that the main aim is to make sure that all aspects of gambling are strictly controlled in South Africa.

Word Box:

Compliance:  to follow the rules which are laid down
Addictive:  an activity such as taking drugs over which one has no control – one is addicted to it
Compulsive:  something which an individual feels driven to do
Socio-economic:  dealing with social, societal, and financial issues
Regulate:  control through written guidelines and / or laws
Paternalistic:  acting like a stern father controlling a child

 

Activity 1: Unpacking Prose

Pairs
In your pairs, carefully read the pieces above. Now see if you can answer the questions which follow. Briefly note down your answers.
  • Why was the situation in which gambling was legal in the “homelands” described as absurd, do you think?
  • Why do you think the nationalist Government’s attitude towards gambling could be described as paternalistic?
  • Do you think that legalising gambling is “recognising maturity of an individual” or putting temptation in people’s way?
  • What do you think the word “harmonise” means in relation to legislation relating to gambling?
  • What do you think some of the problems of banning gambling might be?
  • What are some of the advantages of legalising gambling do you think?
  • What are two key elements of gambling?

South African legislation regarding gambling, since the introduction of the 1994 and 2004 Acts, is seen as very progressive and amongst the best internationally.

Fact File
In 2003 Mr Chris Fismer who had been the chairperson of the IAGR (International Association of Gaming Regulators) had this to say:-

"Perhaps the most gratifying aspect of my chairmanship over the past year of the IAGR was the increasing focus in international gambling policy circles on social issues, such as the empowerment of local communities and problem gambling. The approach being adopted to many of these issues is one which we pioneered in South Africa at the time we crafted the country's new gambling policy framework after 1994".

A leading academic expert on gambling, internationally, Peter Collins, commented thus:-

“That Chris Fismer was chosen to lead an organisation as influential as the IAGR is evidence that this country is held in high regard internationally for the way that it manages and controls its gambling industry. At a time when too many people are wont to criticise delivery by government, it is good to see that the country receives international recognition and prominence, as it has during Fismer’s term of office, and which it certainly deserves”, he said.

Adapted from:  http://www.responsiblegambling.co.za

 

Word Box:

Gratifying: - pleasing
Pioneered: - started
Prominence:- occupying a key position

Topic 2: Some advantages of Casinos and Legalised Gambling

What we are going to discuss now is some of the advantages to society of legalising gambling, particularly in the form of establishing regulated Casinos.

Remember that we have seen that gambling, in some form or another, has always existed in society. People can bet on anything – whether it is that their favourite soccer team wins the next match they play or whether it rains tomorrow. We can debate whether this is always “gambling” in the strictest sense of the word. If we know that the team against which our favourites are playing is very weak, then in some sense, we are simply making a very well informed prediction. Similarly if we look at satellite images of weather conditions we can probably also work out that there is a high or low chance of it raining tomorrow. This is different to betting on the toss of a coin where we have no way of predicting whether the outcome is going to be heads or tails – the chances of either are 50/50. One would, of course, expect the odds one could get on these uncertain events to reflect the available information on the likelihood of occurrence of these events. This, however, is a topic for discussion later on in this Module – for now the only point being made is that anyone can bet on anything and as we have seen, historically, people have always enjoyed gambling.

Gambling, in the sense of betting money on an unpredictable outcome such as which cards will come up in Poker or which numbers will come up in dice or the Lottery, has in certain times in Western society become associated, to a greater or lesser degree with “vice” or immoral pastimes  Most forms of entertainment can be seen by different sections of society as “immoral’. There are some strict religious groups who see recreational activities like the theatre or the movies as “sinful’; others see dancing and singing as immoral. These are issues which can lead to heated discussions and agreement is seldom reached on these types of debates about morality.

Talking Point:
Do you think people who have strong faith based opinions can be “persuaded” by arguments that their position is wrong? Think of people who are passionately against abortion on religious (or other) grounds. Do you think anyone would have a chance of convincing such people that their opinion is ill-informed and incorrect? Do you think one should try to convince people to change their minds on such issues? Why or why not?

What happens when governments ban activities that they consider are wrong as was the case in South Africa, with gambling, prior to 1994?  In 1919 the United States Government voted to ban alcohol sales – ushering in the era of Prohibition. This law was repealed in 1933.

Word Box:

Repealed:  cancelled, removed
Temperance:  staying away from (abstinence) alcohol)
Amended:  changed; altered
Prohibition:  forbidden by law
Rampant:  very widespread
Hedonism:  pleasure seeking

 

Fact File:- Case Study on Prohibition in USA
Alcohol, in particular, had long been recognized as a cause of violence and anti-social behaviour, and the anti-alcohol Temperance movement achieved its ultimate victory in 1919 with the enactment of the Volstead Act, which amended the US Constitution to allow the national prohibition of alcohol.

The results of alcohol prohibition have become the stuff of legend and popular films: Powerful criminal organizations sprang up, arrested offenders clogged the system and corruption of the police and courts became rampant as a large portion of the population simply ignored the laws. There is some evidence that during prohibition, the average age of onset of alcohol use went down significantly, possibly because since alcohol sale was illegal in the first place, age restrictions on sales no longer applied.

Alcohol prohibition was largely the work of religious conservatives who saw it as a way to combat the growing hedonism of urban dwellers; a return to old-time values and morality by attacking immoral lifestyles.

Although alcohol use sharply declined immediately after the passage of prohibition, it immediately began an inexorable climb back up towards pre-ban usage levels. As public sentiment turned against prohibition, it became harder and harder to get juries to convict offenders. Finally admitting defeat, alcohol prohibition, America's "noble experiment", was repealed on December 5, 1933.
Adapted from: http://thedea.org/prohibhistory.html

Prohibition posters

Prohibition Posters
http://www.authentichistory.com/1914-1920/09-fallout/6-prohibition/1-history/index.html

 

Activity 2: What do you think?
Pairs
In your pairs, discuss the following questions. Make brief notes of your responses
  • If an industry, such as selling drugs or alcohol, is declared illegal, can the Government claim any revenue or income from it?
  • If research shows that when an activity such as selling alcohol, is banned or declared illegal, use actually increases, do you think the Government should ban such activities?
  • If an industry such as selling alcohol is regulated, this means that rules such as those about sales to minors can be strictly enforced. Do you think this is a good reason to control rather than ban certain activities?

You may see from your responses and discussions during the above Activity what some possible advantages of legalising gambling are.

If gambling is legalised then the Government can tax the industry just as they do any other recreational premises such as cinemas or hotels and pubs.

If gambling is legalised, then the industry can be strictly controlled. Just as minors (people under the age of 18) are not allowed to buy alcohol, so are they not allowed to gamble at places like Casinos.

When activities such as gambling are declared illegal, they often still happen. We saw this in the Case Study on Prohibition in the USA. What happens is that the activity continues but is criminalised and thus attracts criminals. If it is legal there is no opportunity for criminals to exploit people participating in the activity.

When gambling is legal, then Casinos spring up. These provide job opportunities that did not previously exist and thus provide incomes for many people. In addition, although Casinos exist mainly for the purpose of gambling, they usually provide many other forms of entertainment and attract tourism which means even more employment opportunities and ways for local communities to benefit.

Fact File:
South Africa gets massive income or revenue from gambling. According to South Africa's National Gambling Board, revenues across all forms of gambling - excluding internet - increased to R13.5 billion in 2006/07 from R6.2 billion in 2001/02
Adapted from: www.gamblingplanet.org/GP_news_190508a

Many social commentators would argue that gambling is no more harmful than going to the theatre, eating out or going to the cinema – it is simply a recreational choice. As adults we should have the right to choose what we spend our time and money on. Such people would argue that Governments need to respect choice – certainly that is the South African government’s approach. Freedom of choice is enshrined in our Constitution and some would extend this argument to include how we spend our money.

Topic 3: Disadvantages of legalised gambling

We have looked at some advantages of legalising gambling. We also touched on these when we looked at the mission statement of the National Gambling Board earlier. The main advantages are that the industry can be strictly controlled and that there are compelling financial arguments as to why gambling should be legalised. There are also reasons that people put forward as to why gambling should not be legalised. Many of these, as we shall see are based on moral or social objections but there are also some economic points that can be made in this regard.

Fact File:

Proponents of the view that gambling is harmful use a quote of Nobel Laureate Paul Samuelson.

"(Gambling) involves simply sterile transfers of money or goods between individuals, creating no new money or goods. Although it creates no output, gambling does nevertheless absorb time and resources. When pursued beyond the limits of recreation, where the main purpose after all is to kill time, gambling subtracts from the national income." ." (Economics, McGraw-Hill, 1970.)
Other economists have taken exception to Samuelson's characterization of gambling. They point out that his criticism could be applied to entertainment in general like the movie industry or Disneyland. These are also economic activities that don't have tangibly productive outcomes, but they still have value because they provide satisfaction, or utility (in the jargon of philosophy and economics), to consumers.

What do you think?

Adapted from: www.library.ca.gov/crb/97/03/Chapt9.html

Most other reasons put forward against legalising gambling are socio-economic or moral.

Some would argue that legalising gambling encourages people to waste their money. The chances of winning money when gambling are low so should there be a legal industry that allows people to “throw away” hard earned money?

Many would also argue, extending this, that to situate a Casino, in an area where there are poor people, is to provide temptation and encourage reckless behaviour. Most people are not clear about what the chances of winning money are, and the fantasy of winning a huge amount of money is especially appealing to people with severe financial problems (a large percentage of the South African population live in poverty) – the very people who can least afford to risk their very limited income.

Moreover, there is also the chance that people could become addicted to gambling and could not stop – in the same way that they could become addicted to a drug like heroin. Such people expose themselves and their families and friends to the possibility of great emotional and financial hardship. We will look at the issue of problem gambling in greater detail in Unit 4. For now you need just to be aware that some people struggle to control their gambling habit and legalised gambling makes it easier for addicts to get their “fix”. At the same time legalised gambling exposes more potential problem gamblers to the opportunity of developing a “full blown” or pathological gambling addiction problem. In addition, the ready accessibility of gambling in a society where it is legal, exposes many people to the temptation of gambling who would never even be aware of it were it to be illegal.

Activity 3: Debating points

Small Groups
In a debate you need to look at both sides of an issue. All of the following statements are able to be viewed from different perspectives. Look at all points of view. Remember that fellow learners may have strongly held opinions on such issues and that everyone’s viewpoint needs to be respected. In small groups debate the following points:-

  • The Government has a responsibility to protect people from “misbehaving” themselves, by forbidding certain pastimes which can be dangerous or risky.
  • All things considered, gambling is good for the economy of the land.
  • Adults have the right to choose how exactly they wish to spend their time and money, even if they do things that not everyone approves of.
  • Making activities illegal simply pushes them underground and encourages criminal behaviour.
  • By legalising activities that may be considered morally dubious by some, the government at least has some measure of control.
  • Legalising activities such as alcohol consumption, gambling and prostitution leads to the moral decay of society.
  • Only activities that inevitably have elements of abuse and exploitation such as dog fighting and child pornography should be banned by the Government.

 

We can thus see that there are many arguments for and against legalising gambling. Currently there is debate about legalising on-line gambling in South Africa. It is a contentious subject, and as we said earlier there are opponents and proponents – both with very clear ideas about the side they favour.
What follows below is a very positive take on the benefits of gambling:-

It is heartening to note that South Africa has managed as a country to realise most of its policy objectives. (regarding gambling),The Republic has realised investments of more than R12 billion, a lot of infrastructural development like the building of convention centres, employment opportunities continue being created since 1994. This proves beyond reasonable doubt the collective wisdom of the government in legalising gambling.
Website: National Gambling Board

We will close this Unit with an extract from a speech by the deputy minister of Trade and Industry, Rob Davies  ( April 2008) which highlights some pros and cons:-

"The casino industry alone is estimated to have created about 100 000 direct and indirect jobs. Gross gambling revenue grew from R5.6 billion in 2003 to R10.1 billion in 2006. While these developments are all welcome, it is precisely in the last figure that the double-edged sword of the industry can be identified."

Davies referred to a 2003 study commissioned by the National Gambling Board, which found that a significant percentage of people in low-income groups were involved in casino gambling, betting on horses, and participating in the national lottery.

Davies said: "In my view this highlights the complex and difficult challenge that regulators face in achieving an appropriate balance. Our regulators need, on the one hand, to create conditions under which the industry is able to realise its economic, employment and potential broad-based black economic empowerment benefits. But they need simultaneously to ensure that it does this in ways which do not involve overstimulation, particularly in respect of low-income people and low-income communities."

From: Business report: State committed to combat illegal gaming April 20, 2008
By Wiseman Khuzwayo

 

Self Assessment

  • I can now understand more about the policies and legislation relating to gambling and Casinos
  • I can now discuss some of the advantages to society of legalising gambling
  • I can now discuss some of the disadvantages to society of legalising gambling
  • What I enjoyed most about this Unit was.....?
  • What I enjoyed least about this Unit was....?
  • I would like to know more about....?