South Africa Nears Online Poker and Gambling Approval

A draft amendment bill was adopted by the South African cabinet last week which will legalize online and cellphone gambling, including online poker, if it is passed into law.

Online sports betting was already legal in South Africa, as long as it was conducted on sites within the country. But online poker and gambling were outlawed by the National Gambling Act of 2004 because government wanted more time to research how to regulate and tax these sectors which were growing quickly at the time.

The act gave Trade and Industry Minister Mandisi Mpahlwa two years to draw up regulations to govern internet gambling. Mpahlwa and the provincial MECs responsible for gambling conducted research on how other jurisdictions such as Britain, the US and Australia regulated online gambling.

Trade and Industry deputy director general Astrid Ludin said, "We do not believe outlawing will stop [online] gambling, therefore it is better to regulate it." This is also consistent with South Africa's existing approach to other forms of gambling.

South Africa's attitude is more in line with the UK; both have chosen to create a regulated framework for online gambling.

It is unlike the US, whose Wire Act of 1961 explicitly outlaws sports betting and whose recent Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) makes it illegal for financial institutions to handle online gambling transactions from US residents.

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 percent (R777-million). An additional 5 percent would give the government R38,8-million in taxes.

Online poker in particular is a major source of online gaming revenue.

The proposed Gambling Amendment Bill, which was first submitted to the South African Cabinet this past October and adopted this past week, includes a licensing system for players and the online gaming Web sites.

Ludin noted that it is yet to be determined how gaming proceeds will be taxed. She also said that a key challenge in drafting the proposed legislation was to find a way to effectively regulate anything on the internet, and how to prevent money-laundering.

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.

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