Editorial: Another One Bites the Dust

23 October 2007

IGN has been watching the lurching movement toward a regulatory scheme for online gaming in South Africa since the summer of 1999. Rosy reports early on alleged that the country could be a regulatory hub for what, at that time, could “capture a $1 billion dollar export market.” We watched its progress over the years, eagerly awaiting the time when a rational plan would emerge.

Allegedly, the goal all along was to create a hub for a high-tech industry as well as offering player protections. Recently, the South African Parliament’s Portfolio Committee passed a bill which included the long-awaited legislation and, according to at least one industry expert who’s been monitoring the situation, it’s on the road to arriving “stillborn.”

After multiple studies and much hand-wringing, the process has now become politicized to the point that the committee delivered a piece of legislation that will clearly be DOA (dead on arrival). It offered licensing on casino play which, because it’s not specifically mentioned, excludes poker. But the real deal-killer was a bizarre provision--which even government insiders are calling “strange”--that disallows licensed operators from advertising their online gaming operations to South Africans. So, what’s the point in getting licensed there?

Those of us who have been watching the industry since its genesis in 1995 immediately recalled a similar train wreck in Australia in 1998. There was early hope that the leadership provided by the state gambling ministers in developing the “Aus Model” would lead to an innovative regulatory structure. However, I-gaming was caught in a cross-fire over problem gambling on the video poker machines (pokies) in clubs and pubs. As an outcome, the political process again ran amuck. What was supposed to engender “player protection” got totally subverted. As a result, licensed online casinos could not even accept play from Australian residents--in complete contravention to the initial intent.

So, are we seeing this again in South Africa? It would appear that way. Passing a law is one thing; passing a law that’s commercially viable is another. Perhaps parliament’s policy objectives have been met by this legislation. However, the best player protections in the world will be ineffective if the businesses that provide them cannot survive in a stifling regulatory environment, and especially so if licensees can’t advertise to would-be players for whom they provide those protections.

What remains to be seen is whether the South African government can pull this out by making the necessary changes to create an environment that will be attractive to the industry. If so, perhaps they can still become a viable alternative licensing jurisdiction in what is competitive even on the level of government regulation. If not, maybe it’s just time to pull the plug.

In the meantime, the industry continues to watch with interest to see if there’s still a chance that South Africa will be a good bet for locating an operation.

Mrs. Schneider is the founder of IGamingNews and former chief executive of River City Group. She now consults for Clarion Gaming and contributes regularly to IGamingNews.