Is the South African ban on online gambling effective?

Filed under: Casino News |

Plenty of options for South Africans despite government threats and High Court decisions

Pessimists who saw last year’s High Court decision that online gambling is presently illegal in South Africa as the death knell for the pastime in that country may have to think again; a basic survey of the South African market this week showed that there is still an abundance of online casinos offering action in South African Rand currency.

Even the briefest search will unearth a plethora of information sites, all strongly supported by online casinos licensed in respectable jurisdictions like Alderney and Gibraltar and still accepting South African players.

This could be especially tricky for publicly listed companies that profess to be focused on national regulated markets and dedicated to compliance, yet apparently do not apply the same rigour to licensee activities in South Africa.

The South African authorities and politicians have been procrastinating for years on whether to regulate and license online gambling, despite extensive research studies, ‘how to’ visits to other countries, and most recently a government-tasked independent Commission that recommended the regulation route.

But until such time as the politicians put a properly legislated system in place, the authorities regard the pastime as illegal and have warned players and operators alike of severe penalties and future disqualification from possible licence arrangements. They have also persuaded the country’s banks to warn their credit card clients against online gambling, and have cautioned advertising media that internet gambling is an illegal activity (see previous InfoPowa reports).

Yet prosecutions are rare, and recently the chief executive of the National Gambling Board, Baby Tyawa told the publication ITWeb that her organisation is “powerless to stop international online casinos illegally offering their services to South African punters, because the Internet is virtual and the board does not have any international jurisdiction.”

Ms. Tyawa went even further, commenting that the ban presented problems for her enforcers: “We are the first to accept it’s an impossible mission,” she said.

Proponents of online gambling hoped that a long-running case in the North Gauteng High Court last year would bring some clarity to the issue. Casino Enterprises, an online casino operator based in neighbouring Swaziland, argued that the point at which gambling took place was at the servers, which were outside South Africa and therefore enabled the company to accommodate South African punters for many years.

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However, the court found that gambling took place at the point of consumption i.e. the punter’s computer, and was therefore illegal in terms of South African law, resulting in Casino Enterprises shutting down SA operations.

Interestingly, the ‘point of consumption’ argument is one that the British government is following in its campaign to impose secondary licensing and taxation on offshore internet gambling operators, effectively negating one of the strongest defences deployed by such operators.

For now, South Africa is off limits for all but limited sports betting, a fact recently recognised by Betfair which made an exit on February 14 this year and now blocks SA IP addresses. However, Tom Tuxworth, the company’s public affairs manager, warned SA politicians that prohibition only drives would-be internet punters to offshore and unregulated websites.

He also quoted numbers from H2 Gambling Capital and Gambling Compliance, indicating that online gambling in SA could generate Rands 6 billion in revenue and add an estimated Rands 1 billion in taxes to the state’s coffers each year.

Tuxworth opined that a realistic approach to internet gambling could give South Africa the opportunity to become a technology hub for a growing sector, and would create many skilled technology jobs, as well as other career opportunities in areas such as advertising.

Betfair has reportedly applied for a traditional back-only sportsbook licence in the Western Cape under the present regulatory framework, which permits some licensing for sports betting companies.

Ms.Tyawa told ITWeb that her officials could communicate with other regulators and seek their help in warning their licensees off the South African scene. If that has been done there is little evidence of cooperation, and online casinos licensed in Alderney, Gibraltar and other jurisdictions continue to access the SA market.

Legislative experts have opined that South African legalisation is unlikely to come about for at least two years due to the traditionally plodding nature of lawmaking…but the political decisions will have to come first, and that could take some time, judging on past performance.

For now, it seems that many South African online gamblers are prepared to accept the risk of prosecution…and there are plenty of offshore operators only too willing to defy the local laws and provide their services.