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The mafia bosses and the gambling cartel

Defend Truth


The mafia bosses and the gambling cartel

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets.

Whenever government officials talk about gambling, they spout pure hypocrisy. They act like mobsters running a protection racket. Meanwhile, the government itself viciously exploits the poor and the desperate in order to subsidise sport and arts. If you really wanted to protect punters, you should want more competition, not less.

What do you do when you’re the boss of a crime gang, and some upstart steps onto your turf, opening gambling shops without giving you a cut? You call in the heavies, of course, because competition threatens your profit margins. It undermines your ability to swindle your customer base into paying exorbitant prices for your merchandise.

That’s business, with a Marlon Brando accent. That’s crony-capitalism the mafia way. And that is exactly what the government is doing with gambling.

A draft bill that was to permit online gambling in South Africa, protect people from problem gambling, and prevent fraud and money laundering, was tabled in Parliament in April 2014. More recently, however, officials at the DTI poured cold water over any thoughts that online gambling, or indeed any new form of gambling, would be legalised.

Reportedly, the reason is because South Africa has more problem gambling and indebtedness than some other countries. Of course, the two are not quite so easily related. Presumably, problem gamblers do incur debt, but most debtors got that way via loan sharks, an industry which the government is proposing to join when the Post Bank gets its lending licence.

Moreover, if you’re a problem gambler, it is simple enough to evade the government’s restrictions and gamble online anyway. Even if they whack every mole, a dedicated punter can easily learn how to configure their computer to use a virtual private network to evade geographical restrictions.

Besides, if you want to protect problem gamblers from themselves, it might be smarter to focus on those who gamble away their cash wages, instead of those who are rich enough to own a computer, a decent internet connection, and a credit card.

And when the government does act to protect illegal online gamblers from themselves? Do they get their money back, so they can spend it on baby food? No, sir. The money gets confiscated. And the majority of it, according to the Pretoria News, is confiscated from minors. How is it moral to steal lunch money from children?

The government’s reasoning is a hypocritical pack of lies.

The real reason the Department of Trade Barriers and Crony Industry wants to crack down on online gambling is because it threatens established interests and revenue streams. The government’s tax take, so relentlessly squeezed out of the poor and desperate at South Africa’s crass mega-casinos, is at stake. So are the profits of South Africa’s handful of casino bosses, the sports betting industry and the National Lottery monopoly.

The moneyed interests are plotting among themselves to exclude upstart competition, and the government is offering them every assistance.

Although the casino industry ought to be the regulatory responsibility of provincial government, which benefits from most of the tax take, overarching policy is set at national level. However, no matter how much the existing industry exploits punters, nobody is permitted to apply for a new licence to undercut them without the express invitation to apply from the Provincial Gambling Board.

Through some loophole or other, Bingo operators have been popping up in some provinces. Because they have proved so popular, compared with the other rip-off merchants the government has licensed, they also need to be slapped down, according to the DTI.

The same story played itself out with the National Lottery. Twenty years ago, we had Operation Hunger. You bought a ticket, which gave you some improbably small chance of winning some improbably large jackpot. The upside was that with every ticket, you were supporting a charity. It was one of a field of competitors that vied for your attention and your trust. If you didn’t like the charity, or you didn’t trust the operator, you could buy a ticket from the lottery next door, supporting something else.

Then came the National Lotteries Act, which outlawed all existing private lotteries. In what was essentially a heist, the government established a monopoly operated by a hand-picked consortium selected once every seven years. Uthingo was the first operator, the incumbent is Gidani, and it was recently announced that the new licence would likely be awarded to a shadowy consortium called Ithuba.

The ostensible reason for establishing a closely overseen monopoly was that people were being exploited and nobody knew where the money was going. If that were true, why establish a National Lottery? You see poor people line up by the hundreds every week to buy lottery tickets with money they really can’t afford to lose. The government-mandated monopoly is viciously exploiting their poverty and ignorance of simple mathematics. The membership of the Ithuba consortium has not been disclosed, so nobody knows where the R40 billion of projected revenue might go. Good causes are left to die, waiting for funding applications to be processed. Less than half of the revenue gets used, mostly for arts, sports and miscellaneous.

The masses evidently don’t need bread, they need circuses.

The DTI argues that several other countries have also outlawed online gambling. That’s true, but that’s true for many laws. It doesn’t make that law is a good idea. There are a whole bunch of foreign laws I’m quite pleased not to be living under.

One notable country to have banned online gambling recently is Singapore. The ruling party of this city-state has a strong (albeit weakening) monopoly on power, much like the ANC in South Africa. However, unlike South Africa, Singapore routinely suppresses political opposition and is rated only “partly free” in both civil and political liberties by Freedom House. South Africa is rated as “free”, and last I checked, freedom was something many South Africans died for. Singapore ranks 150th on the Reporters Without Borders Global Press Freedom Index compared with South Africa’s 42nd place. Emulating Singapore’s policies strikes me as very unwise, though not unexpected.

The real reason why governments ban online gambling is, almost universally, to protect government-run lotteries or a licensed casino cartel.

In the United States, for example, a 2011 Justice Department ruling that effectively permitted online gambling is being trumped by a new bill before Congress, outlawing all internet gambling. This bill is the culmination of a 15-year fight on the part of the US government to ban it.

Gambling is unlike many other morality-related laws, and it bucks the general trend towards liberalisation. That is because there is a great deal of money at stake with gambling. The farce is exposed by the fact that supporters of the US bill, like Harry Reid, the senior senator from Nevada (Las Vegas, baby!), want an exception for online poker.

There is, of course, no objective reason why online poker is less harmful to gamblers, or less vulnerable to fraud and money laundering. An exception flatly contradicts the stated motivation of the ban. And if the stated motivation isn’t the true motivation, the only remaining purpose is to protect wealthy incumbents from upstart competition. To be fair, that is what Harry Reid was elected to do. It’s called crony-capitalism. He’d be recalled in a blink if he proposed to shut down Las Vegas’ casinos or Nevada’s online poker businesses, even if he argued exactly the same supposed moral reasons he cited in defence of the online gambling bill.

The same is true for South Africa. If the government were consistent, they’d either ban all gambling and betting, or they’d permit all of it. The complaint by the National Gambling Board that “unlicensed gambling purveyors” threaten the existing industry because they are untaxed and unregulated falls flat when one considers that online sports betting is not subject to a similar ban. If they really wanted to achieve protection for problem gamblers, or crack down on money laundering, they’d simply pass industry-wide regulations that apply equally to everyone. After all, such regulations already exist for current casino licence holders.

But that’s not what they want. They want to milk the casino cow, and protect the National Lottery. There’s a lot of power vested in a government that can issue casino and lottery licences worth over R20 billion a year, and there’s a lot of tax revenue at stake. (Casinos alone make up 78% of this business, according to PwC.)

Personally, I haven’t been a casino customer since playing cards in the cosy, small gambling joints of the early 1990s. They were shuttered (for my protection) in favour of gaudy, noisy mega-complexes with flashing lights and the smell of desperation in the air.

Back in the day, the small operators competed with each other by offering better house rules or other benefits. For a couple of hundred, you could have a glorious night out trying to out-manoeuvre the house. Today, there is no competition at all, and the punter stands no chance. I’m not prepared to be fleeced. How does a law that restricts me to this single option protect me?

It doesn’t. That’s why a bunch of us get together regularly to play poker. If we hate the only casino in a 100km radius, we sure can manage a poker game of our own. If we aren’t allowed to play poker online, we’ll just have to do it on the sly, and not bring our winnings (if any) back home. Even if all this unlawful action could get us a jail sentence for our own protection. DM


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