galaxy design sample Ӏ worker ant

PART 1: Executive Summary

1.1

1.2

1.3

1.4

1.5

APPLICANT AND

PROJECT TEAM

DEVELOPMENT AND

OPERATING EXPERIENCE

SUMMARY OF

PROJECT CONCEPT

PROJECT VIABILITY

AND FINANCIAL RETURNS

BENEFITS TO

THE ECONOMY

1.1.1. The Applicant

1.1.2. Project Team

7

8

8

15

IN THIS DOCUMENT

25

43

49

PART 2: Detailed Proposal

2.1 EMPOWERMENT AND

COMMUNITY ASPECTS

2.2

2.3

2.1.1. Sustainable Employment

2.1.2. Provision of Training and Skills to Employees

2.1.3. Sourcing of Goods and Services

2.1.4. Participation of Black Shareholders in Ownership and / or Profits

2.1.5. Facilities for / Contributions to Needy Communities

63

64

76

92

104

120

ECONOMIC

ASPECTS

SOCIAL

ASPECTS

2.2.1. Maximisation of New Investment in Eastern Cape

2.2.2. Promotion of Tourism

2.2.3. Fiscal Implications

2.3.1. Sports, Arts and Culture Promotion

2.3.2. Protection of Public Interest

147

148

150

162

163

162

172

IN THIS DOCUMENT

2.4 FINANCIAL

ASPECTS

2.4.1. Financial Control

2.4.2. Financial Strength

2.4.3. Financing Structure and Access to Capital Reserves

2.4.4. Financial Viability

2.4.5. Suitability of Funder

185

186

196

203

206

213

2.5 MANAGEMENT 215

2.5.1. Propriety and Integrity

2.5.2. Access to Expertise and Experience

2.5.3. Strategy and Objectives

216

226

244

2.6 DEVELOPMENT

ASPECTS 261

2.6.1. Development Strategy

2.6.2. Site Location and Size

2.6.3. Site Layout and Design Features

2.6.4. Parking Availability

2.6.5. Internal and External Security

262

280

298

318

320

Undertakings and Disclosures by the Applicant

List of Annexures

List of Appendices

324

326

328

Executive Summary

APPLICANT AND PROJECT TEAM

1.1. Applicant and Project Team

Executive Summary

1.1.1.

THE APPLICANT

1.1.2.

PROJECT TEAM

8 GALAXY BINGO | Executive Summary

The Applicant is EC Gaming Uitenhage (Pty)

Ltd, (previously Galaxy Bingo Uitenhage (Pty)

Ltd) a South African owned and registered

private company with Registration Number

2012/136900/07, which has its registered

and business office within the Eastern

Cape Province. Proof of payment of the

application fee and deposit, as well as for

the purchase of the RFP, in respect of this

application is included as Annexure A2 to

this application.

Mr Christiaan Gerrit du Toit will be the Lead

Applicant and negotiator for the purposes

of this application, as contemplated in the

RFP. A signed resolution of the shareholders

as to the authority bestowed on the Lead

Applicant is included as Annexure A3.

The sponsor members of the Applicant,

which are its source of funding for the

Project, are Niveus Investments Limited and

HCI Limited, which are JSE listed companies

respectively holding indirect interests of 29%

and 15% in the Applicant.

The Applicant is backed by Niveus

Investments Ltd (“Niveus”), a South African-

owned, JSE listed empowerment company

and its holding company, HCI Limited.

Niveus has a market capitalisation of

approximately R2.5 billion and a proven track

record of meeting all financial commitments

for the rollout of bingo venues in the Eastern

Cape, namely Galaxy Bingo East London and

Galaxy Bingo Port Elizabeth.

Niveus holds an indirect interest of 100% in

Galaxy Bingo International South Africa (Pty)

Ltd, which holds a direct interest of 29% in

the Applicant.

Niveus is held as to 51.73% by Hosken

Consolidated Investments Limited (“HCI”),

one of the leading JSE listed empowerment

companies in the country, which has a

market capitalisation of in excess of R17.5

billion and a Level 2 B-BBEE Contributor

Status. HCI therefore holds an indirect

interest of 15% in the Applicant.

Galaxy Bingo International South Africa

(Pty) Ltd, which holds 29% in the Applicant,

has a number of provincial subsidiaries,

which collectively operate a number of upmarket

bingo venues in the Eastern Cape,

Gauteng, North West and KwaZulu-Natal.

Galaxy Bingo opened one of the first bingo

outlets in South Africa in 1998.

71% of the equity in the Applicant is

collectively held directly by local PDI

shareholders.

THE CORE MEMBERS

OF THE APPLICANT’S

PROJECT TEAM, AND

THEIR RESPECTIVE AREAS

OF RESPONSIBILITY, ARE

AS REPRESENTED IN THE

TABLE ON THE RIGHT:


Executive Summary

PROJECT TEAM 1.1.2.

PROJECT TEAM MEMBER AREAS OF RESPONSIBILITY

Clarence Mngadi (Chairperson of the Applicant) Chairmanship, Shareholder Relations, and Strategic Review of the Business, with local Eastern Cape knowledge

Santhalutchmee van Vuuren (Director of the Applicant) HR, Training, Skills Transfer, CSI/SED & Sports, Arts & Culture

Luthando Bara (Director of the Applicant) Marketing and Tourism Promotion

Notombobom Judith Jennings (Director of the Applicant) Corporate Social Investment and Sports, Arts & Culture

Christiaan Gerrit du Toit (CEO of the Galaxy Group) Site Development, Operations and Skills Transfer to local shareholders

Mary-Anne Duvenhage (Compliance Officer: Galaxy Group) Internal Audit, Financial Procedures and Control

Paramesh Reshalil (Compliance Manager:

Galaxy Bingo Eastern Cape)

Compliance, Investigations, and Safeguarding of Assets

Local Developers: Transtruct (Local Level 3 B-BBEE

and /or companies with similar credentials)

Development and Rollout of Project

Niveus Investments Ltd Financiers of Applicant

GALAXY BINGO | Executive Summary 9

1.1.

Executive Summary

Applicant and Project Team

1.1.2. PROJECT TEAM

Participation by PDI Shareholders in Ownership and Profits

The total effective broad-

based PDI shareholding in

the Applicant is 82.32%,

and the direct local PDI

shareholding is a ground-

breaking and market-

leading 71%, as reflected

on the right:

PDI SHAREHOLDING IN APPLICANT: 82.32%

LOCAL DIRECT PDI SHAREHOLDING: 71%



Executive Summary

PROJECT TEAM 1.1.2.

The Applicant’s

shareholding composition

by far outstrips the

Essential Minimum

Requirements of the RFP,

as indicated on the right:

APPLICANT’S BID VS RFP ESSENTIAL MINIMUM

REQUIREMENTS



1.1.

Executive Summary


1.1.2. PROJECT TEAM

CONSOLIDATED SHAREHOLDING STRUCTURE OF THE APPLICANT

*Direct Shareholdings in the Relevant Entities. Indirect Shareholdings in the Applicant are Expressed in Brackets.

The Table alongside identifies all natural and

juristic persons holding a financial interest

of five percent or more in the Applicant or in

entities which hold such an interest in

the Applicant:

As appears from the organisational charts

alongside, four Eastern Cape-based entities,

namely Zamori 356 (Pty) Ltd, Euroblitz CC,

Pholela Investment Pioneers (Pty) Ltd and

K2014046696 (Pty) Ltd, all of which are held as

to 100% by black residents of the Eastern Cape

Province will collectively directly hold 71% of the

total shareholding in the Applicant (excluding

the indirect shareholding held by black persons

in the Applicant through the listed entities which

make up the Group, as further described in

this document). The remaining shareholder in

the Applicant is its minority shareholder, Galaxy

Bingo International South Africa (Pty) Ltd,

holding 29% of the equity in the company.

Please refer to Section B: Detailed Proposal

for further information regarding the

Applicant’s local PDI shareholding partners.

M A GOLDING 7%* (1.04%)

SACTWU 28.75% (4.31%)

OTHER

64.25%* (9.63%)

M A GOLDING

8.08%* (2.34%)

HCI LTD

51.73% (15%)

J A COPELYN

5.66%* (1.64%)

OTHER

34.53%* (10%)

NIVEUS INVESTMENTS LTD 100%* (29%)

NIVEUS GAMING AND ENTERTAINMENT (PTY) LTD

100%* (29%)

ZAMORI 356 (PTY) LTD

33%* (33%)

EUROBLITZ CC

22%* (22%) GALAXY BINGO INTERNATIONAL

SOUTH AFRICA (PTY) LTD

29%* (29%)

K2014046696 (PTY) LTD

2%* (2%) PHOLELA INVESTMENT

POINEERS (PTY) LTD

14%* (14%)

EC GAMING UITENHAGE (PTY) LTD

Terms of Shareholding


Executive Summary

PROJECT TEAM 1.1.2.

Participation in Management

and Operations The local PDI shareholders in the Project will

receive their shareholding at no cost.

Funding for the project, covering the costs

of construction of the venue and set-up

costs for the business, will be provided in

full by Niveus, at no cost to the local PDI

shareholders.

As the funding provided by Niveus is in the

form of an interest-free loan, this will entail

a substantial cash saving to the Applicant’s

local PDI shareholders, which equates to

R1.5 million in respect of the first year of

operation, decreasing thereafter until the

loan has been repaid in full.

The Applicant’s local PDI shareholders

cannot lose their equity in the Applicant in

any manner, as they have no obligations

in respect of either funding or equity

repayments.

From a management control perspective,

the Applicant company will be served by

a Board of five initially elected Directors,

four (80%) of whom are PDI’s and 40% of

whom are PDI women, as illustrated in

the Table below:

PORTFOLIO EQUITY %

Clarence Mngadi (Chairperson of the Applicant)

Chairmanship, Shareholder Relations, and Strategic Review of the Business, with Local Eastern Cape Knowledge

33%

Santhalutchmee van Vuuren (Director of the Applicant)

HR, Training, and Skills Transfer 0%

Luthando Bara (Director of the Applicant)

Marketing and Tourism Promotion 22%

Notombobom Judith Jennings (Director of the Applicant)

Corporate Social Investment and Sports, Arts & Culture 14%

Christiaan du Toit (Director of the Applicant)

Site Development, Operations and Skills Transfer to Local PDI Directors

0%

NAME OF DIRECTOR

1.1.

Executive Summary


1.1.2. PROJECT TEAM

Participation in Management and Operations (Continued)

The local PDI shareholders will be closely

involved in the strategic management of

the Applicant enterprise from the outset,

as indicated in the Table on the previous

page, and as more fully described in the

Detailed Proposal.

From the outset, the local shareholders

will be entitled to 71% of the management

fees payable in terms of the management

contract, in direct proportion to the extent

of their shareholding in the Applicant.

The management fees are equal to 5% of

GGR, so that the local PDI shareholders

will cumulatively receive 3.55% of the GGR

generated by the Applicant’s business on a

monthly basis, with effect from the date of

commencement of the licensed operations.

The management agreement may be

terminated by the Applicant enterprise

(which will at all times be controlled by

its local PDI shareholders), after five

years of operation, enabling the local PDI

shareholders to take full responsibility for

the further management of the licensed

business, should they wish to do so.


There are no restrictions on the exercisable

voting rights of the local PDI shareholders.

After the initially elected directors named

previously have served their first term, all

directors will be elected by the majority

of the shareholders (therefore effectively

determined by the local PDI shareholders) at

each Annual General Meeting.

The Chairperson is appointed by the majority

of the shareholders in the Applicant.

The Chairperson has no casting vote in

addition to his deliberative vote.

DEVELOPMENT AND OPERATING EXPERIENCE

1.2.

Executive Summary

Development and Operating Experience

1.2.

DEVELOPMENT

AND OPERATING

EXPERIENCE

The Galaxy Group of Companies distinguishes

itself in the market by offering specialized

integrated gaming and restaurant facilities,

providing a distinctive and markedly superior

gaming and entertainment solution to the public.


1.2. Development and Operating Experience

Executive Summary

GALAXY BINGO

EAST RAND MALL

OPENED IN

BOKSBURG,

GAUTENG, IN

APRIL 2012


Galaxy Bingo International South Africa (Pty) Ltd, which

holds a direct interest of 29% in the Applicant, has extensive

experience in the swift and streamlined rollout of high

quality integrated bingo developments, as it has recently

demonstrated with pronounced success in the Eastern

Cape, with the completion and opening of the developments

operated by Galaxy Bingo East London and Galaxy Bingo

Port Elizabeth.

1.2.

Executive Summary

Development and Operating Experience



Executive Summary


The sheer extent of the Group’s experience

and capacity is highlighted by the fact

that, within a period of just 10 months,

the Group successfully developed

the following substantial, high quality

developments:

GALAXY BINGO PORT ELIZABETH (involving a capital expenditure of R13 million)

GALAXY GRILL THE BRIDGE, IN PORT ELIZABETH

(involving a capital expenditure of R6 million)

GALAXY BINGO EAST LONDON


GALAXY BINGO PAVILION


GALAXY BINGO BRITS


GALAXY BINGO GATEWAY


GALAXY GRILL, WONDERPARK, IN PRETORIA


Executive Summary

Development and Operating Experience 1.2.


Since the previous bingo application

process in the Eastern Cape, the Group’s

permanent staff complement has grown

from approximately 400 to approximately

1 000 persons, which is testimony to real

job creation.

Over 90% of these permanent staff

are PDI’s.

More than 230 of these permanent staff are

residents of the Eastern Cape Province.

The Group now boasts more than 1 000

years’ collective experience in the gaming,

entertainment and food and beverage

sectors, as well as an outstanding

compliance track record.

The recent rollout of the bingo developments

in the Eastern Cape provides compelling

testimony to the integrity and commitment of

the Group, in that the bid commitments were

not only met, but significantly exceeded, as

demonstrated by the Commencement of

Operations Reports furnished to the Board

in April 2014.


Executive Summary


OVER 90%

OF PERMANENT

STAFF ARE PDI’S

Highlights of the Group’s achievements

include the following:

Between 1998, when the Group rolled out

its first licensed site in Boksburg, and the

previous bidding process in the Eastern

Cape, the Group had ploughed a cumulative

investment of approximately R100 million

into six sizeable, high quality sites, ranging

from between 700m² and 2 400m².

Executive Summary


PROJECT TEAM

C G du Toit

C S Mngadi

M Duvenhage

S van Vuuren

P Reshalil

L Bara J N Jennings


Executive Summary

Development and Operating Experience 1.2

.

The Applicant’s core Project Team members boast the following impressive credentials:

As an integral part of the Galaxy Group, the Applicant will draw significantly on the pool of collective expertise described above.

If granted, the bingo licence will be held

by EC Gaming Uitenhage (Pty) Ltd, a

private company with Registration Number

2012/136900/07.


NAME EXPERTISE AND EXPERIENCE

Clarence Mngadi The Chairperson of the Applicant, Mr Mngadi is a highly experienced businessman

who brings a wealth of expertise to the Applicant enterprise. Since the previous

bingo application in the Eastern Cape, Mr Mngadi has successfully opened the

landmark Audi and Volkswagen Centre in East London. He also has gaming

experience and was instrumental in the successful opening of the Galaxy Bingo

sites in Port Elizabeth and East London.

Santhalutchmee van Vuuren Ms van Vuuren boasts 12 years’ gaming and food and beverage experience, and

has served as a Director in the gaming and entertainment industry for two years.

She is responsible for the full HR function in respect of the permanent staff of the

Group, which comprises approximately 1 000 persons, as well as managing all the

Galaxy Group’s CSI/SED projects.

Luthando Bara Mr Bara, who will serve the Applicant as its Director in the field of Marketing and

Tourism Promotion, has extensive marketing experience, in his former capacity as

the Marketing Director of the University of Fort Hare, as well as gaming experience,

as the owner-manager of restaurant and bar facilities licensed by the Board as LPM

sites in both Port Alfred and Grahamstown.

Notombobom Judith Jennings Ms Jennings possesses exceptional business acumen, and has established herself

as a successful franchise holder for Vodacom. She will serve the Applicant as its

Director in the fields of Corporate Social Investment and Sports, Arts and Culture.

Christiaan du Toit Mr du Toit is a Chartered Accountant and a Fellow Chartered Management

Accountant with 21 years’ working experience and is in his fifth year with Galaxy

Bingo. He was responsible for the introduction of the new business strategies,

high quality site selection criteria and innovative design concepts which effectively

transformed the Galaxy Group into a profitable, brand-leading business.

Mary-Anne Duvenhage Ms Duvenhage is a Chartered Accountant with almost ten years’ experience, and

boasts exceptional capabilities in the areas of gaming compliance and internal audit,

as well as operational skills.

Paramesh Reshalil Mr Reshalil brings considerable expertise to the Applicant from the perspective of

gaming compliance, having been previously employed as Compliance Manager at

the Boardwalk Casino and Entertainment World.

Executive Summary



SUMMARY OF PROJECT CONCEPT

1.3.

Executive Summary

Summary of Project Concept

1.3.

SUMMARY

OF PROJECT

CONCEPT

Site Location

The site for the proposed development is

located on Erf 25332, Uitenhage, situated at

42 Union Street, Uitenhage, with the following

GPS co-ordinates:

Latitude: -3.77622229

Longitude: 25.41661263

The Applicant’s site will be housed in a

substantial area totalling 1 200m², located in

Shop G001 of the prestigious new regional

shopping mall, Corkwood Square, to be

constructed in Union Street, on the outskirts

of Uitenhage. It is evident from existing

bingo developments in the Eastern Cape

that an area in excess of 1 000m² is required

to develop a meaningful integrated gaming

and entertainment business with 300 seats.

The site is 37 km from the nearest casino

(Boardwalk Casino) and 24 km from the

nearest licensed bingo venue (operated by

Ritz Gaming).


Executive Summary

Summary of Project Concept 1.3.

ARTIST IMPRESSION


Executive Summary


ARTIST IMPRESSION


The Applicant’s site –

− is already zoned Business 1, with place

of amusement rights;

− is located on an extremely busy four

lane road, in and out of Uitenhage;

− will have high visual prominence, being

located next to Union Street, upon

entering Uitenhage from Despatch and

Port Elizabeth;

− will be easily accessible from the large

parking area;

− is located on one of the last remaining

high quality pieces of land which is

available for development in

Uitenhage; and

− is ideal from the perspective of

promoting responsible gambling, in

that it will be part of a larger shopping

centre development which will attract

patrons commanding higher levels of

disposable income. The neighbouring

retail outlets will deal primarily in middle

and high-end merchandising. The

location of the venue therefore provides

the perfect balance between harnessing

the high volume of patrons making use

of the various facilities provided by the

mall, and limiting the potential for the

displacement of income earmarked for

day-to-day essential items.

Executive Summary


ARTIST IMPRESSION


1.3.

Executive Summary


ARTIST IMPRESSION


Project Concept

The proposed bingo development will –

be developed by the Applicant at a cost

of R15 million (excluding electronic bingo equipment and rentals);

be located on one of the last prime pieces of

land available for development in Uitenhage;

incorporate a ground floor area of 1 200m²,

housing –

− a bingo area spanning approximately 700m² with 300 seats, fitted with

finishes of the highest quality, which will

be of a standard directly comparable with the other up-market licensed bingo

venues operated by the Galaxy Group;

− a substantial full Grill House development of the highest quality,

offering a gourmet dining experience at

competitive prices, fitted with flat screen LED TV’s featuring sporting and similar

events;

− an up-market, sit-down bar area, fitted

with flat screen LED TV’s featuring

sporting and similar events;

− top class local entertainment acts; and

Executive Summary


Investment Quality of Development − a child-minding facility, manned by

child-minders, with provision for –

− a new-style Kiddies’ Cinema;

− various games, colouring-in projects

and crayons;

− state-of-the-art security, including

access control measures whereby photographs and fingerprints are

taken of parents or guardians, which are used at the time of collection

of the child, ensuring the complete

safety of patrons’ children; and

provide for a parking facility offering at least

1 000 parking bays for the use of patrons of

the development.

The Project concept is such as to maximise the

Applicant’s investment to the fullest, as –

it involves the construction of the

development from scratch on an open piece

of land;

it is not merely a shop-fitting exercise for an

existing site, but will be a substantial value-

added facility in its own right; and

vitally, it will be the first bingo venue in South

Africa ever to be developed from scratch, in

the process occasioning significant benefits to the community in the form of investment

and employment.

The Applicant places the highest premium

on maintaining its established reputation as

a sector participant whose developments are of the highest quality.

As such the development as a whole will be an

iconic addition to the immediate environment,

with clean lines and a modern, vibrant entertainment feel, while the Applicant’s site

itself will provide the people of Uitenhage and visitors to the area with a must-see, must-do

gaming and entertainment destination – the

first of its kind to be owned and controlled by Eastern Cape-based PDI’s.

The first ever

Galaxy bingo venue

in South Africa to

be developed

from scratch a must-see,

must-do

gaming and

entertainment

destination


1.3.

Executive Summary


Security

The venue will provide a state-of-the-art,

secure venue located in an up-market,

state-of-the-art mall, with a fully-fledged

surveillance system in compliance with the

requirements of the applicable legislation

and the RFP.

Access to the venue will be rigorously

controlled, with metal detectors installed at the

entrances. In addition, security will extend to the

parking area, which will be floodlit for ease of

observation. An alarm system and panic buttons

linked to an armed response service will further

enhance the safety of patrons and their property

in the venue.


Executive Summary


Development Schedule

The development schedule to be implemented by the Applicant makes provision for an opening date of 30 November 2015, as follows:

DATE PROJECT MILESTONE

24 October 2014 Notification of Preferred Bidder Status

25 October 2014 Commencement of Detailed Planning

1 December 2014 Award of licence

November 2014 – March 2016 Construction of greater shopping centre development

1 September 2015 – 30 November 2015 Shop-fitting, pre-opening procedures and inspections

30 November 2015 Opening of development


1.3.

Executive Summary


Impact on Surrounding Environment and Society

The Applicant’s development is set to have an overwhelmingly positive impact on the surrounding environment and society, by promoting the meaningful development –


100

300

new, permanent and sustainable employment opportunities

new jobs over the construction

period

of commercial undertaking in Uitenhage,

by establishing de novo a vibrant, high quality business offering;

of the geographical environment in which

the business is located, by enhancing its attractiveness and appeal;

of people, by providing for –

− 100 new, permanent and sustainable

employment opportunities, of which –

- 100% will be reserved for residents

of the Eastern Cape; - at least 95% will be allocated to

PDI’s; - at least 65% will be female;

- at senior management level, at least

50% will be female; - at the management and supervisory

level, more than 80% will be PDI’s;

- at least 50% will have been

previously unemployed, promoting new entrants into the labour market

and the economy of the Province; - three will be formal learnerships to

be implemented during the first year

of operation;

− 300 new jobs over the construction

period, of which more than 95% will be

allocated to local PDI workers;

− the contract for the construction of

the development to be allocated to

Transtruct (Pty) Ltd, a 51% local black- owned entity, with a Level 3 B-BBEE

Contributor Status, and/or entities with

similar B-BBEE credentials;

Executive Summary


CSI/SED

1.5% Of GGR

R200 000 Once-off initial project

Projected contribution

R20million


1.3.

Executive Summary


TOURISM

R300 000 Per year

+ SAC focused on tourism with


1,5% of GGR or 4% of NPBT

R4,5million (plus portion of SAC of

R20 million)


Executive Summary


71 %

local black equity

50 % at least

of the Applicant’s management and supervisory staff will be local black women

16 %

of the equity in the Applicant is directly held by local black women

of a 71% locally black-owned Eastern

Cape-based enterprise, in which 16%

(i.e. 23% of the 71% PDI shareholding) is held by local black women, by ensuring

that it is fully equipped to commence

operations as a licensed bingo operator in Uitenhage from custom developed

premises, with the benefit of all the equipment needed for its business;

of the economic empowerment of the

Applicant’s local PDI partners, through –

− 71% equity participation – at no cost –

and profit-sharing, in the Applicant, by

way of dividends, projected to total over

R226 million over the licence term;

− a 71% share of the management fees

payable in terms of the management

agreement from the outset, projected to

total over R46 million;

− in their capacity as the controlling

shareholders in the Applicant enterprise,

the ability to terminate the management

agreement, and in so doing to assume

full responsibility for the management of

the business, after five years; and

of women, in that –

− 16% of the equity in the Applicant is

directly held by local black women;

− over 19% of the equity in the Applicant

is held, directly and indirectly, by black

women;

− at least 65% of the Applicant’s staff will

be women;

− at least 50% of the Applicant’s

management and supervisory staff will

be local black women, as a means

of ensuring meaningful scope for

career progression by women in the

Applicant’s business;

− at least two of the Directors of the

Applicant will at all times be black

women;



Executive Summary


of the Applicant’s staff, in that –

− ongoing skills development will be

provided, as more fully described in the

Detailed Proposal;

− the Applicant will provide staff who have

been in its employ for three years or

longer with housing subsidies;

− on an annual basis, the Applicant will

invest a minimum of R120,000 on

specific skills development measures

for its black employees, including

by way of the provision of bursaries

for further study, training, books,

computers and/or similar resources,

depending on identified training and/or

skills development needs, equating to

a minimum amount of R1.8 million over

the term of the licence;

− the Applicant will make provision

for three formal learnerships to be

implemented during the first year of its

licensed operations, in accordance with

the requirements of the Codes of Good

Practice on B-BBEE;

the Applicant will

invest a minimum of

per year on specific skills

development measures

for its black employees

R120 000

Executive Summary



Executive Summary


of the community as a whole, in that –

− as an initial project, within 12 months of

the issue of the licence, the Applicant

will allocate R200,000 to corporate

social investment in the surrounding

community, which will focus on the

provision of toilets and similar necessary

facilities for nearby townships and

schools;



will allocate an additional R200,000 to

measures aimed at the promotion of

sports, arts, culture and tourism in the

surrounding area;

− the Applicant will contribute 1.5% of

the GGR generated by its licensed

operations inter alia to the CSI/SED

projects more fully described in the

Detailed Proposal;

− the Applicant’s spend on CSI/SED

initiatives during the first three years of

the licence term is projected at R2,5

million, enabling it to fund a substantial

number of already identified projects,

of which a significant portion will be

allocated to the provision and upgrading

of ablution and sewerage facilities in

local schools in the poorer communities;


initiatives over the full licence term is

projected at R20 million in absolute

value;



operations, or 4% of net profit before

tax, whichever is the greater, to

significant measures directly aimed at

the promotion of sports, arts, culture

and tourism in Uitenhage, including by

providing sustainable, ongoing funding,

which will keep alive and further develop

the iconic Uitenhage Street Carnival,

as more fully described in the Detailed

Proposal;

− the Applicant’s spend on Sports, Arts

and Culture initiatives over the full

licence term (which includes a focus on

tourism) is projected at R20 million in

absolute value;

− the Applicant’s spend on promotion

of tourism over the full licence term

is projected at R4.5 million in absolute

value;

additionally,

an initial spend of

to corporate social

investment

R200 000


1.3.

Executive Summary


SPORTS, ARTS &

CULTURE

Greater of

(WITH FOCUS ON TOURISM)

1.5% of GGR or 4% of NPBT

Once-off initial project

R200 000


R20 million


Executive Summary


BENEFITS

TO THE

COMMUNITY

CSI/SED

1.5% of GGR

R200,00 once-off initial project

Projected contribution:

R20 million

SPORTS, ARTS & CULTURE Greater of 1.5% of GGR or 4% of NPBT R200,00 once-off initial project Projected contribution: R20 million

TOURISM

R300,000 per year

+ SAC with focus on tourism

Job creation during the above projects, particularly in the context of the Uitenhage Street Carnival & CSI Projects

aimed at improving community facilities.


of SMME’s and suppliers, in that –

− the Applicant will apply its Preferential

Procurement Policy as a mechanism for

ensuring the involvement of SMME’s in

both the construction and operational

phases of the Project;

− PDI suppliers will be paid within seven

days of invoicing;

− in the context of operations and

procurement, the Applicant will embark

on enterprise development initiatives

to establish SMME’s with a view to

procuring goods and services from such

SMME’s;

− the Galaxy Group has already

developed a database of Eastern Cape-

based suppliers which it will invite to

supply quotations for participation in

the Project at various levels, all of which

have attained B-BBEE Contributor

Status of between Level 1 and Level 3;

− the Applicant will embark upon a

Supplier Development Project aimed

at assisting black-owned businesses

(predominantly SMME’s) to develop, so

that they are able to become suppliers

to the Applicant enterprise; and

of the well-being of the Province, through

the adoption of strategies and measures

designed to ensure that gambling is

conducted in a socially responsible

manner.

PROJECT VIABILITY AND FINANCIAL RETURNS

Executive Summary

Project Viability and Financial Returns 1.4.

1.4.

PROJECT

VIABILITY AND

FINANCIAL RETURNS

The PDI shareholders in the Applicant will

acquire their equity in the Applicant at no cost.

In addition, no security will be required of the

PDI shareholders in respect of the funding to be

provided by Niveus.

Therefore, the Project entails no risk to the local PDI shareholders, freeing them up to focus on the skills transfer and management development measures which are a hallmark of the Applicant’s bid.

Sourcing, Nature and Level of Financing and Ability to meet Financial Obligations

Niveus –

will be the source of all funding for the Project, which will be in the form of an interest-free loan;

is a large listed company with access to substantial cash resources of over R259 million as at 31 March 2013;

has a market capitalisation in excess of R2,5 billion and strong liquidity ratios;

has undertaken to fund all capital requirements of the Applicant by means of interest-free funding up to an amount of R17 million (plus a 10% tolerance level for additional expenditure) on the following terms: − the loan is repayable out of profits of the

Applicant;

− management fees will be paid to the

shareholders from available profits

before loan repayments may be made;

− the loan is interest-free;

− the Applicant will not be required to

provide security for the funding;


1.4.

Executive Summary

Project Viability and Financial Returns

FUNDING HISTORY OF NIVEUS FOR EASTERN CAPE BINGO PROJECTS


− the loan will be repayable over five years

from the commencement of operations

and repayments will be limited to

available cash out of operations at the

end of each month;

− no dividends will be declared until the

loan is repaid;

is a subsidiary of HCI Ltd (with a market

capitalisation of R17.5 billion), which has

furthermore agreed to supply the funding

in respect of the Project in the unlikely

event that this should become necessary,

further demonstrating the financial strength

underpinning the Applicant’s bid; and

has already demonstrated, through its

involvement in the projects recently rolled

out by Galaxy Bingo East London and

Galaxy Bingo Port Elizabeth that it not

only honours its funding obligations, but is

prepared to allocate additional resources

where expenses have proven to be in

excess of the applicable bid commitments.

1.4.

Executive Summary


THE APPLICANT WILL

TIMEOUSLY PROVIDE THE

GUARANTEE DOCUMENTATION

AS PER APPENDICES J AND K

TO THE RFP, IN THE MANNER

AND FORMAT STIPULATED IN

THE RFP.

The financial projections, as set forth in

Appendices C and D to the application,

confirm that the project will deliver

exceptional returns over a 15-year period.

The estimated financial returns flowing from

the Project over the projected term of 15

years, may be summarised as follows:

As is apparent from the graph on the right,

the Project is projected to deliver a healthy

return, in terms of cash flow, throughout the

licence period.

The positive indicators regarding the general

liquidity of the proposed operation in turn

yield the following projections in respect of

net profit after tax:

CASH FLOW BEFORE DIVIDENDS

PROFIT AFTER TAX


THE APPLICANT WILL

ALSO MAKE A SIGNIFICANT

CONTRIBUTION TO BOTH

THE PROVINCIAL AND THE

NATIONAL FISCUS OVER THE

TERM OF THE LICENCE,

AS DEMONSTRATED BELOW:

1.4.

Executive Summary



Total Provincial Accruals Over the 15-Year Licence Term

PROVINCIAL RETURNS

RETURNS TO NATIONAL GOVERNMENT

R142,026,000

Gaming levy @ 10% of GGR R131,414,000

Licence & Application Fees R10,612,000

Total Accruals for the National Government Over the 15-Year Licence Term R219,987,000

VAT * R84,772,000

Company Income Tax R124,132,000

PAYE R7,731,000

Municipal Tax R3,352,000

* VAT output projected to be paid by the lessor of wholly electronic bingo equipment represents an additional R43 million to the fiscus over the 15-year licence

period (less input VAT for acquisition of equipment).

Executive Summary

Project Viability and Financial Returns 1.4.

Market Demand Assumptions

The estimates in respect of GGR in the financial

projections were based on the following key market

demand assumptions:


The base-level targets of GGR for the first

year of operation of bingo venues in the

Eastern Cape are realistic and based on the

established earnings of comparable licensed

venues operated by the Group in the

Eastern Cape and other provinces, taking

into consideration historical GGR and the

average growth per annum.

The Applicant’s bingo operation –

− will provide an accessible service to

approximately 303 000 people, of whom

206 600 are eligible gamblers;

− needs to capture approximately 0.65%

of the disposable income generated

by the relevant market to achieve its

projections; and

− there is sufficient potential in the market

to justify the establishment of a 300-

seat (Category A) bingo outlet.

The estimated annual average increase in

gambling spend and GGR is set at 25%

for Year 2, 17,5% for Year 3, 10% for Year

4 and thereafter at a relatively conservative

rate of 6% per annum from Year 5 to 15 of

the model.

BENEFITS TO THE ECONOMY

Benefits to the Economy 1.5.

1.5.

BENEFITS TO

THE ECONOMY

Over and above the direct financial benefits

accruing to the various stakeholders, the project

seeks to deliver a diverse range of sustained

benefits to the economy of the Eastern Cape

Province and its people throughout the duration

of the licence, including by promoting the

development -

of commercial undertaking in Uitenhage,

by establishing de novo a vibrant, high

quality business offering;

of the geographical environment in which

the business is located, by enhancing its

attractiveness and appeal, with provision

for a further R5 million to be expended

on the improvement and modernisation

(as opposed to the ongoing or routine

maintenance) of the Applicant’s licensed

bingo venue between years 8 and 15 of

the licence term;


1.5.

Executive Summary

Benefits to the Economy

new, direct, permanent and ustainable employment opportunities

100 at least

95 %

PDI STAFF


people, by providing for –

− 100 new, direct, permanent and

sustainable employment opportunities,

of which –

− 100% will be reserved for residents

of the Eastern Cape;

− at least 95% will be allocated to

PDI’s;

− at least 65% will be female;

− at senior management level, at least

50% will be female;

− at the management and supervisory

level, more than 80% will be PDI’s;

− at least 50% will have been

previously unemployed, promoting

new entrants into the labour market

and the economy of the Province;

− three will be formal learnerships to

be implemented during the first year

of operation;

locally black-owned Eastern Cape-based enterprise

71 %

19 %

of the equity in the Applicant is held, directly and indirectly, by black women

Executive Summary



300 new jobs over the construction

period, of which more than 95% will be

allocated to local PDI workers;

the contract for the construction of

the development to be allocated to

Transtruct (Pty) Ltd, a 51% local black-

owned entity, with a Level 3 B-BBEE

Contributor Status, and/or entities with

similar B-BBEE credentials;

a 71% locally black-owned Eastern

Cape-based enterprise, in which 16%

(i.e. 23% of the local PDI shareholding) is

held by local black women, by ensuring

that it is fully equipped to commence

operations as a licensed bingo operator

in Uitenhage from custom developed

premises, with the benefit of all the

equipment needed for its business;

women, in that –

− 16% of the equity in the Applicant is

held by local black women;

− over 19% of the equity in the Applicant

is held, directly and indirectly, by black

women;

− at least 65% of the Applicant’s staff will

be women;

− at least 50% of the Applicant’s

management and supervisory staff will

be local black women, as a means of

ensuring meaningful scope for career

progression by women in the Applicant’s

business;

− at least two of the Directors of the

Applicant will at all times be black

women;

over

1.5.

Executive Summary


16

19 of the equity in the Applicant is held by local black women

%

300 new jobs over the construction period

at least

TWO of the Directors of the Applicant will at all times be black women

the Applicant’s staff, in that –

− ongoing skills development will be

provided, as more fully set forth in the

Detailed Proposal;

− the Applicant will provide staff who have

been in its employ for three years or

longer with housing subsidies;

− on an annual basis, the Applicant will

invest a minimum of R120,000 on

specific skills development measures

for its black employees, equating to a

minimum amount of R1,8 million over the

term of the licence;

− the Applicant will make provision

for three formal learnerships to be

implemented during the fi rst year of its

licensed operations; R120 000

invest a minimum of

per year on specific skills development measures for its black employees


1.5 the Applicant will contribute

%

Executive Summary


of the GGR generated by its licensed operations to the CSI/SED projects

at least

of the Applicant’s staff will be women

the Applicant’s spend on CSI/ SED initiatives over the full licence term is projected at

in absolute value

million R20


the community as a whole, in that –



will allocate R200,000 to CSI/SED

projects in the surrounding community,

which will focus on the provision of

toilets and similar necessary facilities for

nearby townships and schools;



will allocate an additional R200,000

to measures aimed at the promotion

of sports, arts, culture and tourism in

the surrounding area, as more fully

described in the Detailed Proposal;



operations to the CSI/SED projects

more fully described in the Detailed

Proposal;

65 %

1.5.

Executive Summary


projected spend

on promoting of tourism (+ portion of SAC)



initiatives during the first three years of

the licence term is projected at R2,5

million, enabling it to fund a substantial

number of already identified projects,

of which a significant portion will be

allocated to the provision and upgrading

of ablution and sewerage facilities in

local schools in the poorer communities;


initiatives over the full licence term is

projected at R20 million in absolute

value;



operations, or 4% of net profit before

tax, whichever is the greater, to

significant measures directly aimed at

the promotion of sports, arts, culture

and tourism in Uitenhage, including by

providing sustainable, ongoing funding,

which will keep alive and further develop

the iconic Uitenhage Street Carnival,

as more fully described in the Detailed

Proposal;

− the Applicant’s spend on Sports,

Arts and Culture initiatives (which will

include a significant tourism promotion

component) over the full licence term

is projected at R20 million in absolute

value; and

− the Applicant’s spend on the promotion

of tourism over the full licence term is

projected at R4.5 million in absolute

value;

R4.5 mil


Executive Summary


SMME’s and suppliers, in that –

− the Applicant will apply its Preferential

Procurement Policy as a mechanism for

ensuring the involvement of SMME’s in

both the construction and operational

phases of the Project, subject to the

availability of goods and services, price

and quality;

− PDI suppliers will be paid within seven

days of invoicing;

− in the context of operations and

procurement, the Applicant will embark

on enterprise development initiatives

to establish SMME’s with a view to

procuring goods and services from such

SMME’s;

− the Galaxy Group has already

developed a database of Eastern Cape-

based suppliers which it will invite to

supply quotations for participation in

the Project at various levels, all of which

have attained B-BBEE Contributor

Status of between Level 1 and Level 3;

− the Applicant will embark upon a

Supplier Development Project aimed

at assisting black-owned businesses

(predominantly SMME’s) to develop, so

that they are able to become suppliers

to the Applicant enterprise; and

of the well-being of the Province, through

the adoption of strategies and measures

designed to ensure that gambling is

conducted in a socially responsible manner.

1.5.

Executive Summary


The Applicant has its registered offices located at the following address in the Province

Moffett on Main Lifestyle Centre, Shop M1-8 Corner of Main Road and 17th Avenue Walmer Port Elizabeth, 6070

A current Tax Clearance Certificate in

respect of the Applicant is attached under

cover of Annexure A4 to this Proposal.

Please refer to Part 2: Detailed Proposal

for a comprehensive overview of the Applicant’s

strategy to establish in Uitenhage a vibrant

licensed bingo venue conforming to the highest

standards of operational excellence and social

responsibility, which will not only provide the

area with a quality, fully integrated entertainment

offering, but which will add real and lasting value

to the community within which it operates.


galaxy design sample Ӏ worker ant

Design

lead applicant

project team executive

financial aspects

project team development

galaxy bingo executive

galaxy bingo uitenhage

financial viability

development aspects