presentation third quarter performance report: 1

PRESENTATION THIRD QUARTER

PERFORMANCE REPORT:

1 October – 31 December 2014

PORTFOLIO COMMITTEE ON TRADE & INDUSTRY

13 March 2015

Cape Town

Presenters:

Ms Caroline Kongwa and Tumelo Baleni

(Accounting Authority)

CONTENT

1) Executive summary

2) Performance against business plan

3) Progress on actions in the risk register

4) Report against post audit implementation plan

5) Financial report

6) PFMA and Treasury regulation compliance checklist/ calendar

7) Conclusion

2

EXECUTIVE SUMMARY

3

• Prosecution of online gambling continues to prove to be a key challenge of the

NGB.

• Engaged with the National Lotteries Board on sports pool betting and reached

agreement on resolution of the matter.

• The illegal operator’s module concept document and the national registry concept

document has been developed.

• The NGB gathered national gambling statistics and information about the

performance of the South African legalised gambling industry from all Provincial

Licensing Authorities

EXECUTIVE SUMMARY cont....

4

• The number of operational gambling positions in the Casino industry increased by 4.7% from

FY14 to FY15 (Quarter 2) mainly as a result of the increased number of operational gambling

positions in Gauteng, Western Cape, KwaZulu-Natal and Eastern Cape.

• The number of active LPMs increased by only 4.1% from FY14 to FY15 (Quarter 2) , the highest

number of site operators and active LPMs are still located in KwaZulu-Natal, followed by Gauteng

and Western Cape.

• Bingo showed a decrease of 0.6% in generated GGR as noticed from FY15 (Quarter 2) , despite

the constant increase in the number of operational bingo positions from FY13 to 30 September

2015. The reason for the decrease during the second quarter (FY15) is unclear as yet. Growth in

this sector is expected due to the recent roll-out of traditional bingo positions in KwaZulu-Natal.

• GGR increased by 13.6% from R18 417 million in FY12, to R20 914 million in FY13 and by 4.3%

to R 21 802 668 831 in FY14. A total amount of R11 718 398 248 in GGR was generated during

quarter 1 and 2, FY15. A slightly lower increase of 1.9% in GGR generated was noticed from the

first quarter, FY15 to the second quarter, FY15. During FY15, as at 30 September 2014, casinos

accounted for the highest GGR being 71.6% as compared to other gambling modes. Compared to

all other provinces, Gauteng at a 43.2% share, accounted for the highest amount of GGR. The

GGR per gambling mode and province is reflected in Graphs 1 & 2 below.


• Casino sector continues to

dominate other gambling modes

or sectors in terms money

wagered, GGR generated and

taxes/levies collected.

• The racing and betting sector

accounts for the highest

increase in GGR relative to all

other modes as an increase of

14.7%. Increases have been

noticed in the bookmaker and

totalisator industry, relative to

betting on sport and horse

racing.

• The LPM sector showed an

increase of 8.7 % in generated

GGR.

• The bingo sector reflected a

decrease of 0.6% in generated

GGR.

R 8 389 906 695 71.6%

R 1 724 695 210 14.7%

R 588 668 239 5.0%

R 1 015 128 103 8.7%

Casinos Betting Bingo LPM

GGR per gambling mode, all provinces, FY15, Quarters 1 & 2

5


• Gauteng accounts for the highest

amount of GGR generated

,followed by KwaZulu-Natal , and

Western Cape.

• Gauteng still accounts for the

highest number of Casinos and

operational gambling positions,

followed by Western Cape and

KwaZulu-Natal.

• The highest number of licensed

bookmaker outlets are still

situated in the Western Cape,

whereas Gauteng accounts for the

most operational bookmakers and

totalisator outlets.

• The highest number of site

operators and active LPMs are still

located in KwaZulu-Natal, followed

by Gauteng and Western Cape.

• Growth in the bingo sector is

expected due to the recent roll-out

of traditional bingo positions in

KwaZulu-Natal.

GGR per province, all modes, FY15, Quarters 1 & 2

R 5 063 206 141 43.2%

R 1 839 980 446 15.7%

R 2 131 512 958 18.2%

R 523 052 329 4.5%

R 346 941 306 3.0%

R 630 450 076 5.4%

R 110 319 319 0.9%

R 817 251 743 7.0% R 255 683 929

2.2%

Gauteng Western Cape KZN Mpumalanga Limpopo

North West Northern Cape Eastern Cape Free State 6


Key challenges

• Continued proliferation of unlicensed

internet cafes offering illegal server

based gambling remains a massive

problem.

• Collection of illegal gambling statistics

from the PLA’s remains a challenge

as the information is not timeously

updated.

• Vacant posts continue to create a

vacuum in the effective operation of

the NGB.

Proposed action

• Self-funding model for adequate

financial resources.

• Capacitating the organisation in

critical areas, prevention and to

ensure detection of illegal gambling

as well as enforcement.

• Fast tracking of legislative reform to

further empower all licensing and

oversight bodies.

• Recruitment of multi-skilled

professional staff. 7

PROGRESS AGAINST BUSINESS PLAN

QUARTERLY MILESTONES

8

Performance Indicator Annual Target 3rd Quarter Milestones Actual Achievement

SOOG 1: Enhance Liaison and Statutory Advisory Services

Reviewed communication

strategy and plan presented and

approved by the Board

Communication strategy and

plan reviewed and presented to

board for approval

MANCO Workshop on

inputs Strategy & Plan

Achieved

Stakeholder management

strategy and plan (framework)

presented and approved by the Board

Approval of stakeholder

management strategy and plan

(framework) by the Board

MANCO Workshop on

inputs Strategy & Plan

Achieved

Advisory reports presented

to the Board

Annual advisory

report presented to

the Board

Submit report for

tabling S65 to NGPC

through Minister

(Policy & Legislative

Unit)

Partially Achieved

NGPC did not meet during

Q3 however will be sitting

in March 2015


QUARTERLY MILESTONES (CONT…)

9


SOOG 1: Enhance Liaison and Statutory Advisory Services (continued)

Conduct Research on

impact of gambling and

present the report to the

Board

Research on the

impact of gambling

conducted and a report

presented to the Board

Submission of draft report

and feedback to the service

provider

Not achieved

Another project i.e. research

to monitor the prevalence of

gambling and problem

gambling was approved

Audited gambling sector

performance report

Annual audited

gambling sector performance

report

Gambling sector

performance report and

presentation (FY15, 3rd

quarter)

Achieved



10


SOOG 2: Optimise Organisational Excellence

Unqualified Audit Report

with no findings

Unqualified audit report

with no findings

Submit monthly and quarterly

management accounts to the

dti.

Implementation of budget

process plan

Achieved

Report on the

implementation of the

human capital strategy and

plan

Report on the

implementation of the

human capital plan

Presentation of the plan to

HC&REMCO for approval

Not achieved

A draft plan has been prepared.

This will be presented to the

Accounting Authority for

approval

Percentage up-time on

Information Technology

Services(ITS)

Maintain the up-time on

all ITS at 97% or

above

Submit to the CFO a report

on the maintenance of the

servers

Achieved



11


SOOG 3: Compliance

Nine Consolidated

three tier

compliance

evaluation

assessment

reports

Nine consolidated reports

on the evaluation of the

issuance of national

licenses, compliance

monitoring of licensees

and performance of

PLAs

Self evaluation on

issuance of licenses by

five(5) provinces

Partially achieved

Free State on-site evaluation completed, remainder

escalated to NGPC. Await the next NGPC meeting to

take place.

Report on

intervention and

support provided to

regulators, law

enforcement

agencies

Report on intervention

and support provided to

regulators, law

enforcement agencies

Providing support to

regulators, law

enforcement agencies during the

quarter if requested

Achieved

An update meeting with the SAPS and certain

provincial regulators was held, with regard to the

proliferation of unlicensed internet cafes offering

illegal server based gambling. No requests for

assistance from provinces were received

Appointment of the

new NCEMS

operator

New NCEMS operator, to

manage the transition to

new NCEMS appointed

Managing of the

CEMS and the

relationship with the

licensed CEMS

operator

Achieved

Participation in the NCEMS Operational Change

Committee meeting.



12


SOOG 4: Functional Registry

Illegal Gambling

Operator register

development and roll out

plan

An illegal gambling

operator’s module

developed

Present the national registry

concept document and get

approval from the Board.

Achieved

Completed and submitted the

illegal gambling operators

module concept document for

approval

PROGRESS ON ACTIONS IN THE RISK REGISTER

13

Risk name Risk control Residual risk Action

Mis-alignment between

National and Provincial

legislation.

Establish Forum (NGB and

PGB's) work team of legal

managers that will be

working closely with the

dti policy unit.

Each Province continues to

implement its own laws that are

inconsistent with the National

Law and other provincial laws.

The Minister is reviewing the policy and

legislation and the NGB has prepared

written advice, a framework on concurrent

gambling legislation, communication and

stakeholder strategies and plans.

Failure by NGB to

deliver on deliverables

dependant on the dti.

Improve relations with the

dti.

Unauthorised destructive

interaction/communication

between staff/officials from both

sides.

Participating in shareholder forums (COTII,

CEO, CFO, Stakeholder and Compliance).

the dti communication

and interrelationship

with the NGB is limited.

Participation in the COTII

forum, National Gambling

Policy Council, scheduled

meetings on operational,

strategic and financial

matters. Communication

/stakeholder management

strategy formulated.

There are no common

mechanisms to address the

communication challenge;

however the NGB has draft

communication strategy and plan

in place which is not yet

implemented.

Increased interaction with the dti. Meeting

with CFO of the dti to discuss NGB’s

revised budget.

Absence of approved

additional uniform

norms and standards.

Formalised and approved

norms and standards

document in place.

Inadequate involvement of the

NGB in making inputs in terms of

the National Gambling Act

evaluating submissions from the

public.

The NGB has made written input regarding

the revised norms and standards.

Involvement in the co-development of the

norms and standards.


(CONT…)

14


The NGB may produce

unreliable/inaccurate

statistics and/or

information due to PLAs

not providing information

that is reliable.

Requesting audited information from

Provincial Licensing Authorities (PLAs)

which has been checked for integrity.

Non co-operation on

the part of the PLAs.

Insisting on audited information that

was checked for integrity, building

relationships with the PGB's. Escalate

the challenge to the provincial head of

the department and chairperson of the

Board.

Outdated ICT hardware

(servers).

Perform a needs analysis to determine

acceptable requirements necessary to

update the ICT Infrastructure.

Master plan not yet

approved, the risk

continues.

A needs analysis was conducted.

Procurement process was followed to

procure the necessary server hardware

and software.

Inadequate physical and

information security.

Ensure that the IT Framework/Policy

and Procedures are updated and

enforced.

Risk continues while

awaiting approval of

plans.

ICT Policies submitted to ARC on 28

October 2014 for recommendation for

approval by Co-administrators. All

changes requested will be re-tabled to

ARC on 30 January 2015. In addition

the NGB is currently awaiting feedback

from the dti on these policies.

NGB is re-active rather

than pro-active.

Formal Research and Development

strategy and plan ensures that research

is conducted to gain an understanding

of the environment.

Risk continues while

lack of resources to

improve the NGB

continues.

Allocate appropriate funding for

research, development and training.


(CONT…)

15


Insufficient resources to

fully execute the NGB

mandate.

Strategic plan that is in line with

RHLF's mandate, Scope,

Objectives and Goals.

Risk continues waiting

repositioning.

Engage the dti for adequate funding

and submitted a revised MTEF

request.

Low staff morale and

inadequate

performance.

Formal HR Policies and

Procedures relating to

performance.

Policies in HR needs

rationalisation with all laws, risk

continues while that process is

being considered.

Ensure that detailed HR Policies and

Procedures are in place that is

related to skills and performance.

Occurrence of fraud and

theft.

Fraud Hotline monitored and calls

logged daily with a register kept up

to date on cases followed through

on. Report submitted and

discussed at every ARC Meeting.

Risk continues while staff is

being orientated on the Anti-

fraud policy.

All Tip Offs should be logged and

progress on them should be

monitored and noted.

Lack of decisive action discourages

the whistle blowers.

Lack of documentation

and information

management.

Strategic plan that is in line with

RHLF's mandate, Scope,

Objectives and Goals.

N/A Currently implementing the file plan

as part of the document

management strategy and policy.

Employment equity

targets not met.

Formal HR Policies and

Procedures.

Risk of violation of Equity

legislation while awaiting HR

policies and Procedures to be

approved.

Ensure that detailed HR Policies and

Procedures are in place that are

reviewed and updated.

Report against post audit implementation plan

16

StatusAnnual Financial

Statements

Performance

Information

Procurement

and Contract

Management

Financial

ControlsHR Matters

Annual Financial

Statement

Matters

Information

Communication

Technology

Total NumberTotal

Percentage

Complete 0 0 14 7 3 20 9 53 55%

In Progress 6 1 8 3 3 4 10 35 36%

Not Started 1 1 0 0 6 1 0 9 9%

Total 7 2 22 10 12 25 19 97 100%

REVENUE AND EXPENDITURE VERSUS BUDGET (R’000)

17

NATIONAL GAMBLING BOARDStatement of Financial PerformanceFor the month ended December 31, 2014

2014/15

Revised

Approved

Budget Budget Actual Variance % Variance Budget Actual Variance % Variance Rand Percentage

Revenue

Transfers from Government Dept 29 797 000 0 0 0 0% 29 797 000 29 797 000 0 0% 0 29 797 000 0

Other Income A 2 466 679 197 307 198 515 1 208 1 874 758 2 112 110 237 352 13% 354 569 14% 2 702 830 -236 151

Total Revenue 32 263 679 197 307 198 515 1 208 1% 31 671 758 31 909 110 237 352 1% 354 569 1% 32 499 830 -236 151

Expenses

Personnel Costs B 14 582 705 1 172 007 1 113 331 58 676 5% 9 391 404 8 592 819 798 585 9% 5 989 886 41% 12 828 295 1 754 410

Travelling & Subsistence C 847 466 68 495 19 310 49 185 72% 641 981 507 269 134 712 21% 340 197 40% 761 939 85 527

Administrative Expenses D 7 629 883 647 438 621 244 26 194 4% 5 765 582 5 996 757 -231 175 -4% 1 633 126 21% 7 972 301 -342 418

Professional and Consulting Fees E 6 878 980 293 904 374 836 -80 932 -28% 5 559 774 3 407 038 2 152 736 39% 3 471 942 50% 6 445 290 433 690

Board Members' Remuneration 430 920 0 0 0 0% 430 920 430 920 0 0% 0 0% 430 920 0

Depreciaton F 2 111 304 175 942 163 742 12 200 7% 1 583 478 1 522 300 61 178 4% 589 004 28% 2 062 326 48 978

Other Operating Expenses G 841 203 58 309 33 507 24 802 43% 683 076 605 863 77 213 11% 235 340 28% 938 792 -97 589

Total Expenses 33 322 461 2 416 095 2 325 970 90 125 4% 24 056 215 21 062 967 2 993 248 12% 12 259 494 37% 31 439 863 1 882 598

(Deficit)/Surplus from Operations -1 058 782 -2 218 788 -2 127 455 -88 917 7 615 543 10 846 143 -2 755 896 -11 904 925 1 059 967 -2 118 749

Variance

No.

Current Month Year-to-date Available Budget Year-end

Forecast

Variance btwn

Budget &

Forecast

REVENUE AND EXPENDITURE VERSUS

BUDGET (R’000) (cont.)

18

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000Expenditure Q1 to Q4

Actual for theQuarter 1 YTD



Projected Quarter4 YTD

0

5000

10000

15000

20000

25000

30000

35000

The dti grant Other Income

Revenue Q1 to Q4

AnnualBudget

Actual forthe Quarter1 YTDActual forthe Quarter2 YTD

COMPLIANCE CALENDAR FOR THE FIRST QUARTER: 1 JULY 2014 – 30 SEPTEMBER 2014

19

Date Section of the

regulation/ act Action needed Done: Yes/No

31 October

2014 Shareholder’s

requirement

Submit monthly expenditure and income statements with projections

for the remaining months, explanations for material variances as well

as possible remedies to be applied to ensure that expenditure and

income are in line with the approved budget

Yes

31 October

2014 TR 26.1.1, 26.1.2,

29.1.3, 29.3.1,

30.2.1 & 30.4.2

Submission of the second quarterly report signed by the Accounting

Authority to the Minister via Public Entity Oversight (PEO). The

report should be aligned to the Annual Performance Plan (APP) and

Business Plan.

Yes

31 October

2014 Framework for

Strategic Plans and

Annual Performance

Plans

Shareholder’s

requirement

3A public entities submit second draft of the Annual Performance

Plans to the Minister via the PEO

Yes

31 October


requirement

Commissioners, Executive Chairperson and Chief Executive Officers

reporting directly to the Executive Authority submit bi-annual

performance review

Yes


20

Date Section of the


10 November


requirement

Commissioners, Executive Chairperson and Chief

Executive Officers reporting directly to the Executive

Authority meet with Executive Authority to discuss bi-

annual performance

Yes

To be confirmed Shareholder’s

requirement

Chief Financial Officers (CFO’s) convene with the

Shareholder for a CFO’s Forum to discuss key

financial issues

No


requirement

Board Secretaries convene with the Shareholder for

Board Secretaries Forum to discuss key corporate

governance issues

No


requirement

Cluster Forums convene with the shareholder to

discuss matters relevant to the cluster

Yes


21

Date Section of the


To be

confirmed Shareholder’s

requirement

Submit first draft shareholder’s compact with Accounting

Authorities’ comments

Yes

28 November


requirement

Submit monthly expenditure and income statements with

projections for the remaining months, explanations for material

variances as well as possible remedies to be applied to ensure

that expenditure and income are in line with the approved

budget

Yes

19 December

2014

Shareholder’s

requirement

Submit monthly expenditure and income statements with

projections for the remaining months, explanations for material

variances as well as possible remedies to be applied to ensure

that expenditure and income are in line with the approved

budget

Yes

15 December

2014

Shareholder’s

requirement

Submit five (5) PowerPoint presentation to the Executive

Authority on specified topics in preparation for the one-on-one

meetings

Yes

CONCLUSION

22

• 69% of the annual performance targets were achieved.

• The financial position of the entity has been stabilised and a surplus is projected for the end of the

financial year. The year to date variance is at approximately 12%.

• The NGB continues to monitor the market conduct and market share: • A slightly lower percentage increase of 1.9% in GGR of R11 718 million generated was noticed in FY15 (Quarter 2). GGR in

the gambling sector increased by 4.3% to R 21 803 million in FY14 . • A total amount of R 154 262 billion was wagered (turnover) in FY15 (Quarter 2). • Direct employment in the gambling sector has been monitored annually. Based on the information submitted by PLAs

direct employment per province and mode for FY14 as per figures received from PLA’s is 19 475 permanent and temporary employment.

• Based on the information submitted by PLAs, the average BBBEE status or level of the South African gambling industry as at 31 March 2014 per gambling mode and operator, was as follows:

• Average BBBEE level for casino operators: 2 – 3.

• Average BBBEE level for totalisators: Level 2 – 6.

• Average BBBEE level for LPM operators: Level 2 – 4.

• Average BBBEE level for bingo operators: Level 1 - 5 (currently only operational in Gauteng, Mpumalanga, North West and Eastern Cape).

ACRONYMS

23

Act : National Gambling Act, 2004 (Act No 7 of 2004)

ARC : Audit and Risk Committee

COTII : Council of Trade and Industry Institutions

DOC : Department of Communications

DPCI : Directorate for Priority Crime Investigation

GRC : Gambling Review Commission

MTEF : Medium Term Expenditure Framework

NCEMS : National Central Electronic Monitoring System

NGPC : National Gambling Policy Council

NLB : National Lotteries Board

NPA : National Prosecution Authority

PLA : Provincial Licensing Authority

PPP : Public Private Partnership

RFP : Request for Proposals

SAPS : South African Police Service

SCM : Supply Chain Management

24

Thank you

420 Witch-Hazel Avenue

Eco-Glades 2, Block C,Eco Park, Centurion

Telephone: 0100033475

Facsimile: 0866467150

[email protected]

presentation third quarter performance report: 1

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