Close

Not a member yet? Register now and get started.

lock and key

Sign in to your account.

Account Login

Forgot your password?

AN INDUSTRY IN TRANSFORMATION

AN OPERATOR’S PERSPECTIVE “I was working in this industry everyday before it was even born”, says Tsogo Sun Gaming MD and Casino Association of SA (casa) chairman Jabulane Mabuza, who has an intimate knowledge of the casino industry, particularly with regard to black economic empowerment (BEE), legislation and ownership. The reason that Mabuza can make that boast is that he was employed by SA Breweries (SAB) at the time that the casino industry was being legitimised, and SAB owned 100% of Southern Sun and had a 20% stake in Sun International, operator of all 17 casinos in the former homelands. Southern Sun was eager to move into the casino industry and Mabuza was responsible for bringing the BEE partnership component together. He also played a role in devising the casino industry operating framework, negotiating with the National Gambling Board and the provincial boards. Sun International CE Peter Bacon has been involved in the SA industry for 30 years and his group stood to lose the most with the new regulations, having to reduce its casinos from 17 to seven. “When one looks at the investment, the cross-subsidisation of tourism infrastructure, job creation, the generation of tax income for the Treasury and a provincial level, I think the policy objectives set by government have been achieved,: he says. “Overall, when I compare what has happened in SA with what has happened in other jurisdictions, It think its been positive and, by and large, problem free,” says Bacon. As to how BEE in the industry has progressed, Bacon says: “Government’s objective was that previously disadvantaged individuals were included at ownership level and I think that has been done successfully with real value creation.” With regard to the BEE in Tsogo Sun group, Mabuza says Tsogo Sun Holdings is 51%-owned by Tsogo Investments, a consortium comprising the African Federated Chamber of Commerce & Industry (25%); Foundation for African Business & Consumer Services (38%); the Clothing & Textile Worker’s Union, through Hosken Consolidated Investments, (25%); and Africa Renaissance Investments (9%). SA Breweries owns the remaining 49% of Tsogo Sun. Tsogo owns five of the 32 casinos operating in SA. Asked about Tsogo’s influence and commitment to providing business for black-run companies, Mabuza says a large chunk of his company’s expenditure is nondiscretionary, but contracts worth R5m/year or more for services such as security or cleaning are awarded to black businesses wherever possible. Besides the salary bill, the bulk of services spending goes to financial services companies, such as the auditors. There are eight casino licences still to be awarded. Mabuza says Tsogo is unlikely to take any of these up. “We will look at any opportunity,” he says. “All the big ones have gone and at the moment we are in a consolidation phase. To be honest, I’d be surprised if there are any opportunities other than mergers. We could look to the UK or other parts of the world in two years, but you have to have deep pockets to play outside SA and we have to pay off our debts first.” Mabuza won’t divulge what sort of returns his casinos bring in, but he did give an indication regarding Hemingways in East London. The Eastern Cape is the only province that does not award its licences in perpetuity. The Hemingways licence lapses after 10 years, and asked if he was concerned it would not be renewed, Mabuza says he is because there is seven to eight year payback of the capital investment.

Source: Financial Mail