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KZN gaming and betting Tax Amendment Bill: the end of horse-racing?

Photo: Cindy Waxa/African News Agency (ANA)

Photo: Cindy Waxa/African News Agency (ANA)

Published Feb 22, 2022

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By William Lambert

THE leisure and hospitality industries were among the worst hit by lockdown measures implemented in response to the Covid-19 pandemic worldwide. Even when regulations were relaxed in South Africa, restrictions remained on the numbers of people who could gather in one place, leaving leisure activities like sport to languish at immense cost to the businesses, and the people they employ in these sectors.

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KwaZulu-Natal (KZN) is in a particularly tough spot. Even before the pandemic, the province had one of the highest unemployment rates in the country, especially in rural communities. Covid-19, therefore, struck heavy economic blows through the loss of holidaymakers and leisure travellers, and cancellation of big-ticket events like the iconic Durban July horse race and major sporting tournaments.

This already grim situation was made exponentially worse by the unrest of July last year, which had devastating consequences for business owners in KZN and for confidence in the future shared prosperity of the province.

Despite these challenges, many companies like Gold Circle Horse-racing and Betting have remained in KZN, committed to rebuilding their businesses despite the crises of the past two years.

But for the horse-racing industry, this resilience is once again being tested by a new threat to the industry, namely the Gaming and Betting Tax Amendment Bill.

Currently, racecourse operators receive 3 percent of the proceeds from betting on horse-racing. This arrangement ensures that bookmakers contribute towards the cost of staging the events from which they profit.

The revenue is crucial to racecourse operators, and makes it possible to fund mega events on South Africa’s social and cultural calendar, the most celebrated of which is Africa’s largest horse-racing event, the Vodacom Durban July.

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The Gaming and Betting Tax Amendment Bill, published by the KwaZulu-Natal Legislature for public comment on December 10, 2021, would nearly halve the revenue from betting proceeds at the stroke of a pen, and immediately imperil horse-racing in the province.

The industry is understandably alarmed by the approach utilised in passing this bill. Racecourse operators, who could have shed light on the devastating impact of the bill early on, were not consulted during its drafting.

Then the bill was published with an unlawfully short period for public comment, during a time when most South Africans were turning their focus to year-end breaks and spending time with their families.

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The public comment period was extended thanks to the objections from the industry, but this was a meagre victory considering the broader consequences. The haste with which this process was implemented cannot be reasonably justified given the serious implications of the bill.

The bill proposes cutting the betting proceeds received by racecourse operators from 3 percent to 1.6 percent so that the difference can be diverted to a “Transformation Fund”.

If the bill is passed as is, operators will lose nearly half of their vital revenue stream. This would be crippling under normal circumstances; but coming after two years of Covid-19 lockdown, the impact would be catastrophic for racecourse operators, workers in the industry, the province, and the country as a whole.

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The immediate consequence of the bill will be that Gold Circle alone will lose R70 million in revenue. As the company declines, so will its contribution to the country’s gross domestic product (GDP) and to the fiscus, as its loses out on millions in tax revenue. And this does not apply to Gold Circle alone – the decline would be seen throughout the racecourse operating sector.

Arguably the worst consequence of the bill would be the job losses. The demise of racecourse operators will trigger a domino effect with a knock-on for workers at the racehorse training facilities, racehorse breeders, the Coastal Horse Care Unit, the South African Jockey Academy, horse feed manufacturers, veterinarians, farriers, grooms, jockeys, horse transporters, and downstream leisure horse grooms, among others.

It's also important to note this will not be isolated to KZN. The Durban July, for instance, as the largest horse-racing event in Africa, draws international as well as inter-provincial visitors. Many of the small businesses that depend heavily on showcasing their wares at the event, such as fashion designers, are spread throughout the country.

One should likewise not lose sight of the cultural and sporting significance of the Durban July, which is 125-years old. That it survived South Africa’s past, and maintained its relevance and magic in the democratic-era is testament to its significance as a cultural and sporting jewel in South Africa.

The Durban July also serves to draw the attention of a new generation of previously disadvantaged individuals to the world of horse-racing. There are both national and global opportunities for young people who want to explore this exciting industry. But there will be no industry to explore if it is gutted by this bill.

Transformation is as important to the industry as it is to the government. That is why we cannot afford to get it wrong. We know that sadly, in South Africa, big funds tend to be opaque and all too often poorly administered, creating fertile ground for corruption.

There are better ways to affect a meaningful transformation agenda, and the industry is more than happy to share what it is already doing, as well as have a discussion about what more can be done to help the government achieve this crucial objective. But we shouldn’t have to do this while staring down the barrel of a job-killing bill.

It is not too late to stop and reconsider this proposal: KZN legislators can remove it from the current bill. This will give the government and industry time to work together to determine a better way to achieve even greater levels of transformation in the industry.

If we fail to heed this warning, we will be forced to watch as the industry gallops towards disaster and the death of the Durban July, the crown jewel of the provincial cultural and sporting calendar.

William Lambert is a former councillor and caucus leader for the DA in Msunduzi Municipality, KwaZulu-Natal.

*The views expressed here are not necessarily those of IOL or of title sites.

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