Horseracing at Turffontein. Picture: Russell Roberts. Financial Mail.
Horseracing at Turffontein. Picture: Russell Roberts. Financial Mail.

Phumelela Gaming & Leisure said a proposed amendment to Gauteng’s gambling regulations could cost it R75m a year and could damage the local horseracing industry.

In January, a member of Gauteng’s executive council published proposed changes to the province’s gambling regulations, including a proposal that would deprive Phumelela of the 3% betting tax gain it derives from punters’ winnings.

The amendment is aimed at directing this tax gain to the Gauteng Gambling Board.

Phumelela said it had submitted detailed representations regarding the proposed amendments, supported by an economic impact report.

It said the betting tax received by Phumelela in Gauteng accounts for 90% of its betting taxes in SA, and amounts to about R75m per year.

“If the amendment is implemented and Phumelela is deprived of the betting tax, it will have a material adverse effect on Phumelela and on racing in general,” the group said.

Phumelela said the final amended regulations were likely to be published on Friday.

The company had been advised to apply to the high court to have the betting tax amendment reviewed and set aside if implemented, “on the basis that it is irrational, unreasonable and unconstitutional”.

Phumelela said on Friday its headline earnings fell 18% in the six months ended January, to R68m, due largely to a “disappointing” performance in SA.

The group canned its interim dividend “in the interests of conserving cash and with a view to future capital commitments”.

“The difficulties we faced in the 2018 financial year continued, with political turbulence, labour unrest, criminality, a stagnant economy, low business and consumer confidence, increasing unemployment, higher tax, inflationary administered prices, all a daily fact of business life,” Phumelela said.

The horseracing industry “continues to face unpredictability and inconsistency in the regulatory and licensing regime”, placing an “unnecessary burden” on the sector which inhibited planning.

Management was in talks with key stakeholders in the horseracing and gaming industries “to improve relationships and mend fences where there has been discord”. 

“Even as we strive to develop, management has taken a view that in the likely absence of a meaningful improvement in the domestic economy, we have no option but to rightsize the group because of these commercial realities,” it said.