‘Industry-killing’ BEE levy in KwaZulu-Natal bill slammed

Horse racing in KwaZulu-Natal is heading for rough seas if a bill under discussion in the provincial parliament is passed, says Bill Lambert, former councillor and caucus leader for the DA in Msunduzi Municipality, and a former chair of the Gold Circle owners and trainers chapter.

Lambert expressed his concerns in an article published on Mike de Kock’s website.

“After a difficult year for KwaZulu-Natal marked by successive tragedies and economic setbacks, the province finally had a good story to share as thousands of visitors made their way to the premier horseracing event on the continent: the Hollywoodbets Durban July,” Lambert said.

“The event is a reliable revenue generator for the province, a much-needed reprieve from the otherwise gloomy picture … But the fanfare and pageantry of the event took place under a cloud that calls the future of the industry into question. A bill is under discussion in the provincial parliament that will determine the fate of the horseracing industry in KwaZulu-Natal.

“In June the KwaZulu-Natal provincial legislature held public hearings on the proposed Gaming and Betting Tax Amendment Bill.

“The bill had already got off to a bad start, being published and republished a number of times between November 2021 and January 2022. The immediate opposition to the bill was to be expected given its enormous potential to decimate an entire industry in the province, with severe economic knock-on effects.

“A new schedule in the bill proposes reducing the betting proceeds that are paid to racecourse operators from 3% to 1.6%. The 1.4% of funds taken from racecourse operations are to be diverted to a so-called transformation fund.

“What makes the proposal difficult to understand is that Gold Circle already reinvests all profits directly back into the industry by design — its memorandum of incorporation prohibits the distribution of profits. This investment is already aimed at accelerating transformation in the industry and supports hundreds of much-needed jobs in KwaZulu-Natal.”

Foster transformation

Lambert continued: “The initiatives funded by Gold Circle include the training and career development initiatives, small business development, skills development for matriculants and job seekers, as well as operational support and skills transfers to black-owned bookmaking businesses.

“The funding also provides financial and operational support to rural racing in KwaZulu-Natal and various corporate social investment programmes — all initiatives that foster transformation in the industry.

“Rather than an acceleration of transformation, the proposed diversion of the funds poses an existential threat to the industry. Gold Circle is forecasting a loss of R106m for the 2021/2022 financial year even after receiving the R66m betting tax contribution. Direct racing and events only generated R50m in total revenue. Without the betting tax contribution, the losses that year would have been about R172m.

“The fact is the funding subsidies the proposal would take from Gold Circle keep the provincial industry alive. The destructive power of this proposal was on full display when a similar one in Gauteng saw the racecourse operator in that province placed in business rescue within one year of its introduction. There is no reason to expect a different outcome this time about.

“The death of the industry would have foreseeable knock-on effects for employment in the province. Workers at racecourse training facilities, racecourse breeders, the National Horse Racing Authority, the Coastal Horse Care Unit, the SA Jockey Academy, the National Racing Bureau, horse feed manufacturers, veterinarians, farriers, grooms, jockeys, horse transporters and downstream leisure horse grooms — all of these would lose their jobs.

“And with the KwaZulu-Natal industry decimated, the bookmakers would start afresh — elsewhere.

“The province has endured successive crises that have left the provincial economy on its knees. The recent floods in the province have only worsened the challenges that began with the spread of the Covid-19 virus and were compounded by the unrest in July 2021. In this context, KwaZulu-Natal cannot afford an industry-killing proposal that will cost hundreds of jobs.

“In this exceptionally difficult climate, the province could also use every rand it can earn in tax revenue to help rebuild the province. Gold Circle is a tax-paying entity, but if the proposed reduction is effected, the province will lose an estimated R100m a year in taxes.”

“This is a textbook lose-lose scenario and a self-inflicted wound for the province.”