The resignation of two members of the North West Gambling Board has left the Board without the quorum needed to approve an empowerment deal between Sun International and a BEE consortium. Allegedly attempts had been made to rush through the approval without formal consent from the Board. Gaming licences authorized by the provincial gambling boards in South Africa demand that black economic empowerment (BEE) partners hold part of the equity, but the intention of Sun International to transfer part of its group to the consortium at a 35% discount has been criticized.

The Chairman of the North West Gambling Board has stated that the transaction was approved in principle as the board was satisfied that it met the licensing conditions of empowerment equity. He denied that he had given approval in principle without formal consent from the Board. The BEE consortium is led by the former premier of North West province, Popo Molefe, which has led to the suggestion that the deal is benefiting the well-connected rather than empowering the disadvantaged. Under the terms of the deal Sun International employees, black managers and a community trust would also benefit.

The question of Molefe’s involvement in gambling regulation when he was premier is at issue. He previously claimed there were no ethical considerations over the discounted deal as he had left the government and had never been involved with gambling regulations. However, it appears that he was present as premier when a decision was taken by Cabinet to adopt a ‘progressive stepped’ system of taxation favoured by Sun International and not the ‘progressive flat’ rate that the Gambling Board considered the regulations required. The regulations have yet to be altered and Sun International continues to pay the stepped taxes while the issue is unresolved.

The proposed R600 million (US$ million) sale of Sun International shares is being discounted by 35%, some R217 million (US$ million). The disputed deal includes the former Minister for Tourism and Environmental Affairs, Valli Moosa, as part of the consortium along with Molefe. The discounted shares are estimated to be worth around R18 million (US million) to each of them. Critics of the deal say that the sale of shares to the consortium is contrary to the spirit of the terms under which Sun International bought the shares when gambling legislation required the provincial government to sell them. The terms were defined to ensure an appropriate level of empowerment of previously disadvantaged groups or individuals in the North West Province. (E-12.09.05)

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