Five bids in for EC gambling licences

But 10-year duration for Mthatha and Queenstown scares some off

By TOM MAPHAM

BIDDING FOR the last two casino licences in the Eastern Cape has closed with several investors showing an interest.

Three applications were submitted for the Queenstown licence, while two are competing for the bigger Mthatha licence.

Eastern Cape Gambling and Betting Board employees will not comment on the licensing process until the bids become publicly available in two weeks’ time.

Board chief executive, Gonza Mati had previously hinted that the licences would probably be issued in February next year.

The board charges an application fee of R200000 per bid – “so only serious bidders are involved,” an employee said.

Bidders are also sworn to silence during the judgment process.

One of the companies expected to be in the running, Mthatha Casino Holdings, declined to apply.

A representative, Patrick Buwa, said the company’s financiers were concerned that the 10-year lifespan of the licences were too short.

The time-frame for casino licences in the Eastern Cape has stayed at 10 years, despite a suggestion made by Mati in February that it might be extended to make them more attractive to investors.

Buwa, who has several property investments in King William’s Town and Johannesburg, said the short time-frame combined with the board’s requirements made the licences too “risky” an investment.

“Most casinos take eight years to pay for themselves, which leaves only two years to earn profits, and this was making the funders a bit nervous,” he said.

The Mthatha licence requires a minimum R65 million development and a 40-room hotel, while the Queenstown licence requires R50m investment and at least a 30-room hotel.

The board also requires that conference facilities, restaurants, child-care and play areas be included in the casino complex.

Buwa said he felt that building these extra facilities posed a financial risk, while the major revenue would come from the casino.

“Although we would have liked the business we felt the board’s requirements were a little onerous,” he said.

The board has previously received two applications for the Queenstown licence, but both fell through due to lack of finance.

The two new licences complete the province’s quota of five casinos. The first three are Port Elizabeth’s Boardwalk Casino & Entertainment Centre, Hemingways Casino in East London and the Wild Coast Sun Hotel, Casino & Country Club.

The three existing casinos brought in R663m during the 2004/5 financial year, generating R46m in gambling taxes.

The Eastern Cape gambling industry posted a gross turnover of R10,3 billion last year. The board regulates the industry and ensures that venues take no more than an eight percent profit margin.