Inside Asian Gaming

INSIDE ASIAN GAMING | February 2009 22 Brave New World Modern gaming technology keeps Africa’s old enemy, corruption, at bay A commonquery among institutional investors regardinggaming businesses in emerging markets is concern over due diligence issues such as fraud by employees or customers, and money laundering by criminals. Mr Robbins stresses the credentials of his management team, who have experience of working for public gaming companies. He adds that because KaiRo International’s African venues are focused on slot play and managed by state of the art slot management systems, the opportunities for criminals to abuse the casinos have been eliminated. “I would say our SMS [slot management system] is even more advanced than Vegas. We have full online systems, including tracking. You name it, we’ve got it,” he states. Slot machines at KaiRo’s venues are fittedwith online smart card technology and bill acceptors that the company says guarantees client satisfaction by keeping up to date with modern trends. “We also have the governments and the taxation systems to comply with, and the regulators via the gaming boards etc, so everything is at the press of button,” adds Mr Robbins. “We use cashless systems. Everything’s sealed and under good surveillance. “We dohave very experienced, long-servingmanagement. Most of us have come out of a PLC company in Sun International, so we run our operations like that. At floor level, middlemanagement runs our business under systems and controls. We are very comfortable about that. A lot of other operators in Africa are owner operators that actually sit in the casinos and more or less have their families involved,” he says. “We have full-on audited accounts with major auditing companies, etc. Sometimes running things this way gives us a bit of a handicap compared to some competitors who may not have the official overheads. They have cash power and can develop much quicker. But doing things the correct way is not only essential, it has also worked for us commercially and our reputation is very, very, good. In Africa, our brand is not as big as the big public companies, but our reputation is up there with them. The big public companies speak very well of us. They know us all personally as we were in senior executive level jobs with them, and they support us.” A frica isn’t generally noted for the ease or transparency of its tariff and taxation systems. John A. Robbins of KaiRo International says, however, that politicians in Ghana andTanzania have been extremely helpful in keeping duties on the gaming industry simple and effective. “In Tanzania, which was a communist country until it began reforms in the early 1990s, they were very clever,” says Mr Robbins. “They started with a system where you paid a licence fee for a machine and a licence fee for a table. The policing of that simply involved a guy coming round to count the number of machines and then multiplying it by the fee. Over the years with our help, they’ve now come to a levy system. They’re comfortable that the market has now found its level and are happy with the gaming management systems, which have been approved by the gaming boards in southern Africa. The systems allow a high level of monitoring without the operator needing to have a high powered casino management team in place locally,” he explains. “Now with the levy system in Tanzania, we pay a basic licence fee, then on top of that a 13% levy on gross gaming win. Because of the automated gaming systems, you can’t avoid declaring what should be declared. We started off the system-based gaming model outside southern Africa, and now the opposition casinos also have to use the same systems, so that the gaming boards are comfortable about being able to collect their revenues. The beauty of that is that we have to pay VAT and other import duties, but no corporation tax, so you get to a level where the returns for the business are very good still. “With an annual licence fee, plus 13% levy monthly, plus operational costs, you are still going to get returns of 30-36%. It depends on what you put back into the business. I’m sure that with time—they’ve allowed ten years to get to this level—the next thing they will do is to introduce corporation tax,” says Mr Robbins. “In Ghana, there’s no levy, but there is corporation tax, so it balances itself out. The returns there are still good.” Taxing Times? KaiRo International says African politicians are doing their best to help the fledgling industry New Africa Casino, Dar es Salaam, Tanzania In Focus