Mark Wignall | Not the time for bad gamble

A few weeks ago while I was hosting a Friday slot of Cliff Hughes Online, a caller engaged me in a brief discussion about a matter that was never at the forefront on my mind. According to him, the inclusion of another major player in the national lottery as offered by Supreme Ventures would be inimical to Jamaica’s best interest.

To me, this sounded quite counter-intuitive. I suggested that like any other government-regulated industry like the telecoms, where landlines are involved, power generation, or water systems, the more of those in the country the better it would be for the consumers of these services.

Was I right or totally off base? I suggested to the caller that until I could see studies showing the benefits of a single player, I would continue to believe in the standard narrative of the more the merrier is better for the consumer.

Since that time, I have seen some of those studies, and the matter is a bit more complex than I had first thought. One fact that may not have been thought out by the gaming-consuming public is that lottery companies are close to the ideal tax-collection agencies on behalf of the Government.

Being highly regulated, a company like Supreme Ventures operates in the standard market economy, but by arrangement for all to see that it is heavily taxed, it employs hundreds of people who would have been caught up on the fringes of the unemployment market. The Government can always claim that millions of dollars gained from the company goes back to its good causes such as education for that sector of the population most at risk.

In addition, it also frees the company to extend its good corporate citizen image and allows it to sponsor other activities like certain sporting endeavours that are popular with the people.

The other matter that is seen regularly is the way the lottery amount is built up. Think of it. Let’s say the lottery is at $40 million. It then makes a slow crawl to $60 million. It trots to $75 million and then reaches the milestone of $100 million.

After that the real race begins. At $100 million even people like me who hardly ever gamble will buy five or so tickets. It is a smart, certain gallop to $200 million and beyond where lines outside of outlets are long and sure right across the country.

With two or more players in the market can we say that two or three big operators would attract the same level of ticket purchase, that is, at $100 million, all three would race to a gallop to $200 million and beyond?

The world trend does not support multiple operators

Many governments around the world have looked at the single structure model and placed it against multiple lottery licences to determine if more is better than less. The big question they ask is simply this. Would three of four big operators yield three or four times more than just one?

What they have found among the best-run systems is that single operators are better at maximising returns, giving better support for a country’s good and just causes such as education support and sporting events for at-risk youth while ensuring propriety and integrity; this might not be the case when there are multiple operators.

All one has to do is look at the most successful lotteries found in the US, Europe, and the subcontinent of Australia to determine that there is hardly a country or a jurisdiction that wants to give up good and prudent management and efficiencies to a bloated one involving multiple operators where the regulation would be subject to high levels of inefficiencies.

Another factor that must be considered in utilising multiple operators is that they cannibalise each other, watering down the sales and ultimately creating a bad image for the industry. With too many operators in the system, and given the cut-throat competition, they fail to develop new products, leading to low revenues. In the end, it is the Government that suffers as the marketplace becomes a circular firing squad.

In 2005, the government of Barbados moved way from the multiple-operator system and brought all the operators into a single, central system. What that move brought about was that the weaker games were thrown out and the Bajan system was the better off for it. In 2005, the lottery market there recorded sales of US$36 million, three years later under the single platform sales moved to US$44 million and in 2017, the Barbados lottery market scored sales of US$53 million.

Is Minister Nigel Clarke paying attention?

One of the biggest stars in this Andrew Holness administration is Dr Nigel Clarke, the finance minister. His presentation in this year’s Budget presentation created waves. And deservedly so.

And then, of course, came COVID-19. A few years ago Dr Clarke sounded as if he would have been perfectly placed in a lecture room. But he exploded early this year and stole the show from many more seasoned politicians. For this reason it is imperative that the minister take a look at the matter at hand.

I need to ask the minister this question: Do you think, Minister, it is prudent that an agency under your ministry, the BGLC, should proceed with a new applicant to the lottery business without a study to determine if this is the correct way forward? Certainly, the minister must know that the major trend internationally, in the region, and the wider global space is towards the single operator, where the overall take to government is at its highest.

Minister Clarke is not only an academic, but he is a man who believes that matters such as the present subject must be supported by evidence in the form of objective research.

At this time, the Government is being seen as doing many things right in this COVID-19 crisis and pain. Minister Clarke cannot afford to get this one wrong.

- Mark Wignall is a political- and public-affairs analyst. Email feedback to columns@gleanerjm.com and mawigsr@gmail.com.