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TWST: Can we start with a brief historical sketch and introduction to Gold Reef (Johannesburg: GDFJ.J)?

Mr. Friedman: We became a gaming company in 1998. It was a complicated process where one listed company acquired another, the assets of both were sold and the resultant cash used to finance the new company. Gaming only became legal in South Africa in 1996 and we opened our first casino in 1998, which was our flagship called Gold Reef City Casino in the South of Johannesburg. We opened our second property Casino Mykonos, which is a smaller resort based property, in November 2000 on the Cape West Coast. The following year, in September 2001 we opened our third property, Golden Horse adjacent to a horse race course in Pietermaritzburg, KwaZulu Natal. And then in December 2002 we opened our fourth property, Garden Route Casino on the Cape south coast. Gold Reef City in Johannesburg is our biggest property. We have 1600 slot machines and 50 tables. There’s also a massive theme park and an apartheid museum adjacent to the theme park, which was built at a cost of about R80 million.

TWST: How is the macroeconomic environment impacting your business currently?

Mr. Friedman: South Africa is quite unique. We do obviously feel the ripple effects coming out of the US and Europe from a more macroeconomic point-of-view, but probably more from a financial markets point of view because we are effectively viewed as a third world country and experience the kind of volatilities in our currency, which impacts directly on inflation and hence interest rates. As you know, we saw a situation last year, because of a huge depreciation in the rand in 2001, where inflation went into double digits. Our interest rates were hiked 4% during the course of 2002 in an effort to curb spending. This should have put pressure on gaming spending and revenue growth, but in fact we saw quite the opposite and there was an inexplicable boom in terms of gaming spend. Then, during 2002 the huge depreciation in the rand reversed itself and we had a huge appreciation in the rand. In 2001, we were if not the worse performing, one of the worse performing currencies against the US Dollar. In 2002, we were the best. It is these pressures that cause a bit more volatility than necessarily the ripple effects coming out of the northern hemisphere markets. My own view on it -- because it is quite hard to explain that while interest rates are increasing, there is high inflation and world markets are depressed, our revenues were growing -- is that because interest rates had decreased significantly over the previous two or three years, people had effectively alleviated their credit burdens to a large extent, and had a lot of available credit to build up again.

TWST: What are you seeing this year?

Mr. Friedman: I think we’re starting to see that these high interest rates are starting to bite because obviously now people have been running on credit for a period of time. I think what we’ve seen is a delayed effect, but with the strengthening rand, inflation coming down and interest rates expected to come down, sentiment, can see us through. So a long answer to a short question is that the more localized financial pressures or relief is effectively offsetting what we’re seeing globally to a certain extent, but that’s more on the disposable income side of things. I think the financial markets, are more closely linked to the international arena.

TWST: Can you run through your key objectives for the next 12 to 18 months?

Mr. Friedman: We find ourselves in a situation where we’ve pretty much broken the back of our external debt at most of our properties. That is a major criteria in these kinds of operations because there is huge initial capex required, large upfront debt, which obviously brings with it a significant interest expense and huge cash flows generated. So, especially with the interest rates we’ve been seeing, we’ve been focusing on reducing our debt levels and that will obviously help grow the earnings; the lower your debt, the lower your interest. And, in tandem, we also try and grow revenues and earnings. Therefore, I think from a more micro-perspective, we’re looking to reducing our debt and generating as much cash flow as possible. And, on the flipside, we will look at ways to grow revenues and earnings, whether it be organically through increasing market share and cost control, or externally perhaps by trying to get some hard currency exposure and possibly enter the global market through our alliance with Casinos Austria.