Centre for Civil Society Research Report 1

“Smoke and Mirrors” The National Lottery and the Non-Profit Sector Dr. Stephen Louw

Published in Collaboration with the Non-Profit Partnership

1

The Centre for Civil Society is a research and training organisation working at the nexus of civil society and higher education. The Centre is committed to producing high quality research on the non-profit sector. As one aspect of this project it contracts and publishes research on issues pertaining to the sector. However such research does not necessarily reflect the views of the Centre or its staff.

ISBN 1 – 86840 – 473 - 0

2 CONTENTS

Introduction 4 The National Lottery – Overview 4

PART ONE: BACKGROUND TO THE NATIONAL LOTTERY 5 1.1 The Licensed Operator: Uthingo Management (Pty) Ltd 6 1.2 Gaming operations 6 1.3 The National Lotteries Board 7 1.4 The National Lottery Distribution Trust Fund (NLDTF) 8 1.5 The Distribution process 8 1.6 The Distribution Agencies 9 1.6.1 The Miscellaneous Category 10 1.6.2 The Reconstruction and Development Programme (RDP) category 10 1.6.3 The Charities Distribution Agency 11 1.6.4 The Sport and Recreation Distribution Agency 12 1.6.5 The Arts, Culture and National Heritage Distribution Agency 12 1.7 Determining the total allocation 13 1.7.1 Gross sales, prizes, and good cause determination 14

PART TWO: ATTITUDES, PERCEPTIONS, HOPES 15 2.1 Perceptions of the Lotto: Civil Society, The Lotteries Board, Government. 15 2.1.1 Those pesky applicants: The Lotteries Board and the non profit sector 16 2.1.2 Accountable: To whom? 17 2.1.3 The Lotteries Board – Professionalism and consistency 18 2.1.4 The loss of funding from alternative (Scratch Card) gaming operations 19 2.1.5 Relationship between the Distribution Agencies and the Lotteries Board (1): Excluding civil society and existing grant-makers? 20 2.1.6 Relationship between the Distribution Agencies and the Lotteries Board (2): A conflict of interest? 21 2.1.7 What sort of applications should be funded? 22 2.1.8 Provincial – Regional bias of allocations 24

3. CONCLUSION – CRITICAL ISSUES 25 3.1 Empower the Distribution Agencies 25 3.2 Decentralise the process of allocation 25 3.3 A need for transparency 26 3.4 Link funding guidelines to a medium-term developmental agenda 26

4. REFERENCES 26

5. APPENDIX A 28

6. ENDNOTES 30

3 INTRODUCTION THE NATIONAL LOTTERY – OVERVIEW In a context of massive The National Lottery Act (57 of reductions in government consumption 1997) makes provision for the operation spending, the National Lottery is of a countrywide lottery. The National intended to provide a sustainable source Lottery was founded in 1999. The Lotto, of funding for non-profit organisations its flagship, was launched on March 2 providing much needed sporting, arts, the following year. On October 23, cultural, social and environmental 2000, scratch cards were launched. The services to the South African public. purpose of this report is to overview This funding, it is hoped, will help some of the key issues relating to the secure a better life for all citizens. operation of the Lottery, particularly the One of the criticisms frequently distribution of money to good causes, made of the post-1994 South African and to highlight areas of particular government is, however, that their concern to the non-profit sector. commitment to the formulation of At the outset, it must be stated ambitious, often wide-sweeping, that the report is intended to highlight a development plans are seldom matched broad array of issues, raised primarily by with an accompanying attention to the non-profit organizations themselves. critical institutional and social Clearly, the sector includes a variety of framework needed successfully to different organisations with different implement this policy. organising styles, bureaucratic and As we see in this report, the administrative concerns, and fundraising manner in which the National Lottery capacities. Expectations of the National has been run since its inception in 2000 Lottery differ widely, particularly lends much weight to this criticism. between the larger, non-governmental Most damming of all, perhaps, is the fact organisations, and smaller, often that, whilst the National Lottery was set unregistered, community-based up with relative ease, it took government organisations. Many non-profit a full year, and then only after organisations were beneficiaries of widespread public criticism, to begin to earlier scratch card gaming operations, set up three of the four key Distribution and the sudden loss of this source of Agencies charged with disbursing the revenue means that their perceptions of proceeds of ticket sales to good causes. the National Lottery are motivated by Furthermore, barely half of the money quite different concerns to those available for distribution has actually expressed by organisations applying for been distributed. This represents a lottery funding for the first time. complete disregard for the necessary The report can do no more than institutional and social factors needed to highlight the variety of perceptions, make legislation work, and is, sadly, without making judgements as to the indicative of the increasing inability of most appropriate strategies for reform or the South African government to match mobilisation around the Lottery. That is its social commitments with actual the task of the non-profit sector. delivery.

4 Two time-periods should be born in PART ONE: BACKGROUND TO mind. Uthingo Management Company THE NATIONAL LOTTERY Pty (Ltd) has been granted a licence to operate the Lottery for seven years, With the curious exception of the starting in 2000. During this period, lucrative horse racing industry, betting incremental reforms rather than dramatic on sports events, or gambling in any change are possible, particularly with form, was illegal in South Africa prior to regards to the structure and operation of the democratic reforms in 1994. the Distribution Agencies. After this Gambling was, however, allowed in the period has ended, however, new nominally independent “homeland” regulations will have to be drafted, and a states, which gave rise to a flourishing new tender process will be embarked casino business. upon. In anticipation of this, the non- Despite these prohibitions, profit sector should seek to make underground gaming operations began to maximum input into the debate as to the appear in the 1990s. At the same time, a most appropriate terms and conditions variety of scratch card gaming for the second licence period. operations were launched, which were In Part One, some background to the used to help fund worthy causes. The National Lottery is offered. This Community Chest, Ithuba, and Viva, includes the establishment of the were all involved in these latter Lottery, as well as the functions, operations, and raised millions of rands responsibilities, and performance of the for beneficiary organisations. main players: Uthingo, the Lotteries After the elections in 1994, the Board, the Distribution Agencies, etc. A new government was charged with the very brief overview of the Lotto and task of managing the burgeoning scratch card operations is also provided. underground gambling industry. To this Whilst Part One is largely end, a variety of government inquiries, descriptive, Part Two considers some of including the Howard Commission and the criticism that has been levelled the Lotteries and Gambling Board, under against the National Lottery, as well as the chairpersonship of Professor Nic the perceptions of three categories of Wiehahn, were conducted to inform role-players: the loosely defined non- government policy. The Gambling profit sector; parliament/government; Board proposed that government and the Lotteries Board itself. acknowledge gambling as a “social It must be emphasised that, to reality”, and seek to regulate the industry adopt the phrase used by one informant, and ensure that some of the profits from some of the criticism offered is valid, gambling are used to benefit the poor. some is based on misinformation, and The gambling industry was also some of it is simply sour grapes. It is identified as an area where black hoped that this report might contribute in economic empowerment could actively some small way towards sifting out the be championed. This principle informed valid criticism and using this in a the licensing of legal casinos (now constructive way to contribute to the restricted to a total of 40), as well as the development of the National Lottery. tender to run the National Lottery.

5 In order to promote a culture of board. The partners are: the Black “responsible gambling”, the South Management Forum Investment Co (Pty) African Advisory Council on Ltd (10%); the Disability Employment Responsible Gambling (SAACREG) Concerns Trust (5%); Motswedi was established, composed of Technology Group (Pty) Limited (10%); representatives from civil society and the NAFCOC Investment Holding Co Ltd gambling industry.1 (10%); NUMSA Investment Co (Pty) Two organisations have primary Ltd (10%); WDB Investment Holdings responsibility for the National Lottery: (Pty) Ltd (5%) the licensed Operator, that runs the The two State shareholders are Lottery itself, and the National Lotteries the National Empowerment Fund (5%) Board, which is responsible for and the South African Post Office overseeing the Lottery and looking after (15%). the interests of all parties concerned. The Chief Executive Officer of Added to this we need to pay particular Uthingo is Humphrey Khoza. The attention to the Distribution Agencies, current Chairperson is Dr. Barney which are appointed by the Minister but Pityana. are, in effect, run by the Lotteries Board. As the Operator, Uthingo is These latter are responsible for the responsible for the establishment and distribution of the good cause money. management of a national communications network, the selection, 1.1 THE LICENSED OPERTOR: licensing and training of retailers, and all UTHINGO MANAGEMENT associated marketing activities. (PTY) LTD Although Uthingo is not responsible for Three consortia bid for the the distribution of money to good licence to run the first South African causes, it has set up its own charity, the National Lottery. The preferred bidder Uthingo Trust. The Trust invests in was Uthingo Management (Pty) Ltd, a small-scale community projects, consortium formed in 1996 composed of particularly programmes aimed at the a variety of South African black youth, women, the disabled, and Aids economic empowerment partners, orphans.3 The Uthingo Trust functions industry shareholders, and, like any major social investment controversially, state shareholders.2 programme, and does not warrant The three “industry particular attention in this report. shareholders” bring considerable experience of the gaming industry to the 1.2 GAMING OPERATIONS consortium, and together own 30% of The flagship of the National Uthingo. The shareholders are Camelot Lottery, the Lotto, was launched by International, which operates the UK President Mbeki at Yeye Butchery in Lottery; Tattersalls, with a background Langa on March 2, 2000. At the launch, in the Australian gaming industry; and Mbeki predicted that the National GTECH, a gaming industry and online Lottery would raise R13 billion for good service provider. causes within five years. The black economic A second gaming operation, the empowerment partners own 50% of scratch cards, was launched on October Uthingo, and control 80% of seats on the 23, 2000. Currently nine variations of

6 this game are on the market, namely Pot responsible for the regulation of all of Gold (R3), Pocket Money (R2), Cash lotteries conducted in South Africa, Explosion (R5), Money Spinner (R3), including the National Lottery, as well Going for Gold (R5), Treasure Chest as other private and society lotteries. (R3), Banco (R3), Money magic (R2), The Board is made up of public and Goal (R2).4 nominees, at least four of whom are The draw for the winning outside government service, and is numbers is held each Wednesday and chaired by Joe Foster. Although the Saturday on the television show Board reports annually to parliament, it Road2Riches, which has become the operates independently. second most watched programme on In addition to ensuring that the national television. The programme is National Lottery and all other lotteries associated with the widely known catch are conducted “with due propriety”, the phrase, Tata Ma Chance, Tata ’Ma Lotteries Board has three other duties Millions, which, depending on one’s that are of particular concern here, perspective, is either a stroke of namely: marketing genius or a thinly veiled ploy to stimulate false hopes amongst the • to protect the interests of all poor and despondent. participants, st By the 1 July 2002, the gross • to maximise the net proceeds of the 5 sales of the Lotto were R8,884,390,136. National Lottery, and No accurate figures are available for • to ensure that a percentage of money gross sales of scratch cards, but this has from ticket sales is transferred to the been estimated as R542,225,724 for the National Lottery Distribution Trust same period. Together, this amounts to Fund (NLDTF) and administered and an (estimated) total sales of invested in terms of the Lotteries R9,426,615,860. Act.6 Over the duration of the seven It is important to emphasise that year licence, an average of 30% of all the Lotteries Board understands the ticket sales after VAT is designated for phrase “all participants” to imply that good causes. Although only a fraction of they are accountable only to ticket this has been disbursed so far, this holders,7 and not to non-profit money will become available in the organisations applying for funding from immediate future, and is thus a the national Lottery. significant source of finance for This is an area where further charities, arts, sporting and other non- debate should occur. It is not profit organisations. unreasonably to assume that all three of these duties go beyond a narrow, 1.3 THE NATIONAL LOTTERIES bureaucratic mandate, and imply a BOARD substantial degree of accountability to The National Lotteries Board is a both the general public and the intended statutory body established in terms of the beneficiaries of the good cause money. Lotteries Act (57 of 1997). The Board is This is discussed in more detail in 2.1.2.

7 1.4 THE NATIONAL LOTTERY basis,10 whilst the distribution of these DISTRIBTION TRUST FUND funds takes place on an annual basis. (NLDTF) No more than 10% of the money The money raised through the awarded to the National Lottery sales of Lotto tickets and scratch card, Distribution Trust Fund for distribution after VAT, is distributed according to to good causes – i.e. no more than 3% of the following formula:8 the total proceeds from ticket sales – is allowed to be used for administration. • 50% – goes to prizes The Lottery Board is proud of its ability • 20 % – goes to the licensee to administer the Fund within such tight (Uthingo) financial parameters, and claims that • 30% – distributed to good causes their overhead costs are considerably (National Lottery Distribution Trust lower than those levied by earlier Fund) lottery-funded grant-making organisations. The 20% awarded to the licensee One question that might be is divided further into two categories, considered when considering the terms namely: and conditions for the second licensee (i.e. after 2007) is whether the amount • 15% – which goes to the licensee stipulated for good causes should remain (Uthingo) at 30%, and whether this amount should • 5% – which goes to the various include the expenses of the Lotteries distribution outlets and vendors Board.

Whilst many commentators have 1.5 THE DISTRIBUTION PROCESS been quick to criticise Uthingo for The Lotteries Act prescribes the making huge profits out of the Lottery,9 purposes to which funds invested in the this formula was agreed upon by NLDTF can be used by distinguishing parliament, and is part of the contract five categories within which good causes entered into with the operator. money is to be allocated. The categories Moreover, in-so-far as the Operator are: makes its profits by maximising overall ticket sales, they are also increasing the • The Reconstruction and share transferred to good causes. There Development Programme, is little to be gained in criticising the • Charities, Operator for making a profit! • Arts, Culture and National 30% of ticket sales, after VAT, Heritage, are thus intended for good causes. This • Sport and Recreation, and money constitutes the National Lottery • Miscellaneous Purposes. Distribution Trust Fund, which is established and monitored – but, as we The Act stipulates that a suggest below, need not necessarily be minimum of 10% of the total funds are to administered directly – by the National be allocated to the first four of these Lotteries Board. The money is categories, and a maximum of 5% to the transferred to the NLDTF on a weekly Miscellaneous Purposes category. Should the demand for funds

8 administered by the four primary 1.6 THE DISTRIBUTION categories exceed this statutory floor, the AGENCIES Distribution Agency responsible can The decision as to which approach the Minister of Trade and organisations are to receive funding is Industry and motivate for an additional the responsibility of the nominated allocation. Members of the Distribution Agencies. The Lotteries Board has Two-and-a-half years after the sometimes come under criticism for start of the National Lottery, only three allocating money to sporting and cultural of the four key Distribution Agencies bodies at the expense of the poor.11 have been established. Moreover, these Whatever the merits of this claim, it is Agencies were only established a year important to emphasise that it is the after the first Lotto tickets were sold, Lotteries Act that determines these broad and then only in the face of severe parameters. It is a decision taken by criticism from the general public and parliament, not by individual members parliament. The Agencies remain of the Lotteries Board or by the Minister severely understaffed, and it is clear that of Trade and Industry. the attention given to the profit-making The decision to stipulate only side of the gaming industry has not been minimal levels of support for each of the matched by an equal commitment to four primary categories was taken in maximise the quite enormous benefits order to give the Minister of Trade and that this industry offers to the Arts, Industry the discretion to respond to Sports, and Charities-Welfare sectors. changing sectoral needs. Prior to the The Agencies established so far introduction of the Lottery, no one knew are the Charities; Arts, Culture and with any certainty what type of National Heritage; and Sport and organisations would apply for funds, and Redistribution Agencies. Members of it was felt that by stipulating only these Agencies were appointed by the minimal levels it would be possible to Minister of Trade and Industry on satisfy the competing need for multi- February 1 2001. sectoral funding (Arts, Culture, Sport, The procedures for dispersing Development, etc.) and to respond more funds allocated to the RDP and innovatively to demands from the Miscellaneous Purposes categories are ground up.12 As we see below, the still under review, and it is not clear Charities category has received the when, if at all, a decision will be taken greatest share of the overall allocation to as to their future. At present, and in date. accordance with the provisions of the The Department of Trade and Act, these categories are administered by Industry has indicated that it will use the the Minister of Trade and Industry. experience learnt through the first seven Unfortunately, no accurate, up- years of funding applications to further to-date distribution figures exist. The develop the principles informing best available information is presented in allocation.13 The non-profit sector must some detail in Appendix A: seek to influence this learning process. Distributions to date.

9 As these figures show, there is a might take place, especially given the considerable amount of money that has size of undistributed funds.17 yet to be distributed: approximately half Many people have suggested that of the total money available in 2001- the idea of a general emergency and 2002. Unfortunately, it is not clear how discretionary category, subject to a much of this was carried over from the statutory funding ceiling (currently 5%), first round of distribution (up until 31 is a good one, and should be supported. March 2001), and how much of this Initial concerns that this would be used stems from the second round of arbitrarily or for overtly political reasons distribution (up until 31 March 2002). – as was the case in the UK, for As such, it is impossible to example, with money allocated for speculate as to whether the distribution Millennium celebrations – do not appear process has become more effective as to have been warranted, although the Agencies grow in experience, or whether this is due to the inability of the whether the Agencies have become less Ministry to spend money or a credit to effective in the face of rapidly increasing responsibly manner in which the sums of money. Minister administers the fund remains to be seen. 1.6.1 The miscellaneous category The Miscellaneous category is 1.6.2 The Reconstruction and intended for “emergency funding”. The Development Programme (RDP) Minister of Trade and Industry, in category consultation with the Minister of Of all the categories, the RDP Finance, has discretion as to how these category poses the greatest dilemma for funds are to be used.14 the National Lotteries Board. The Comparatively little money has category reflects the concerns of been allocated from this category so far. parliament in 1997 when the Act was Between December 2000 and January passed. The abandonment of the 2001, in response to a public outcry Reconstruction and Development regarding the slow pace of allocation,15 Programme means that there is no longer emergency funding of just over R4.1 any clear basis upon which allocation million was allocated to 80 organisations decisions might be made, and the which had benefited previously from the category appears to be superfluous.18 scratch card operations run by Ithuba With the abandonment of the and the Community Chest. Reconstruction and Development Between 1 April 2001 and 31 Programme, the Minister of Finance is March 2002, R21.96 million was supposed to identify a fund into which transferred to the Miscellaneous money from the RDP category is paid.19 category of the NLDTF. None of this Although the idea of transferring money money was disbursed, and it (and the to the NDA has been mooted, no interest it accumulates) is available for decisions have yet been taken.20 distribution. To date, no funds have been There is considerable debate allocated from the RDP category, and a within the Lottery Board as to the best total of R63.92 million is available for way to use this money.16 This is an area distribution.21 where potentially meaningful lobbying The Lotteries Board is working

10 with the Ministers of Finance and Trade but excluded from consideration any and Industry to develop a policy for applicant with reserve funding or dispensing the RDP money. As with the investments of its own, regardless of the Miscellaneous category, this is an area type of service they provided,27 and flew where potentially meaningful lobbying in the face of government’s general might take place. insistence that non-profit organisations put measures in place to help secure 1.6.3 The Charities Distribution their sustainability. Agency Based on the experiences gained, The Charities Distribution as well as discussions within the Agency Agency is responsible for guiding the itself, the criteria were changed allocations made to the broadly defined somewhat for the 2002-2003 funding charity and welfare sector, and is cycle. Here the focus was placed on:28 appointed by the Minister of Trade and • capacity building for organisations Industry, in consultation with the and communities which will involve Minister responsible for welfare and training; advocacy and lobbying; and population development.22 Ten skills development, 23 members were appointed on 1 • poverty alleviation, and February 2001, one of whom has since • community and residential care for resigned, ostensibly because of his the vulnerable, i.e. children, families, frustration with the way in which the older persons, persons with 24 Agency is operating. disabilities, women, people A request to speak directly with affected/infected by HIV/AIDS, the the Agency members was declined by chronically ill, youth, and drug 25 the Lotteries Board. As such, it has not abusers and offenders. been possible officially to canvass their One significant criticism of the views on operation of the Agency and earlier funding approach is that by the distribution to date. expecting applicants to be registered The initial focus of the Charities non-profit organisations with audited Distribution Agency was directed at financial statements, many innovative “organisations serving the needs of and effective community based children, the youth, socially vulnerable organisations were excluded. groups (e.g. elderly, women, and The latest funding criteria seek to disabled) and people living with broaden the pool of potential applicants HIV/AIDS.” Controversially (see the by “requesting” non-profit organisations discussion in Part Two of the Report), to enter into a “formal working this was subject to the clause that relationship” with unregistered “Organisations had to demonstrate that community-based organisations, and to they faced the risk of scaling down or assist these organisations to apply for 26 closure if not assisted.” This later and to help administer this money should consideration meant that members of the the application be successful. Non-profit Board were given little freedom to assess organisations are entitled to include in the merits of project-based proposals, their funding applications the costs and were instead directed by the incurred in such partnerships, although Minister to take decisions simply on the the Lotteries Board has expressed basis of urgent financial need. This all concern about the “unrealistic” nature of

11 many of the budgeted claims.29 No must be remembered that the minimum guidelines to govern this intended allocations (10%) given to Arts and cooperation have been provided. Sports are determined by law, not by the To date, the Charities Minister, the Lotteries Board, or the Distribution Agency has been allocated Distribution Agencies. It is only when the lion’s share of the NLDTF money. In amounts in excess of this “statutory 2000-2001, a total of R44.2 million was floor” are claimed that the Minister’s distributed. discretion becomes important. In the 2001-2002 funding cycle, The criteria for priority funding this rose to R103.28 million, out of an in the Sports category have not changed available R154.7 million. since the initial round of funding applications. Emphasis is placed on the 1.6.4 The Sport and Recreation provision of equipment for and the Distribution Agency renovation and upgrading of existing The Sport and Recreation infrastructure, as well as capacity Distribution Agency is responsible for building in sport. Applications for new overseeing and guiding the allocations infrastructure are not considered.33 made to the sports and recreation sector, This stress on infrastructure and and is appointed by the Minister of capacity development is understood as Trade and Industry in consultation with an empowerment exercise. Thus, in the Minister responsible for sport and response to public criticism of the large recreation.30 Five members31 were sums of money allocated to sporting appointed on 1 Feb 2001. bodies like the Blue Bulls Rugby Union Much criticism has been levelled (R1.15 million in 2000-2001),34 the against the Lottery for funding sports at Lotteries Board is quick to point out that the expense of charities, or, as one critic this money was allocated specifically to suggested, for “Robbing the Helpless to the upgrading of stadiums in six under help footballers.”32 Clearly, this raises serviced areas, and that none of this goes important “macro” issues relating to the to the Blue Bulls rugby team.35 purpose of the NLDTF and the types of Ironically, the decision – which is causes it should support. Should the perfectly legitimate and in keeping with Lottery be used to fund a cross section of the brief of the Arts Distribution Agency good causes, including the arts and – to award R1 million to the Cape Town sporting worlds? Or should funding be opera has not been widely criticised.36 restricted to priority developmental In the 2000-2001 funding cycle, welfare targets? Or should some sort of a total of just over R20.2 million was balance between the demands of these allocated. sectors be sought? This report can do no In the 2001-2002 funding cycle, more than flag this “macro” question: it the total amount disbursed was R71.66 is the responsibility of all organisations million, out of an available R99.3 and interested parties to develop their million. own answers to this. At the same time, it is important 1.6.5 The Arts, Culture and National to put the allocations to “non-welfare” Heritage Distribution Agency organisations into the context of the laws The Arts, Culture and National governing the National Lottery. Thus it Heritage Distribution Agency is

12 responsible for overseeing and guiding • Indigenous knowledge systems the allocations made to this sector, and is • Historical and cultural research and appointed by the Minister of Trade and surveys Industry in conjunction with the Ministers responsible for arts, culture, Four preferential focus areas are science and technology, and identified for the Environment sub- 37 environmental affairs. Twelve sector, namely: members were appointed on 1 Feb 38 2001. • Biodiversity in conservation and eco- Within this category, three sub- development sectors have been identified, namely, the • Anti-pollution and anti-degradation Arts, Heritage (both Cultural and of the environment Natural), and Environment, each of • Temporary relief from disasters and which has its own qualifying criteria. the prevention of erosion of the Although the focus of the report environment is the Charities Agency, this Agency • Regeneration of effected should be born in mind as it overlaps environments with many of the concerns of the developmental and welfare sectors. In the 2000-2001 funding year, a Indeed, some organisations have found total or R9.8 million was dispersed that their areas of interest overlap. In one under the Arts, Culture and national case, a decision was made to apply to Heritage category. this Agency on the assumption that there 39 In the 2001-2002 funding year, would be less competition for funds. this had increased dramatically to R48 In the current (2002-2003) round million, out of an available R99.3 of funding, the category is open to a million. wide range of funding applications. Preference is however given to proposals 1 .7 DETERMINING THE TOTAL that promote job creation, skills transfer, ALLOCATION equity and redress of historic 40 Due to the significant roll out imbalances, and Nation building. costs involved in establishing the Within the Arts sub-category, National Lottery, the Operator is not both major project funding applications expected to be able to pay out 30% on and creative development grants will be all ticket sales immediately. Instead, the considered. In addition, applications percentage given to good causes is only from festival organisers, organisations expected to average out at 30% over a involved in the production of films and seven year period. Thus, contributions documentaries, organisations involved in are expected to rise from 10.16% in year public art, and grants to projects in the one of the contract to 40.58% in year rural areas. seven. Within the Heritage sub- There is, however, some category, three priority areas are uncertainty as to how this “averaging identified: out” has been determined. Whilst the first and last years percentages have • Architectural, archaeological and been announced publicly,41 it is not clear living heritage conservation whether fixed percentages for each of

13 the seven years have been determined ex 1.7.1 Gross sales, prizes, and good ante, or whether the Operator (Uthingo) cause determination has the discretion to adjust these within Based on figures released by the limits imposed by the 30% average Uthingo, as well as extrapolations based disbursement clause. Moreover, it is not on the published average weekly Lotto clear what, if any, sanctions can be and scratch card sales, Brian Bailey of imposed if the yearly targets are not met. the Helderberg Society for the Aged has The significance of this is as prepared the summary analysis on page follows: if the Operator has the 15.44 The figures should be treated as discretion to make only minimal provisional only. There is still no payments to the NLDTF until well into reliable information for the total good the contract, then, in effect, considerable cause allocation. Of great concern are amounts of interest free loan capital have the huge amounts of money available to been made available. Some have good causes that have yet to be speculated that, given the current disbursed. percentage payments made to the NLDTF, this amounts to R200-R300 million per year.42 This arrangement could well be permissible under the terms of the contract entered into with Uthingo, and there is no reason to suspect that anything untoward is occurring. However, in the interests of transparency, it is vital that this issue be clarified publicly. Attempts to get hold of a copy of the contract from Uthingo, the National Lotteries Board, or the Department of Trade and Industry, all failed. Brian Bailey, who has produced the most comprehensive financial analysis of the Lottery to date, was similarly unsuccessful in his attempts to get hold of the contract. The reason stated for this failure to disclose information is that (a) Uthingo is a private company, and cannot therefore be compelled to reveal information, and (b) making details of the contract public would give Uthingo’s competitors access to privileged information when competing for the license to operate the 2007 Lottery.43

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Summary Analysis All amounts in rand LOTTERY SCRATCH TOTALS CARDS LOTTERY & 2-Jul-02 ESTIMATE SCRATCH CARDS

Gross sales 8,884,390,136 542,225,724 9,426,615,860 VAT paid to State 1,091,065,455 66,589,124 1,157,654,579 Net sales 7,793,324,681 475,636,600 8,268,961,281 Prizes paid or allocated 4,002,318,274 237,818,300 4,240,136,574 Licensee’s fees and profit – 20% 1,558,664,936 95,127,320 1,653,792,256 Amount for good causes 30% 2,337,997,404 142,690,980 2,480,688,384 Interest “earned” on “G C” money 395,589,031 13,720,184 409,309,215 Total to be accounted for 2,733,586,435 156,411,164 2,889,997,599

Paid or allocated to date to Good Causes 301,419,575 301,419,575

The missing amount 2,432,166,860 156,411,164 2,588,578,024

Theoretical allocation Charities 820,075,931 46,923,349 866,999,280 Less allocated (301,419,575) - (301,419,575) 518,656,356 46,923,349 565,579,705 Arts and culture 820,075,931 46,923,349 866,999,280 Sport 820,075,931 46,923,349 866,999,280 Miscellaneous and costs 273,358,644 15,641,116 288,999,760 Net amount which should be available 2,432,166,862 156,411,163 2,588,578,025

PART TWO: ATTITUDES, 2.1 PERCEPTIONS OF THE PERCEPTIONS, HOPES LOTTO: CIVIL SOCITY, THE In the second part of the report LOTTERIES BOARD, we focus on the perspectives of the GOVERNMENT various role players involved in or Social perceptions, whilst affected by the National Lottery. As subjective and often difficult to quantify, stated above, the purpose is primarily to are an important determinant of the highlight issues of concern. In some success or failure of all government cases, these issues are based on initiatives. Perceptions are especially misunderstandings that can easily be important to the success of the National corrected. In other cases, the concerns Lottery, especially in light of the huge are more serious, and must urgently be public interest in both the gaming addressed if the non-profit sector wishes operations and the distribution of monies to obtain maximum benefits from the to good causes. Lottery.

15 In order to unpack the views of funds, it is hardly constructive to the stakeholders, a number of small, proper administration and utilisation of medium and large non-profit money raised through the Lottery. organisations in the charities, sporting The Lotteries Board has also and cultural sectors were consulted.45 been criticised for treating the money This was supplemented with interviews raised for good causes as a state with representatives of parliament, the resource, to be dispensed as a privilege, Department of Trade and Industry, and as opposed to something that can the National Lotteries Board. rightfully be claimed by non-profit organisations providing services to the 2.1.1 Those pesky applicants: The poor, or addressing social, cultural and Lotteries Board and the non- sporting needs that the state is unable to profit sector fund. In opposition to this, many At the outset, it must be noted organisations consulted felt that the non- that the report is unable to offer any profit sector has a right to feel entitled to substantial insight into the day-to-day this money. That is why the National operations of the Lotteries Board. For a Lottery was established, and why the variety of reasons, the Board operates in Lotteries Board is given responsibility a relatively non-transparent manner. for maximising the amount of money Very little information is provided to the available to the NLDTF. public regarding the amount of money The Lotteries Board is aware of available for distribution, or the such criticism, and has chosen to restrict procedures involved in the distribution all contact with the general public to the process. Although two annual reports occasional press release and interviews have been published, these do not satisfy with its Player Services Media Liaison the public demand for accountability, Officer. On one level, this is and this reluctance to communicate understandable, and there are good openly and proactively is largely reasons why certain Board and responsible for the considerable feelings Distribution Agency members are of mistrust encountered in the non-profit “shielded” from the public. The success sector. Although the Board has promised of the allocation process depends on the [May 2002] to set up a website which ability of the Board to make releases such information on an ongoing independent, objective decisions. Were basis has been made,46 this has yet to be the public and hopeful applicants honoured. allowed to communicate directly with Much of this ill-feeling is Agency members, this process would be attributed to the attitude of the staff at seriously jeopardised. As such, some of the Lotteries Board. One informant the criticism regarding the Board’s described this as a “siege mentality,” reluctance to discuss specific whereby the Board has responded to applications needs to be contextualised. public criticism by closing ranks and Certainly, Distribution Agency members treating all queries and correspondence appear to be grateful for the fact that as an attempt to undermine their powers. they are able to operate in a confidential, Although much of this ill feeling can be private manner, and believe that the traced back to the public outcry over the increased protection offered by the Agencies initial hesitance to disburse

16 Player Services Media Liaison Office is Whilst it is correct to highlight a good thing.47 this responsibility to ticket holders, this Whilst accepting the need to seems an unduly restrictive manner in limit certain forms of communication, which to define the accountability of the the public and potential applicants have Board. The intention in establishing the a right to expect greater transparency National Lottery was more than simply from a Board that is established by Act to regulate the booming underground of parliament. If for this reason alone, it gaming industry. Instead, the Lottery is important that the Lotteries Board was understood as a means to raise and improve its relationship with the sectors direct money to good causes that might and interest groups it is supposed to not otherwise receive sufficient support serve. Ideally, the Board should seek from the state or the private sector. actively to encourage a healthy, ongoing Accordingly, as noted in 1.3 above, it is relationship with the non-profit sector, instructive that the Lotteries Act defines and develop a common vision as to how one of the tasks of the Board as ensuring the proceeds of the Lottery should be that “the net proceeds of the National distributed. If this were to occur, the Lottery are as large as possible.”50 non-profit sector and the state would, in Clearly, this suggests that the Board’s partnership, be able to leverage accountability goes beyond a simple potentially enormous amounts of money legal accountability to ticket holders, as and utilise this in a focussed and the purpose of maximising net proceeds constructive manner. is to ensure that greater amounts of For as long as an “us” and money are available to good causes via “them” attitude prevails, there can be the National Lottery Distribution Trust little hope of this occurring. Fund (NLDTF). Maximising this is as important as ensuring that the Lottery is 2.1.2 Accountable: to whom? conducted in a way that is fair to all The Board believes that its job is “participants”. to ensure that the commercial aspects of Other responsibilities identified the Lottery are conducted within the by the Act reinforce this broader parameters of the legislation and that the conception of accountability. These Operator is held to public account. As include the establishment and regulation Sershan Naidoo, the Player Services of the NLDTF, as well as widely Media Liaison Manager points out, no construed advisory functions. In one buys a ticket because a portion of particular, the Board is directed to advise this money goes to “good causes.”48 the Minister on matters such as the People buy tickets because they hope to percentage of money (over and above win prizes and it is the Lotteries Board’s the statutory minimum) allocated to each job to ensure that the interests of such distribution category,51 the “efficiency” “players” are protected. This, it must be of legislation “pertaining to lotteries and said, is in keeping with the definition of ancillary matters”52, and the a “participant” in the Lotteries Act, i.e., establishment and implementation of “a “a person … in possession of a valid social responsibility programme in ticket in the lottery”.49 Players must be respect of lotteries”53. protected, and this is a statutory If it is true that the Board’s responsibility of the Board. responsibilities implies that it is

17 accountable to both players and the nominations to the Distribution Agencies broader public, then this widens the was cursory, at best, and there has not parameters within which lobby groups been an open public debate as to how the can pressurise the Minister and the money raised through the Lottery should Lotteries Board. Higher percentages may be distributed. be awarded to some categories, as long Applications submitted to the as these remain above the statutory Distribution Agency are not always minimum. (In practice, this is already acknowledged, and frequently get lost. occurring). When organisations attempt to find what On the positive side, the Board has happened to their applications, they acknowledges a need to improve its complain of being passed from one communication strategies, and has person to another. Perhaps most promised [20 May, 2002] to place significantly, decisions by the posters at all 8,000 Lotto stations listing Distribution Agencies are never the 1,240 recipients of Lottery funding. explained. Unsuccessful applicants The poster is to be sponsored (R35,000) receive cursory, one-line letters, in by ABSA bank, and will not be paid for which they are informed of the Agency’s out of money demarcated for good cause decision and invited to re-apply next allocation. In addition, the Board has year. Some applications are partially promised to start a web site providing funded, but no explanations are offered up-to-date information on the allocation as to why this is the case, or even as to process. what part of the proposal the money is Although there is, as yet, not intended. evidence of either promise having been The Lotteries Board kept, such moves are to be welcomed, acknowledges that its decision not to and are, hopefully, suggestive of an provide reasons for the success or failure attitudinal shift of attitude within the of funding applications was an error, and Board. have promised [20 May, 2002] to do so with the current (2002-2003) round of 2.1.3 The Lotteries Board – applications. 54 As with other related Professionalism and promises, there is no evidence to suggest consistency that the Board is able to honour this Another very widely shared view commitment, and recent rejection letters is that applications for funding are not continue simply to inform applicants that dealt with in a professional and they “did not meet the criteria.” consistent way. To a significant extent, This failure to explain why or this attitude is born out of the how decisions are reached helps circumstances in which the Distribution reinforce a more general concern with Agencies were constituted. As noted the consistency of decisions taken. For above, the Agencies were only example, there is considerable established a year after the inception of unhappiness amongst the welfare sector the National Lottery. Prior to this, little about the fact that some organisations or no thought seems to have gone into had their applications for funding turned how the money would be distributed, down on the basis that they had financial and what principles would govern reserves or Trust funds, and were thus distribution. The call for public not in danger of immediate closure,

18 whilst other organisations with financial operations, for example, those run by the reserves were granted funding. Community Chest, Viva and Ithuba This perception may well be Trusts, were forced either to close down incorrect, and there could be a good or to compete under very different reason why the decision not to fund circumstances. Many beneficiaries of organisations with financial reserves was these operations were affected badly, not applied consistently. Once again, if and have been forced to scale back their there was greater transparency in the operations until alternative sources of way the Agencies operated, and if the funding can be located. According to Joe reason for funding decisions was Foster, chairperson of the Lotteries explained to all applicants, then this Board, these regulations are intended to concern may well be addressed. protect the public from dishonest In order to function in a fundraisers and scratch card operations, consistent and transparent fashion, it is rather than unduly to restrict the capacity vital that the Board change its attitude to of organisations to raise their own the non-profit sector it serves. To do funds.55 One of the functions of the this, it is clear that the administrative Lotteries Board is to monitor and ensure capacity of the Distribution Agencies that organisations register with the will have to be enhanced considerably. Board, and comply with its regulations. In theory, staff members at the Central Some non-profit organisations Distribution Agency are expected to have dismissed this as nothing more than perform most of the legwork, sifting an attempt to protect the monopoly through and pre-screening applications, enjoyed by the National Lottery. Others and presenting these to the nominated have suggested that the requirements representatives for each category. governing the operation of these lotteries In practice, staff shortages at the are too onerous, especially regarding Lotteries Board, as well as a lack of prize money, making it very difficult for sector-specific skills, mean that the non-profit organisations to raise funds members of the public nominated to via their own lotteries. each of the Agencies have had to take on Recent amendments to the board a huge administrative role. In the provisions governing society lotteries first round of emergency applications, make it possible for organisations to for example, Agency members in the continue to raise up to R12 million charities sector went through all of the annually. Several non-profit 3,000 applications themselves. This is a organisations, notably the Nelson complete waste of their time, and makes Mandela Children=s Fund, the South nonsense of the Lotteries Board’s claim African Blind Workers= Organisation, to have established a viable and the Cotlands Baby Sanctuary, the professional distribution system. National Thoroughbred Trust, and the Variety Trust, have registered with the 2.1.4 The loss of funding from National Lotteries Board to legally alternative (scratch card) conduct society lotteries.56 Although this gaming operations is an encouraging start, the viability of The nationalisation of the lottery society lotteries has yet to be meant that a variety of earlier gaming demonstrated, and it remains to be seen

19 whether the domestic gaming market is the non-governmental sector.”58 In large enough to allow any small lottery response, SANCOCO, in conjunction to compete with the National Lottery. with the Non-profit Partnership, have For their part, the Lotteries Board developed an alternative proposal for an and the Department of Trade and independent Charities Distribution Industry are adamant that there is Agency.59 This was submitted to the sufficient space for society lotteries to Lotteries Board as well as the Minister compete, and to raise additional funds of Trade and Industry, but was never for the non-profit sector. Moreover, they acknowledged officially. claim that the former beneficiaries of The Board is not sympathetic to scratch card operations have exaggerated such criticism. When asked about the greatly the extent of their dependence on SANGOCO/NPP proposal, they pointed these funding sources, and that they are out that these organisations “basically already receiving Lottery grants vastly in wanted to become the Distribution excess of any funding they received Agency” and that “The Act does not from the old scratch card operations. allow this. People, not organisations, There is some substance to this point: In make up the Agency.”60 one case known to the author of this From a legal perspective, this report, an organisation that is attitude is understandable. The Act is particularly critical of the National clearly concerned to ensure the Lottery has just received a grant exactly independence of the distribution process ten times that which it used to receive and, for this reason, places considerable from the Community Chest.57 emphasis on the need to ensure that In summary: it is important to neither parliament nor any particular note that there is a very strong sense organisation or lobby group is able to within the welfare and development exert undue influence on the Distribution sector that the former scratch card and Agencies.61 Clearly, this precludes the gaming operators who lost out as a result possibility of any organisation becoming of the National Lottery should be a Distribution Agency. At the same time, compensated for the reduction in their it raises the question as to whether the revenues. Lotteries Board – which, quite clearly, is an organ of state62 – should be able to 2.1.5 Relationship between the influence the day-to-day operation of the Distribution Agencies and the Distribution Agencies. This is explored Lotteries Board (1): Excluding in more detail in the section that follows. civil society and existing grant The Lotteries Board is no less makers? sympathetic to calls that they utilise the The decision to make the experience of existing grant-makers. National Lotteries Board responsible for Their mandate, the Board insists, is to the distribution of funding has come fund organisations and projects, not under criticism in some quarters. The funders. In particular, the Board points South African National NGO Coalition, out that the total amount of money for example, cites this as “another allocated by Viva and the Community example of the contempt with which Chest combined was only R30 million a Government, and in particular the year, and that these organisations are Ministry of Trade and Industry, views simply not equipped to handle the R430

20 million which is currently available to When approached about this, the the Distribution Agencies.63 spokesperson for the Minister of Trade This response is not entirely and Industry, Mr Edwin Smith, convincing. The question is not whether confirmed that the DTI was willing to the Community Chest and other grant consider proposals to decentralise some makers take responsibility for of the decisions pertaining to allocation. distributing all available funds, but, As long as the decision making-powers rather, whether the task of distributing remain with the Board, there does not the NLDTF to good causes could be appear to be any reasons why this should performed more efficiently if the not involve some form of consultation extensive regional networks and grant with existing grant-making making expertise of existing funding organisations.65 conduits could be employed. One of the criticisms often 2.1.6 Relationship between the levelled against the Distribution Distribution Agencies and the Agencies is that they lack an “on the Lotteries Board (2): A conflict ground” presence in any of the three key of interest? sectors or categories in which they From a legal perspective, it is not operate. Although Agency staff do certain whether the Board is entitled to sometimes visit applicants, this is done play a direct role in the process of infrequently and on an inconsistent allocation, whilst having at the same basis.64 This shortcoming is exacerbated time responsibility for regulating this by the fact that the Board sits in Pretoria, same process. A referee cannot which removes it further from the ordinarily be a player in the same game disparate communities seeking support. that she is overseeing! One way to avoid this Legal opinion on this relationship shortcoming may be to decentralise the is being sought, and will be integrated Distribution process. Provincial or into the report as soon as it is available. perhaps Regional Distribution Agencies At face value it is fair to suggest that the would be far more efficient, in that they close operational relationship between would be responsible for considering the Board and the Distribution Agencies fewer claims, and would have a far makes it difficult for these latter to greater understanding of local dynamics. function as an arms-length policing Applications could still be pre-screened mechanism. In the UK, by contrast, by the Central Distribution Agency in considerable effort has been made to Pretoria to ensure general compliance distinguish the bodies responsible for with the funding criteria, whilst more policy formation and regulation from the conceptual decisions as to the bodies responsible for overseeing the appropriateness of funding applications allocation process. would be taken at a Provincial level. In The Lotteries Board does not regions or Provinces where existing believe this relationship is cause for grant makers and funding conduits exist, concern. As they put it: these could play an active role in The National Lotteries Board has been assisting the Provincial Distribution charged by the Minister of Trade and Industry to set up and manage the Agencies.

21 Central Applications Office. This is the Lotteries Board identifies a list of office that offers administrative support nominated beneficiaries, who can be to the Distributing Agencies. The Agencies have been appointed by the assured of regular funding. This category Minister DTI. In term of the Lotteries would include organisations that take on Act, the Agencies, together with the long-term funding commitments, for NLB and the Minister are responsible example, child welfare organisations for policy formulation. It is the function who are responsible for looking after a of the Agencies to then adjudicate the applications. The Board, as trustee of child for many years. the NLDTF, oversees the distribution of The third issue concerns the funds and reports on this to Parliament degree of organisational, administrative in the Annual Report of the NLDTF. and financial capacity that can The Agencies report to the Board at a legitimately be expected of applicants. frequency determined by the Board.66 Presently, applicants are expected to be 2.1.7 What sort of applications registered organisations, and be in a should be funded? position to furnish (usually three years) Three issues need to be raised audited financial statements. Opinions here. Firstly, the question of whether on the merits of this vary enormously funding should be short-term and project within the sector. For some, this is based, or whether funding should be unduly restrictive, as it effectively available for longer-term projects and prevents many unregistered community core organisational expenses as well. At based organisations (CBOs) from present, funding is geared exclusively receiving funding, despite the fact that towards the former. However, given the many of these organisations are very effective at delivering services at stated intention of the National Lottery 69 to introduce a degree of financial community level. Others are quick to stability and predictability into the non- point to the poor track record of grants profit sector,67 a call for longer-term administered by CBOs, and are generally funding would appear appropriate. supportive of the need to ensure One way to structure this would stringent financial accountability. The Lotteries Board, largely in be to introduce a dual distribution 70 system, whereby applications could be response to criticism from parliament, made for annual expenditure, typically is attempting to make it easier for CBOs focussed on a specific project, or for a to apply for funding. This is seen as an longer-term combination of project and adaptation to the changing nature of core organisational funding. As the South Africa, and of the developmental licence to run the National Lottery is sector in particular. Thus, according to granted for a seven year period, such Mr Alister Ruiters, the Director-General applications could be for a period of of Trade and Industry, the principle of three to four years, i.e., half the life of offering smaller grants to help smaller the Lottery. The Department of Trade organisations to get started had been and Industry has indicated that it is accepted by the “adjudicating panels” willing to entertain such a request.68 [Distribution Agencies], whilst the strict Secondly, and related to the requirement that only juristic persons objective of introducing a degree of [i.e. registered organisations] can apply financial security into the non-profit for funding had been relaxed, and is now sector, it has been suggested that the only enforced with larger organisations.

22 Thus, according to Ruiters, a woman of information informing decisions taken hoping to start a community crèche can by the Lotteries Board, and by now apply on the strength of “a letter parliament. As noted above, the Board from a person of standing in the lacks the capacity to make systematic community.”71 and regular visits to applicants, and to It is not clear whether and to audit properly their operations. The what extent this claimed relaxation of Board has only five field officers the rules has actually occurred. (although it hopes to increase this to Moreover, as the stipulation that only nine75), and operates solely at a national juristic persons may apply for grants is a level. As such, it is difficult to see how it statutory one,72 it is highly that either the is able to make informed decisions Distribution Agencies or the DTI has the regarding the extent to which power to take such a decision. organisations are, or are not, The main way in which the “transformed” (whatever that is taken to Board is able to facilitate broader access imply); or even to gather meaningful is by encouraging larger non-profit information about what the organisation organisations to form partnerships with applying for funding actually does and un-registered CBOs. The larger which interest groups it actually serves. organisations will, it is hoped, assist the In one case, a senior member of CBOs to improve their financial and the Central Distribution Agency openly administrative capacity, and help ensure challenged an applicant about the racial that the funds are administered as composition of its senior management, intended. The CBOs, in turn, will bring without having any direct contact with their close contact with “communities” the organisation.76 Surely it is a to the partnership. This will improve the legitimate expectation that the Board capacity of both partners to deliver requests information about how an services efficiently. Such partnerships applicant operates, how efficiently they are meant to foster empowerment deliver services, what percentage of relationships, and not indefinite funds go to administration and what partnerships.73 percentage goes to services, etc., before Whilst supportive of the need to making sweeping statements about broaden funding channels, many larger degrees of “transformation” and political organisations are, understandably, acceptability. concerned about the impact of this shift Whilst the concerns of larger on their operations. Firstly, they are more professional organisations are concerned about a general tendency for valid, it is clearly important to broaden Board members (and parliament) to the net of potential funding, and the make sweeping generalisations about decision to allow CBOs to apply for what the Chair of the Portfolio funding in partnership with non-profit Committee on Welfare describes organisations has been received cursorily as the “eighty percent” of positively. It will be interesting to see organisations that existed “before how this evolves over time: what types transformation” and which “served of partnerships are formed, how the certain populations.”74 CBOs benefit from this funding, and Such generalisations about civil whether the CBOs are able to use this society organisations point to the paucity

23 money to develop into sustainable 2.1.8 Provincial – Regional bias of organisations or not. allocations At the same time, it is not clear The fact that one of the criteria how the larger non-profit organisations for the allocation of funds is the are to be compensated for entering into provincial distribution of ticket sales is partnerships with CBOs. The application often criticised, in that it reinforces forms makes provision for “reasonable” existing inequalities between the wealthy reimbursement for organisational time and poor provinces. When this was spent in mentoring the CBO, but this is discussed in the Social Development an ill-defined term. The Board Portfolio Committee in October 2001, complains that many of the applications Ms Mamphi went so far as to suggest received to date make vastly inflated that she “could not believe that claims, whilst others have not claimed Parliament had passed legislation which for money at all.77 Again, one will have perpetuates poverty.”78 to wait until the next round of funding As the figures below decisions are made before passing demonstrate, this is a valid concern. In judgement on the way in which this the financial year ending March 31, the principle is being applied. distribution was as follows (for full details, see Appendix A: Distributions to date).

Eastern Cape

Free Provincial State

14 7 Gauteng 6 5 KwaZulu 2 Natal

6 Mpumalanga 39 7 North West

14 Northern Cape

Northern Province

Western

Cape

24 No comparable figures exist for the as to the future of these categories, and period thereafter, although the Lotteries as to how the monies accumulated in Board claim to have corrected some of these might be distributed. As an these distortions in the allocations made emergency measure, the Minister should during the 1 April 2001 to 31 March consider using existing grant-makers to 2002 period.79 help disburse funds.

3. CONCLUSION – CRITICAL 3.2 Decentralise the process of ISSUES allocation This report has done no more than There is no reason why all flag some of the key issues concerning decisions pertaining to allocation should the impact of the National Lottery on the be taken at a head office level. In the non profit sector. It is not intended to be UK, the allocation process has been prescriptive, but, rather, to provoke decentralised. Decisions regarding debate amongst various role players. smaller applications are taken by With that in mind, the following four regional staff, and it is only once points might help focus discussion. applications cross a certain threshold that the central office has to play a role. 3.1 Empower the Distribution Appropriate accounting procedures Agencies ensure that the regional offices act Above all, and regardless of any within the parameters of the law and other changes that need to occur, the respect budgetary limitations, whilst funds available for Distribution need to modern computer technology ensures be distributed efficiently and timeously. that the decentralisation process does not In the 2001-2002 funding cycle, barely entail an unnecessary duplication of half (R223 million) of the money administrative personnel and resources. available for distribution (R439 million) In order to do this effectively, it was disbursed. This is a national is necessary to make a greater disgrace, and cannot be allowed to distinguish between the roles of the continue. Lotteries Board and the Distributions As discussed in 2.1.7 above, the Agencies. If the former acts as a Distribution Agencies have only five regulator, and oversees the operations of field officers, and are hoping to expand a number of independent Distribution this to nine. This is completely Agencies – as the Act appears to imply, inadequate. Until sufficient staff and and as is the case in the UK – then it will resources are allocated to the running of be far easier to disburse funds in an the Agencies, this situation is likely to efficient and informed manner. This will get worse, whilst continued increases in allow the various Distribution Agencies the total amount of money available in to utilise the experience of local and the National Lottery Distribution Trust provincial organisations, including Fund are likely further to strain the established grant makers, without administrative capacity of the Agencies. surrendering their own autonomy. Finally, the distribution of funds By contrast, in South Africa the from the RDP and Miscellaneous Central Distribution Agency is, to all categories has, effectively, ground to a effects and purposes, part of the halt. Urgent decisions have to be made Lotteries Board. In addition to the fact

25 that this may well be in violation of the priorities change, making it difficult for Lotteries Act (57 of 1997), it is also an organisations to anticipate a reliable obstacle to the efficient operation of the source of medium-term funding. Agencies. Until the Agencies are able to Funding is largely short-term (1 year) operate at arms length from the Lotteries and project-specific. The DTI claims that Board, and from parliament, it is a core objective of the Lottery is to unlikely that they will ever develop the ensure that non-profit organisations are hands on expertise and the capacity to able to obtain a degree of long-term take independent decisions needed for funding security, tied to the seven year the Lottery to succeed in its objective of cycle of each Lottery contract.80 Yet the providing reliable, sustainable, funding entire nature of the funding process for the non profit sector. seems to preclude this, in that applications have to be made annually. 3.3 A need for transparency Moreover, in-so-far as each Distribution The complaint most frequently Agency is free to alter its criteria for encountered about the Lotteries Board priority funding annually, organisations remains their perceived lack of can (and, in the case of Charities, have operational transparency. This stems already) find themselves in a situation largely from their somewhat where they have to “reinvent” controversial role in the distribution themselves annually in order to apply for process. Decisions made are seldom, if funding. ever, explained, introducing further Surely some combination of uncertainty into the application process. longer-term funding, linked to both Despite a promise to rectify this in the project and organisational funding, and current round of funding applications, shorter-term, project-based funding, organisations are still being told that would offer greater security and their application was turned down enhanced opportunities for the non-profit because they “did not meet the criteria”, sector? without even being told why this is the case. The fact that neither the Lotteries Board (as the regulator) or the REFERENCES Distribution Agencies (as the bodies Anon (2000) “Fundraising bodies responsible for distribution), are able to register for lotteries,” in Dispatch account for their decisions is a serious Online, July 7 indictment of their commitment to the (http:// www.dispatch.co.za/2000/07/07 principles of transparent and /southafrica/LOTTO.HTM) accountable governance. Christiane Duval (2001) “Society Lotteries: Summary Guidelines” 3.4 Link funding guidelines to a (http://www.dma.org.za/). medium-term developmental National Lotteries Board (2001). Annual agenda Report. Mimeo At present, there does not appear National Lottery Distribution Trust Fund to be any clear developmental agenda (2002a) “Report: Allocations for the informing the allocation of funding in Period 1 April 2001 to 31 March 2002”, any of the three core sectors: charities, mimeo. sports, and arts. Instead, funding

26 National Lottery Distribution Trust Fund Interviews (2002b) “Guidelines and Application Forms,” mimeo. Brian Bailey – Heldeberg National Gambling Board of South Society for the Aged Africa (n.d.) “About us” Rob Davies – MP, Chair, (http://www.ngb.org.za/about. htm). Standing Committee on Finance Social Development Portfolio Graham Falken – Community Committee (2001) “Minutes of meeting: Arts Project Disbursement of funds generated Leon Isaacson – ex Nicro. by the State Lottery: Briefing by DTI (3 Amelia Jones – Community October),” (http://www.pmg.org.za). Chest of the Western Cape Xako, Simphiwe (2001) “ANC wants to André Kallis – National change lotto bill,” Business Day (4 Council for Child and Family Welfare October, 2001). Brian King – Johannesburg Child Welfare Websites Polani Makadeni – Emonti FM. Anon – http://www.2600.co.za/lotto/ Hettie Marais – National Dispatch – www.dispatch.co.za/ Council for Persons with Physical Lottery Insider – Disability www.lotteryinsider.com Moshe More – SANGOCO LottoFun: The South African National Beauty More – Thusong Youth Lottery – www.lottofun.co.za Club National Gambling Board of South Sershan Naidoo – Media Africa – www.ngb.org.za spokesperson, National Lotteries Board Uthingo Management Pty (Ltd) – Lynne Perry – Johannesburg www.uthingo.co.za Child Welfare Sophie Perryer – ArtThrob Newspapers Edwin Smith – Ministerial Business Day (South Africa) Spokesperson, Department of Trade and The Mail and Guardian (South Africa) Industry The Sowetan (Johannesburg) Mike Thlala – Pan South The Star (Johannesburg) African Language Board The Sunday Times (South Africa) Louis Vale – Grassroots Adult Education and Training Trust Brenda Taylor – Johannesburg Child Welfare Anonymous interview – Charities Distribution Agency

27

APPENDIX A: DISTRIBUTIONS TO DATE

As noted in the body of the report, the figures presented here are based on those provided in the annual reports submitted by the Lotteries Board. These offer little detail, and do not make it clear how much money was carried over from the first round of distribution (up until 31 March 2001) and how much money stems from the second round of distribution (up until 31 March 2002).

1. 2000-2001 Allocations81 The distribution for the period up to 31 March 2001 is as follows:

Province Percentage Miscellaneous Charities Sport & Arts, Culture ticket sales Purposes * Recreation & National Heritage Percentage 100 % of allocated to emergency 59.6% 27.3% 13.2% category funding round

Eastern Cape 7% R 317 000 R 6 001 R 2 509 R 1 495 000 178 800

Free State 5% R 107 000 R 2 037 R 1 580 R 440 000 000 000

Gauteng * 39% R 2 425 000 R16 783 R 7 074 R 600 000 000 078

KwaZulu Natal 14% R 121 000 R 6 718 R 1 351 R 2 819 000 408 000

Mpumalanga 7% R 65 000 R 906 R 2 330 R 700 000 930 400

North West 6% - R 915 R 18 R 1 050 000 678 149

Northern Cape 2% R 42 000 R 1 311 - R 95 000 800

Northern 6% R 90 000 R 683 R 2 848 R 871 000 Province 000 190

Western Cape 14% R 935 000 R 8 859 R 2 533 R 1 747 000 377 360

TOTAL R 4,102,000 R R R 9,817,000 44,216,371 20,244,977 R74,278,348 * These figures include National Bodies based in Gauteng

28 2. 2001-2002 Allocations82 In the period 1 April 2001 to 31 March 2002, the breakdown was as follows:

Province Percentage RDP Miscellaneous Charities Sport & Arts, ticket sales Purposes Recreation Culture & National Heritage Percentage (relative to total money Nil Nil 46.3% 32.1% 21.6% actually allocated) Percentage (relative to total money 23.5% 16.3% 11% available for allocation) No of Nil Nil 2 254 535 742 applications No of Nil Nil 851 251 139 beneficiaries

Money R R R R available R 21,960,708 63,921,436 154,705,387 99,313,412 99,313,412 for

Distribution R439,214,364

Eastern n. available Nil Nil R10,287,991 R12,177,635 R3,445,504 Cape

n. available Nil Nil R4,404,672 R2,896,583 R987,460 Free State

n. available Nil Nil R36,858,077 R18,274,807 R17,012,680 Gauteng**

KwaZulu n. available Nil Nil R15,177,155 R10,862,528 R5,603,360 Natal

n. available Nil Nil R2,400,544 R3,495,400 R400,000 Mpumalanga

n. available Nil Nil R2,143,960 R3,185,276 R2,642,500 North West

Northern n. available Nil Nil R3,044,865 R3,430,321 R498,247 Cape

n. available Nil Nil R2,530,900 R5,191,217 R2,971,000 Limpopo

Western n. available Nil Nil R26,433,111 R12,147,771 R14,535,663 Cape R R R103,281,275 71,661,538 48,096,414

TOTAL n. available Nil Nil

R223,039,227 • These figures include National Bodies based in Gauteng

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ENDNOTES 1 Details from the National Gambling Board of South Africa http://www.ngb.org.za/about.htm 2 Details from http://www.lotteryinsider.com/lottery/uthingo.htm; http://www.nationallottery.co.za/IE/Profile/ WhoAreWe.htm 3 The Sowetan, September 17, 2001. 4 Information from the Uthingo website. 5 All figures provided by Brian Bailey, interview 12/06/2002, and correspondence, 01/07/2002. 6 National Lotteries Board (2001). 7 Interview with Sershan Naidoo, 20/05/2002. 8 I have not been able to get access to the contract entered into by Uthingo. The information in this section is drawn largely from my interview with Brian Bailey 12/06/2002. 9 Nigel Bruce, for example, has claimed that Uthingo is “growing obscenely rich on the proceeds alone of the cash flows it handles” (correspondence from the DA). As with most of Bruce’s claims about the National Lottery, this is part phantasy, part simply ignorance. 10 This appears to be the case, although I have not been able to obtain a copy of the contract to verify it. 11 This sentiment is widely held in the non profit sector, and has been expressed within the Portfolio Committee for Welfare and Development. Interview with Rob Davies, 11/06/2002. 12 Interview with Edwin Smith, spokesperson for Alec Erwin, 28/06/2002. 13 Interview with Edwin Smith, spokesperson for Alec Erwin, 28/06/2002. 14 National Lotteries Act 57 of 1997, s.31(1). 15 Business Day 04/10/2001. 16 Interview with Sershan Naidoo, 20/05/2002. 17 Information provided by National Lotteries Board (2001); and National Lottery Distribution Trust Fund (2002a) 18 Interview with Rob Davies, 11/06/2002. 19 National Lotteries Act 57 of 1997, s.27(1). 20 Interview with Sershan Naidoo, 20/05/2002; Interview with Edwin Smith, 28/06/2002. 21 National Lottery Distribution Trust Fund (2002a). 22 National Lotteries Act 57 of 1997, s.28(1). 23 Dr Teboho Maitse (chair), Mr Lionel Louw, Mr Henry Shaw, Mrs Margaret Grobbelaar, Mr Arthur Magerman, Ms Gail Smith, Mrs Joyce Matube, Mr Musa Madonsela, Mr Vincent Daniel, and Ms Boitumelo Setalentoa (Government Gazette No 22040, 1 February 2001; Social Development Portfolio Committee (2001). 24 Confidential interview with Agency member. 25 Correspondence with Sershan Naidoo, April-May 2002. 26 National Lotteries Board (2001). 27 Confidential interview with Agency member. 28 Information on Charities taken from the 2002 application forms (National Lottery Distribution Trust Fund (2002b)). 29 Interview with Sershan Naidoo, 20/05/2002 30 National Lotteries Act 57 of 1997, s.29(1). 31 Dr Mathume Phaahla; Ms Kedidimetse Tshoma (chair); Mr Daniel Jordaan; Mr Gideon Sam; and Mr Denver Hendricks (Government Gazette No 22040, 1 February 2001; Social Development Portfolio Committee (2001). 32 Nigel Brice: “Robbing the Helpless to help footballers”, Sunday, September 30, 2001 (correspondence with DA). 33 Information on Sports taken from the 2002 application forms (National Lottery Distribution Trust Fund (2002b)). 34 See, for example, the exceptionally ill-informed article by Barry Ronge, “Lotto’s bad sports,” Sunday Times 1 Aug , 2001. 35 Interview with Sershan Naidoo, 20/05/2002 36 Although one organization was quick to point to the irony that long-standing community arts organizations did not receive funding, whereas former recipients of large state grants, like the Opera, did. Interview with Graham Falken, Community Arts Project (CAP), 12/06/2002.

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37 National Lotteries Act 57 of 1997, s.30(1). 38 Dr Tanya Abrahamse; Dr Razeena Wagiet; Mr Eugine Moll; Dr Nombasa Tsengwa; Ms N Danby; Mr EPM Radebe; Dr Prince Nevhutalu (chair); Mrs DNA Ntela; Mr Vusithemba Ndima; Mrs P Madiba; and Ms GM Masemola (Government Gazette No 22040, 1 February 2001; Social Development Portfolio Committee (2001). 39 Interview with Louis Vale, Grassroots Adult Education and Training Trust, June 2002. 40 Information on Arts, Culture and National heritage taken from the 2002 application forms (National Lottery Distribution Trust Fund (2002b)). 41 National Lotteries Board (2001). 42 Interview with Leon Isaacson, 23/05/2002. 43 Interview with Brian Bailey, 12/06/2002. 44 I have altered the entry for “paid or allocated to date to Good causes” as Bailey’s figure of R80 million does not reflect the published figures for the 2001-2002 funding cycle. 45 In order not to prejudice any organization, reference to specific organizations is not made in this section. 46 Interview with Sershan Naidoo, 20/05/2002. Naidoo assured me the website would be running by early June. 47 Confidential interview with Agency member. 48 Interview with Sershan Naidoo, 20/05/2002. 49 National Lotteries Act 57 of 1997, s.1(xvii). 50 National Lotteries Act 57 of 1997, s.1(10)(b)(iii). 51 National Lotteries Act 57 of 1997, s.1(10)(e) 52 National Lotteries Act 57 of 1997, s.1(10)(f) 53 National Lotteries Act 57 of 1997, s.1(10)(g) 54 Interview with Sershan Naidoo, 20/05/2002 55 Cited in Christiane Duval (2001). 56 Sershan Naidoo, cited in Anon (2000). 57 The Heldergerg Society for the Aged, which was awarded R600,000 in the 2002-2003 funding cycle. 58 SANGOCO proposal. 59 Mimeo. 60 Interview with Sershan Naidoo, 20/05/2002. 61 Interview with Rob Davies, 11/06/2002. 62 The fact that the Lotteries Board is an organ of state has been confirmed by Appeal Court Judge Mervyn King SC (Sunday Times, 18 November 2001 (Business news section).) 63 Interview with Sershan Naidoo, 20/05/2002 64 The Charities Distribution Agency has recently decided to do this in all cases where the grant awarded exceeds R50,000. This is a welcome development, although it remains to be seen whether this will actually happen, and what impact such visits will have on the allocation process. 65 Interview with Edwin Smith, spokesperson for Alec Erwin, 28/06/2002 66 Sershan Naidoo, e-mail response to questions posed by the author, 05/08/2002. 67 Interview with Edwin Smith, 28/06/2002. 68 Interview with Edwin Smith, 28/06/2002. 69 Sentiment relayed by Rob Davies, interview 11/06/2002; Interview with Lionel Louw, 27/06/2002; Social Development Portfolio Committee (2001). 70 Simphiwe Xako, “ANC wants to change lotto bill,” Business Day, 4/10/2001. 71 National Lotteries Board (2001: 4). 72 National Lotteries Act 57 of 1997, s.28(5), s29(5), s30(5), s31(5). In the RDP category, money is to be paid into a designated fund. 73 Interview with Sershan Naidoo, 20/05/2002. 74 Cas Salojee, as reported in Social Development Portfolio Committee (2001: 4). 75 Social Development Portfolio Committee (2001: 4). 76 It is preferable not to reveal the names here. The senior CDA member has since left, however she/he has challenged at least three organisations known to the author on this basis. Of these, one was Johannesburg based, one was a National organisation, and one was a Provincial community arts organisation. To a lesser extent, this sentiment was expressed by one of the two Agency members spoken to, and by a senior

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Member of Parliament. 77 Interview with Sershan Naidoo, 20/05/2002. 78 Social Development Portfolio Committee (2001: 1). 79 Interview with Sershan Naidoo, 20/05/2002. 80 Interview with Edwin Smith, spokesperson for Alec Erwin, 28/06/2002. 81 Information adapted from National Lotteries Board (2001). 82 Information adapted from National Lottery Distribution Trust Fund (2002a).

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