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UKZN Centre for Civil Society 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.
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