South Africa’s beloved National Lottery faces a potential six-month shutdown, leaving hundreds of charities, community organisations, and even sporting bodies facing financial ruin.
The crisis stems from a tangled web of allegations surrounding the National Lottery Commission (NLC) and the process to appoint a new operator, leaving the future of the lottery hanging precariously in the balance.
The current operator, Ithuba, holds a licence expiring in May 2024. With the appointment of a new operator yet to be finalised, a significant gap looms, potentially halting lottery operations for at least six months, and possibly as long as a year. This delay, sources within the Department of Trade and Industry (dti) confirm, is not due to simple administrative delays. Instead, it is entangled in a complex series of allegations of irregularities, conflicts of interest, and even illegal board appointments.
A source close to the situation revealed last week, "Lottery in South Africa may come to an abrupt stop for about six to 12 months next year. Precipitating this drastic halt of the country’s favourite gambling pastime is a myriad of alleged irregularities in the process under way to appoint the lottery licence operator."
The source further explained that Trade and Industry Minister Parks Tau's failure to meet deadlines could force the government to temporarily cancel the lottery altogether.
The minister's postponement of the announcement of the successful bidder – already delayed three times due to surfacing allegations – highlights the severity of the situation. Several officials within the NLC and the dti have confirmed that extending Ithuba’s licence again would be illegal, given its 18-month extension last year. This leaves a critical time constraint for establishing the infrastructure of a new operator, including ticket machines nationwide, requiring at least six months of lead time.
The consequences of a lottery shutdown are far-reaching. Hundreds of early childhood development centres, old age homes, and charities rely on the NLC’s funding, distributed through the National Lotteries Distribution Trust. Last year alone, R1.2 billion was channelled to these organisations. The absence of the lottery would bring an immediate end to this crucial funding stream. Sporting codes like athletics and swimming, along with organisations such as the SA Sports Confederation and Olympic Committee, also receive significant funding, leaving them vulnerable to severe financial hardship.
The problems extend beyond simple delays. This week, Minister Tau and his team appeared before Parliament’s portfolio committee on trade, industry and competition to address concerns about the NLC and the licensing process. The committee raised serious concerns about allegations of conflicts of interest involving board members and bidding companies, and critically, that the board itself was illegally constituted. Concerns were also raised about the appointment of the NLC commissioner.
Following intense questioning, Minister Tau committed to investigating these allegations, which threaten to derail the entire process. Government officials have confirmed that the minister has not yet received the two recommended bidding operators from which he must choose. While Tau has stated he will not be rushed, insiders suggest that the conflict of interest allegations and the investigation will inevitably cause further delays.
The allegations of an illegally constituted board are particularly damning. Sources claim that the previous trade, industry and competition minister, Ebrahim Patel, allegedly hand-picked board members, bypassing proper processes. This contravenes section 13(2)(a) of the Lotteries Act, which mandates thorough vetting to avoid conflicts of interest. The source further stated that the appointments violated section 195(1) of the Constitution, which outlines principles of good governance, and section 38(1)(a) of the Public Finance Management Act (PFMA). The source alleges that Patel, as the executive authority, failed to ensure fair, equitable, and transparent appointments to the board. Only the board chairperson, Barney Pityana, who underwent parliamentary interview, is considered a legitimate appointment.
These irregularities could render any recommendations from the board illegal, potentially leading to legal challenges if the minister proceeds with announcing a new operator. Front-runners for the R180 billion contract include consortiums like Hosken Consolidated Investments, Gold Rush, and Ithuba, while other bidders have reportedly been eliminated.
The potential consequences extend beyond financial hardship for beneficiaries. The NLC’s annual performance plan for 2023/24, encompassing over 10,000 jobs within the commission and supporting industries, is at risk. The source warned of widespread job losses, disruption to the lottery and sports betting industry, and the potential for unregulated operators to exploit the vacuum. The unlawful return of R300 million to the National Treasury further exacerbates the financial strain. The missed deadlines, the source notes, are partly a legacy of delays from Minister Patel, who significantly delayed issuing the request for proposals.
NLC board chairperson Pityana, while acknowledging the concerns raised regarding conflicts of interest and the commissioner’s appointment, maintains that the board was legally constituted and that all members underwent rigorous selection. He insists the NLC followed strict procedures and that the selection process is subject to independent quality assurance.
However, the severity of the allegations and the potential for legal challenges cast a long shadow over the future of the South African National Lottery. Despite Pityana's assurances, the looming deadline and the lack of ministerial comment leave the future of the lottery, and the thousands who depend on it, uncertain.
