South Africa: Minister Responds to Attack On the Lottery

And NLC Board Chairperson Barney Pityana explains why the Lottery returned R300-million to Treasury

On 18 September Members of Parliament in the Trade and Industry Portfolio Committee, some of whom have serious question marks over their integrity, launched an attack on the recently appointed board and commissioner of the National Lotteries Commission (NLC). The attack on the NLC comes ahead of the process to appoint the next licence for running the national lottery, a highly lucrative contract. One of the issues raised by MPs is why the NLC surrendered R300-million to the National Treasury. But the DA member of the committee says questions raised by his colleagues on the committee “paint a distorted picture of the state of play” at the NLC.

The National Lotteries Commission (NLC) says that despite two legal opinions expressing reservations it had to surrender R300-million from its reserve fund to the National Treasury.

Failure to do so would have resulted in both the board and the NLC commissioner being guilty of financial misconduct, NLC Board Chairperson Reverend Barney Pityana explained in a letter to Parliament dated 3 October.

The payment to the Treasury was raised by MPs during a fiery and often ill-tempered meeting when Pityana, NLC Commissioner Jodi Scholtz and other senior executives when they appeared before the trade and industry parliamentary portfolio committee on 18 September.

The NLC had reserves of R1.4-billion at the time of the payment but was only ordered to pay R300-million to the Treasury, Pityana, told Parliament.

The NLC reserve fund ensures that it has sufficient funds in its kitty if cash flow problems arise.

MPs said that the NLC had not answered questions in Parliament sufficiently and instructed Pityana to supply written answers. Pityana has done so.

Parks Tau is the recently appointed Minister of Trade and Industry. Mzwandile Masina is the recently appointed chair of the parliamentary portfolio committee.

In a letter to Tau, Masina had asked the minister to disband the NLC’s board and dismiss Scholtz, as had several other MPs during the 18 September committee meeting.

The committee has summoned the Treasury to appear before it on 16 October to explain the R300-million payment.

GroundUp reported last week about a coordinated campaign – both within Parliament and outside of it – pushing for the dismissal of Scholtz, who was appointed early in 2023, and the dissolution of the NLC’s board led by Pityana.

The NLC has been under sustained attack these past few weeks, with allegations of corruption, nepotism, conflicts of interest, and discrimination against staff, so far without evidence being offered by MPs and others making these claims.

Many of the MPs’ questions during the 18 September committee meeting appeared to be based on recent media reports and allegations contained in letters to Minister of Trade and Industry Parks Tau.

Several different people and organisations have coalesced around the assault on the NLC, which had been engulfed by corruption for a decade.

The attack on the NLC in Parliament was led by Masina, former cabinet minister Malusi Gigaba and the EFF’s Mbuyiseni Ndlozi, with MPs from other parties on the committee joining in.

The attack is taking place against a backdrop of the process to appoint a new lottery licence operator. There appears to be a fightback by former and current executives and some board members, who have either resigned or are facing disciplinary hearings for their role in the massive looting of the lottery that took place until 2022. In 2022, the new board, headed by Pityana, was appointed.

Properties and other assets worth tens of millions of rands belonging to former NLC executives and board members, paid for with misappropriated lottery funds, have been frozen by courts.

The new board and administration embarked on a clean-up of the organisation and has taken measures to hold those involved in the looting to account.

The Democratic Alliance appeared to be a lone voice in Parliament defending the NLC against these attacks.

In a statement this week, DA MP Toby Chance wrote: “Widely reported attacks by members of the portfolio committee on trade, industry and competition on the National Lotteries Commission (NLC) board chair and executive management at a committee meeting that took place on 18th September paint a distorted picture of the state of play at the Commission.

“The DA believes the current board and management must be given the benefit of the doubt in their herculean task of cleaning out the NLC’s Augean stables,” Chance said.

The DA will monitor matters closely and hold all parties – Minister Tau, the board and executive management – to account to restore sound governance and management controls over this institution, vital to the survival of so many organisations and worthy causes, he said.

Read letter by Parks Tau to Parliament.

Read letter by Barney Pityana to Parliament.

“Bullied”

EFF MP Mbuyiseni Ndlozi raised the issue of the R300-million payment to the Treasury, arguing that because the Commission did not receive government funding, it should not have acceded to a Treasury instruction to pay over money from its reserve fund. “You say that you were bullied by the Treasury, but you will not restore order if you do not stand up to politicians.”

During the committee meeting, Pityana told MPs: “We argued with Treasury and got their concurrence that the money was kept in reserve for a legitimate purpose. In the end, the Treasury ruled that we were obliged in terms of the Public Finance Management Act and Treasury directives to surrender the R300-million, failing which both the board as the audit authority, and the audit officer, who is the Commissioner, would have been guilty of financial misconduct,” he said.

“The audit officer is obliged to surrender and may argue the case once the money has been paid,” Pityana said, adding that the NLC was contesting the payment and had asked for the money to be refunded.

In his written response to Parliament on 3 October, Pityana elaborated further on the R300-million payment, saying that the NLC was concerned about the Treasury’s reasoning for the payment. The NLC had sought two legal opinions. Both “confirmed the reservations” of the board about the payment.

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Lottery licence

Asked by Masina whether he had “any concerns surrounding the fairness and transparency” in the current lottery licence process, Tau responded: “Except for the letter received from the Portfolio Committee and another one from United Civil Society in Action (USCA), I am not aware of concerns surrounding the fairness and transparency in the current lottery licence process.”

The UCSA letter was from its head, Tebogo Sethathu, who is linked to some members of the NLC’s former board and executive. His now-defunct organisation, the Gospel Association of South Africa, has received several lottery grants totalling R9.7-million. These grants are under investigation by the Special Investigating Unit.

In response to questions by Masina about conflicts of interest and the transparency in the adjudication of the award of the next lottery operator, Tau said he had been advised that “everyone involved in the licensing application process operated in terms of an approved Conflict of Interest Framework”.

Tau further wrote: “This required board members, the commissioner, executives of the NLC involved in the process and members of the evaluation committee, as well as all advisors, to declare their interest and confirm that there was no conflict of interest in their involvement.

“All these participants are also required to declare whether they have any relationship with the applicants, the companies involved either as shareholders, service providers to the applicants as well as all the executives and key individuals related to the applicants. These declarations are subjected to an independent review by attorneys to determine whether any possible conflict of interest exists.”

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