Draft Lotteries Amendment Bill: Gambling with the future of SA civil society?

Many South African charities rely – to varying degrees – on funds from the National Lotteries Board in order to carry out their work. But they pay a high price for this reliance, since the administration of lottery funds is often reported to be downright chaotic. Last October the Daily Maverick profiled one such charity, Grahamstown’s Raphael Centre, which was on the verge of closure because its staff had heard nothing back from their usual lottery funding application. “Like most NGOs we are too reliant on Lotto funding, because it’s one of the few funds that pay for operating costs,” coordinator Jabu van Niekerk said at the time.

A 2011 report on lottery funding put together by the Funding Practice Alliance confirms the picture of endemic maladministration within the National Lotteries Board (NLB) and the National Lottery Distribution Trust Fund (NLDTF). “It is clear that, while considerable thought went into the gaming side of the National Lottery, very little consideration went into making sure that its grant-making would work well,” the report suggests. It cites evidence of “ineffective and sometimes confusing lines of communication” within the relevant bodies, leading to delays of sometimes up to 12 months to disburse funds.

Even after that, the report notes, “those organisations which have been awarded grants have had to wait a further six to 12 months for the money to be disbursed”. It describes the impact of these delays as “catastrophic”, leading to staff retrenchments or closures in some instances. As a result of these administrative inefficiencies, less than 50% of the available lottery funds had actually been handed out in each of the three years leading up to the report’s publication.

“It makes it impossible for civil society organisations to engage in planning,” says Shelagh Gastrow, executive director of civil society organization Inyathelo. “There’s no stability for organisations. They [the NLB and NLDTF] imply that civil society is needy and dependent, but their role is to fund civil society. It’s what they’re meant to do. They’re not doing people a favour.”

In addition to the administrative problems – attributed to a lack of trained staff, high staff turnover and an inefficient application processing system – there have also been a number of controversies over certain large funding awards made over the past few years. In 2011, for example, a R64.1 million Lotto grant was awarded to a company called Makhaya, which stages South African exhibitions in Serbia and other Eastern European cities. Aside from the fact that South African lottery money was going to pay salaries in Belgrade, and the organisation was running partly as a commercial enterprise, it emerged that Makhaya was also employing the daughter of the chairman of the National Lotteries Board, Professor Alfred Nevhutanda.

The National Lotteries Board has also come under fire for funding a number of politically affiliated events in recent years. Most notoriously, R40 million was awarded to the National Youth Development Agency in 2010 for its World Festival of Youth and Students, of which R60 000 went on confetti and R100 000 on balloons.

Given this state of affairs, the recently released Draft Lotteries Amendment Bill was awaited with some anticipation in the hope that it might serve to clean up matters. In advance of its release, it was indicated that the bill would serve to make changes to the Lotteries Act to streamline the process by which NGOs would apply for money, and speed up the time it took for the organisations to receive the funds.

eNCA quoted Nevuthanda in May as saying: “We’ve heard you, we collaborated with the department of trade and industry and today we are happy to announce that yes the department came up with a policy, that is going to be tabled as a bill that seeks to simplify the manner in which we adjudicate”.

And indeed, the draft bill does include some measures designed at tidying up the system, including approving accountability among the agencies responsible for distributing the funds by employing their members on a full-time basis, rather than part-time (as is currently the case). It also proposes to reduce the possibility of fund mis-use by tightening the criteria for board membership, and terminating the membership of those who fail to attend two meetings consecutively without approval. It also lays out an internal appeal procedure for disappointed applicants, and provides for such applicants to approach a court of law if they cannot find satisfaction in this way.

But these points have been somewhat overshadowed over a clause that is flashing warning lights for civil society. “In the event that the minister decides on justifiable grounds not to issue a license [for the running of the lottery],” it states, “the minister may, after consultation with the board, appoint or authorise an Organ of State to conduct the National Lottery for a period not exceeding eight years”.

DTI Minister Rob Davies explained to the Mail & Guardian last week that this provision was designed to prevent a situation like that which arose in 2007, where a challenge between former and future license-holders halted the lottery for six months. The new measure would allow the state to step in, in such a situation, to prevent this loss of revenue.

But the Funding Practice Alliance doesn’t buy this. “Which organ of state would be capable of running the national lottery in that situation?” FPA coordinator Janine Ogle asked the Daily Maverick on Wednesday. “When the national lottery was set up, the whole reason why it had to be run by a private company was because government didn’t have the relevant expertise.”

They spy a more sinister potential purpose to the clause: to effectively bring about a state lottery. In the FPA’s formal submission to the DTI on the bill, they state: “Not only will the Lotteries be run by the State, but the distribution of funds will be guided by government plans and priorities – in effect the funds will be distributed as per the national budget, there will be no independent board to hold the funds in trust or to guide the distribution thereof, which will mean that the money will belong to the state for the state to do with as it pleases”.

Inyathelo’s Shelagh Gastrow explained to the Daily Maverick that a further concern is that, if the government has total discretion about how to award funds, without any independent oversight, they could cut out funding for civil society organisations which in some way oppose government policy or practice. Gastrow says that of late there has been an upsurge in negative government rhetoric towards civil society.

Gastrow pointed in this regard to a speech given by Deputy Minister of Public Service and Administration Ayanda Dlodlo in June in Mombasa, where Dlodlo reportedly complained that South African civil society was acting increasingly in line with the parliamentary opposition, and without sufficient accountability. Dlodlo allegedly said that “proper” civil society organisations were those that provided services for women, youth and the disabled.

“There appears to be this concept that as long as civil society organisations shut up and deliver services, they’re okay,” Gastrow said. “The minute you get into advocacy work, systemic change or policy research the government seems to feel threatened, rather than seeing it as something that makes society stronger.”

Her words are given credence by Basic Education Minister Angie Motshekga’s attack on Equal Education this week, in which Motshekga accused the education NGO of being “a group of white adults organising black African children with half-truths”, and described their actions as “opportunistic, patronising and simply dishonest to say the least”.

If the state were to take over funding of the lottery, the suspicion is that less money would be given to this kind of inconvenient NGOs and more to quasi-governmental structures, or organisations supporting whatever the government decides falls within its priorities of the moment.

“One of the biggest problems with the lottery funding is that it has no explicitly-stated purpose,” says Ogle. “There are no values linked to it – like, say, supporting civil society or alleviating poverty.” This gap could make a state lottery ripe for abuse.

When the Daily Maverick contacted the DTI for comment, they swept away the idea of any hidden agenda to the clause allowing an organ of state to run the lottery. “The provisions for the state organ to run the lottery are enabling provisions to allow in the event of any suspension of license or revocation,” spokesperson Zodwa Ntuli said. “It will also allow the state to opt not to license the lottery operation if the state is of the conclusion that the licensing does not achieve the goals such as skills development, BEE, localisation, etc.”

The next license to run the lottery will be awarded in October next year, with bidders having a three-hour window on November 30 of this year to submit their bids. “Have those people who are bidding looked at the draft amendment bill?” asks Gastrow. Her point is that bidding for the (potentially very lucrative) lottery licence is a costly business, and there presumably is a reduced incentive to go through with it if the government may decide just to run the lottery on its own.

The Daily Maverick asked the DTI which “organ of state” in particular might be equipped to handle the task of running the lottery. “The structure and nature of the organ of state referred to will be determined by the requirements to operate a lottery. Thus any organ of state that meets such requirements can be considered,” Ntuli replied.

But are any organs of state actually capable of running the lottery? “Key to operating the lottery is the technology, and this technology can be sourced by the organ of state as may be required,” Ntuli said. “Depending on the need, the state would develop such capacity locally with a view to have a state-run lottery in the event that the objectives of development are not met by licensing the lottery to private parties.”

Some may accuse civil society of unnecessary cynicism or unease in this case. There is, after all, no firm indication that the intention of the clause is to move towards a state lottery, or that this would inevitably spell trouble for oppositional NGOs. But if you take the lottery’s poor track record to date, and couple it with the perception of growing government hostility towards civil society – it seems like a dose of scepticism might be well justified. DM

Read more:

• Lottery law tweak sparks abuse fears, in the Mail & Guardian;


• The Great NGO Funding Crisis, Part II, in the Daily Maverick.

Photo by Hope for All.