DRAFT SUBMISSION DOCUMENT – LOTTERIES

Introduction:

The Non-Profit Partnership wishes to thank the Portfolio committee on Trade and Industry for affording it the opportunity to make a submission in respect of the Lotteries Legislation.

We herewith acknowledge the important role which the lotteries plays in sustainability to the sector and more importantly, the critical role which the lotteries and the distribution of the funds could make to development and poverty alleviation in South Africa.

The Lotteries Board has in the past few weeks come under criticism and there has been much public discourse regarding the distribution of funds to good causes. The Non-Profit Partnership wishes to record its disappointment at the delays which have occurred in the distribution of funds to the non profit sector. This is not to say that we do not acknowledge the board’s efforts to more recently keep the public informed but feel that this should have come earlier and that there is still so much which the board could be doing to distribute funds more effectively and efficiently.

The NPP therefore makes submission in respect of the following:

1. Functions of the Lotteries Board

      1. Functions of the Distributing Agencies
    1. Funding Requirements
    2. RDP/Miscellaneous Categories
    3. Delays in Distribution of funds
    4. The Spirit of the Act

The NPP’s written submission duly presented to the honourable members will speak to the above in greater detail.

  1. Functions of the Lotteries Board:
  2. Provisions of the Act:

    Section 10 of the Lotteries Act 57 of 1997 sets out the functions of the board which are repeated hereunder for the convenience of the reader. These functions will not be discussed under this heading but can be inferred from the discussions which follows.

    Section 10: The board shall, applying the principles of openness and transparency and in addition to its other functions in terms of this Act-

    1. advise the Minister on the issuing of the license to conduct the National Lottery as contemplated in section 13 (1) and on any matter contemplated in section 14 (2) (g):
    2. ensure that –
    1. the National Lottery and sports polls are conducted with all due propriety and strictly in accordance with the Constitution, this Act, all other applicable law and the licence for the National Lottery together with any agreement pertaining to that licence:
      1. the interests of every participant in the National Lottery are adequately protected; and
      2. subject to subparagraphs (i) and (ii), the net proceeds of the National Lottery are as large as possible
    1. administer the fund and hold it in trust;
    2. monitor, regulate and police lotteries incidental to exempt entertainment, private lotteries, society lotteries and any competition contemplated in section 54
    3. advise the Minister on percentages of money to be allocated in terms of section 26 (3);
    4. advise the Minister on the efficacy of legislation pertaining to lotteries and ancillary matters;
    5. advise the Minister on establishing and implementing a social responsibility programme in respect of lotteries;
    6. administer and invest the money paid to the board in accordance with this Act and the licence for the National Lottery;
    7. perform such additional duties in respect of lotteries as the Minister may assign to the board;
    8. make such arrangements as may be specified in the licence for the protection of prize monies and sums for distribution; and
    9. advise the Minister on any matter relating to the National Lottery and other lotteries or any other matter on which the Minister requires the advice of the board.

The Lotteries Act clearly defines the functions of the board. Recent news articles has highlighted the lack of clarity in respect of roles and functions of the Board and Distributing Agencies.

More specifically one of these articles stated that ‘the central applications office of the NLB scrutinises all applications to ensure the prescribed criteria are met’. There are no provisions in the Act which allows for this. It is clear from the Act that applications should be directed to the relevant distribution agencies that will consider whether or not it qualifies in terms of the Act and the regulations.

    1. Functions of the Distributing Agencies:

Provisions of the Act:

A distributing agency as defined in the Act means a person appointed by the Minister to distribute money, but not any department in national or provincial government.

Section 26 of the Act provides for the allocation of the money in the fund by the Minister after consultation with the National Lotteries Board. The Board clearly has a role to play in the allocation of money to the different distribution agencies. The allocation of funds which is dealt with hereunder refers to the determination of the amounts to be used for each of the specified good causes and not to the process of deciding which beneficiaries are to receive the money.

A lack of clarity around the roles is evident in two different statements in the newspaper which refers to on the one hand the fact that applications are scrutinised by the central applications office of the NLB and a second statement that the distribution agency is responsible for the adjudication process and for the allocation of funds.

Section 28, 29, 30 and 31 provides clearly for the distribution agencies to distribute the allocated monies in accordance with the requirements of the Act. The board is not authorised by the Act to distribute (or to be involved in the actual distribution) of the allocated monies.

It is clear from the provisions of the Act that the board is not responsible for the distribution of funds. This is the responsibility of the distributing agency. It is the responsibility of the distribution agency to consider applications for grants and it is the distributing agency which pays the grants to appropriate recipients.

 

  1. Funding Requirements:

Provisions of the Act:

The requirements for funding are set out in both the Act and the Regulations. The application form for funding, which has been issued through the regulations, contains additional requirements.

Section 32 requires that a juristic person shall in respect of amounts granted to it from time to time provide the board or the distributing agency with audited accounts of all amounts distributed and any relevant information it may require.

The regulations on the other hand requires amongst other things the following:

The application form requires the following:

From the aforegoing, it is clear that there exists inconsistencies between the Act, regulations and application forms in respect of requirements. It is also unclear whether the registered certificate is in respect of a trust, section 21 company or an Non Profit Organisation certificate. It is furthermore clear from the inconsistencies which exist that whoever was responsible for drafting the application form failed to take into account the requirements as set out in the Act and Regulations.

In a recent newspaper article, it was stated by the Lotteries Board that ‘organisations need to have audited statements and to be formally constituted before being eligible for funding’. This is not unreasonable, but many organisations lack the capacity to do this’. It has to be borne in mind that most organisations are voluntary organisations and are not required to be registered. If there is a requirement that they be registered to receive funding from the lottery, then there exists no clear requirement in terms of the Act or regulations to support this. If organisations are required to be registered in terms of the NPO Act, then the requirement of furnishing audited financial statements is inconsistent with the NPO Act.

It is our submission that a "formally constituted" organisation that is registered with the NPO Act and complies with requirements of the Act will not necessarily comply with the requirements of the lottery as the NPO Act refers to accounting officer and does not require audited financial statements

The aim of the NPO Act is to create an environment in which non profit organisations can flourish. In addition, we note the failure on the part of the legislature to take the Non Profit Organisations Act into account in drafting the Lotteries Act, particularly in light of the fact that the distribution of lottery funds was intended largely for the benefit of the Non Profit sector.

  1. RDP/Miscellaneous Category:
  2. There has been a fair amount of criticism regarding the aforementioned categories and the Lotteries board’s failure to distribute these funds.


    Provisions of the Act:

    Section 12 (6) of the Act requires that the board shall prepare a report inclusive of recommendations of the board with regard to the percentages prescribed in terms of section 26 (3); and

    Any amendments to this Act or regulations issued under this Act in order to improve the execution of the functions of the board

    It remains uncertain what the RDP and miscellaneous categories have been earmarked for or who the beneficiaries of these funds will be. It is our submission that section 12 of the Act allows the board to be pro active in this regard and to make recommendations to the Minister with regard to the allocation of these funds.

  3. Delays in Distribution of Funds:

The NPP has noted with some concern that funds were only distributed a year after the lotteries came into existence and that six months are taken to respond to applications.


In a recent newspaper article, the Lotteries Board’s response to this criticism has been ‘South Africa began paying out within a year of starting off, a prudent decision and in line with, or better than, other lotteries worldwide.


We submit that the problem is not whether we are on par with international standards but whether we have the infrastructure to effectively address the problems which South Africa is faced with in an efficient and proactive manner. The biggest problem that South Africa is faced with is poverty. 2.3 million households with people aged 7 years and older go hungry due to an inability to purchase food. Researchers put the number of South Africans living in poverty anywhere between 45 and 55 percent. Depending on the poverty line used, about 20 – 28 million citizens are living in poverty in South Africa. The incidence of poverty differs between different provinces. In all estimates the Western Cape and Gauteng have the lowest rates of poverty, and Mpumalanga, the Eastern Cape and the Northern Province the highest rates.

Given these statistics which are specific to South Africa and incomparable to international standards, we fail to understand the delay in distribution of lottery funds. We furthermore find it hard to believe that the very provinces which have been earmarked as those who have the lowest poverty rates, have received the most lottery funds.

 

5. The Spirit of the Act:

The spirit of the Act is one which encourages ‘openness and transparency’. This is evident from section 11 which encourages consultation with the public. Section 35 furthermore states that the Lotteries Board must comply strictly with section 195 of the Constitution, which amongst other things sets out the following:

It is our submission that the Lotteries Board has not acted in the spirit of the Act. The board should have adopted a pro active approach to problems encountered and embarked on consultation with stakeholders, capacity building initiatives and made timeous recommendations to the Minister.

 

The Non-Profit Partnership is committed to a financially sustainable non-profit sector that will strengthen South Africa’s democracy and transformation. It is with this in mind that we make the following recommendations:

We hope this submission will help us build a stronger non profit sector.