National Lottery and South African National Amateur Boxing Organisation (SANABO) on Funding of Sports Federations and Olympic Games preparation

Meeting report

The Chairperson stressed that sport was a very important organ that ensured social cohesion in the country. The most important thing was organisation and professionalism without which federations could not succeed in dealing with the challenges in sport. The Committee’s view was that sport had not been transformed to its satisfaction despite it being the easiest area to transform. Development of sport was very slow in the country. Development and transformation in sport needed to be emphasised so that every South African could be afforded the opportunity to develop their talent potential. The presentations therefore were to focus on matters of development, governance and challenges of transformation in sport. As lawmakers, members could only assist the entities if they were informed about the organisational aspect of sport.

National Lottery Board (NLB) presentation
Prof Alfred Nevhuthanda, NLB Chairperson and acting Chief Financial Officer, spoke about the NLB mandate, distribution of funds, appointment of Board members, distributing agencies, funding regulations and governance issues. The NLB was established through the Lottery Act no 57 of 1997 and was mandated to advise the Minister of Trade and industry on the issuing of licences, percentages allocated to good causes and legislation. The first lottery operating licence was won by UTINGO and ran for seven years and the second was won by GIDANI, which is the current operator. A bidding process for the issuing of the third licence holder in 2014 was underway. NLB advised the Minister on the percentage allocated to good causes (money given to SASCOC, National Federations, Provincial Federations, and Non Governmental Organisations.) and advised the Minister on the efficacy of the legislation guiding National Lottery operations. In addition, it ensured the protection of players, administered the National Lottery Distribution Trust Fund (NLDTF) and regulated other lotteries. The Minister in consultation with Parliament appointed the NLB Board. The Portfolio Committee on Trade and Industry vetted selected candidates for security reasons. In appointing the Chairperson of the Board, the Minister consulted with that Portfolio Committee. The term of office for the NLB was five years of which two years had been served so far.

The National Lottery Distribution Trust Fund (NLDTF) was established through section 21(1) of the Lottery Act. The Fund consisted of a percentage of the sales of a lottery, interest derived from investment of monies and other money lawfully paid into the Fund, which was audited and reported on by the Auditor-General. Money that was currently being collected was invested, and would be distributed to applicants in the coming financial year. The NLB imposed penalties on operators dealing in illegal activities. The NLDTF was allocated towards the following categories: Reconstruction and Development Programme (0%), Charities (45%), Sports and Recreation (22%), Arts, Culture and National Heritage (28%) and Miscellaneous purposes (5%). The funds were distributed by agencies following applications received in response to a call for applications.

There was a misconception by the public that agencies were appointed based on their affiliation to certain political parties. However, the appointment of members of the distributing agencies followed an open process where the posts were advertised in all newspapers for the public and the civil society to nominate candidates based on merit, after which nominations were forwarded to the DTI. The Minister consulted with the Ministries of Social Development, Sports and Recreation, Arts and Culture, Science and Technology and Environmental Affairs before sending candidates for approval by the Cabinet.

Discussion
Mr M Dikgacwi (ANC) said people faced difficulties in filling the application forms and suggested that the form should be simplified. There was need to engage the DTI in some of the concerns and the 22% allocation for sport was very small compared to what other categories got.

Mr Alfred agreed with the member that the form was very difficult to complete but the organisation was not empowered to come up with a new form, as it had to be gazetted by the Minister after public comment. The process had been set up to prevent fraudulent activities. However, the matter had been reported to the Minister and the DTI was working on the issue and distribution agencies were looking at a user-friendly form to cater for people in rural areas. As part of the exercise, NLB was considering translating the form into other languages to enable better understanding. He added that by June, a new form would be in place.

Mr T Lee (DA) asked when the new CEO was going to be appointed and by whom. He said that a community in Port Elizabeth, which ran a soccer team project, had applied for funding to the NLB but they had not gotten any reply. He wanted to know if NLB was happy with the agencies as people were complaining about their inefficiency. What oversight was done by the NLB over them, and why were the allocations declining despite an increase in needs.

Mr Alfred replied that the CEO post had been advertised in the City Press and Sunday Times but in the mean time, he was taking care of the section as per board decision. In terms of the Act, NLB was not empowered to impose decisions on agencies but could liaise with them on areas of conflict. The working relationship with the recently appointed agencies was cordial.

Dr Z Luyenge (ANC) sought clarity on which Minister was responsible for the appointment of the Board, as the presentation had not specified which Minister was being referred. He questioned the allocation of 22%, arguing it could not help build necessary infrastructure. The Department of Sport was instrumental in the founding of the National Lottery. As such, it deserved a bigger portion of the total allocation. He wanted to know what monitoring mechanisms were put in place to monitor progress. He requested NLB to identify funded organisations in the Eastern Cape particularly in Mthatha that had benefited from the lottery. He asked how federations were monitored and were they funded only at national level, because funds did not trickle down to rural areas where development was non-existent and the majority of the poor resided.

Mr Alfred replied that the 22% allocation was a lot of money but the question was how it could be utilised effectively. It was the stipulated allocation in terms of section 27-31 of the Act. The government through the National Lottery had invested a lot of money. The problem with underperformance could be that people who implemented projects were not doing their job. Therefore increasing the money allocation without addressing the challenges would not help at all. South Africa had chosen a single model of the Lottery unlike countries such as Germany, which had lotteries for education, charities and sport - as such, the money catered for many needs.

Mr Alfred said the NLB Board was appointed by Parliament through the Portfolio Committee on Trade and Industry. The Minister, in consultation with the Committee, appointed the Chairperson. Six people constituted a board and the seventh was a member of the DTI who represented the Minster.

Mr G Mackenzie (COPE) wanted to know about the trends in revenue and what was the remaining 66% of the total revenue collected used for. Did the entity receive an unqualified or qualified report in the last financial year? Was there a standard procedure for funding federations because most of the funds allocated were misappropriated? He wanted to know how long it took to process an application for financial support and how many times did the NLB distribute funds in a year as timing was extremely important in fund disbursement.

Mr Jeffrey du Preez: NLB Chief Operating Officer, said 50% of the total revenue went to prize money paying the jackpot, 6% was reserved as commission for ticket sellers, 40% went to players through prizes and the remaining 10% went to the operator to cover operational costs. NLB had never received a qualified audit since its inception in 1797.

Mr Alfred said the application process was very tiring and lengthy but NLB had done consultations on what needs to be done to better the situation. In the coming financial year, an application would not stay more than 3 months before being processed. The other problem now was that people submitted applications close to the due date and some would even enter on the last submission date. During last year’ call with road shows, NLB received more than 4000 applications on the last day of submission with some submitting incomplete forms.

Ms G Sindane (ANC) questioned the commitment of NLB to the reconstruction and development programme arguing that since the Lottery’s inception in 1997, something should have been done to fund the category. How did the NLB monitor federations to ensure that sporting facilities were being built throughout the provinces and were facilities easily accessible? She sought clarity on the amount of money that was paid to NLB lawfully apart from the 34% allocation.

Mr Preez answered that according to the Act, the Minister of Finance was supposed to identify a fund for reconstruction and development. As such, it was not a decision of the Board that resulted in inactivity. However it was true that something could have been done to solve the matter. Mr Alfred said the amount of other monies paid to NLB was insignificant. In this financial year, NLB had received R8 million from First National Bank.

National Lottery Board: Regulation Framework
The regulations gave a broad framework of how the money collected was allocated. Every Distributing Agency had to take these into account: The general development in the country, with special reference to the regional, economic, financial, social and moral interests and provincial and local interest (population size, poverty index, ticket sales etc). In a year, at least 5% of the total allocation to a particular sector should go to each province and some of the provinces had yet to reach that spending capacity, among these were the Eastern and Northern Cape. From 1 April 2011 to 31 January in 2012 the total allocation to provinces was R377 million. Last year a directive was issued that of the total allocation available for distribution by a Distributing Agency, at least 50% was to be directed towards the “development of sports and recreational facilities in rural areas to increase talent development and accessibility to such facilities for all, including the disabled.” The number of charities had increased from about 4 000 to about 8 500, which had resulted in the decrease in the size of monies allocated and eventually complaints from bigger charities.

National Lottery Board: Budget Allocations
The total revenue received from the operator as at 31 March 2011 was 12, 3 billion. Interest on investment was R3, 6 billion so total available revenue was R15, 9 billion, R10, 9 billion was disbursed, R336 million spent on administration, funds at hand were R4, 8 billion, less the amount already committed which was R3, 1 billion and thus the balance of cash available was R1, 752 billion for 1 April 2011 to 31 March 2012. A graph showed trends in spending since 2002 to 2011 and fluctuations in the NLDTF cash disbursed and allocated. Prior to 2009 there was a lot of rollover from previous years but the reserve had since been exhausted and NLB was now working on year-to-year income. As such, the actual income had decreased while needs had increased. NLB was guided by three objectives in funding sport, which were to promote transformation and development, improve accessibility of sporting facilities and develop capacity in order to promote sports nationally. There were many challenges pertaining to administration especially with report writing from the smallest organisations to national federations. Outstanding issues such as reporting and failure to follow regulations resulted in a number of applicants being denied funding. Some municipalities received allocations for sport facilities but could not use the money and in some cases, it was channelled towards other projects because sport was not considered a priority. Major beneficiaries of the NLB Fund were SASCOC, national federations, provincial federations, regional federations, tertiary institutions, NGOs, clubs and municipalities.

The sport and recreation disbursement since the inception of the Lottery, as at 31 March 2011 was R3, 7 billion. Going forward the NLB would look into better ways of allocating the money because despite money being pumped out to support sporting projects, the results were disheartening. Allocations to national federations were very high but had decreased in recent years. A graph showed that in 2008/09 national sport federations had received 50,4% of the allocation and by 2011/12 they received 28,1%. In 2009, Athletics South Africa got the highest allocation with R17, 7 million, South Africa Tennis got about R15 million and volleyball was the smallest with R6 million. In the 2010/11 financial year, Cycling South Africa got R25, 9 million, followed by Hockey with R11, 5 million and Squash South Africa got the smallest amount with R7, 1 million. In the current year South Africa Rugby got the highest allocation at R35 million, followed by SA Football which got R8,5 million and Judo South Africa got the smallest amount at R3 million. It was problematic that the biggest federations, better placed to attract commercial sponsorship, were the ones that got the biggest share in the allocation of funds from the National Lottery. When the lottery was introduced, it was meant to put additional resources for sport development and facilities but rather it was abused to replace expenditure lines of certain organisations. Going forward, he suggested that funding to national federations should be given on condition that they also provide at least 50% of the money they apply for because much of it was misused. There was no point in giving money to tertiary institutions for sport facilities when people could not access the facilities and the needy in the rural areas were struggling.

In 2010 SASCOC received R137, 7 million of which R14, 6 million was used for administration costs, R59 million for elite Athlete Development, R12 million for Commonwealth games, All Africa games R10,3m, Hosting of the IOC Congress R15m and R8,7 for World Student games. Currently NLB was finalising a R73 million grant for SASCOC for the impending 2012 Olympic Games. Unfortunately, the National Lottery did not receive recognition for its contributions despite it being the main sponsor of sport. In 2010, the NLB gave the Local Organising Committee R170m to build 27 artificial turfs in all provinces under the legacy project.

Discussion
Mr M Mdakane (ANC) said a number of critical issues had been raised by NLB around the development of the sport. Money was not a solution to the problems confronting sport in the country rather what was important was the level of organisation and professionalism displayed in the federations involved in running sport. Federations that run their programs well had a better chance of getting sponsorship since they accounted for the money allocated and were following stipulated regulations. Members of Parliament should intervene to help federations that were struggling to run their affairs well. Some federations received money from sponsors while at the same time, they benefited from NLB allocations but it was not clear how the money was used. It was also strange that organisations that clamoured for increased funding could not account for the small amount they were receiving. If the real issues that created the problems were not dealt with, no development or transformation was going to take place in sport.

Mr Mackenzie said he disagreed with some of the comments made by Mr Preez. The money administered by the lottery came from the public. He was against the idea of penalising big federations on the basis of getting sponsorship because they were driving the policy of development and transformation. In KwaZulu Natal there were about five academies of Rugby and Sub-Unions to assist disadvantaged people in the rural areas. In that light it would be inappropriate to reduce funding to a federation that was trying to develop sport.

Mr Dikgacwi asked if BSA was applying for NLB funds since it had received a paltry R3 million form the Department of Sport and Recreation. On the 2012 allocation for federations taking part in the London Olympics, he asked why Banyana Banyana was not reflected in the report because the South African Football Association was not helping it.

The Chairperson said that members should avoid being emotional and rather address issues that could help in the development and transformation of sport.

Mr Lee wanted to know where NLB got the equipment to establish school clubs. There was nothing in the report that referred to golf and he wanted to confirm the fears that had been raised by the media about a security glitch at NLB. The NLB had sent about R8 million to the Eastern Cape through the Nelson Mandela Metropolitan and people in New Brighton had not received the money. It was very bad that money allocated for sport was misappropriated to other programmes because the municipality did not value sport.

The Chairperson said that NLB accounted to the DTI but had agreed to appear before the Committee to give necessary information around the development of sport. Competition for resources was very high yet the funds were limited and not all the players would be satisfied with the allotment. It was because of such factors that management of resources was very critical in addressing issues. It was the desire of the Committee to ensure that there was development of sport in the country.

Mr Alfred said NLB was to continue working with the Department of sport and recreation and the Committee in carrying out its mandate.

South African National Amateur Boxing Organisation (SANABO presentation
Mr Eric Green, SANABO Treasurer, apologised on behalf of the organisation’ acting president Mr Steve Masike who could not attend the meeting due to a court appearance in Soweto. The presentation aimed to address two questions: (1) What interventions were needed to assist amateur boxers until they turned professional, (2) SANABO’s preparation for the Olympic Games and funding challenges faced by the entity. Mr Barries Barnard, president of SANABO, had resigned and Mr Masike was to remain acting president until the Olympic Games were completed. There were nine amateur-boxing organisations affiliated to SANABO in all provinces of the country. Three of the provinces were responsible for establishing boxing clubs in schools per year. Some of the equipment supplied to schools included punching bags, gloves, skipping rack, hit guard and other basic infrastructure. The safety of the boxer was considered the most important rule in boxing. SANABO was responsible for junior boxers (12-17years), Youth (17-18 years), Elite (19-34 years), coaches, officials (referees and judges) and mangers. SANABO was a volunteer organisation but it had not received funding for a full time Secretary, Development Officer or Full Time Coach. Such a situation was not good for an Olympic code expected to obtain medals for the country. The entity depended on volunteers who already had other commitments and expenses, among them food and education of their children.

Funding
SANABO had no sponsor as potential sponsors preferred professional boxing to amateur boxing when it came to media exposure. Sport and Recreation South Africa (SRSA) provided limited funding annually but the major problem was that the funds were received too late to be spent before the end of the financial year. In 2007 SANABO received R400 000 on 31 March, 2008 it received R539 000 seven weeks before the end of the financial year, 2009 it received R440 000 six days after the financial year and had been instructed to spend the money by the end of May failing which, resulted in R460 000 being taken away. In this financial year it received R530 on 11 February and the money had to be spent before the end of March.

The funding from the Lottery was sporadic and in some cases money was received years after the project could have been presented. The media had reported that R930 million was returned to the Treasury while federations were struggling to survive. SANABO had exhausted its reserves after it was forced to spend R600 000 of its own funds to pay for expenses of SANABO teams in qualifying tournaments for the 2008 Olympics and the funds had not been reimbursed by NLB. The reason there was only one boxer at the 2008 Olympics was because amateur boxers turned professional too soon. Hekkie Budler had been a promising candidate for a medal in Beijing, but he had turned professional. The Eastern Cape Professional Boxing Board was cooperating in placing a two-year moratorium on talented amateur boxers before they could turned professional. SANABO had good relations with SASCOC.

The international Boxing Association regulated boxing and according to the regulations, no affiliate or member of amateur boxing was allowed participation in professional boxing lest the country risked suspension from competition. A memorandum of understanding was reached with BSA in 2008 but the later would not cooperate and since 2008 only two payments for amateur boxers who had turned professional had been received. According to the MoU, upon signing a boxer as a professional, BSA was supposed to deposit R300 into the account of SANABO. The price paid for developing a boxer was indicative of the message that BSA did not want to cooperate with SANABO.

Mr Green said that in each situation where BSA had got itself into a financial crisis, the government had come to its rescue, so why was it not giving SANABO the same amount of money that BSA received.

It was unfortunate that BSA continually had financial and management problems as indicated by the Auditor-General. This had led the public to believe that the problems extended to SANABO. The organisation had nine elite male boxers and three female boxers who were appearing for the first time at the Olympics. In 2011 about R1 893 000 was budgeted for the boxing Olympic team’s medical and scientific support team and it had since requested R2 082 300 for the 2011 financial year. SANABO had submitted an application for the 2012 Olympic Games to the Department of Sport. However, when the preparations started, SASCOC took over, and it had since indicated they would not pay for the qualifying games. SANABO had agreed to do so because it had anticipated funds from the Lottery. The Lottery was requesting, as a condition for funding, that SANABO had to submit a report on how it had spent its money in 2004. The report could not be located by SANABO and the Lottery denied having received it. Should the situation continue as it was, there was a chance that the team would not attending the Olympic Games Qualifiers next week. To qualify for the Olympic Games each continent got a quota and Africa’ quota was 49. Qualification was classified in two camps the World Boxing Championship for which a country had to be among the best eight. The tournament was held last year and only one boxer from Africa qualified. The remaining 48 places would be contested in Morocco at the Africa Olympic Qualifiers in April. To support amateur boxers, SANABO was requesting adequate funding and an equitable distribution of funds by SRSA, funding for a full time administrator and the implementation of the MOU drawn up with BSA in 2008

Discussion
Mr Lee asked the Department of Sport and Recreation to respond to some of the funding queries that had been raised. He urged that it was important that the Committee, SRSA, NLB and BSA assisted SANABO because all the great boxers had come through the Olympics. He was happy that boxing clubs had been established in schools and given the necessary resources. How many medals was SANABO expecting from the Olympic Games.

Mr Green answered that the money obtained from SRSA was used to fund facilities projects and about R100 000 worthy of facilities could be bought for three provinces, which was further divided among five clubs. SANABO promised that they would bring one medal from the Olympics.

Mr Mackenzie agreed with Mr Lee that boxing had always been a successful sport in South Africa. How many Model C schools, and other schools, participated in boxing? There had never been a boxing championship for schools and all boxing tournaments had since died. However, with the new strategy boxing federations could be allowed to visit schools. Boxing was part of the three spectator sports in the country.

1MS G Tseke (ANC) asked NLB to give a word of advice to SANABO on its funding problems.

Mr Alfred said it was not possible to solve funding problems in the meeting and promised to give his contact details to Mr Green to raise the issue with him

Mr Moffat Qithi, BSA Chief Executive Officer, said it was sad that SANABO and BSA were appearing before the Committee on contradictory grounds. BSA and SANABO had to work together and the Committee, together with the Department of Sport, were supposed to help. Moving forward, the two needed to have a unified vision. According to the Act, BSA’s mandate was to recognise amateur boxing and to create a synergy between amateur and professional boxing. BSA was a commission that regulated professional boxing. BSA could not be compared to SANABO, which was a voluntary organisation. The matter of the MOU should be revisited. Government’s Outcome 8 stressed that sport be used as a vehicle for social cohesion. Thus SANABO and BSA should not fight with each other but instead act in unison. Therefore, boxing needed its own convention to deal with problems facing federations and the commission.

Ms Sumayya Khan: Chief Operations Officer, SRSA, said that before transferring funds to an entity, the Department requested the entity’s business plan. For this financial year, SRSA had allocated R47 million to all the federations. In the case of 2010/11 where they said they had received R20 000, the Public Finance Management Act stated that if an entity was given funding and could not account for it, the Department could not transfer any funds. R400 000 was withheld and money provided was for administrative costs. In the 2011/ 12 financial year, R100 000 was given to SANABO for administrative costs. In addition, other conditions for funding included the quality of previous reports, financial statements of the entity and the AG audit report.

The Chairperson said boxing had nosedived in recent years but all parties should work together to revive the sport. The Committee was going to visit provinces to see some of the facilities that had been built. It was important that federations accounted for funds allocated to them, ensured proper management, organisation and professionalism, as these were important in securing funding. The Committee was driven by one desire to see sport developing in the country.

The meeting was adjourned.

[Apologies for Mr B Holomisa (UDM) and Mr W Rabotapi (DA)]