PRESS RELEASES
8/8/2001
NLDTF RESPONSE TO CITY PRESS
Mr. Vusi Mona
The Editor
City Press
Durban
Fax: 011-713 9986
8 August 2001

Dear Sir,

GROSS MISREPRESENTATION OF ISSUES RELATING TO THE NATIONAL LOTTERY

The article, “Lottery’s vision for good causes is not living up to expectations” by Mike van Graan in the City Press of 5th August 2001 has reference.

We strongly believe that the misrepresentations of Mr. van Graan are unwarranted and serve to confuse rather than enlighten your readers and the public at large.

It is evident that Mr. van Graan and some others in the NGO sector have built up the false perception that the National Lottery is “the beginning of the land of milk and honey”. It is not possible for South Africa’s National Lottery, or any other lottery for that matter, to generate sufficient funds to meet the needs of all philanthropic organisations. The funds being generated by South Africa’s National Lottery addresses five good cause categories. Elsewhere, in the US for example, the entire proceeds are channelled to one area e.g. bursaries, the aged, the disabled etc. South Africa’s need is varied and it is envisaged that the funds being generated by the National Lottery will make a difference to lives of all the needy; many of whom had not previously had access to funding mechanisms. The process of deciding which organisation is more deserving is complex and every endeavour is being made to expedite the process.

Mr. van Graan makes continuous reference to Brian Bailey’s research and calculations which are unjustified and inaccurate. The relationship between the Government and Uthingo Management is clearly spelt out in the Licence to Operate the National Lottery. The Licence is a comprehensive and complex document that outlines all aspects of the National Lottery including the payment of monies and the treatment of interest.

The combination of prize levels, retailer commission, overheads, contributions to the National Lottery Distribution Trust Fund (NLDTF) and profit to the operator, as presented by Uthingo Management in their proposal to operate the National Lottery, was found to be the best of the three proposals considered.

Some of the more pertinent bases for calculations as included in the Licence are as follows:

·The percentage allocated to prizes starts at 49% and rises over the licence period to 50.39%.
·Retailer commission is fixed at 5%.
·The allocation to Good Causes varies with number of tickets sold. It starts at 10.16% and goes up to a high of 40.58%. Over the 7-year Licence period, an average of 30% of the proceeds after VAT will be contributed to Good Causes.
·The balance of the proceeds goes to operating costs.

Each week, the Board receives detailed reports on the sales of tickets for Lotto and related games. These figures and all lottery-related transactions can be verified at any time on an on-line terminal at the Board’s offices that is linked to the mainframe computer system. Besides receiving submissions of monthly financial statements, the Board has electronic access to Uthingo’s bank account as a means of monitoring all financial transactions.

All calculations are based on various factors as contained in the Licence Agreement and Uthingo’s Business Plan. It is the function of the National Lotteries Board to monitor this and to ensure that all calculations are correct. To this effect, the Board is satisfied that all commitments of the Licence are being met.

In terms of the Lotteries Act (No. 57 of 1997), all allocations to good causes are held in the NLDTF. All proceeds in the fund, together with the interest accrued, are utilised for purposes as prescribed by the Act. Further, the allocation to prizes is invested in a specially assigned Players’ Trust Fund and is also closely monitored by the Board.

The National Lotteries Board is answerable to the people of this country. In achieving this, the financial records of the Board are audited by the Auditor-General and presented annually to Parliament.

The purpose of setting up a National Lottery was to benefit South Africa’s needy. Everyone concerned with the National Lottery appreciates and understands the financial difficulties faced by organisations involved in philanthropic work.

It is for this reason that Minister Erwin gave the Board the mandate to disburse Emergency Funding to organisations facing crises as a result of the funding they previously received from the likes of Community Chest being stopped. In December 2000 and January 2001, an amount of R4,1million from the Miscellaneous Purposes category of the NLDTF was disbursed to 80 organisations that met the Emergency Funding requirements. This amount is twice the amount the Western Cape Community Chest is quoted in the article to have lost as a result of lottery regulation closing down their Scratch Card competition.

The prescribed procedures to start with the distribution of funds have been put in place and applications were called for in March and April 2001 in the categories Charities; Arts, Culture and National Heritage; and Sport and Recreation. At the beginning of June, the first beneficiaries were identified and R8million was allocated. Further meetings have been scheduled for the adjudication of all of the 3 783 applications received by the deadline. Announcements will follow each adjudication meeting and a further call for applications will be made after the current process has been completed.

The Distributing Agency for Arts, Culture and National Heritage has received a total of 902 applications. The Members met on 31st July to adjudicate on the first 204 of the 902 applications processed. The meeting adjourned, was re-scheduled for 8th August 2001 and will be followed by a press statement announcing the outcome of the first applications adjudicated.

Regulations promulgated by Minister Erwin prescribe that a minimum of 10% of the funds in the NLDTF is allocated to each of the beneficiary categories. The exception being Miscellaneous Purposes, which qualifies for a maximum of 5% of the proceeds.

Should any of the beneficiary categories require more than the minimum allowed for in the regulations, the Distributing Agency for that category will have to submit a substantiated proposal to the Minister of Trade and Industry requesting more funds. For the current year, there is a maximum of R400million available for distribution to all the good cause categories. The balance of the funds in the NLDTF, which is being added to weekly, will be accumulated for next year’s allocations.

At no stage did anyone from the Board’s offices give reasons for Ms. Masemola’s absence at the Arts, Culture and National Heritage Distributing Agency meetings. In terms of regulations governing the Distributing Agencies, Minister Erwin’s office will be informed of Ms. Masemola’s absence at meetings and of the fact that no apologies have been tendered on her behalf.

Finally, the purpose of the National Lottery and the funds it generates for good causes is to make a difference to the lives of the all those in need. The monies raised, albeit it substantial, is not sufficient to address all the financial needs of the organisations involved in philanthropic work. Organisations are therefore urged to continue with their other fundraising drives and to look to the National Lottery as one of many sources of funding.

Yours faithfully
NATIONAL LOTTERIES BOARD

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Joe Foster
Chairperson