PRESS RELEASES
9/12/2002
Response to the report, “Smoke and Mirrors”
The National Lotteries Board hereby places on record its response to the report, “Smoke and Mirrors” released on 27 August 2002.

The first two comments we make are directed generally at the whole report. This is followed by comments on specific instances in the report.

The first comment relates to the intention of the report that was commissioned by the Non-Profit Partnership (NPP) and claims to highlight issues that affect the NPP. It is an attempt to articulate the frustration the NPP has been harbouring for many years and fundamentally concerns their failure to secure an active role in the distribution of lottery funds and the Board is convinced that as a consequence, most of the criticisms in report are indeed based on misinformation and sour grapes.

The second issue relates to the quality of the report as well as the quality of the research contained in the report. On the cover page it is asserted that the Centre for Civil Society (CCS) is “committed to producing high quality research”. This means that either the CCS does not understand the meaning of high quality research or that the report was not produced by it. As will be clearly evidenced from the specific comments that follow, the quality of the report is mediocre; it is riddled with factual inaccuracies, severe misconceptions and gross ignorance. These problems unfortunately also force the intelligent reader of the report to view with suspicion the few valuable insights that the report does contain.

The report claims that the most “damning” of all the criticism is the fact that it took a full year and widespread criticism to set-up the distribution mechanism. (In fact the report uses the word “damming” which is either a spelling error or intended to mean something entirely different: waves of criticism flowing through the sluices perhaps?). Minister Erwin clearly stated in the debate in the National Assembly on the National Lottery, that it was a conscious and deliberate decision by Government to allow the National Lottery to run for a full year before any distribution could be considered and further that neither he nor the government would be “bullied” into rushing into irresponsible and unaccountable distribution. If the government had decided to wait 2 years (as was the case in the UK), no amount of lobbying or criticism or badly written research would have made any difference. In retrospect, the Board believes that it was a prudent decision and given a second chance, would not do anything differently.

Throughout the report the writer exhibits his ignorance of the relationship between the Lotteries Act and Regulations published under the said Act. The first explicit example of this is in the statement that in the first licence term of 7 years, “incremental rather than dramatic changes are possible” and that “after this period, new regulations will have to be drafted”. There is absolutely no logical basis on which to make such a statement, it is simply absurd.

The second example occurs in the statement “the Act stipulates that a minimum of 10% of the total funds are to be allocated to these four categories…”. The reference to 10% is in Regulations and not in the Act. We hope that the writer will be encouraged to seek out the difference between the two.

The writer further makes the assertion that, “...no more than 10% of the money awarded to the NLDTF is allowed to be used for administration”. This again is absurd and it is unimaginable how this figure is derived. The Board submits a budget annually to the Minister of Trade and Industry for its administrative costs and in the first 2 years of operation the Board’s total budget was less than 2% of Lottery sales.

The statement that “the allocations given to arts and sport are determined by law, not by the Minister of Trade and Industry, the Lotteries Board or the Distribution Agencies...” again demonstrates that either the writer did not bother to read the Act or that he has severe limitations understanding the contents. In addition, all the entities involved in the National Lottery and the NLDTF are defined in the Act but the writer makes several references to the “Central Distribution Agency”. There is no such agency.

Further, it is rather late and foolish to raise the issues of the “macro” funding strategy. The beneficiary categories were chosen and agreed to by Parliament in consultation with civil society during the lotteries bill debates before the Lotteries Act was passed in 1997. Where was the NPP then?

There are several assertions made in the report that reveals a total ignorance of the relationship between the operator of the National Lottery and the Government. The Licence signed by and between Uthingo Management and the Minister of Trade and Industry, on behalf of the Government, is a public document. The Board is quite surprised that the writer did not request a copy and further that he develops hypothetical arguments based on his assumptions of what it may contain. For example, it is totally absurd to assume that the Government would allow a private operator to operate the National Lottery and then allow the same operator the discretion to choose the levels of payments made to the NLDTF so as to generate “considerable amounts of interest free loan capital”.

The accounts of the Board and the NLDTF are audited by the Auditor-General and presented annually to Parliament. If the ridiculous figures including the “missing amount” conjured up by Brian Bailey has any substance, it has obviously evaded the Board’s internal auditors, Uthingo Management’s auditors, the Auditor-General and the Portfolio Committee of Parliament.

The relationship between the Board and the Distributing Agencies is defined in the Act and correctly paraphrased in the report. However, the report persists in questioning the “legality” of this relationship. The Board regulates (or is a referee as the report prefers) the National Lottery, Society and Other Lotteries and Promotional Competitions and the Board is responsible and accountable for the NLDTF. The management of the Central Applications Office is an additional function allocated to the Board by the Minister of Trade and Industry with the approval of the Cabinet. This function could very easily have been allocated to some other entity. The statement that “that a referee cannot be a player in the same game” clearly illustrates that the writer is confused about what exactly is the “game” and what is being refereed.

Finally, the report states that “it is not intended to be prescriptive” but is nevertheless littered with phrases such as “the Minister should” and “the Board should”.

As a point of correction, the Board would like to point out that at the time of the report being released to the media, the posters referred to were already distributed nationally and the NLB website was live. In fact, the posters were released at the end of May 2002. We believe strongly that it would have been prudent for the writer to check for correctness of comments attributed to the participants in the research before releasing the report. Besides being the ethical thing to do, this would certainly have prevented the publishing of inaccuracies.

The Board is quite satisfied that it is executing the functions and responsibilities required of it under the Act and by the Minister of Trade and Industry in the most efficient and cost-effective manner and will continue to do so. The Board continuously monitors its effectiveness and will implement new processes and procedures when these make good business and good corporate governance sense. The Board seeks and welcomes input from all sources provided that this input is sound, unbiased and seeks to improve the lives of all South Africans rather than to serve the interests of a disgruntled minority.