The National Lotteries Board provided the Committee with a comprehensive presentation on the regulatory framework within which it functioned, its governance structure, the functions of the board, the functions of its distributing agencies, its strategic objectives, the strategic objectives of the arts distributing agency, its beneficiary categories, its strategic focus, the Board’s interventions to foster equitable distribution, its allocations and also the challenges it faced.
Given that the presentation was comprehensive it evoked quite robust discussion. The fact that the Chairperson of the Board felt the Act to be too restrictive probed Members to question how the Board managed to perform its functions. The Board’s actions were limited to those prescribed in the Act which was felt to be too restrictive. The Committee was urged to influence the amendments to the Act to go ahead so that the Act could be more in tune with the needs of South Africa. The Act at present was a first world act to be implemented in a third world country. The procedure for applications to the Board for funding of projects was considered far too complex and bureaucratic for the average South African. Much of the funding towards the arts sector seemed to be finding its way to those provinces which were more or less affluent, that is, the Western Cape, Gauteng and KwaZulu-Natal. The more affluent the area the more it seemed that applicants were able to cope with complying with the application requirements. It was felt that the funds were not finding its way to those areas which needed them most. The issue in many of the poorer areas was that many applicants did not comply with the application requirements and hence would be unsuccessful. Applicants in poorer areas were often illiterate and did not comprehend the complexities of the application requirements. It was hoped that the amendments to the Act would make the application process simple and that the merit of the application would lie in the business plan attached. The opening of regional offices was appreciated as it meant better accessibility to the Board especially in rural areas. The Committee was concerned about certain projects obtaining funding from both the Board and the Department of Trade and Industry (DTI). It was considered double dipping. The Board conceded that it was a problem but felt that the Committee was better tasked to address the issue.
National Lotteries Board
The Chairperson at the outset of the meeting raised a concern that there were entities that were being funded by the National Lotteries Board as well as by departments. Why were certain entities receiving double funding?
Prof Alfred Nevhutanda, Chairperson, and Ms Marjorie Letoaba, Grant Manager: Central Applications Office, represented the National Lotteries Board.
Prof Nevhutanda stated that the National Lotteries Board reported to the Department of Trade and Industry (DTI). The Board had three sectors or distributing agencies (DAs) to which it allocated funds. They were sports and recreation; arts, culture, national heritage and eco-tourism; and lastly charities. There was a fourth sector provided for in the National Lotteries Act but it was not functional, that is, the Reconstruction and Development Programme (RDP), for the reason that it had not taken off. There was also a small amount of funds allocated for miscellaneous use. Miscellaneous funds fell within the competency of the Board. The distributing agency was appointed by DTI.
The National Lotteries Act established the Board. The Board was responsible for advising the Minister of Trade and Industry, for the licensing of operators as well as distribution and governance issues. The Act also established the National Lottery Distribution Trust Fund (NLDTF). The Act set up the process for distribution. The National Lottery was an asset of South Africa. The Board also monitored and regulated private and society lotteries as well as promotional competitions. Gidani was the current lottery operator. 34% of lottery ticket sales proceeds went towards the NLDTF. Per week R20m-R25m was paid by Gidani into the NLDTF. Lottery rollovers meant more funds for the NLDTF.
The National Lotteries Board regulated Gidani through the license granted. Meetings with Gidani were held every fortnight to check on compliance. The National Lotteries Board was the trustee of the NLDTF. The arts, culture, national heritage and eco-tourism distribution agency received 28% of funds, charities received 45% of funds and sports and recreation received 22%. The remaining 5% was allocated to a miscellaneous fund. RDP being non functional received 0%. Applications for funding from the three major sectors or distributions agencies were done through the Central Applications Office. For example non-government organisations (NGOs), community based organisations (CBOs), community trusts and community foundations could apply but not family trusts and family foundations. Even schools and universities could apply for funding. Museums and the National Youth Agency also qualified to apply.
Functions of the Board
The Board advised the Minister on the issuing of licenses. It could also advise the Minister about the efficiency of lottery related legislation. Prof Nevhutanda stated that the Act was currently being amended. He pleaded that members should suggest amendments to the Act to make it more relevant to the South African situation. The Act at present was considered a first world act in a third world country. The Act was so restrictive that even if a disaster happened and the President of South Africa required funds, the Lotteries Board’s hands were tied by the Act. It could not give the President funds; only the relevant organisation requiring funds could make application for the funds. Sometimes the Board would allocate funds from miscellaneous fund. The NLDTF was regulated by the Act and the Act was very prohibitive. The Board administered the NLDTF. The Board also looked after the best interests of lottery players themselves.
Functions of the Distributing Agencies (DAs)
The Minister of Trade and Industry appointed the DAs for a period of 5 years. Criteria and guidelines for allocations were developed. The arts DA which was relevant to the Committee was appointed in 2006 and its term was to come to an end in August 2011. Applications for new individuals to serve on the DA had closed in March 2011 and the decision on successful candidates would be made in due course.
Distributing Agencies adjudicated on applications for funding and reviewed the progress of projects. The new distribution agency had to operate on uniform guidelines. The guidelines had to be in line with the new regulations passed in 2010. The process on the amendments to the Act was expected to be complete by the end of 2011.
The Board wished to improve the effectiveness of funding from the NLDTF. The intention was also to strengthen compliance and regulation. The Board was currently restructuring its governance structure. It was additionally exploring alternative revenue streams for the NLDTF.
Strategic Objectives of the arts and culture sector
To provide support for initiatives designed to protect and promote traditional knowledge and cultural expressions. In addition to engage in promotional work of arts and crafts, literature, theatre, music and dance. To also develop and preserve cultural heritage and the environment.
Section 21 companies, NGOs, CBOs, public benefit organisations (PBOs) universities, parastatals, projects of municipalities, schools and non profit trusts were entitled to make applications to the Board for funding.
Disabled persons and women were identified as categories that needed funding. The aim was to ensure 50/50 urban/rural split for the equitable distribution of funds. The Board had distributed R15bn thus far. R3bn was distributed in the Western Cape and Gauteng respectivley. Limpopo, Eastern Cape and Mpumalanga only received 2% of the funds. Prof Nevhutanda stated that it seemed as if funds were still going to the haves and not the have nots.
Interventions to foster equitable distribution
The Board had embarked on national roadshows. There was also a roll-out of regional offices in the Eastern Cape and Limpopo. Further rollouts for Mpumalanga and the other provinces were being discussed. Partnerships with organisations like the National Development Agency and the Independent Development Trust
(IDT) were also initiated. The new regulations published in July 2010 prescribed a minimum allocation of 50% to identified priority areas with an emphasis on rural areas.
The total allocations for the various sectors were R767m for arts, R1.2bn for charity and R700m for sports. The total amount of funds disbursed to date was R875m for the period 2010 to 2011. Most of the funds still went to the hubs of arts and culture which were in Gauteng, Western Cape and KwaZulu-Natal. Prof Nevhutanda explained that one of the reasons for this was that these provinces knew how to apply for funds. Legacy projects for the 2010 FIFA World Cup had also been funded up to R166m within the arts and culture sector. The breakdown of the total of R767m for arts and culture per province percentage wise was Eastern Cape-7%, Free State-1%, Gauteng-34%, KwaZulu-Natal-11%, Limpopo-2%, Mpumalnga-3%,Northern Cape-0.5%, North West-0.4%, Western Cape-20% and other-22%.
Equitable distribution of funds remained a challenge. Applications were also done on a first come first served basis. There was also a high decline rate of applications where applicants made mistakes in the filling of forms or failed to attach contact numbers, etc. Turnaround times for applications were a challenge but the Board was improving on it. Another issue was that the operational model was taken from overseas countries when South Africa in fact had its own unique set of circumstances.
Mr J Smalle (DA) referring to the equitable share of funds to provinces stated that perhaps the reason why certain provinces received more funds than others was because most of the arts assets were located in those provinces to which more funds were allocated. He also asked referring to the percentage distribution of funds to the various distributing agencies, ie arts, sports and charities respectively and asked how were these percentages determined. Did the Board do estimates of the income it might receive from lottery proceeds? How did the Board determine how many applications it could grant? Referring to the 34% of lottery takings received from Gidani, was it actually received when it should be. He asked where in the Act or the regulations provision was made for the miscellaneous fund that the Board had competency over. Did the Minister of Trade and Industry and the Finance Minister have a final say where the funds of the miscellaneous fund would be allocated? He asked what alternative revenue streams the Board were considering. Where applications had minor mistakes did the Board give applicants the opportunity to correct them or were applications of the sort rejected. He asked of the R875m that was disbursed how much of it was disbursed for the current financial year.
Prof Nevhutanda stated that the percentages to the various sectors were determined by the Act and regulations. He stated that Gidani transferred the 34% of lottery ticket sales to it every week. The Board placed the funds in trust. The funds were invested in an investment portfolio with banks like ABSA, FNB and Standard Bank. He stated that when the lottery started the Board was given R300m. If the lottery should for any reason stop at present the Board could continue to make distributions for 18 months. Provision was made for the miscellaneous fund in the Act and it received 5% of fumds. The Act empowered the Minister to empower the Board. The miscellaneous funds remained in the Board’s coffers and could be used for projects of national importance. Projects of national importance could not be funded by the other three sectors ie arts, sports and charities. Distribution agencies report to the Minister of Trade and Industry and not to the Board. The Board did however meet monthly with distribution agencies. In the past applications would be rejected for having small mistakes. The current regulations made provision for the correction of small mistakes perhaps telephonically. Projects were now adjudicated on business plans, budgets and registration certificates. Applicants had to fill out a form on the Board’s website. There was also a motivational form. Until the Act was amended the requirement was to have two audited financial statements. The new regulations now allowed for two financial statements from a book-keeper to suffice. If the applicant did not have the required statements the other option was for the applicant to enter into a partnership agreement even with a municipality. The distribution per equitable share was set out in the Act. The new regulations spoke to the 50/50 split between rural and urban areas.
Ms F Mushwana (ANC) asked what informed the Board’s decision to allocate 0% of its funds to RDP. She asked what necessitated there to be time frames for applications. Why was the majority of funding for the arts sector allocated to Gauteng, Western Cape and KwaZulu-Natal? The distribution across provinces should be fair. She referred to the latest regulations and asked how the Committee knew that it would take off.
Prof Nevhutanda stated that the current Act set the time frames for applications. The new regulations would leave application times open. The 0% allocated towards RDP was set out in the Act. There were talks that education and health should have its own slice of the cake and the new amendments sought to address the issue. It would replace the RDP provision in the Act.
Ms N Shilubane (ANC) was concerned about how the distribution agencies functioned. Was the Board affected by the part-time nature in which the distributing agency members functioned? She felt that the distributing agency should not be part-time specialists. The issue of pyramid schemes was highlighted given the fact that the Board did regulate and monitor private competitions. She was glad that the Board was opening regional offices.
Prof Nevhutanda stated that having part-time distribution agency members was a problem. Distribution agency members sometimes did not even have time to adjudicate applications. The Board had advised the Minister to appoint some full time distribution agency members. Out of 9 or 10 distribution agency members half should be full time. He agreed that persons sitting on distribution agencies should be knowledgeable about culture and tradition etc.
Ms T Lishivha (ANC) was also glad to hear that regional offices were to be opened. How else was the Board to reach rural areas and more specifically women and disabled persons?
Prof Nevhutanda stated that in urban areas applications would most of the time meet all requirements and were for considerable amounts. In rural areas applications were usually for small amounts. The opening of regional offices had been suggested by the National Council of Provinces (NCOP). There would be regional and sub regional offices. Sub regional offices would be located at tribal council offices. Having mobile truck offices was also an option. Information could also be made available at municipal offices.
Mr D Mavunda (ANC) asked how persons in rural areas would obtain application forms. He pointed out that most of the projects in rural areas were culturally based and he was concerned about rural persons not meeting all the stringent requirements of applications.
The Chairperson asked what the composition of the Board was and how many people sat on the Board.
She pointed out that persons who often sat on boards were from the elite of society and not persons from grass roots level who were actually aware of arts, culture and heritage. The fact that provinces like Gauteng and the Western Cape received large allocations was considered a problem. What about provinces like the North West and the Northern Cape? She highlighted the fact that there were perhaps illiterate persons who also wished to apply for funding but simply did not know how. What about them? How did the Board monitor organisations that funding had been granted to? She asked what measures the Board had in place to prevent double dipping or more specifically to prevent both DTI and the Board financing the same project. Did the Board undertake oversight visits? She was concerned about the Board financing municipal projects. The Cape Town and Gauteng Municipalities were considered rich, how could the Board finance their projects?
Prof Nevhutanda stated that the Board was appointed in terms of their skills. A balance was needed in relation to issues of culture and tradition. The Act dictated the way in which the Board did things. He was relieved that the Act was being amended to reflect the way things should be done in South Africa. The Act should cover both persons who were literate and those who were illiterate. He conceded that double dipping did in fact take place. It was a practice that needed to be stopped. The aim was about getting funding to those who deserve it.
The Act stipulated that where a municipality applied for funds for a project funds should be granted if requirements were met. With the amendments to the Act this provision would be removed. The Board monitored projects and checked on compliance. Its team was small but it partnered with organisations like the South African Police Service (SAPS), the National Development Agency (NDA) and the IDT. The issue of double dipping was a problem but he felt that the Committee was better tasked at finding a solution to it.
Ms L Moss (ANC) stated that it was perhaps true that most of the Board’s funds were allocated to the Western Cape and Gauteng but the question was on what type of projects were the funds being spent on. She suggested that the Board partner with Parliamentary Constituency Offices (PCOs). She had seen at first hand how funds from the Board were being abused on so called projects. If the Board had a small staff how did it monitor projects?
Prof Nevhutanda conceded that some projects were worrying. On paper a project might look good whereas in practice it failed. The reality was that business plans sometimes failed. The Board had increased the numbers of its monitoring team. He believed the review of percentage allocations to be critical. The use of PCOs was not a problem for the Board. If Members of Parliament needed information, the Board would only be too glad to provide it.
Ms Mushwana pointed out that the Board’s Strategic Objectives did not speak about job creation and poverty alleviation.
Prof Nevhutanda noted that for every R1m allocated the Board wished to see six full time jobs created. Job creation and poverty alleviation was a priority. Poverty alleviation was addressed through the 45% allocation of funds to charities.
Mr Mavunda noted that if the Board was bound to what the Act stipulated it had to be asked how it intended to go the extra mile to become accessible to applicants, especially rural area applicants.
Prof Nevhutanda once again asked the Committee to influence the amendment of the Act to make application forms simpler and shorter. The merit of the application should lie in its business plan.
The Chairperson stated that the Committee would do its best to impact upon the amendments to the Act. She appealed to the Board to try to reach out to nodal areas.
The Chairperson asked what the Board’s relationship with the Department of Arts and Culture was. Did the Board fund any of the Department’s projects?
Prof Nevhutanda stated that the relationship between the Board and the Department of Arts and Culture was very cordial. He worked closely with the Minister of Arts and Culture on strategic issues.
The meeting was adjourned.
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