National Lottery budget allocated to sport: briefing by Department of Trade and Industry & National Lotteries Board

Meeting report

Opening Remarks
The Chairperson welcomed the National Lotteries Board (NLB) delegation and acknowledged the apologies from some absent Members. Immediately after, he gave the NLB the platform to address the Committee.

National Lotteries Board: National Lottery budget allocated to sport
Prof Alfred Nevhutanda, NLB Chairperson, introduced his delegation and started the briefing to the Committee.

The Chairperson proposed that it would be helpful and would save time if Prof Nevhutanda skipped certain aspects of the presentation, and dealt mainly with, the coordinated approach to funding facilities and the National Lottery budget allocated to Sport.

Prof Nevhutanda then detailed the budget allocation for sports. Sport received 22% of the Grant Funding budget from NLB. Schools that had applied had received between R 50 – R 100 000 grant funding individually from NLB. NLB had previously reported that it had constructed 27 artificial turfs which cost about R 171 million, in 2013. NLB said it used the Sport and Recreation Distribution Agency (SRDA) as its implementing wing, where it simply gave SRDA the money and SRDA decided where the money would go to, depending on deserving applications. NLB thereafter monitored SRDA performance through their Annual Reports. SRDA had recently allocated R 17 million to the Orange Africa Cup of Nations (CHAN) football spectacular. He said it had become normalized for applicants to not directly specify reasons for applications before approval from National Government, but after such, those very same organizations would come to NLB and say the application was of National importance. The SRDA had started putting R 100 million aside to start legacy projects before the 2012/13 financial year end, in every province. SRDA had also funded the World Conference on Doping in Sport which had taken place in Johannesburg in 2013. SRDA had also funded a high performance centre at the University of Pretoria to the tune of approximately R 30 million. SRDA could in one week adjudicate more than 100 applications, so it could very well spend the remainder of its allocation towards those legacy projects mentioned earlier.      

Ms Thabang Mampane, NLB Chief Executive Officer (CEO), greeted the Committee and simply handed over to the Senior Executive for Grant Funding to take the Committee through the funding allocations breakdown.

Mr Jeffrey Du Preez, NLB Senior Executive for Grant Funding took the Committee through the financial breakdown of allocations done by the SRDA. He said it was a fine balancing act to balance the interests of the high level elite sports and grassroots development, club and school sport. Even though schools had been the biggest beneficiary up to the end of the third quarter of 2012/13, that percentage figure when compared with the number of applications from schools. It was a small percentage from what could be covered for those that had qualified, which had then precipitated a need to put a restriction in terms of the maximum amounts that could be allocated to individual schools. NLB with the SRDA had started developing strategies to close the gaps between the high end provinces like Gauteng and the Western Cape versus the North West and Northern Cape, in terms of the basic 5% legislated provincial allocation. SRDA had at time a dilemma of receiving an application for R 100 million from one municipality to spend on infrastructure, whereas there were other imperatives within that R 462 million allocation that had to be split across provinces. It became a challenge then, to figure out how meaningful a contribution the NLB would have in the entire sporting infrastructure sector if it were to grant that application funding. Therefore NLB had deliberated over that issue and considered discussing with SRDA that; on wanting to make a bigger impact and aligning some of the funding to national priorities. They would have to become more targeted in their approach and focus on one or two components of the funding from one year to the next, instead of doing everything every year. Mr Du Preez had been impressed with the South African College Principals Organization (SACPO) proposal. That was because the beneficiaries from that project would include schools and clubs at grassroots. Additionally approximately R 26 million of that allocation was geared towards developing a curriculum aligned with the South African Qualifications Authority (SAQA), so that that intervention could be aligned to standards of the National Qualification Framework (NQF). If applied properly that project could have a significant multiplier effect in producing NQF graduates, and possibly it could be adopted as one of the flagship legacy projects of NLB.

Mr Mveleli Ncula, SRDA Chairperson, said the SRDA had a good history of being led by sports loving administrators. He said pre-democracy non-racial sport had no funding agencies to grant funding for development of sport. With the advent of democracy, the grassroots development was forgotten as back water. With the establishment of the NLB, those inadequacies were to be rectified through the SRDA. SRDA had to deal with grassroots as well as high performance sport, because South Africa (SA) had to perform internationally. The money that went into the major sporting federations made no impression to disadvantaged communities. Many people at club and school level from disadvantaged communities were playing sports with the hope of representing SA at National level. With the big domestic sporting federations being affiliated with International federations, up to 2014, if one compared 1994 when SA was readmitted into the international arena; because at that time the National Sports Council had three pillars as principles. Those were development, participation and transformation. SA sport was still grappling with those issues in 2014, which were also what the SRDA was trying to address with its very limited budget. It was unheard off, that there still remained schools that did not even have rugby or soccer balls to kick around; when the refrain was that most schools were playing sport. SRDA argued that in providing that equipment to those schools, it was also impacting in the state’s efforts to address SA socio-economic struggles. The challenge that SDRA had, had to do with compliance issues concerning the supporting documents, which needed to be submitted with applications. Most of those applications with incomplete documentation that ended up being declined were from rural disadvantaged schools. Privileged schools simply appointed consultants to do the applications on their behalf, always received funding. The perception then in public was that the SRDA was funding urban privileged schools at the expense of the disadvantaged schools.

With the re-admittance of SA in the international sporting arena, the country was currently competing at the Olympics, the Commonwealth Games and the African Games. All those teams had to be prepared; hence SRDA gave so much of the allocation to the South African Sports Confederation and Olympic Committee (SASCOC). In comparison, the money that had been given to big federations was more than the money given to grassroots sport development organisations. SRDA owed its success to the NLB management team that was there on the day. SRDAs plan was to consult relevant stakeholders in its bid to start legacy projects that were targeted at specific communities, which included getting the support of local municipalities. There was for example an artificial turf in Nyanga location that had never been used, owing to the Municipality refusing to maintain it, even though there were many people who played football in that location. SRDA had formed partnerships with the Black Lawyers Association (BLA) and the National House of Traditional Leaders (NHTL) so that there could be custodians to ascertain that the facilities that SRDA set-up would be utilized properly and daily.



Prof Nevhutanda said the current Act governing NLB was very prohibitive, but the Department of Trade and Industry (DTI) had produced and developed a manner where the SRDA with the NLB could coordinate and fulfil all their current aims and targets.   
     
Ms Zodwa Ntuli, Deputy Director-General (DDG), DTI, said as alluded to by the Chairperson that the intention of the Lotteries Act (57 of 1997) had been to help with the development of sport. The legislation ultimately though, was not giving effect to the intention. One of the main contributors of that had been that the Act was clear that there had to be applications before grants were given. Therefore it would be irregular to take alternative routes, as beneficiaries had taken NLB to court often previously, over the fact that their applications had met the criteria and thus they deserved funding. The legislation had not been considering whether the granting of funds would ultimately have impact on the ground. She said the amended lotteries Act addressed such issues. There would be currently, application based funding, but also proactive funding, meaning that it would be possible for the Department of Sport and Recreation (SRSA) to say it had certain priorities for that funding. Then the proactive funding could then be aligned with those SRSA priorities. There would still be room though for projects, those whom were not state priorities to also get funding. 22% was a significant allocation and it could make an impact, if it was properly managed. Ms Ntuli then read from the presentation. There had always been a difference of opinion between NLB and SRDA over what type of call should go out to advertise for available funding. Ultimately there would be a compromise call, and because of there being no mechanism to resolve that issue properly there were gaps. Ultimately in each DA one would find requirements that when scrutinized, one found that they were so prohibitive, that applicants were being excluded even before they even applied. DTI had then engaged DAs on the type of calls they wanted and what the priorities of the state were, so that calls could actually speak to those issues. Those issues had been ironed out without even changing the legislation.

Ms Ntuli made the analogy that the high rate of decline mentioned by Mr Ncula was like denying someone medication on the bases that the individual had not requested it, even though it was evident the individual was sick. With the enactment of the amended Act, DTI had an opportunity to relook the regulations. In the regulations there had been percentages allocated to the various sectors, but currently impact assessments could be done, so that along with state priorities the allocation percentages could be changed accordingly. DTI acceded that indeed all that was well, but adjudication on a daily bases would be the only way to make sure that all the targets of the SRDA could be met. To that extent it also acceded that it could no longer employ adjudicators on temporary bases, when the work entailed therein need full-time personnel. With full-time adjudicators, the calls would be made more frequently with the adjudication being done daily and faster. That would also improve the turn-around time, and would also make it possible for there to be no calls at all in future. DTI would expedite the process of issuing the regulations and ensure the consultation, where it had already called on SRDA to continuously engage SRSA. SRSA was also making its presentations to the NLB and SRDA quite frequently, so that SRDA and NLB were always aware what the priorities of state were.       

Prof Nevhutanda said the SRSA, the Departments of Arts and Culture (DAC) and Social Development (DSD) had already made presentations on their plans to the NLB. Indeed NLB did not fund Departments, but their priorities gave direction as to where funding needed to be channelled towards. In their following engagements the SRDA would also be invited.

Ms Mampane said as the Chairperson had warned previously that the NLB should not call for applications for funding without really dealing properly with the challenges that had been plaguing the NLB first, in terms of the number of applications it targeted and how it processed them. She then read through the challenges the NLB faced in achieving its mandate. The new legislation stipulated that the NLB was required to do outreach with communities on how they could apply for funding from it.  

Prof Nevhutanda said it was in the SRDA mode of operation to process applications even though there had been no call made for applications. The amendments would simply re-enforce the SRDA work ethic.

The Chairperson saidit would be incorrect to speak of poverty as if it was in the rural areas only, because it had simply migrated to urban areas with the influx of jobseekers moving towards urban areas. The NLB therefore would have to work through that dilemma in terms of allocation.

Discussion
Mr T Lee (DA) said he was grateful for the NLBs assistance over the years. The best example of how infrastructures spend from NLB should be used; the Free State was the best example. Perhaps the state and NLB had to put stipulations to the grants they provided, because it was useless to have equipment without a court or field to play in. He also suggested that the NLB should also accompany the Committee on its oversight tours to provinces, because other people claimed NLBs achievements. How much did SRSA put into CHAN, in real terms? Probably the best people to consult on the new regulations for SRDA were perhaps SASCOC and the portfolio Committee on SRSA. Since they all had a very clear idea of how the funding needed to be regulated.

Mr M Dikgacwi (ANC) said the NLB had spoken on capacity building and asked how far NLB went to help federations with governance specifically, in capacity building? What was happening in terms of monitoring as well? The International regulations versus National laws gave federations too much power to run amok. Could NLB explain the R 18 million withdrawals? The Committee had gone to the Eastern Cape on oversight where after being shown a facility that was supposed to have cost R 50 million; the evidence belied that amount. Could it also explain the provincial allocations from that R 100 million?

Ms G Sindane (ANC) recalled that NLB seemed to have addressed some of the Committees concerns from their previous interaction, but could it share with the Committee the exact improvements as compared to last time, pertaining to responses to applications. What were NLB targets, when granting funds to the different causes it supported and what were the time frames attached to those? What was NLBs outreach strategy in assisting communities and organisations to access funding? How was NLB intending to close the gaps between the provincial allocations, for provincial investments? What was the coordinated approach to facilities and what were its tangible targets?

Prof Nevhutanda replied that in total, the lottery distributed more that R 2 billion a year, but the lotteries Act had made the National Lotteries Distribution Trust Fund (NLDTF) a free for all to anyone. Across all sectors, NLB had from 2013 April until mid-February 2014, distributed R 258 million in the Western Cape alone. If for example NLB gave SRDA R 500 million, then R 300 million would indeed be application based, but the remainder would have to be proactive funding as Ms Ntuli had detailed. NLB indeed would increase its visibility, but that had to be through tangible and visible projects on the ground. He agreed with Mr Dikgacwi that the international affiliates always wanted recognition in domestic tournaments or projects even if they had not sponsored anything whilst the NLB, probably having paid for everything would get a small mention.
Additionally the call time for applications would be extended to be open ended so that the needs basis of communities and federations could be addressed continually. NLB had signed Memoranda of Understanding (MOUs) with BLA, the South African Institute of Chartered Accountants (SAICA), the South African Local Government Association (SALGA), so that those agencies could monitor SRDA funded projects.

Ms Ntuli said DTI would indeed follow up Mr Lee’s comments and suggestions. Additionally DTI was aware of the challenges concerning governance and added that there also were issues with financial management as accountability proved a challenge, for both federations and other types of organisations that were funded by the NLB. The DTI plan was then to ring fence a certain amount, within the allocation it would give to an organisation, so that proper governance and financial management could be done. SAICA had in their MOU agreed to assist beneficiaries in that regard. In lessening the burden for entry, DTI was alternatively enhancing monitoring of accountability for beneficiaries. The DTI was going to fine tune its turn-around times process, so that it could measure the time from receiving an application to ultimately paying a beneficiary, which was a requirement of the new regulations as well. That would make it possible for anyone to measure the SRDA performance based on its turn-around time. Targets would also be set for the amount that needed to have been distributed in a financial year, so as to avoid rolling over funds when there were needs on the ground. Moreover DTI was also to focus on the number of jobs temporary or otherwise, that had been created by the NLB funded projects since that had never been attended to in the past. That was included as a measure in the Impact Study that the NLB had commissioned. NLB had introduced an oversight mechanism and upfront verification mechanism which it had not done before, to monitor whether the organisations and projects it was funding existed and had the envisaged impact. Towards visibility, the NLB had increased awareness over its existence, in that for those who played the lottery. The NLDTF logo showed individuals what they were contributing to on the ground. Overall the NLB was developing a mechanism that could determine how much an administrator of a project should take versus how much needed to go into the project.    

Mr Ncula replied that the R 100 million he had alluded to was for a R 10 million allocation per province, for a period of time. SRDA said there could not be two parallel plans between the two bodies, whilst there was the National Sport and Recreation Plan (NSRP). In their plan the SRDA wanted to fund a combination field, where rugby and soccer could be played, with cricket pitches on the peripheries of that field. Similarly with a combination court, netball and volleyball needed to be both accommodated in that one court. In having swimming pools and athletics tracts within that very same multipurpose facility, the SRDA was trying to cover as many codes as possible. SRDA was also very worried that the Northern Cape only received about 2% and the North West about 4% of the provincial investment allocation. What was misleading when looking at Gauteng’s provincial investment allocation though, was that one needed to add the major sporting federations, which were housed there as well, therefore one needed to negate the National federations when considering the actual investment. Moreover when SRDA made calls there were very few applications from the North West and the Northern Cape. Access to facilities would need a lot of consultation and formulation of partnerships, so that the objective of erecting facilities could come to fruition.

Ms Mampane said the workshops which NLB was currently running were focused at assisting beneficiaries with how to apply for funding so as to give them leverage in getting funding. NLB was to have an Indaba in April 2014, where after NLB consulted with beneficiaries on how it could improve its service provision to its beneficiaries. Following that it would go to provinces and work with beneficiaries in smaller groups to deal with individual common challenges, so as to close the gaps in terms of previous imbalances and to get an idea what was happening in particular provinces. NLB had a very interactive website, but were also considering newsletters and a small scale marketing activity in taxi ranks in small communities to bridge the technological gap.

Mr Du Preez said as part of the recent engagement with the charities sector, NLB intended to use, for example the data it had from the Northern Cape on organisations that had been declined funding in previous attempts. To then target those organisations before the generic awareness drives that NLB would do with the call for applications, and to talk with them, over why they had been declined. That tool was to enhance and reduce the number of non-compliant applications, because as Mr Ncula had indicated a lot of the time the pool from which NLB could allocate from was very small to begin with in such provinces, compared to the Western Cape and Gauteng. NLB was also aiming to roll out provincial offices to assist with processing applications. DAs were also prioritising the small investment provinces in terms of adjudicating, all within the confines of the regulations. He said there would be a lot of withdrawals of course, but one of the reasons was that because NGOs changed management, the incoming new management never returned grant agreement forms, because the reason would be no one knew about the application. Moreover because the funding sometimes would be done in divided tranches, if an organisation for example received R 5 million, it would receive the first tranche of about R 3 million. The remaining balance would depend on the organisation submitting a report on how the first tranche had been spent. Then there was a general theory that because the organisation could not account properly for that first tranche, they simply never bothered with the remaining funding. Before applications closed or before a call, the SRDA would sit and decide on a limit for the different categories of beneficiaries, for example they would decide that for schools in a particular year, SRDA would allocate a maximum of R100 000. Ideally one would want to give more, but under the circumstances of dealing with so many priorities and the fact that the allocations needed to be well spread across the country, SRDA did good work in that regard. 

Prof Nevhutanda said when there was still ample time to submit applications, very few submitted but on the last day everyone would be rushing to submit. Those very same people who submitted applications on the last day, on the last hour would want responses first.

The Chairperson asked whether the SRDA actually checked the existence of beneficiaries before releasing funding to them. He felt it was very easy to pump money into poor people to do more harm than good. All the NLDTF resources of NLB were there, mainly to assist the state in addressing poverty, inequality and unemployment. Since the existence of the NLB was legislated, it operated like a state agency and there were regulations to be followed, and clearly somewhere there had to be a requirement about pre-verifying the existence of beneficiaries. He argued that there were many female headed organisations from rural areas that seriously needed NLB funding, but for lack of competency in applying for the funding they were always marginalised. He cautioned NLB against the practice of rotational funding, without first systematizing a mechanism where first it ensured that when recurrent application organisations reached a certain level of empowerment, then new applicants could be picked up at the expense of those then self-sufficient organisations. National Sporting Federations by their nature were supposed to be self-sufficient and therefore NLB was not supposed to burden itself with them at the expense of good and impacting causes in need of NLB funding.   

Mr Lee said the best way to curb fraud was to prosecute fraudsters; how many had NLB prosecuted? The Committee said it was not happy that sport only received 22% from the total amount of R 2 billion that NLB granted through its NLDTF, when in fact its existence had been advocated for by sport in the first place. Was it a legal imperative for sport to get only that percentage of funding from NLB or was that being addressed in the amended lotteries Act?

Mr S Mmusi (ANC) asked whether there ever was an incident in the past where NLB sponsored Billboards, because he had seen a number of them in schools.

Ms G Sindane (ANC) said the Limpopo Sports Council had applied to the NLB so that it could buy Gymnastics equipment, but that very equipment was still at the Councils offices. How did NLB follow up, how its funds had actually been used?

Mr Dikgacwi said one of the resolutions of the sports indaba were school sports. Was the NLB looking into funding that? How could NLB assist Boxing SA (BSA) and Netball SA (NSA)? NLB needed to relook its partnership with SALGA, because Municipalities applied for funding on behalf of their communities, but the state of the facilities left a lot to be desired.

Ms Sumayya Khan, CEO, SRSA, said there was only one NSRP in the country, but the issues were in the details of implementing the plan, that is SRSA needed to engage further with NLB and other stakeholders to ensure optimal implementation of the plan, because otherwise everyone ran the risk of duplicating the same projects at various sectors. SRSA had been doing some work on the Facilities Plan and had finalised the Classification Framework, which spoke to the types of facilities that SRDA wanted to build.  

Mr Tsholofelo Lejaka, Chief Director: Cooperate Services, SRSA, said that the Department had to transfer R 120 million to host cities for the CHAN soccer tournament. Where Cape Town had received R 63 million, Polokwane had received R 28, 5 million and Mangaung had received R 38, 5 million and over and above that SRSA had had to transfer just above R 36 million to the CHAN Local Organizing Committee (LOC), and for mobilization, SRSA had budgeted R 2 million. That was just about R 158 million in total. He said most of the thorny issues at SRSA had been responded to in that NLB briefing and the intervention from the legislative amendment would also ease some of the pressures SRSA had to deal with. The application based funding model that NLB had been using had indeed been an issue for SRSA for a long time, because a developmental state was an intervening state. And where SRSA had identified that there had been problems and challenges, it could not intervene as it did not possess the necessary capacity to do so. SRSA was glad that NLB would want further engagement, because after two years of implementing the schools sport programme, there were lessons that SRSA had learned and also priorities possibly would have changed. So that opportunity would make it possible for SRSA to update the NLB on those issues. For SRSA the biggest challenge were turn-around times, for example at the beginning of the 2014 some of the sporting personalities which had received sporting honours in 2013, had complained that they had not received their monetary pay-outs.

Prof Nevhutanda said it was a great learning experience to hear some of the grievances from members and acceded to the Chairperson’s comment that indeed South Africa had resources, but what remained was how they managed those resources. NLB had been alarmed by the fact that indeed there were individuals gifted in the art of lying on paper to get funding from them. The issue with funding billboards was that a particular school had applied for funding from the SRDA and had received it. The consultant had taken R 50 000 for himself, had put up the billboard with NLDTF sponsorship branding. So there could be no soccer grounds built, as there was not enough money remaining to even rehabilitate an old one. Indeed all such occurrences had and were being reported to the Hawks, but of course such investigations took time to conclude, and DTI emphasised that such fraudsters needed to be brought to book. It was saddening that the public were also not critical of bogus lotteries officials, because those individuals put their names as the contact persons on the funding application forms. All correspondence from then was with those individuals which was how the NLB got defrauded, and obviously NLB did need to increase its monitoring and awareness over such issues as well. NLB would also check from then on that whether the directors of the organisations they were funding were paying tax and also whether they were recognised. NLB had funded schools sport with a large amount of money. Follow ups were done through progress reports in the past, but with the new legislation and the drive to improve on operational efficiencies, follow ups would be done physically with or without progress reports.  

Mr Ncula said SRSA had set-up a Sports Trust as a conduit to apply on its behalf for R 200 million for the National Schools Championship. The SRDA had agreed to fund that championship in tranches of R 50 million per year over a period of four years in total. Initially the SRDA had issues with the composition of the Sports Trust, because it felt that the Trust was too white, and as such it looked after the interests of white affiliates. That issue had been addressed though. One issue the SRDA had raised with the Trust was the criteria that there had to be previous operational progress reports of what an organisation had done before getting funding from the SRDA. Problematic as that was, the SRDA had decided to implement that rule strictly, and had subsequently informed both the Trust and SASCOC about that decision, as that affected them specifically. There would be no funding without those progress reports. SRDA was not allowing federations to spend money like drunken sailors. NSA had applied to the SRDA, but their application had been denied on the bases that NLB criteria was that it did not pay salaries for professional sports personalities. With BSA, SRDA had agreed to assist its administration with governance capacitation. The issue with the South African National Boxing Organisation (SANABO) was that it had been funded before and had never reported after that. Their response was that they had a new Committee, which was the normal response from organisations that had mismanaged NLDTF money. There were such problems of dishonesty where SRDA really wanted to help, as SANABO had produced good amateur boxers that needed to be prepared for the Olympics, but the dishonesty was preventing assistance.

Ms Ntuli said indeed there was an opportunity to relook the 22% allocation to sport when DTI would be reviewing the regulations. The Act though did require DTI to be informed by the provincial spread and categories where NLB wanted to make the impact as well. The Committees plea was similar to the charities sector, which felt that sport and, arts and culture where not supposed to be getting money from NLB anyway as the national fiscus provided for them anyway, but of course DTI chose to balance all of those interests. Fortunately Departmental priorities and the NLBs ten year impact review would also inform DTIs decision over how it would determine percentages per sector. It was also difficult when looking at the NLBs Annual Reports where funding would have been provided for festivals, conferences and so forth, in contrast with the need for poverty alleviation; where people would then ask whether those were priorities? The people involved with poverty alleviation where not the ones calling NLB and asking such questions, in fact those who were so concerned where the individuals who submitted applications late and called the following day on progress in processing their applications. To an effect that hampered the NLBs work as it had to serve diverse interests, where what was important to one organisation was not necessarily seen as important by another. Categorisation of grants also would cut down the rejection rate and also address issues to do with turn-around times, as currently calls had the same criteria for individuals who were asking for R 50 million in comparison to those that were asking for R 500 000. There would be small grants where organisations would have to give the basic needs, so that turn-around time would be much faster. Even though NLB would not be able to monitor the entire country, it wanted to make sure that there higher value funded projects could be verified pre- and post-funding so that it could measure the impact. DTI advocated for lesser use of conduits whether necessary or not, because that had exposed NLB to fraudulent activity and those destabilised partnerships that Prof Nevhutanda had alluded to.

The Chairperson said the NLB would have to work it out from all the inputs from the meeting. As the Committee had visited on oversight in the different provinces, it had been indeed difficult to differentiate between a legacy fund and an NLDTF facility because of the branding issues mentioned in the discussion. So there was a lot of confusion over who really had built facilities since everyone claimed that they had built them. That needed to be brought to the attention of the incoming Committee. He then thanked the NLB delegation for the presentation.

The meeting was adjourned.