National Lotteries Board on its 2015/16 Annual Performance Plan and developments

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Meeting Summary

The National Lotteries Board (NLB) had distributed more than R18 billion to good causes since inception 16 years ago. The Lotteries Amendment Act came into effect on 14 April 2015 with the main changes being that the National Lotteries Board (NLB) was renamed the National Lotteries Commission (NLC), that there would be full time Distributing Agents, education and awareness programmes and proactive funding This allowed the NLC to do research and if a project was worthy to be funded, the NLB would not wait for an advert to be placed, rather the Commissioner and the research group would compile a recommendation for the project to receive funding. From the current year onwards, one would see the impact as funds would be targeted, which had not been possible before the Lotteries Amendment Act had been passed.

The new NLC had a dual mandate, to regulate the National Lottery (which was operated by a new operator from 1 June, Ithuba Holdings), and to regulate other lotteries. The second part of its mandate was the National Lottery Distribution Trust Fund (NLDTF) which covered the distribution process for applications for good causes and the making of payments. The sectors remain the same but some of the sector percentages have changed and the allocations are now Charities - 47%, Arts - 23%, Sports - 28%, Miscellaneous - 2%. The Arts sector percentage had been reduced while the Sports sector percentage had gone up from 22%. The Distributing Agencies (DAs) adjudicated applications and made grants in line with criteria. The focus of the NLC was to fund non government organisations (NGOs), community based organisation (CBOs), non profit organisations (NPOs) and community trusts.

The NLB spoke to its operational model and alignment to the dti priorities before moving on to the NLB’s performance indicators for 2015/16.
- Under Strategic Objective 1, it wanted to implement 100% of the approved re-branding strategy, re-design and populate the organisational structure and revamp its technology by developing the E-system, an integrated enterprise-wide architecture platform.
- Under Strategic Objective 2 it wanted at least 50% of grants to be paid in line with the regulated 60 day timeframe and have an annual minimum of 8% return on investment of NLDTF funds.
- Under Strategic Objective 3 it wanted to conduct investigations on 70% of all identified and reported illegal lotteries and develop and implement the third National Lottery Licence Monitoring matrix/scorecard.
- Under Strategic Objective 4 it wanted to implement 50% of the grant funding model, hold four workshops per province, ensure that a minimum of 5% grant funding was allocated to each province and conduct 1000 monitoring and evaluation site visits.

Grant funding was R1.6 billion and there was a net deficit in the budget of R176.7m to ensure that beneficiaries received their money.

Capital expenditure projects were the IT renewal project, which was the redesign of the grant management system (the E-system), together with the full integration of all other systems which included the system design and also the acquisition of the necessary hardware. The other capital expenditure was on the NLB plan to embark on acquiring long term accommodation for its head office in Pretoria. This would take approximately three years to complete between 2015 and 2018. The NLB had engaged in and concluded a business process review and would implement a decentralised model for pre-adjudication work at provincial level as it sought to intensify and strengthen its interventions to achieve its objective of a minimum of 5% for each province. The establishment of provincial offices would assist in this regard. There would be an increased focus on a more strategic selection of the kind of things the NLB wanted to support.

Members said they were impressed to hear of the NLB’s involvement in early childhood development projects. They would appreciate an intervention in the Mossel Bay township which the Committee had occasion to visit recently where there was a crèche situated in a shack catering for 60 children. Members
commented on the low distribution percentages for certain provinces. They found it difficult to comprehend how the strategic objectives found expression in aligning it with the dti. Members wanted to see a greater impact in the poor rural areas. What was the current status regarding the old/new lottery operators and how could litigation be mitigated? Members said it had to be acknowledged that more could be done by the NLB, given government’s priorities. Sport and art in rural areas still needed to be transformed to give those living there, the space to contribute to the development of the country. More information was requested on illegal gambling as Parliament was concerned about it. Members asked how the NCOP could assist municipalities to assist community bodies in filling out NLB application forms. Members asked why board member emoluments had decreased from R5m to R2.4m. Why was there a deficit in the budget? Would it not have been better to separate the Compensation of Employees and Goods and Services line items. Members asked that the actual figures for 2014/15 be sent to the Committee.
 

Meeting report

Prof Alfred Nevhutanda, Board Chairperson, said that the National Lotteries Board (NLB) had distributed more than R18 billion to good causes since inception 16 years ago. The Lotteries Amendment Act came into effect on 14 April 2015 with the main changes being that the National Lotteries Board (NLB) was renamed the National Lotteries Commission (NLC), that there would be full time Distributing Agents (Das), education and awareness programmes and proactive funding. This allowed the NLC to do research and if a project was worthy to be funded, the NLB would not wait for an advert to be placed, rather the Commissioner and the research group would compile a recommendation for the project to receive funding.

The new NLC had a dual mandate, to regulate the National Lottery, which was operated by a new operator, Ithuba Holdings, and to regulate other lotteries. The second part of its mandate was the National Lottery Distribution Trust Fund (NLDTF) which covered the distribution process for applications for good causes and the making of payments. The sectors remain the same but some of the sector percentages had changed and the allocations were now Charities - 47%, Arts - 23%, Sports - 28%, Miscellaneous - 2%. He said he was happy that R400m had been spent collectively on early childhood development (ECD) centre projects across country. The Arts sector percentage had been reduced while the Sports sector percentage had gone up from 22%. The Distributing Agencies (DAs) adjudicated applications and made grants in line with criteria. The focus of the NLC was to fund NGOs, CBOs, NPOs and Community Trusts.

Ms Thabang Mampane, CEO, spoke to the operational model and NLB alignment to the dti priorities before moving on to the NLB’s performance indicators for 2015/16.

- Under Strategic Objective 1, it wanted to implement 100% of the approved re-branding strategy, re-design and populate the organisational structure and revamp its technology by developing the E-system, an integrated enterprise-wide architecture platform.
- Under Strategic Objective 2 it wanted at least 50% of grants to be paid in line with the regulated 60 day timeframe and have an annual minimum of 8% return on investment of NLDTF funds.
- Under Strategic Objective 3 it wanted to conduct investigations on 70% of all identified and reported illegal lotteries and develop and implement the third National Lottery Licence Monitoring matrix/scorecard.
- Under Strategic Objective 4 it wanted to implement 50% of the grant funding model, hold four workshops per province, ensure that a minimum of 5% grant funding was allocated to each province and conduct 1000 monitoring and evaluation site visits.

Mr Phillemon Letwaba, CFO, said grant funding was R1.6b and there was a net deficit of R176.7m to ensure that beneficiaries received their money. Capital expenditure projects included the IT renewal project, which was the redesign of the grant management system (the E-system), together with the full integration of all other systems. This included not only the system design but also the acquisition of the necessary hardware. The other capital expenditure was on the NLB plan to embark on acquiring long term accommodation for its head office in Pretoria. This would take approximately three years to complete between 2015 and 2018.

Mr Jeffrey Du Preez, Senior Executive: Grant Funding, said the NLB had engaged in and concluded a business process review and would implement a decentralised model for pre-adjudication work at provincial level as it sought to intensify and strengthen its interventions to achieve its objective of a minimum of 5% for each province. The establishment of provincial offices would assist in this regard. The DAs had found ways to prioritise those provinces that were under that target. There would be an increased focus on a more strategic selection of the kind of projects the NLB wanted to support. A lot of sport funds were made available to federations for use in international sport, like funding to SASCOC for Olympic events but federation programmes also had to include implementing development programmes in their local structures. Charities were the biggest sector both in terms of NGOs and because the sector was vast with a number of sub sectors in it. The percentage allocation for Charities was previously 50% and included funding for drug rehabilitation, orphanages, old age homes. All funding was geared to finding its way to the most vulnerable in communities. The NSRI had also received finding. Arts and Culture was not less important and an interesting project was the South End Museum Trust which was the articulation and exposure of a heritage. The South End Museum Trust was a reflection of the history of forced removals in the South End. It had also funded the performing arts in the form of Opera Africa. There had been smaller funding of equipment and infrastructure and also to enhance and encourage participation in the arts at school level. At the higher end there had been funding of the National Heritage Council. He said the Miscellaneous sector dealt with the gaps for applications that did not fall into any of the other sectors and for emergencies, national interest or disaster relief. He said the impact of some of the projects in the miscellaneous sector had shown a substantive return on investment.

Discussion
The Chairperson said he was impressed to hear of the NLB’s involvement in early childhood development projects in Kannaland, Ladysmith and Bredasdorp. He said he would appreciate an intervention in the Mossel Bay township which the Committee had occasion to visit recently where there was a crèche situated in a shack catering for 60 children. He commented on the low distribution percentages for certain provinces given in the presentation under strategic outcome four for Mpumalanga and Limpopo provinces.

Mr S Mthimunye (ANC; Mpumalanga) said he found it difficult to comprehend how the strategic objectives found expression in aligning NLB with the dti. On the distribution statistics per province, it appeared the rich provinces benefited more, which missed the objective of transforming society. He wanted to see a greater impact in the poor rural areas. What was the current status regarding the old/new lottery operators and how could litigation be mitigated?

The Chairperson said that the latter issue was sub judice.

Mr B Nthebe (ANC; North West) said that it had to be acknowledged that more could be done especially in light of what the NLB was doing and what government’s priorities were. Sport and art were areas that still needed to be transformed to give those in rural areas space to contribute to the development of the country. Spending R200m on ECD centres was a great achievement but rural areas should be concentrated on more than places like Gauteng.

Ms M Dikgale (ANC; Limpopo) said that she hoped that a sports ground similar to the one in the presentation could be built in Limpopo.

The Chairperson asked that more information be given on illegal gambling as Parliament was concerned about it. He noted that teachers experienced a lot of difficulty in accessing reputable IT. He said the dti were paying their suppliers within 30 days. He said that unless people were skilled in filling in NLB application forms to assist those applying, there would always be problems. He asked how the NCOP could assist municipalities to assist community bodies in filling out application forms.

Prof Nevhutanda said the Act gave the norm of 5% for the provinces. He said there were lots of help desks in the provinces but that part of the work of the NLB was to educate applicants on how to fill in the application forms. There was however a tendency for South Africans to submit the forms on the last day and this cut across all creeds and colours. They then had no time to correct any errors and the NLB operated on a first come, first served basis.

He said it was true that areas like that mentioned by the Committee Chairperson existed. This had prompted the dti to let the NLB have a proactive programme. Such areas did not have to wait for a call for submissions by the NLB. Areas could be checked out and a determination made. For example a parliamentarian had asked him that the specific area be looked at where a crèche was overcrowded. He had investigated and reported back to the NLB and the distributing agents and a grant of R5m was made available to the crèche and a further grant of R2m to renovate the surrounding schools. In the Eastern Cape, at Fort Hare University, the NLB had funded a world class theatre with a recording studio. The NLB was building a R50m integrated sports facility in rural Eastern Cape and it was trying to ensure that all provinces reach at least 5%. The NLB was trying hard to transform the communities in rural areas. He said South Africa had opted for a monopoly lotto so one could not create other diverse forms of gambling as this would eat into the coffers of the lotto.

Ms Mampane said the provincial distribution numbers in the presentation were for the previous year. The current unaudited numbers were Mpumalanga at 4% and the Northern Cape at 3%. The rest were above the 5% target.

Mr Du Preez said Gauteng’s percentage was approximately 50% in previous years. The NLB however found that it needed to refine the statistics it was gathering as there were instances where the allocation was attributed geographically to Gauteng because an organisation’s offices were there but the project was actually in different provinces or in a rural area.

Mr Du Preez said one should not underestimate how the new legislation facilitated dealing with historical challenges. For small grants the requirements to submit financial statements had been eased as, previously, audited financial statements had been required.

Historically, the concentration of established NGOs was found in Gauteng and the Western Cape. A sample of the big national organisations would show that 80% were in the Western Cape, Gauteng and KZN. So legislation should provide assistance to new entrants otherwise one would just reinforce historical patterns. The NLB was looking at how relevant the channels were that they were using in their outreach programme. They would not rely solely on the national newspapers but were considering using radio and community newspapers as other means to advertise.

On how Strategic Objectives 2 and 3 related, Ms Mampane said the NLB regulated and licenced the lottery operator to promote industrial development and job creation especially for young people. This was done through the procurement process of funded infrastructure projects.

The NLB was simplifying the application processes, especially on finances, and the communication of this was through holding four workshops per province.

Mr Letwaba said the NLB had taken the strategic view that technology was key in issues of accessibility to grants. The NLB therefore planned to move to completely online applications which would indicate immediately whether something was missing or erroneous. They were looking at the turnaround times and said they did supply payments within a month to suppliers but the turnaround time for the payment of grants remained a challenge.

Prof Govin Reddy, Board member, said the NLB would be revamped to the NLC which it already was legally since the Amendment Act was promulgated six weeks ago. There would be an official launch of the NLC which had to be postponed as they wanted the Minister of Trade and Industry, Mr Rob Davies, present. It would be launched on 29 June at a project in the Benoni area. The change to the NLC was also an opportunity to revamp the organisation and make it more visible. It would be opening more provincial offices making them more accessible and hopefully more meaningful.

On rural areas, Mr Du Preez said that if organisations were less than six months old, they could apply and the NLB was looking at how the workshops were spread across the provinces. The NLB had consciously started to prioritise the areas with the most need. With the new technology, applications could be done online and the capturing of data would immediately note when discrepancies arose. He added that parallel systems would run which meant that those who had no access to the web could still apply. Online applications however would release resources to where it was needed in the rural and poor areas. The contact centre was also looking at self help technology. The NLB wanted to partner with institutions in rural areas where there would be a facility to connect with the contact centre. People coming to the offices with their applications would be assisted, in a more structured intervention, to populate the application forms online where they would receive immediate feedback on what was wrong or missing from the application. Partnerships have been established with a number of organisations like the House of Traditional Leaders and the NLB wanted to piggy back on these partnerships. It was aiming to have more structured interventions. In future hopefully there would be a need to increase the services provided as one office in each province was not going to be enough to do the job.

Ms Zodwa Ntuli, dti Deputy Director General: Consumer and Corporate Regulation Division, said the lottery contributed significantly to rehabilitation and addiction to gambling. She said it was the operator’s responsibility to run educational programmes about irresponsible gambling. Ultimately one did not want to deal with addicts as it was costly.

Internet gambling was a problem and the point had been raised with Parliament. They were finding a lot of internet gambling websites offering online gambling which was illegal in SA. The NGB was devising means to tax websites or close them down and stop people gambling. The Democratic Alliance had called for internet gambling to be legalised. On the distribution of lottery funds, she said that from the current year onwards, one would see the impact that one wanted to see because funds would be targeted, which was not possible before the amendments had been passed and this would give opportunities to people who worked in the communities.

The Chairperson asked why board member emoluments had decreased from R5m to R2.4m. Why was there a deficit in the budget? What was the problem? Would it not have been better to separate the Compensation of Employees and Goods and Services line items.

Mr Letwaba said the R5m amount in the presentation was the budgeted figure not the actual figure. He said
the NLC were tapping into its reserves to ensure money was available for distribution. NLB would take note of separation of budget line items for future presentations.

The Chairperson asked that the actual figures for 2014/15 be sent to the Committee

The meeting was adjourned.

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