National Lotteries Commission sport allocation

Sports, Arts and Culture

11 August 2015
Chairperson: Ms B Dlulane (ANC)
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Meeting Summary

The National Lotteries Commission (NLC) said it regarded the differentiation of grants into small, medium and large grants as a milestone in the Lotteries Amendment Act of 2013, as this would allow small organisations to access funding. Over and above that the Act had also provided for differentiation of processing of applications that were in the three categories from: small, medium to large grants. The reason for the prioritisation of schools in the October 2014 call for sports applications was that it was an accepted fact that they were the production houses of sporting talent. The Sports Distributing Agency had also resolved that it would either not fund national sporting federations that were not pushing the transformation agenda or alternatively it would enforce a clause that 50% of the money from grants in excess of R5 million had to be for national federation transformation activities.

The NLC had signed a Memorandum of Understanding (MoU) with the Advancement of Black Accounting Students (ABASA) and other financial institutions to assist in training beneficiaries on financial management both in terms of applying for funding and the management of grants afterwards. In terms of improving efficiency: the NLC had separated the submission dates for small and medium grants from those of large grants in their current call for applications for arts and culture as well charities.

The Committee could not discern from the presentation, whether legacy inequalities were being addressed or those that could 'navigate the application system" were continuing to amass resources at the expense of the disadvantaged. It lamented the fact that the presentation gave broad investment figures per subsector without specifying which communities, clubs, federations and schools had received funding. This was important for oversight purposed. It also wanted to know:
- Which federations made up the group that received the R135 million grant?
- How would the new amendments to the Act stipulating a three year grant agreement cycle affect those non government organisations that relied heavily on NLC funding?
- What was the progress in improving turnaround times for applications?
- What was the cause for some repeat applicants being consistently rejected?
- What were the challenges caused by the litigation by Gidani and iThuba?

Meeting report

National Lotteries Commission (NLC) on status of distributing activities
Prof Alfred Nevhutanda, Chairperson: NLC Board, said that the NLC would request that the Committee inform the Portfolio Committee on Trade and Industry when it was inviting the NLC as its coming without that committee's knowledge sometimes caused conflict between the Commission and that Committee.

The Chairperson interjected, with the entire Committee agreeing, that all Committees in Parliament were equal and no particular chairperson had superior powers to another. The Committee agreed that the mandate to notify that committee was upon the NLC when it came to Parliament.

Prof Nevhutanda went through the presentation with the Committee noting the name change of the entity from the National Lotteries Board (NLB) to the NLC. He said that the mandate remained the same despite the name change. The NLC regarded the differentiation of grants as a milestone in the amended Act which regulated it, because that would allow small organisations to access funding from it. Over and above that, the Act had also provided for differentiation of processing of applications that were in three categories from: small, medium to large grants.

Ms Thabang Mampane, NLC Chief Executive Officer, said that the NLC was required by law to improve its turnaround time by 150 days from receiving an application to the time of transferring the money to the recipient.

Ms Mampane said that the NLC had signed a Memorandum of Understanding (MoU) with the Advancement of Black Accounting Students (ABASA) and other financial institutions to assist in training beneficiaries on financial management both in terms of applying for funding and the management of grants afterwards.
In terms of improving efficiency, the NLC had separated the submission dates for small and medium grants from those of large grants in their current call for applications for arts and culture as well charities.

Ms Marjorie Letoaba, NLC Programme Manager: Grant Funding, spoke to how the October 2014 sport and recreation grant allocation had been utilised. Over and above allocating for new basic facilities and their maintenance at schools, the NLC had also catered for participation in local leagues between clubs and schools by providing for transportation to local and provincial competitions.

Mr Mveleli Ncula, Chairperson, Sports Distributing Agency (SDA), said that the reason behind the prioritisation of schools in the October 2014 call for applications was that it was an accepted fact that they were the production houses of sporting talent. Since 2016 was an Olympic year, the SDA had sent out a call for Olympic sporting code federations in February 2015 to apply for funding. Unfortunately some had been rejected due to lack of proper documentation in the submission package.

Discussion
The Chairperson said that she was surprised to learn that municipalities were also receiving financial support from the NLC: More so because the Committee had recently been briefed by the Department of Cooperative Governance and Traditional Affairs (COGTA) that municipalities were redirecting the 15% Municipal Infrastructure Grant (MIG) portion, which was supposed to be for Sport and Recreation (S&R) facilities to other priorities. She applauded the work that she had witnessed as being attributed to funding from the NLC across the country.

Mr P Moteka (EFF) recalled that previously the Committee had asked for specifics in presentations, that is, breakdowns of what facilities the NLC had built and in which municipalities so that the Committee did not have to research this itself. That would also enable the Committee to assist the NLC in monitoring the use of those allocations.

Mr S Malatsi (DA) also lamented the fact that the presentation gave broad investment figures per subsector without specifying which communities, clubs, federations and schools (and their location) had received funding and what the funding was meant to address. The Committee could not discern from the presentation, whether legacy inequalities were being addressed or those that could 'navigate the application system' were continuing to amass resources at the expense of the disadvantaged. Which federations made up the group that received the R135 million grant? Which schools and which clubs and provincial academies received the reported amounts? Notably, however, though the Eastern Cape, Gauteng and Limpopo had received the largest provincial allocations, Gauteng and Limpopo together had spent approximately 8% on sport infrastructure and that re-emphasised his earlier point on how the NLC together with the Committee could ensure that the funding it allocated addressed the legacy inequalities in infrastructure for disadvantaged communities.

Mr Malatsi asked how would the new amendments to the Act stipulating a three year grant agreement cycle affect those non government organisations (NGOs) that relied heavily on NLC funding? What was the progress in closing the gaps that allowed officials with conflicts of interest to sit on the SDA? What was the progress in closing the gaps and weaknesses in the application process where consultants could manipulate the system and the recipients of grants?

Ms D Manana (ANC) said that for 2013/14 the NLC had alluded to a R162 million, 11% of which had been given to the Eastern Cape for facilities. What had happened to that money? What was the progress in terms of the recommendations to the NLC from the previous Sports Portfolio Committee regarding improving turnaround times? What had happened to the applications submitted by the previous Committee on behalf of schools and organisations in the Eastern Cape as all of them had never received responses from the NLC?

Ms B Dlomo (ANC) asked whether the skewed distribution between KwaZulu Natal (KZN) and Gauteng spoke to a lack of financial capacity by beneficiaries in rural communities and schools or was it that those communities were not applying.

Mr G Mmusi (ANC) asked the NLC to speak directly to what the cause was, that led to repeat applicants being consistently rejected?

Mr S Ralegoma (ANC) said that the NLC would at one point need to use reports from tools such as the Eminent Persons Group (EPG) as part of the criteria to determine whether federations would receive funding, as some codes had no grassroots footprint and that affected the transformation project being lobbied for by Sports and Recreation South Africa (SRSA). He referred to the skewed and vague presentation of allocations for Gauteng, especially if the allocations were for national sporting federations instead of actual sport infrastructure expenditure by the province.

The Chairperson asked how the challenges with litigation against the NLC by Gidani and iThuba were affecting the Commission.

Prof Nevhutanda said that running an organisation that gives money without expecting monetary returns was more difficult than running Parliament as it always faced ligation seeing that everyone in the country was entitled. Even implementing the amended Act would be very challenging.

On the request for information breakdowns, Prof Nevhutanda said that the information was readily available and could be provided to members on request. When he came into the NLC in 2009 he had changed the working model to allow officials to go out and physically monitor expenditure of allocations. Unfortunately that opened up the NLC to criminal elements. Ancillary to that, the information on who had been funded for what project was on the NLC website but even then it could confuse people as umbrella organisations received large amounts without the website specifying how the amounts would be divided amongst the subsidiaries. Compliance monitoring had challenges as beneficiaries wanted to be notified ahead of visits such that "on the spot oversight" led to beneficiaries reporting the NLC to the Department of Trade and Industry (DTI).

In terms of focused funding the NLC annually held engagements with departments that legislatively had to be funded by the Commission to find out what unfunded mandates they had so that it could prioritise those in call outs for submissions. However, the Act stipulated that all provinces had to have a 5% share of allocations by the NLC but the difficulty was that when there were no applicants, the NLC could not coerce organisations to apply or approve applications that did not meet all the requirements. The new Companies Act had also allowed an NPO that was registered through DTI without needing to audit its finances to be adjudicated favourably without the NLC needing audited statements. However, if the NPO was registered through the Department of Social Development (DSD) and the law required audited statements the NLC would expect applications to include audited statements.

Members of distributing agencies with a conflict of interest were still only required to recuse themselves from adjudicating applications. Only in 2016 would the NLC be able to bar individuals from being permanent members of distributing agencies if they were part of organisations that could apply to the same sector as the adjudication. The phenomenon of application consultants unfortunately was continuing even though the NLC had cautioned the public about the disadvantages of such tendencies.

On the NLC not replying to organisations, one would find that the consultants had been responded to because they would register themselves as the contact person on the application form. Sometimes even the registered bank account on the form would be that of the consultant and that spoke to the vigilance that the NLC always cautioned the public to have when signing forms.

A limitation with the original Act was that once a recipient bought an asset, the NLC had no say over the use of the asset. The Commission was developing a policy which would give it power to say that for a certain period NLC would own infrastructure or assets bought with its funding. It also wanted to include a clause that would allow it to transfer the responsibility for that entire funded infrastructure to the South African Local Government Association (SALGA) so that municipalities could then take over.

Ms Mampane added that in terms of the requested information, the NLC was finalising its annual report in August 2015 and it would prioritise sending this to the Committee. On the skewed distribution brought about by the national federations headquarters being in Gauteng, the NLC was working on engagements to find a way forward in that regard. The NLC had offices in all nine provinces to date to allow the Committee and the public to better oversee the activities and processes of the Commission’s work. The NLC could compile a report of the shortcomings it often dealt with in terms of non-compliant applications even if they were repeat applications. Moreover, the Auditor-General was quite strict in its auditing processes which was why the Commission could not adjudicate incomplete applications.

The defrauding of the NLC was not a phenomenon amongst consultants only. The fact that the money was not coming from the fiscus, the NLC had found out that there had been an undetectable way of falsely accounting for the money. About 120 schools had given the NLC challenges where there was a hanging decision on whether to report them to the South African Police Service (SAPS) but it was engaging with DTI on a way forward. Over and above that, most consultants had been reported to SAPS and the NLC had discovered that the phenomenon was ran by a syndicate which sometimes involved former employees of the NLC.

In terms of assessing the impact the NLC had in rural areas as per the different sectors, it had an internal scorecard that spoke to prioritisation per sector. However, Ms Mampane admitted that the NLC had a long way to go in that regard.

Ms Letoaba said that the new regulations emphasised that the NLC had to invest more on sport infrastructure. The recent call for schools in October 2014 had been targeted for rural areas.

Annually the NLC had what were referred to as 'aged projects' where money would have been allocated but organisations either could not account for previous NLC funding expenditure or had only just received their first allocation tranche. When the NLC failed to reach the organisations to monitor for compliance the remaining monies would be returned to the NLC budget for new adjudication.

In terms of priority areas the NLC consulted Statistics South Africa (Stats SA) and other state institutions to find out where the needs were so that it could craft targeted calls.

Mr Ncula said that in the NLC's previous engagement with the Committee the Commission had been told that its schools' funding cap of R100 000 was wasteful expenditure. The Commission had since increased that cap to R300 000 as per Committee recommendation but even that had not been enough. The NLC had since resolved that it would identify three or four provinces where it would ask provinces to find districts where there were sporting needs as an initial step towards proactive funding. Moreover, the NLC would also provide for transportation to leagues and competitions. That initiative would then be taken to other provinces going forward.

On the possible duplication of functions in terms of capacity building, Mr Ncula said that the NLC provided targeted funding for development. For example, that category of grants of not less than R500 000 was not allowing clubs and small NGOs the opportunity to access NLC funding. Additionally the Act allowed the NLC to ask for bank statements instead of audited statements as part of application documents.

The SDA had also resolved that it would either not fund national federations that were not pushing the transformation agenda or alternatively it would enforce a clause that 50% of the money from grants in excess of R5 million had to be for NF transformation activities.

Mr L Filtane (UDM) suggested that if the SDA was not funding national federations that showed no appetite to work on transformation, could it then focus on the affiliates seeing that they needed assistance with administrative capacity and talent development. When adjudicating did the SDA grant funding on a needs basis or did it look at demonstrable appetite to do what an organisation said it wanted to do. Mr Filtane was asking because he had found that on many occasions sport organisations were rejected on the basis of flawed administration even though players were showing talent. Ancillary to that, could the NLC not fund clubs on the basis of merit, where winners of competitions would be prioritised?

Mr Moteka said that seeing that consultants mainly exploited rural communities why was the capacity building reported on not being done there? On transformation in sport, that would only be achieved once there was acknowledgement that it was very much an issue of colour.

Mr Malatsi said that though the NLC had identified gaps in its funding model especially regarding national federations there were those that consistently received large amounts from the Commission because they knew how to navigate the application process, and one found that they were national federations that were self sufficient in terms of generating their own income. He applauded the grant agreements that the NLC entered into with recipients. He felt that it was highly unacceptable for a recipient to want to dictate how the Commission monitor how its grant had been spent.

Mr Mmusi was in support of Mr Filtane and Mr Moteka's comments on transformation.

Ms Manana asked whether the NLC used Geographic Positioning System (GPS) coordinates available from the Government Communication Information System (GCIS) as and when it was allocating funds to rural schools so as to assist compliance monitors when they had to do oversight.

The Chairperson thanked the NLC for availing itself for engagement with the Committee.

Prof Nevhutanda said that indeed the lottery licence resided in Mpumalanga and that the courts had found the Minister of Trade and Industry at fault about certain aspects of the bidding process agreement to operate the National Lottery. However, the Minister had since consulted on those and signed a new licence agreement on the 7 August 2015, but the process was ongoing as that decision had also been appealed.

Regarding municipalities, the original Act had stipulated that if the project being undertaken by the municipality was not to augment the municipality's budget the NLC could fund such a project. However, the amended Act explicitly said that state organs would no longer benefit from the NLC but that was an ongoing debate as the definition of state organ was very much contested.

On education and awareness about the NLC, the more the Commission educated the public the smaller the budget for funding would be. There would be very few rejected applications as applicants would be completing forms in front of NLC officials. The need for funding that the Commission had projected for 2013 alone had been R72 billion while it could only afford R2 billion annually.

In terms of infrastructure establishment, SRSA had to take ownership of it because the NLC's obligation ended after handover as it was true that it became dilapidated if it was not maintained properly.

Minutes of the Portfolio Committee on Sport and Recreation
The Committee adopted its minutes for the 4 August 2015 without any amendments.

In matters arising from minutes, Mr Ralegoma asked how far along the proposal for a joint meeting with SRSA, COGTA and National Treasury was.

The Committee Secretary replied that a date would be decided upon once the Management Committee (MANCO) had decided on the Committees programme going forward.

The Chairperson made a few more in-house announcements and the meeting was adjourned.

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