National Lotteries Commission: Sport and Recreation allocations in 2015/16 and 2016/17

Meeting report

Before the meeting could commence, the Chairperson said that the Chairperson of the National Lottery and its board members were not present, as they were attending the World Lottery Conference in Singapore. She appreciated that they had excused themselves from the meeting, but it seemed that the person who would be leading the presenting delegation was not present at the meeting either.

Mr D Bergman (DA) said this was a problem. He could understand if people had gone to a conference, but this meeting had been in the diary for a while and Committee Members should not be attending a meeting when the people that they needed to be asking questions to were not present. He added that either this was a scheduling error on the Committee’s side, or on the side of the presenters. He added that more respect needed to be given to the agenda, as the Committee had a tight schedule and if they missed a week of meetings, this would result in a backlog. He would have rather had the meeting postponed in order to have the top management there, as opposed to having a meeting just for the sake of having one.

The Chairperson said she understood that an apology had been sent through to the Committee for the members who would be absent due to attending the conference. The problem that she had, however, was with the person leading the presenting delegation, who appeared to be absent from the meeting. She was not happy that the Committee seemed to be waiting for the people who should be presenting. She said there was a suggestion to postpone the meeting because the board leaders were not present and the leader of the delegation was also not present.

Mr S Ralegoma (ANC) said that he felt as though the Committee should proceed, because Mvelile Ncula, Chairperson: Sport and Recreation Distributing Agency, had been held up on his way to the meeting and now that he was present, the Committee should proceed. He did, however, note the concern that if the Committee did not receive the answers they needed, another meeting where the top management would be present would have to be scheduled.

Mr M Malatsi (DA) stated that it was unpleasant to have to start a meeting this way especially given that the Members were prepared for the meeting and had hoped that the presenting delegation would have also been just as prepared.

Ms D Manana (ANC) acknowledged that Mr Ncula was late to the meeting, but also pointed out that the Committee had not given him a chance to apologise for his late coming, especially considering that it had been mentioned that there was a long line at the entrance. She felt that for the sake of the country, the meeting should carry on and the Committee could ask the relevant questions and if they were not answered, they would be taken up with the board.

The Chairperson said that it was unpleasant that the meeting had to start on such a bad note, but that in Mr Ncula’s absence, an issue about programming had been brought up. By the time she had found out about the board’s absence from the meeting, she could not cancel it.

Mr Bergman appreciated that the Chairperson understood what he was talking about. However, it was not about anyone being later but rather that if it was allowed that top board members missed meetings by sending a delegation in their place, this would set a precedent and other organisations might find that the Committee found it acceptable, when in fact it did not. This would also mean that the organisations would not be held to account for their actions if meetings were not held with the relevant people. If the people who were meant to be present at a meeting were not there, then they may need to consider rescheduling the meeting.

The Chairperson said she appreciated the contribution made by Mr Bergman, but she had received the apology from the board members with not enough time to inform the Committee Members of this in time. However, she also suggests that if the relevant people were absent from a meeting, then it should be postponed.

Mr Ncula began by saying how embarrassed he was for being late. It was not his nature not to be punctual, especially for an important meeting where he was representing the Board and Commissioner of the National Lottery. He respected the meeting because this was not his first time presenting to the Committee, and he was truly apologetic about his late coming.

The Chairperson said that the Committee accepted his apology.

Mr Ncula then introduced the rest of the delegation who were present with him at the meeting: Mr Jeffrey du Preez, Senior Executive: Grant Funding, NLC, and Mr Tsietsi Maselwa, Senior Legal

National Lottery: Briefing on Sport and Recreation

Mr Du Preez began by presenting the operation model of the NLC, particularly the grant funding aspect. He said that non-governmental organisations (NGOs) made applications for funding; Ithuba operated the National Lottery, which then made weekly transfers to the National Lotteries Development Trust Fund NLDTF.

He discussed the NLDTF budget allocation for 2015-16, with R2 235 billion being allocated between the arts, charities, miscellaneous and sports, and referred to the following budget allocations:

• The sport and recreation sector currently received an annual budget allocation of 28% of the total funds available for distribution. This amount was aligned to the Lotteries Act no. 57 of 1997, as amended;
• On average, R464 million per annum was invested nationally, translating into approximately 750 allocations being processed each year over the last two financial years;
• Different sub-sectors qualified for prescribed items, as communicated through guidelines.

Sports clubs were allocated funding for basic facilities (new and upgraded), sports equipment and apparel, participation in local leagues and provincial competitions, and capacity building such as coaching and technical officiating. Schools were allocated funding for basic facilities (new and upgraded), sports equipment and apparel, and participation in school leagues and competitions. National federations were allocated funding for international and domestic participation, capacity building, sports equipment and apparel, transformation and development programmes and administration costs.

He then took the Members through sets of tables that indicated the allocation per province, the allocation per sub-sector for 2015/16, the allocation by sub-sector per province for 2015/16 and lastly the allocation of sport infrastructure in 2015/16 per province. Allocations per province for 2016/17 were presented, showing that Gauteng (53.3%) was the main beneficiary of the NLC funding, followed by Limpopo (11.2%) and the Eastern Cape (9.8%). The lowest recipient provinces were the Free State (1.2%) and Western Cape (3.2%). The main drivers for the relatively high allocation in Gauteng remained the investments made to national bodies like SASCOC and national federations. He then took the Members through another set of tables which looked at the allocation by sub-sectors for 2016/17, with a total allocation of R354.9 million.

Mr Ncula added that for the past financial year, only schools found in the rural areas would have been considered for funding, hence the increase in schools getting funds from the Sport and Recreation Distributing Agency (SRDA). There had been a huge problem because so many schools were having their applications declined. The reason for this was because they had not yet been accredited, and therefore could not be given funds. The legal team had been working on this and since their intervention, the problem had been dealt with. Secondly, clubs were responsible for ensuring transformation across the country, which was why the National Lottery needed to fund them, but with most clubs having no formal offices and often operating out of the boots of cars, and having no audited financial statements, the Lottery had been unable to assist them. They had thus funded fewer clubs than they had hoped for. Lastly, a research unit on potential projects had been proposed. This unit had been created as a means to consider all concerns that may arise with funding applicants so that by the time they appeared before the distribution committee, all concerns and issues would have been dealt with prior to the meeting. In the Northern Cape and Mpumalanga, there had been a reported lack of facilities, so whatever facilities the National Lottery was going to provide, these were to be made easily accessible to clubs, schools and the community, so that all could benefit from them.

Discussion

The Chairperson said that education received quite a large amount of funds from the national budget, and she only hoped that this would be true for sport and recreation. As had been previously mentioned, rural schools were reported to be suffering and as a result, there needed to be an investigation into the delegation and use of the funds. Most funds found their way back to urban schools, meaning that the Committee needed to adopt a rural bias so that funds were directed to schools that needed it the most. The committee had to monitor the flow of money to the various schools, but she was not sure how the Committee would go about this. Were there systems in place that could assist in ensuring that this oversight could be carried out?

Mr Bergman wanted to find out what the ‘miscellaneous’ group was, and what items it was made up of. He also asked about the National Federation, and inquired if transformation and national development were not things they also wanted to pursue in schools and clubs as well. Maybe there should be an educational road-show developed to get the public informed on how funding applications worked. Looking at the allocation of Gauteng, it was easy to see that the province was rich compared to the rural schools the Committee were advocating for. R146 million gets allocated to the federation to fund all provinces, but it seemed as though 20% of that allocation always made its way to the National Federation. As the Lottery had been able to detect that there was a pattern that a lot of sport and recreation applications were unsuccessful, it needed to embark on a road show to address why applications were being declined and teach organisations how to apply properly, especially given that most of the time they were being denied for simple reasons.

Mr Ncula responded that they had decided that the focus for 2015-16 would be placed on schools in deep rural areas, as had been highlighted by various Members. They had allowed applicants to use other organisations for funding purposes, but there had also been instances where Model C schools had applied on behalf of rural schools that were unable to apply for themselves, which they regarded to be a positive and progressive way of solving some of the issues they had with rural schools.

Mr Du Preez responded that the ‘miscellaneous group’ was meant to deal with those areas that did not fall under the three sectors of the NLC, and to facilitate quick, proactive funding which allowed some flexibility. This kind of funding would be used for emergencies so that there was no need for an application form to be filled out, which could delay the process. Besides running workshops, the NLC had also had a look at the database and invited those organisations whose applications had been unsuccessful to focus on the reasons and factors that addressed why their applications had been declined. They had also held separate sessions with them, where they tried to measure the impact of the sessions by seeing how many of the organisations that had attended, when given another chance to apply, were able to translate from the declined lists on to the funding recipients’ list.

Mr M Malatsi (DA) stated that in the annual report (on pages 124 – 126), there was a breakdown provided of the federation, the applicants, the distribution agency member and the declaration of the nature of that relationship, which he was glad was an aspect that had been highlighted. This relationship came with a disclaimer that the distribution agencies did not sit on the panels of adjudication where the applicants would get adjudicated. This raised two questions for him, the first being that applicants that were familiar with the system were at a much better advantage because they would be the most likely to receive funding and have successful applications. However, he posed a question on how they planned to deal with the perception that the applications of those individuals that had relationships with distribution agencies seemed always to be successful, as opposed to other organisations whose applications were unsuccessful, bringing up question of conflict of interest. Secondly, what mechanisms did the distribution committee make towards its contribution for transformation as a means to ensure that the contribution was aligned with the national development plan? He welcomed the introduction of smaller grants, but the majority of sports clubs from rural areas would still struggle because they did not have the basic internal infrastructure to be able to provide financial statements, so he wanted to know what was being done to ensure that these kinds of organisations had an equal chance of accessing funds.

Mr Ncula responded that on issues of conflict of interest, if it had been found out that any member had any affiliations to an application tabled for adjudication and review, the member would need to recuse themselves so that the allocation could be dealt with equitably, and with no biased influence on it. On the issue of distribution agencies, there were people in Gauteng who claimed to know all there was to be known on the application processes, which historically had also been the group of people that has received the bulk of the funding. Since this had been noticed, efforts had been made to counter this. However, it was important for the Committee to remember that it was not possible for them to correct every single problem, and that there would be some gaps that would remain unfilled.

Mr Du Preez said that as a way of assisting organisations with no financial statements, a template had been drawn up. This was given to them and some concessions were made, as there was a slight relaxation on the requirement of providing records when it was known the organisations had mostly been operating informally. Part of what they had also been trying involved getting them to understand that there needed to be information provided of where the money had been used, regardless of how much the money amounted to. 

Ms D Manana (ANC) commented that there had been a drop in some of the provincial funding allocations. Was this percentage drop due to organisations not applying, or was it a result of their applications being declined? What was the turnaround time for each application sent to them? She then suggested that perhaps the NLC could accompany the Committee on their next oversight visits. This would be a way to help the Committee see and understand what the funding allocations were, what was given to which organisation, and on what basis. The Committee would then be able to assess what the respective organisations had done with the funds, and what was still outstanding to be completed. She also asked how the NLC monitored the funds that had been allocated and how the municipality assisted the community with the allocations by making sure that they were used as intended.

Mr Ncula responded that on the matters of oversight, communication and capacity building, quite a few changes had been made in order to rectify some of the problems that had been identified. Some good work had been done by structures such as provincial offices that had been established, and their duties included workshops and road shows on how to source funds from the Lottery.

Mr Du Preez said that the current turnaround time for applications was 150 days. Part of the contributing factor to the long turnaround time was that a large number of applications would arrive only in the last two weeks of the two-month period for which it had been opened for. This had had an impact on the efficiency of processing the applications and as a result, the NLC had introduced open-ended calls for applications, with no closing date. This meant that applications were spread across a longer period and applicants could submit them all year round, with no pressure of running around trying to get the supporting documents in the last couple of weeks. Furthermore, this meant that each application received was processed immediately it was received, and if there were any errors or outstanding documents, this information could be communicated and dealt with as soon as possible.

On the monitoring of funds, when a grant agreement was signed, the legal document gave the NLC the binding power of ensuring that the funding that was received had to be used in the stipulated manner. Progress reports were also expected to be handed in, an e-unit stated what needed to be submitted when the grant was received, supporting documents and how those funds had been used. Not all monitoring aspects had been implemented, much like accompanying the Committee on oversight visits, but the more often they were implemented, the better they would be at being able to monitor the funds.

Mr K Sithole (IFP) asked how much the NLC had contributed towards transformation. He also asked about sports in rural areas, and if there was any communication strategy between the schools and the NLC to ensure that relevant information was being shared between the parties. How many schools had been capacitated through their funding because he was aware of the fact that most schools were under-funded, yet the provincial figures showed that the money was going to schools? He requested that the funding allocation be shown according to municipalities, to give a more detailed breakdown of where the money was going and which schools were receiving it. Lastly, he said that Gauteng was known to be a resourceful and rich province, yet the allocations showed that it still had the most funding compared to other provinces with fewer resources and more disadvantaged schools.

Mr Ncula responded that their contribution towards transformation had been such that whatever amount was given to the National Federations, 50% of that amount was allocated towards transformation. For a lot of organisations, transformation was simply a buzzword, but the NLC took its contribution seriously, which was why 50% was automatically allocated towards it.

Mr Du Preez said that all allocations were listed in the annual report, so maybe those spread sheets could be used and the formatting just changed to represent them according to provinces in order to provide the details requested. This would also apply to a municipal breakdown -- it would just require some manual labour to extract the information and make it user friendly, because in the current format it was a bit complicated.

As far as the Gauteng province was concerned, the NLC had interestingly never used the stipulations of the law as a funding guide -- this being the one that stipulates that they could use lotto ticket sales as a means by which they decided the amount of funding allocated to a particular province. The location of the National Federation did not mean that Gauteng was the only receiver or beneficiary, but that all its affiliates should also be beneficiaries, and maybe more work needed to be done in monitoring the use of the allocations. It was true that the people in the urban areas seemed to have an upper hand, but some of the established organisations also did not always comply, which was a disincentive for people to cheat the system. 

The Chairperson said that what needed to be reflected was that applicants received funding based on their needs, regardless of their national fiscal position and budget allocation.

Ms B Abrahams (ANC) said that Gauteng had two rural areas, and wanted to know if they were beneficiaries of the NLC, because she had often found that these areas got overlooked. She also wanted to know if the small grants being provided considered other sports that fell outside the major sports, such as martial arts sports, because she was aware of organisations that had been representing the country at high level competitions, yet struggled to receive funding. Were they considered on the same criteria as the rest of the sports categories?

Mr Du Preez responded that the NLC unfortunately did not fund individual programmes, and as a result he could not speak on that. They only fund people affiliated with some form of federation, club or school. He would take the issue up higher for consideration.

The Chairperson asked which NGOs the NLC was affiliated with, what contributions they had made towards sport, and how these contributions were being made.

Mr Du Preez said that the Northern Cape and Mpumalanga historically had a low number of registered NGOs, so for a long time they had been competing with existing and established NGOs in provinces such as Gauteng. He recognised that this meant that they hadbeen at a slight disadvantage which was why he found that this was something that could be addressed during oversight visits.

Mr Ncula responded the on the impression that certain federations always got funds from the lotto. He said this was not true, because there was new legislation that had been passed allowing for a waiting period before the NLC could fund the same organisation it had funded within the same time frame. Often they had had to enact a process of multi-funding to help organisations so that they were not affected negatively by the waiting period.

He said that the SA Sports Confederation and Olympic Committee (SASCOC) was part of the top six federations that received funding because they participated in the Olympic Games, and had the highest chance of bringing back the most medals. Funds were made available based on the achievements within each category. The successes of Wayne van Niekerk and Caster Semenya had created a huge desire for people to participate and as a result, this was going to put a strain on the NLC to meet all of those aspirations.

Ms Tebogo Tsotetsi, ‎Director: Lotteries Policy and Law, DTI, said that the Commission had required road shows to be held nationally, as it was a continuous process of educating and informing people about the application process. Mostly, these would be held in those provinces that had people that were not aware of the process of applying for funds from the Lottery.

Mr Malatsi followed up on the allocations to schools, compared to the allocations to macro-bodies local government. It was difficult to try and spot a trend or form an opinion on what the cause was, or what informed the disparity between the figures. He was very curious on what the rationale was for the different allocations. Secondly, he asked why there had been a lack of engagement with the Department of Sport and Recreation. Was there a common understanding of what the top priority of the Lottery was? On the issue of perceived conflict of interest, there had been instances of unsuccessful applications being linked to individuals on the board, so it could be seen that it worked both ways.

Mr Du Preez said that the call for applications did not necessarily coincide with the financial year, which explained how there would be some discrepancy with the figures. The NLC was at the tail end of the process in 2016-17, and with macro-bodies the difference was that the current year had been an Olympic year, and thus it had had to increase the allocation, as had been observed in the document. The value for local municipality allocations would over time eventually go down to zero.

He responded to the issue of conflict of interest, saying that even in corporate government, good governance was linked to ethics. However, this would not be enough because ultimately one depended on the people to adhere to certain principles, and take full accountability for their actions. He said that there was a ‘bullet-proof’ plan against issues of conflict of interest and could not make the Committee any more comfortable than that. However, as far as the board was concerned, they were serious about addressing this issue and had to progressively work on it, while relying on the ethics of the people in those positions.

Mr Ncula added that issues of conflict of interest could easily damage the reputation of the organisation and the credibility of the decisions they made. When they had previously seen that there had been an issue of conflict of interest with a board member, there had been a request to pull the member aside and ask for the application to be withdrawn. Further instances had resulted in unsuccessful applications. They had tried to safeguard the reputation of the NLC as well, as the credibility of the people who had been involved in sport for a very long time, and did not want their credibility to be questioned based on one member’s misconduct.

Ms Manana asked what the 2015-16 audit outcomes had been.

Mr Du Preez responded that they had received a clean audit from the Auditor General (AG), and had also received an award from the AG about two days back to commend them on their audit status.

Mr Malatsi asked if the priorities of SASCOC were aligned with the National Sports and Recreation Plan.

Mr Du Preez responded that although the objective was, where possible, to align with those of government, they also had their own plans and objectives that they were required to achieve, and some fell outside those based on what the Department supported. There were a number of issues that influenced the final decisions made by the NLC, but no one directive could override another.

Mr Ncula added that they were required apply all the rules when making decisions on the allocation of funds. SASCOC also had to abide by the rules and regulations of the regulations agency when being allocated funds. They considered areas of priority first when allocating funds, and anything that did not fall within that list was not funded. Other beneficiaries may need to receive a grant agreement if they were to be funded, and had to follow the stipulations of the grant agreement.

Ms Tsotetsi reminded Members that the funding provided by the Lottery did not replace the budget allocations of the departments. There had been a growing tendency by organisations to depend solely on the NLC for funds, and they had since had to devise ways in which to cut the dependency.

The Chairperson said that the answer from the DTI representative should not derail the Committee from what it come to address in the meeting and as such, that answer should not be considered.

Mr Malatsi felt that his question had been misconstrued. He had asked if SASCOC, the Department of Sport and Recreation and the Lotto had established a list of priority sports and if not, he suggested that this be done through a formal forum, so that when all parties engaged on the subject of the different categories of funding, this could be pursued in alignment with the National Development Plan and the gaps would be closed.

The Chairperson said the Committee had its own set of priority sports, while SASCOC had its own set, which was different to that of the Committee. She asked when the NLC had met with SASCOC to discuss their current list, because it was obviously different to the one the Department had.

Mr Ncula responded that they had established a committee that met with SASCOC, with a focus on high performance, because these athletes usually had to represent the country. The process of funding distribution was then decided on what priorities they put forward.

The Chairperson noted that it had been a pity that the Committee had not received a satisfactory answer with regard to the process involved in the allocation of resources. Perhaps there could be an agreement that a focus should be placed on rural schools, and as the people who allocated funds, the NLC could make the biggest difference in this regard. It had been clear that despite having worked together for the last five years, there had not been enough serious impact, hence the need to focus primarily on those schools. The Committee did acknowledge the effort that the Lottery had made thus far. The scrutinising of the use of funds and the need for this to be accounted for, including SASCOC, was the job of the Committee, but that did not mean it did not appreciate the work that both the DTI and the National Lottery do.

Mr Ncula said he understood the work of the Committee was to represent the people of the country, which was why they often got excited when they had the opportunity to present before the Members. There was always a mention of rural schools, sports and infrastructure, which gave them some insight into the kind of things the policy makers of the country wanted to see realised. It was always a joy to present before the Committee, and they take seriously the issues raised as well as the advice given.

Oversight visit report

The Chairperson presented the report of the oversight visit to the Free State. After perusal by all the Members, she suggested that the report be adopted.

Mr Malatsi proposed its adoption, and Ms Abrahams seconded.

The Chairperson noted that while it had been a rather long report, the Committee had done some good work on it. She made a few closing remarks, including thanking the delegation that had presented.

The meeting was adjourned.