B-BBEE & NLC Commission 2018/19 Annual Report & 2019/20 Quarter 2 performance

Meeting report

Opening remarks
The Chairperson welcomed everyone to the meeting, especially the team from Broad-Based Black Economic Empowerment (B-BBEE) Commission: Commissioner Zodwa Ntuli, Executive Manager Compliance Busisiwe Ngwenya, Chief Operating Officer Nontokozo Nokhwali-Mboyi and Executive Manager Investigations Moipone Kgaboesde.

Presentation by the B-BBEE Commission
Commissioner Zodwa Ntuli, noting that it was the Commission’s first engagement with the Committee, presented an overview of the Commission which was, in fact, the Regulator of B-BBEE.

The Commissioner stated that the economic advantage still lay with historically advantaged people. Black business owners still had difficulty in obtaining bank loans and were not well represented on boards that were still dominated by white board members. She stated that the target was 50% black ownership, of which half had to be black women. The third aspect that remained problematic was training in the workplace, especially in respect of people being given the opportunity to use skills once they had been trained. Including black businesses in the supply chain remained a challenge. Lastly, the socio-economic environment was a key aspect of developing B-BBEE.

The Commissioner indicated that some businesses did not supply information without the issue of a summons.  The Commission had also picked up that some companies were registered up to four times on the Central Supply Database (CSD) and those companies would use the B-BBEE certificate appropriate to a particular tender. The B-BBEE registration system was to be linked to the National Treasury’s CSD to prevent that. The Commissioner was concerned that many publicly announced black-ownership deals were often re-financed, resulting in the black owners going into debt or ownership rights were restricted, especially by vendor companies that financed black people but withheld voting rights while they owed money to the company. Government was funding 2% of B-BBEE deals. In 2016, the country was at 32% black ownership but in 2019 black-ownership stood at 25%. Certain ownership deals had fallen through, creating a reduction in black ownership.

Operational Challenges
The projected budget of R138 million did not include an increase. An additional R59 million had been allocated but it was not accessible as the Commission was not independent. The budget was therefore inadequate. In addition, the dependency on the Department of Trade and Industry frustrated delivery as the entity was not listed as an independent entity.

In respect of Human Resources, the Commission had a total staff allocation of 113 permanent employees and 10 internees and trainees. However, the Commission was currently operating with 39 staff members due to the lack of office space. The Commission was sharing office space with the National Gambling Board.

Over-criminalisation tended to derail effective enforcement. The Commission was not consulted on codes and notices. Businesses received conflicting advice and interpretation of the B-BBEE codes. Processes were not automated resulting in a lack of operational systems and there was inadequate security.

Challenges Derailing Achievement
The scourge of fronting remained the major problem and the vast majority of complaints were about fronting where the black owners were owners in name only. The lack of awareness of B-BBEE and what was required in respect of the B-BBEE legislation by beneficiaries and measured entities was a challenge. The lack of integrity in the verification process remained a disappointment. It was a huge problem that the state-owned entities and departments were not implementing B-BBEE correctly or fully.

The limitations in legislation needed to be addressed. Section 10 of the legislation stated that all entities of state were obliged to implement the B-BBEE legislation. The Commissioner explained that the Commission had to take companies to court for not adhering to the legislation before the B-BBEE Commission could pursue the companies in terms of administrative fines. It could take up to ten years before B-BBEE could apply any measures against a company. That was a major concern for the Commission.

The Chairperson noted the footnotes on slides 24 and 25 and slides 26 and 26 were important. The issues could be picked up in the discussion.

Discussion
Mr M Cuthbert (DA) noted that it was often recorded that B-BBEE was used for rent-seeking and asked if the Commission had received any complaints regarding political interference and whether any politicians if had been subject to investigation for deals that had gone wrong. He believed that it was important that the public know whether or not politicians were putting their hands into the cookie jar.

Mr D Macpherson (DA) was very grateful for the immense work that the Commission had done in respect of the complaint that he had laid in 2017 about fraudulent B-BBEE certificates that had been supplied by Gupta-linked companies to gain contracts from Eskom with the assistance of a verification agency and an audit firm. The investigation had been world class and it had been done completely  internally. He assumed that the Commission would have to get in consultants but the expertise was in-house in the Commission. He congratulated the Commission.

What Mr Macpherson could not understand was why it was taking so long to publish the findings, despite publicly saying that the Commission would do so after he had sought legal advice about his ability or status to publish the findings himself. He had finally published the findings but the advice of senior counsel had been that the section that the report relied on was unconstitutional and would have likely not have been applicable to him. He believed that it was important for the Commission to obtain legal opinion on the section. He assumed that the Commission knew that he had laid criminal charges against people named in that report. He believed that he and the Commission should follow up with the NPA because people who stole money from the state under the guise of  empowerment should spend time in jail and not just get a fine.

Mr Macpherson asked if the Commission believed that “once-empowered, always empowered” was no longer required. It was important to get an honest assessment from the Commission. He believed that the reason that B-BBEE transactions had declined was because people who had benefitted from ownership schemes had, quite rightly and in a free market economy, sought to maximise the value of those transactions by selling the shares to gain profit and value which meant that the businesses were no longer compliant. Those businesses had to go through the process and discount their businesses again. The rule was good in that it allowed more people to be empowered rather than the same people benefitting time and again. How much was empowerment worth? Was R49 million not enough to be empowered? Could one person do ten transactions below the R50 million limit? He requested a discussion on that.

Mr Macpherson stated that he and the Commissioner both knew that State compliance of B-BBEE was far worse than in private sector. The State had oftentimes given the middle finger to the Commission and compliance. What was the latest status of State compliance?

He understood that dti was looking to move towards a more punitive measure for lack of compliance with B-BBEE legislation. Could the Commissioner let him know about that? He asked whether the discussion regarding the 2% of net profit after tax provision was currently in action or whether it was to come.

The Commissioner indicated that it was currently in existence.

Mr Macpherson moved on to his next question asking what the Commission was doing regarding the abuse of B-BBEE by State-Owned Enterprises (SOEs) through fraudulent companies. The complaint that he had laid about Eskom was probably the tip of the iceberg. There had to be a hard, laser-like understanding of what was going on with B-BBEE.

Finally, Mr Macpherson asked about the financing of B-BBEE. He had come across a new way and it was mostly by companies located in Johannesburg that identified B-BBEE transactions and advanced the value of the transaction upfront to those benefitting from the transactions but paying a discounted percentage of the value of say 60% to 70%. They took a bet that the shares would be worth more than the discount in the future, but on the condition that those shares were ceded to the financiers after five years. That took a business right back to square one where it had no B-BBEE value. What was the Commission doing to stamp out those types of immoral financing which were hijacking companies through the back door and using B-BBEE to do so? The financiers and those who accepted the deals should both be punished and prevented from doing it ever again.

Mr W Thring (ACDP) was going to be controversial but he was concerned about hypocrisy. He sat on a number of Committees which were extremely vocal about gender disparity. If an entity came in with 100% males, they left with a whipping and were told that it was absolutely unacceptable. Rightfully so. But he sometimes saw an applauding when there was 100% female representativity in entities and departments. Either Parliament had to talk about gender equality and apply it equally, or it did not. His problem was not with the women, but with the hypocrisy.

Mr Thring said he had been approached by a man who was black but had the wrong surname. The son wanted to advance in life but could not. The father wanted to change his son’s surname so that he could advance economically. The Commissioner had spoken about those who had been alienated under apartheid and remained alienated.

He also asked whether the Commission had considered measuring B-BBEE interventions against growth in GDP, employment rate, poverty alleviation, etc.? If so, had such measurement been done and, if so, what were the statistics?

Mr F Mulder (FF+) stated that the previous questions were very important. He was pro-B-BBEE but he had a serious problem with the way  B-BBEE was being rolled out in practice. Time would tell and time would teach expensive lessons about the way it was being rolled out. It was an emotional question. Mr Thring had spoken of a man who had been excluded. His son had been excluded by the practice. His son was working in Luanda because he had been discriminated against. He had been headhunted to work in another African country but could not work in SA because of B-BBEE. There were lots of stories like that. He wanted his son back in the country so he was looking forward to when B-BBEE became B-BEE.

Mr Mulder was concerned about the vendor finance model as it impacted on the current shareholders. It was not sustainable and was in contradiction with Company Law.  Referring to slide 27, he noted that SOE’s and departments were not implementing B-BBEE. What did a department or SOEs do if it could not find designated people with the skills? Would they appoint undesignated people with the skills? That was not the case. They imported people from Cuba while undesignated South Africans had to leave the country to find work. He asked for more information on the challenges because the Committee needed to understand whether the workload at the Commission was acceptable as it did not look good.

Ms Y Yako (EFF) stated that representation mattered so when she saw 100% women sitting before her who owned the spaces, it was very good for black women. She got a sense that there were concerns about the mandate of the Commission. What did the Commission plan to do to improve the 25% black ownership? What could the Committee do to make the legislation work? It was sad that the Commission had to force people to comply at that stage in the democracy when there were people who had the skills. She had seen it herself where many black people became tokens. They needed to be assimilated.

How could the Commission force companies to assimilate the SETA trainees? If they were not assimilated, they simply became cheap labour. Was there a way of making companies absorb SETA trainees? She felt that the Commission had a mountain on its shoulders but it had severe limitations – staff, budget and the mandate. There was no succession plan for assimilating young black people, especially women, to take over as the Commissioner would not be Commissioner forever and knew what the work entailed.

Mr S Mbuyane (ANC) asked for clarity on what the Commission was doing to align with ease of business. Registration of B-BBEE took five days but CIPC registration took one day. Was there a plan for dealing with non-compliance? What could the Commission say about government sector not applying B-BBEE?

He added that the entity was not doing enough in the rural areas. It was too centralized. It was skewed away from rural areas. One programme in each province was inadequate. The knowledge and empowerment had to be shared. Mr Mbuyane was concerned about the continued practice of fronting. He did not know if the matter of the Commission not being autonomous impacted on the Commission in terms of achieving its goals. How could the Commission execute its task without funding, staff and offices? How far was the Commission in the listing processes? What assistance did the Commission require from the Committee?
The Commissioner had spoken of funding. Dti had funding agents such as SIFA, etc. Were those agencies not assisting in B-BBEE?  How could one company have two B-BBEE certificates. He wanted clarification as to what was being done regarding fronting. He wanted clarity regarding the 51% black ownership when the black people were not really part of the business nor acquiring benefits.

Responses by the B-BBEE Commission
The Commissioner addressed the challenges as many questions were linked to the challenges. Dti had started the Commission as an unfunded mandate as National Treasury would not budget for the Commission. When dti had shown that it could provide the budget, National Treasury would list the entity. The dti could not provide sufficient funds. The R59 million identified by the dti sat in a transfer line but the Commission could not access the money because the Commission had not been listed. She requested the Committee to assist in the challenge of listing the Commission. The legislation was clear: the Commission was to be an entity that would act without fear or favour. In the legislation, the budget was to be appropriated by Parliament and the Commission had to be audited by the Auditor-General but the Commission was audited under the dti. The Commission could not comply with its own legislation. If the Commission could list, it could find its own premises.

The Commission was located in the National Gambling Board but had only one boardroom for all its meetings which meant that meetings had to be held even outside office hours. There was no space for another person to be employed. In terms of the plan, based on the approved strategy, the Commission was looking at 123 people to perform all the functions. The Commission would have to find other methods to reach the rural areas. The Commission did not want to outsource investigations as they were very sensitive. The Commission had recruited black graduate trainees that had obtained their first job at the Commission because it could not afford to take on experienced people. It had created its own succession plan by training those people. The senior management consisted of people who had been in the dti. An advertisement had been placed for a Deputy Commissioner because it was necessary to have proper succession but she was confident that everyone in her management team was capable of taking over from her. Everyone did both technical and high level work. The environment did not limit people to their job descriptions but they did whatever the Commission needed. The Commission had an Employment Equity plan and there were another four management positions to be filled that would allow the Commission to have a diverse employment structure. The Employment Equity Plan was available for inspection.

She stressed that corruption had nothing to do with B-BBEE. Corruption happened at all levels and had to be dealt with unapologetically. However, corrupt people did use the B-BBEE legislation to serve their corrupt purposes. The fact that there were rent-seeking schemes and fronting schemes had been taking place, was the very reason for the institution of the Commission. She was pleased that an increasing number of companies were seeking advice to be able to do the right thing. She needed sufficient resources to guide businesses properly. The advantage of the current legislation was that the Commission was able to pick up funding conditions that were a way of fronting because B-BBEE transactions had to be filed with the Commission within 15 days. The Commission could pick up incorrect transactions and tell a company to undo it if only the funder was benefitting. Funders were often not black.

The Commissioner addressed the issue of people who felt excluded. The definition of Black people meant Africans, Indians, Coloured and they could all benefit from the legislation. There was also an issue about Chinese. Chinese people could only be included in B-BBEE if they had lived in South Africa during the time of apartheid. B-BBEE provided an opportunity for white companies to partner with black businesses. Joint venture arrangements allowed companies to continue to do business in the country. Companies did not have to leave the country because they could work in partnership with black companies.

Executive Manager: Compliance, Busisiwe Ngwenya responded to the question about the ease of doing business. The previous day, the CIPC had launched another portal which enabled companies to get B-BBEE certificates at the same time. Small, medium and micro enterprises (SMMEs) could register as a company and immediately get a B-BBEE certificate. Alternatively, an SMME could download an affidavit and have it officially certified. That was legally acceptable as evidence of the automatic level 2 status of SMMEs with black ownership and level 4 status of white-owned companies. Businesses could also acquire a B-BBEE certificate from CIPC website on annual renewal of their company registration. CIPC was linking with the SA Revenue Service (SARS) and the Unemployment Insurance Fund (UIF).

Ms Ngwenya stated that the Commission had had a meeting with the Auditor-General earlier in the year and had sent of list of companies not reporting to the Commission. The Auditor-General had written to those companies and there had been a spike in compliance reports received. Part of the annual audit would also include whether the departments and entities were implementing B-BBEE and a report would be submitted to the Commission.

Ms Ngwenya explained that most of the education sessions had been in parts of the country outside of Gauteng, although government departments were centralized in Gauteng and many had been requesting education sessions. Many sessions had been in conducted in the Free State and KwaZulu-Natal. Whenever the Commission received an invitation, they used that as an opportunity to reach people. They bussed people into provincial conferences and meetings.

Regarding the “once-empowered, always empowered” issue raised by Mr Macpherson, Ms Ngwenya said that over 90% of transformation deals were not transformative and were not value-added nor empowering – the loans were increasing so most black people were left with nothing, or a debt. Only when B-BBEE was working properly, could the Commission consider “once empowered, always empowered”. However, continued consequence meant that, for three years after a black person had exited, the company could still claim black ownership, if the black involvement had been a genuine empowerment. The latest financing was not pleasing.

Executive Manager: Investigations, Moipone Kgaboesde stated that there had been no reports of political interference but the Commission was getting support and there had been no complaints involving politicians. She thanked Mr Macpherson for the opening fraud case as the Commission could not get SAPS to understand fronting and therefore police did not want to open cases. The Commission would be having a meeting with the SAPS Commissioner to discuss the matter. Regarding Mr Macpherson’s case, Ms Kgaboesde promised that she would follow up.

Ms Ngwenya said that the Commission could not force a company to employ people. However, a company got points for training black people, even if the company was unable to employ the people. The company simply need to track and keep a record of those trainees. The Commission had not looked at the impact on poverty alleviation, etc. as it was focused on implementing the codes but maybe it could be considered in the future.

The Commissioner stated that the Commission had a compliance and an enforcement mandate so it looked for ways of supporting companies, rather than looking to catch people out. It was better to achieve empowerment rather than going through the lengthy processes of enforcement. Those processes would be left to companies who really did not want to engage with the legislation.

Regarding the ease of doing business, the Commissioner stated that sometimes the codes were undermined. An exempted white micro enterprise with a turn-over of less than R10 million did not have to qualify as it automatically qualified for a Level 4 B-BBEE certificate while if an SMMT was more than 50% black-owned, it qualified automatically for a Level 2 B-BBEE certificate. Most entities or private companies that had previous rejected the affidavit from small SMMEs were now accepting them. The intention was not to place a compliance burden on small businesses. Section 10 gave SOEs the opportunity to get deviation from requirements or an exemption where market conditions and circumstances were applicable. None of those exemptions had been approved as they were not coming through. If a multi-national company did not allow the company to dispose of equity outside of the country, it could contribute in a number of ways in lieu of ownership to qualify for B-BBEE. The equity equivalence provided flexibility in the country. The Commission measured the ease of business. The Commission had a Memorandum of Understanding with CIPC and access to its system. Certificates issued through the CIPC system were helpful to companies.

The Commissioner responded to the question about the publication of the findings of the case that Mr Macpherson had laid. Section 13 J(7)(a) of the Act stated that the Commission may publish any of its findings in a manner that it sees fit. However, Section 13J(7)(b) put limitations on publication of findings. The Commission could not publish its findings if there was a criminal process happening. If someone intended to review a report, the Commission could not publish until the review process had been completed. The Commission had to allow 180 days for the review processes to be instituted. If the company had not submitted a review to court within 180 days, the Commission could publish the report. Four reports had been reviewed where the companies had only tabled their review papers on Day 180. That delayed the entire process. It was an unnecessary limitation and it did not exist anywhere else in legislation. The Commission had obtained two legal opinions and both believed that the Commission could publish but the Commission had erred on the side of caution and only published where it definitely could publish according to the legislation.

The Commissioner suggested that Members would be shocked at how many companies had two certificates. Entities were now phoning the Commission to verify B-BBEE certificates. Private sector and the government sector were equally bad in complying with B-BBEE. Many took a tick box approach. She had many examples of fronting.

She added that an ex-Member of Parliament complained that she had been made a partner in a company and once the company had the lease for renewable energy from the Department of Public Works, she had been kicked out.  The lease was a 30-year renewable lease so the company no longer needed the woman but she did not have the money to fight the case. The Commission presented a voice to Black people who had knowingly and unknowingly become involved in fronting.

The Chairperson stated that clause 13(b)(1) which established the B-BBEE Commission needed to be addressed. The scourge of fronting, on slide 27, was the main issue and the Committee would have to spend time on it and follow through. He acknowledged positively the actions of Committee Members who had reported instances of fronting. He encouraged all Members to pick up on those issues. He had to conclude and there was no time for further discussion as the Commission had been very passionate. He suggested that the Committee should ask dti re the footnotes on slides 24 and 25 as well as slides 26 and 27. More interaction might be necessary.  He knew that the Commission reported to dti quarterly so it was privilege to engage with the Commission. The Committee would ask the dti to follow-up.

Mr Macpherson asked to follow-up as his question had not been answered. Was it okay for the Commission not to answer questions?

The Chairperson said that no one had been given a follow-up opportunities. All questions that had not been responded to would be given to the Commission and the answer would have to be sent to Parliament in writing.


Presentation by the National Lotteries Commission (NLC) on the 2018/19 Annual Performance and Financial Statements

Prof Alfred Nevhutanda was supported by the Commissioner, Ms Thabang Mampane, and Executive and Legal Advisor, Tsietsi Masewa, Company Secretary Nomapumalele Nene and CFO Xolile Ntuli.

Key Highlights and Impact on Communities
The Chairperson of the Commission, Prof Alfred Nevhutanda, presented the highlights of 2018/19. These included the decentralization of NLC to provincial offices, attainment of a total of 12 000 lottery terminals and the introduction of instant play through online platforms. R39 billion had been paid to winners since the start of the National Lottery.

Prof Nevhutanda stressed that the NLC stressed the determination of the NLC sound corporate governance culture and a culture of maintenance of strong internal controls and he was pleased to announce that the Commission had now had five clean audits in a row. The audit team had also visited those sites that had appeared in the media, allegedly for corrupt practices and all details were to be  found to be in the audit. The NLC had eliminated the historical  backlog and grants were paid within 60 days of the signing of the grant agreement. The NLC had facilitated economic empowerment in respect of R4.1 billion. The procurement spend was focused on B-BBEE companies: women, youth and persons with disabilities.

The current operator of the National Lottery, Ithuba, had a problem and had gone to court a few days earlier. The NLC had to court as a friend of the court simply to provide information regarding the awarding of the licence. Judgement had been passed the previous day and the licence that had been adjudicated under the Chairperson’s leadership went unchallenged, which meant that he had done the correct thing. Ithuba would remain the national lottery operator. They would invigorate the lottery.  

Prof Nevhutanda stated that the media had accused the NLC of not building toilets but did not know what they were talking about. He showed photographs of the toilets that the Commission had had built by Enviroloo in the Eastern Cape and Limpopo.  He invited Members to go and visit the sites of the toilet.

The CFO, Xolile Ntuli,  presented the financial statement and the audit report. The NLC had achieved 100% performance against its predetermined objectives and targets for the past five years. No corrective actions were identified. The NLC had achieved a clean audit opinion from the Auditor-General for the consolidated financial statements of the NLC and separate financial statements of the NLC, National Lottery Development Trust Fund (NLDTF) and the National Lotteries Participation Trust (NLPT). The Auditor-General SA had noted that the overall audit outcome had remained clean as a result of having the right skills set in key management positions, a leadership that drove a culture of sound corporate governance and the maintenance of strong internal controls throughout the financial period.

Challenges
A majority of complaints and allegations received by the NLC related to conflicting beneficiaries of funds, as well as service providers. The conflicts often led to criminal investigations and litigation. It led to compromises of the NLC’s integrity.

Macroeconomic challenges included the persistent challenges of poverty, low levels of employment as well as the urgent need for economic growth that led to unrealistic demands on the lottery funding. In particular, stakeholders did not understand Section 2A of the Act relating to proactively funded projects.  

Online gaming was a challenge as the NLC did not have the means to regulate the conflicting legislation across the various provinces nor the enforcement powers to effectively regulate illegal lotteries.

The Commissioner asked whether she should present the Second Quarterly Report immediately.

The Chairperson agreed that the NLC should move on to the Report.

Mr Macpherson stated that he wanted assurance that there would be sufficient time for asking questions and receiving the answers.

The Chairperson stated that the answers could be submitted in writing.

Mr Macpherson was unhappy as there were questions on the audit that had been unanswered during the Fifth Parliament. The NLC could hold the Second Quarter Report over for another meeting.

Mr Mbuyane was in favour of the Second Quarter Report being presented.

Ms Yako supported the proposal that another date be found to allow the NLC to present the Second Quarter Report and, even to complete answers if there was not sufficient time.
 
Mr Cuthbert supported the recommendation so that a proper question and answer session could be held.

The Chairperson agreed to the request of the Members.  

Discussion
Mr D Macpherson (DA) had heard from the professor that there was a conspiracy to put the NLC in a bad light with misleading articles in the media. His experience was that where there was public discourse around the way that a public entity was being run and there were accusations of malfeasance, they usually proved to be correct. The NLC had done a very bad job of refuting allegations made against it. The NLC had stated that it stressed sound corporate governance. He asked Prof Nevhutanda what corporate governance allowed him to stay in the Chair although his unrenewable term of office had expired in August that year. What had allowed him to stay in the Chair and why had it not been vacated?

Mr Macpherson noted that Prof Nevhutanda had not spoken at all about the Forensic audit in the NLC. Why had it taken so long? When would it be completed and who was doing the forensic audit? For the first time in its history, the NLC had taken a decision not to not release a list of beneficiaries in the Annual Report. Mr Macpherson argued that it was not in the best interest of transparency to the general public or to Parliament. He requested a report on the beneficiaries of 2018/19.

Mr Macpherson asked why no one, neither NLC nor the dti had seen it fit to update the Committee on litigious actions between Hosken Consolidated Investments (HCI) and Ithuba. It was a matter of critical importance as it had been an attempted takeover by a company that had not been granted the licence but that had not been communicated to the Committee.

He noted that Prof Nevhutanda said that the Committee should be interested in what had been built but Mr Macpherson was interested in what had not been built. There were still massive questions about a company called Denzhe that had received R27 million, of which R11 million was spent on a luxury house on a golf course in Pretoria. No one could explain why that money had paid for a luxury house built when there were old age homes, etc that had not been built. What was the NLC doing to correct the problem?

Mr Thring asked about the challenge presented by NLC in respect of some communities. The NLC seemed to suck up funding from particular communities which was then channelled into the NLC for distribution. Some NGOs that had been in existence for many years were experiencing financial problems because the NLC was supposed to take care of them e.g. Child Line. How many of those NGOs was the NLC no longer funding?

Ms Yako was pleased that Mr Macpherson had the opportunity to air his views. She noted that the DA always had questions that went beyond the report. She asked about the term of office of the Chairperson. What was legislated term of office for the Chairperson. She wanted a detailed legislative ruling that protected or did not protect the names of beneficiaries from being exposed. She also requested that the Committee be informed of any media or legal issue prior to it happening.

Ms Yako noted that the NLC had recorded an overview of 2 500 sites completed by the NLC. Year-on-year, how many sites were completed? How did they make sure that it was not the same beneficiaries benefiting each year? What measures were put in place in that regard? In respect of the legal issues, and the fact that the Chairperson had spoken of Ithuba1, what were the implications of the court case? How did the NLC plan on prioritising women in gaming? Concerning illegal gambling, especially international illegal gambling which led to money leaving SA, what were the timelines for addressing that?

Ms Hermans thanked the NLC for the good work. She was sure that the NLC could answer all questions as they all fell within the mandate of the NLC. She was new to the NLC so she asked for an explanation as to how the NLC related to the dti, distributing agencies, etc. How did the NLC carry out its mandate? How was international sports gambling regulated in SA as it was a very big industry and money left the country?
She had heard the explanation regarding the creation of the Trust Fund. Why was the Trust Fund still there now that there was an operator and who decided on those projects? She had heard the reference to R6 billion in the fund.

Ms Motaung asked how the beneficiaries were determined by the NLC? Did the NLC have awareness campaigns regarding funding in rural areas? Who were the illegal operators and who was licensing them?

Ms Moatshe welcomed the report and the good audit. What were the opportunities for empowerment of emerging SMMEs? How did NLC distribute funds equitably to all provinces? When was the NLC open for applications when one could apply for funds?

Mr Mbuyane asked if the NLC had a plan to resolve the conflict between Ithuba and HCI. There were two funding models. He asked for information on both forms of funding, but especially how beneficiaries were decided on for the pro-active funding. Were there offices in all provinces for the holding of education and awareness programmes and what programmes did the NLC offer about how to go about getting funding? Seeing as the NLC was the only organisation that could licence operators, who were the other people who were licencing the gambling operators?

The Chairperson knew of a process between the ministry and the Chairperson of the NLC but the NLC could respond to the questions. Concerning the beneficiary list, he informed the NLC that he had been questioned by a journalist about why there were no lists. Mr Macpherson had asked the same question and he was sure the NLC could assist with that question.

Response by NLC
Prof Nevhutanda told Mr Macpherson that the Lotteries Act said that when one applied to be a Board Member, it was for a five year term and it was renewable if the Minister appointed the person again. He had applied in 2009 and had got the job. When the NLC was in the process of appointing Ithuba, the Minister had, without him requesting it, given him two more years, together with all other members. He had not requested additional years as he was educated with two PhDs and knew his time was up. He had applied like any other person when the dti had advertised the positions. He had applied for the second term which was five years, not two years. If Macpherson wanted him to leave, he would do it. He did not have a problem because he was educated. He was who he was because of Macpherson’s knowledge and Macpherson might be who he was because of Prof Nevhutanda’s experience and knowledge. If the Minister said that the term was ending, he would explain that the term was five years and then pack his bags and go. He had qualifications to serve anywhere. If he had been corrupt, he had to be fired. He thought that lawyers backed him. President Ramaphosa had taken over from Zuma and had served the remainder of Zuma’s term. He was now appointed for five years and Parliament would not ask him to go earlier because he had served part of Zuma’s term. Prof Nevhutanda said that he was not an Englishman but he thought that that was what the dictionary said.

Regarding HCI, Prof Nevhutanda stated that the NLC had communicated with the dti, although not with the Committee. The NLC had gone to court to put its point about the licence. If there was an issue, the NLC would in future write to the shareholder and the Committee. The NLC might have erred in not informing the Committee as there were a lot of allegations in the media. Concerning media coverage, he agreed that the NLC was battling to find agreement with the media. Mr Macpherson had asked what had not been built. Two toilets of the ten to be built in Limpopo had not been built. At the school near Waterval, the Chairperson of the Governing Body had gone in to start a demolition project because the school was looking for money. The building there had been halted. All ten ablution buildings had been built in the Eastern Cape and the NLC would even pay for a helicopter for Members to go and see the toilets. He could give the engineers’ certificates to Members. Prof Nevhutanda complained about a journalist who had criticised the NLC about a building for a boxing club in the Eastern Cape without even going to see the building. A journalist had to do his work and go and look at a place for himself. Regarding the list of beneficiaries, the legal advisor would give Mr Macpherson an answer. It was about the law but it was not easy to apply.

Company Secretary Nomapumalele Nene responded in terms of the integrated report and the beneficiaries list. The report had been prepared in alignment with National Treasury Regulations and the Public Finance Management Act. In terms of excluding the beneficiaries, the legal office had advised consulting the Promotion of Access to Information Act, the Protection of Personal Information Act and the NLC regulation 8, which forbade the publishing of beneficiary information. In addition, the NLC had, as had the Minister, received complaints from beneficiaries because their information had been published. The list could be obtained in line with relevant legislation and with the consent of the beneficiaries.

Legal Advisor, Tsietsi Masewa, informed the Committee that work was being done around Denzhe and the report had been sent to the Department. The NLC was advised that additional work had to be done and that was being undertaken. NLC was being advised by the dti and the Minister.

Mr Masewa added that education and awareness programmes were compulsory in terms of the legislation and that was being done in all corners of the land and informed people about the NLC and how people could assist them. Illegal lotteries were run by unregistered local people and NLC had systems to deal with that. The other situation was where provincial gambling boards lawfully licensed bookmakers to take bets on contingencies. They were taking bets on the outcome of lotteries, but that was illegal in terms of the NLC.
One cannot take bets on a contingency on which it was unlawful to take bets. There was a case in Mpumalanga where such bets were taking place. The NLC had approached the courts but the court had told the NLC not to rush to court but to use Inter-Governmental Relations Act. The matter had been discussed with the provinces but the NLC needed clarity in terms of the law about the scope of the Lotteries Act and so was appealing the judgement.
           
Mr Masewa had not fully understood the question on funding but he explained that the NLC worked with NPOs, community-based structures and the National Development Plan. Planning was done through the communities but each year there would be a priority area. Proposals for funding would be taken to the board. In the past people could apply for everything but the NLC needed focus in order to be able to measure the impact.

Concerning funding for emerging entrepreneurs, Mr Masewa explained that the NLC could not fund for-profit organisations, nor even State-owned organisations, unless it was an educational institution.

Prof Nevhutanda noted that Mr Macpherson had said that his term had ended in August 2019 but his secretary had reminded him that he was Chairperson until the end of November 2019. He did not want the Members to think that he was there illegally. The dti was there so the Acting GCOO could say if there was another letter about his appointment.

Ms Nontombi Matomela, Acting Group Chief Operating Officer of the Department Trade and Industry, agreed that the Chairperson’s current position ended at the end of November 2019.

The Chairperson noted that interviews for the Chairperson of NLC were scheduled for 20 November 2019. The Department and the ministry were aware of the issue.

Mr Masewa added that the HCI and Ithuba matter was a contractual matter between the two bodies. It stemmed from funding arrangements and the conditions attached. The NLC would only become involved if, at any point, there was any element of concern about the control of Ithuba. In that case, the NLC would have to get involved via the Minister. The Minister would have to approve any change in the licensed operator. The NLC was waiting as an application would have to be made if there was any change to the control of Ithuba.

He added a clarification about funding by the NLC. Ordinarily those requiring funding would apply on prescribed forms and there was a process for allocation of the funds. However, section 28(3) of the amended Lotteries Act provided for an exception in that the board or the Minister could intervene to provide funding in particular circumstances, such as in the case of a disaster. Only 10% of the funds could be used for proactive funding.

The Commissioner responded to the question regarding NGOs. The NLC distributed R1.3 billion per year but received applications totalling R17 billion in a year, hence there had been a discussion around community lotteries as there was not enough funding for all. Regarding beneficiaries who were funded repeatedly, she explained that the revised legislation determined that there had to be a cooling off period of twelve months before an organisation could be funded again. That was why the NLC had introduced society lotteries.

The Commissioner noted that she and the Group CEO of Ithuba had spent time discussing the prioritising of women in gaming and the Members would see in Ithuba’s Annual Report the initiatives that Ithuba had introduced to empower women in gaming. In the RFP (Request for Proposals) for a new operator in four years’ time, the board would focus on the area of women in gaming. Lastly, concerning how beneficiaries were determined in rural areas, she stated that the NLC went out and informed communities because that was required in the Act. Funding was application-based but the NLC specifically trained the communities to do that.

The CFO responded to the question of how NLC empowered emerging entrepreneurs. She explained that the NLC procured from designated groups: black people, women, youth and people with disabilities and it focused on empowering entrepreneurs in the provinces.

She added an explanation about the R6 billion in the Trust Fund. The Fund had been established by the National Lotteries Act in order to keep money from lotteries that could be used for funding the NLC’s own operations in the event of there not being a lottery operator at any time. The remainder of the funds went to beneficiaries. The amount in the Fund was currently very low. There was just sufficient to cover the NLC in the event of disturbances with the operator. There was currently R1.5 billion in the Fund.

The Commissioner explained the relationship between the dti as shareholder and the committees that acted as adjudicators. One side of the organisation was administrative and was not linked to the money. On the other side were the adjudicating teams that were the distributors. Everything was automated and the system contained all the names of beneficiaries. Although the NLC operated independently, it reported to the Department of Trade and Industry.

The Chairperson said that he would create an “abusive” space. The NLC had responded but he asked if he could have the responses in writing as that would be valuable, especially as it was a new Parliament. He asked that all responses be submitted in writing within two weeks.

Closing remarks
The Chairperson noted that the House sitting had started but he had allowed the NLC to respond as the organisation had brought the whole team and had come to meet the Committee in Parliament.

The minutes were postponed for another meeting. Members would have training for the following day.

He wished the members of NLC a safe trip home and closed the meeting.

The meeting was adjourned