Lotteries commission appoints investigator to look into its own alleged corruption

Lottery. Photo: Ashraf Hendricks / GroundUp

Numerous reports have raised concerns over how money meant for charity is being disbursed in highly questionable ways.

After more than a year of relentless reporting by GroundUp’s investigative journalists, sometimes in partnership with The Citizen, the National Lotteries Commission (NLC) has decided to investigate alleged corruption in its own ranks.

The NLC also suggested that suspicions should also have been reported to the NLC’s own anti-fraud hotline, and made a renewed call for that to happen.

In a statement on Monday, the NLC board said they had nevertheless appointed Sekela Xabiso to investigate fraud allegations against the NLC, and claimed that he would be acting independently.

Earlier it was revealed that the lotteries commission had threatened to lay criminal charges against journalists for writing reports exposing alleged corruption, many of which were also carried by The Citizen. Both The Citizen and GroundUp (to a far greater extent) have been dragged to court in civil action subsequently.

GroundUp has had to ask for donations from the public to finance its defence.

“The Board of the National Lotteries Commission (NLC) has appointed audit firm Sekela Xabiso to institute an independent investigation into allegations of improper use of funds intended for good causes,” said NLC spokesperson Ndivhuho Mafela on Monday afternoon.

Prof Alfred Nevhutanda, chairperson of the NLC, made the announcement following an open invitation by the board to journalists and the public at large to bring forward evidence of recent claims made in the media. The evidence has been piling up in GroundUp reports since 2018.

The appointment of Sekela Xabiso would “reassure those that may have concerns to report of the independence of the process”, according to the NLC.

They said Sekela Xabiso would receive all information, documentation and any other evidence directly and could be contacted using the following methods:

  • Hotline: 0860 123 772
  • Postbox: NLC Fraud Hotline, P O Box 78, Bramley, 2090
  • Email: lotteriesanonymous@skxprotiviti.co.za

“It is important to note that this appointment is in addition to the NLC’s hotline for the public to report any suspicious activity around regulating and funding of lotteries, where callers may remain anonymous.”

Last week, NLC members implicated in corruption threatened to lay criminal charges against freelance journalist Raymond Joseph and GroundUp over an ongoing investigation into alleged fraud and corruption involving multimillion-rand Lottery grants.

The threats were made in two separate letters from the NLC’s lawyers, Malatji and Co, which were received by email on Thursday and Saturday.

The NLC also demanded that GroundUp remove 16 stories from its website, many of which exposed incompetence and probable corruption involving multimillion-rand Lottery-funded projects.

In the initial letter Malatji said that the NLC was “considering” laying criminal charges. But in a follow-up letter, the lawyers said: “The NLC intends to lay criminal charges against Joseph and GroundUp for the contravention of Regulation 8.”

The regulation of the Lotteries Act quoted by the lawyers deals specifically with members of the NLC’s Distributing Agencies. Among other things, the regulation makes it an offence for a distributing agency to reveal details of both grant applications and awarded grants. Members of the distributing agencies are appointed by the Minister of Trade and Industry.

That the section of the Act being invoked by the NLC refers specifically to Distributing Agencies is clear from the letter sent by their lawyers.

“The aforementioned conduct of Joseph and GroundUp respectively, of disclosing and publishing the details referred to, contravenes the Regulations relating to Distributing Agencies published under the Lotteries Act, 57 of 1997,” Malatji say in their first letter of demand.

Neither GroundUp nor Joseph are “Distributing Agencies”.

The NLC has also, in part, used this same section of the Act to deny several Promotion of Access to Information Act (PAIA) applications requesting details of Lottery-funded projects. In response to previous questions, as well as PAIA requests, NLC officials have also claimed that the right to privacy of organisations and people involved in Lottery-funded projects prevents them from supplying the requested information.

While leaked NLC documents were used in some of the stories the NLC wants taken down, most of the reporting is based on interviews with sources, on-the-ground reporting, leaked bank statements and publicly available information, including the Commission’s annual reports published on its website. Other information about funded organisations was supplied by the Department of Social Development and records on the Companies and Intellectual Property Commission database.

The NLC’s lawyers listed 17 stories that they say contravene the law. Fifteen were originally published on GroundUp and republished by other media under a Creative Commons policy. One was co-published by the Zoutpansberger in Limpopo and GroundUp. One was published by the Sunday Times.

“The … articles not only have the effect of tarnishing the good name and reputation of the NLC, they also unlawfully disclose details of persons who have been awarded grants by the NLC, as well as the grants themselves,” the letter reads.

In the second letter, the NLC lawyers makes a further demand relating to the stories they listed.

“The NLC has instructed us to demand … that Joseph and Groundup, promptly retract all publication of information that contravenes Regulation 8 from all electronic and other platforms that it was published including those circulated by email within 6 (six) days of date of this letter.”

Most of the stories they want taken down — like thisthis and this — exposed evidence of probable corruption in the use of Lottery funding.

But others don’t, and only rely on interviews and public documents, like this one about an NLC decision — reversed after the article was published — to stop funding animal welfare. The same goes for this one based on an analysis of grants data from NLC annual reports that compares NLC funding to sport and to education. Or this one about declining Lottery income which was based on the NLC’s 2017/2018 Integrated Report published on its website.

‘Deeply suspicious’

Corruption Watch executive director David Lewis said: “Corruption Watch notes with alarm the intimidation techniques that are being used by the National Lotteries Commission (NLC) against journalist Raymond Joseph and the news outlet GroundUp.

“The NLC is relying on a regulation to the Lotteries Act that prohibits the disclosure of grant information and, given the important place the rights to freedom of expression and access to information play in our constitutional system, Corruption Watch is concerned that this regulation — or its implementation by the NLC — may be unconstitutional.”

Lewis also criticised the NLC for refusing to reveal details of its most recent grant recipients, as it had for the previous 18 years.

“It is deeply suspicious that they have gone from voluntarily disclosing information on their grants to flat-out refusing to do so. Transparency is a vital component in the fight against corruption, and the utter lack of transparency in the NLC at present raises serious questions about the integrity of their work.”

Charl du Plessis, a lawyer with media law firm Willem de Klerk Attorneys, said: “The NLC’s conduct … raises question marks about its commitment to the constitutional values of openness, transparency and accountability.”

“For more than a year, GroundUp and the media in general, have been reporting about allegations involving the flagrant misuse of lottery grant money, which is meant to go to worthy causes,” he said.

But rather than that the NLC was relying on “secondary legislation”, namely a regulation promulgated by a minister, in what seems to be an attempt to silence journalists and sweep these matters under the rug.

Minister ‘can no longer sit on the sidelines’

Dean Macpherson, the Democratic Alliance shadow minister for trade and industry, last week wrote to Minister of Trade and Industry Ebrahim Patel, asking him to place the NLC under administration, dismiss its board and suspend its chief operating officer. (Patel’s office, when asked by GroundUp to comment on Macpherson’s letter, said a response would be sent to Macpherson.)

Macpherson described the NLC’s legal threats against Joseph and GroundUp “as a last-ditch attempt to cover up for alleged fraud and corruption by senior staff members”.

He said: “The NLC and its Board have done everything possible to obfuscate the truth … Their threats to journalists are reminiscent of the Apartheid government which sought to hide the truth and bully journalists who exposed them.”

Despite the ongoing revelations about alleged corruption, Minister Patel has remained silent, Macpherson said. “He can no longer sit on the sidelines while this tragedy unfolds and must without further delay fire the Board and put the NLC under administration.”

List of stories the NLC wants removed

  1. Sunday Times: Middlemen hit jackpot: Lottorpreneurs cash in on a change in the law http://bit.ly/2zYleH6
  2. Zoutpansberger (co-published on GroundUp): Limpopo school falling apart http://bit.ly/2GNlj3u
  3. GroundUp Lottery money goes to waste as school starts falling apart http://bit.ly/2s0EZ04
  4. GroundUp: How library a hijacked organisation scored millions from the Lottery http://bit.ly/2NNpiBi
  5. GroundUp: The Lottery-funded library with empty shelves http://bit.ly/2ZDH6T3
  6. GroundUp: Lottery whistleblower pays a high price http://bit.ly/2V9eujd
  7. GroundUp: Mystery Limpopo outfit gets multimillion-rand contract to build old age home in Limpopo http://bit.ly/33XIkdg
  8. GroundUp: Lottery admits it’s investigating projects it defended http://bit.ly/30locBv
  9. GroundUp: SPCA dropped by Lottery http://bit.ly/32d4gAT
  10. GroundUp: Lottery gives more money to associates of controversial lawyer http://bit.ly/2oPPGkI
  11. GroundUp: Lottery has to do more with less http://bit.ly/2Rh6g8A
  12. GroundUp: Lottery: R6-bn for sport, only R2.8-bn for education http://bit.ly/3aztQFa
  13. GroundUp: The Lawyer, the Lottery and millions in dodgy grants http://bit.ly/2NPrisB
  14. GroundUp: Lottery hides it beneficiaries following corruption exposés http://bit.ly/2PKAUGX
  15. GroundUp: how the Lottery money is spent ohttp://bit.ly/37NqAEr
  16. GroundUp: How a lawyer used a Lottery-funded project as his personal ATM http://bit.ly/33SP9NQ
  17. GroundUp: Mystery Limpopo outfit gets multimillion contract for old age home in Mpumalanga http://bit.ly/33XIkdg

NLC letters of demand and GroundUp’s response

More about National Lotteries Commission

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