Lottery Bosses Turned to State Security Agency to Investigate Leaks

Former National Lotteries Commission board chairperson Alfred Nevhutanda asked the State Security Agency to investigate whistleblowers. The outcome of that investigation was probably not what Nevhutandu had hoped.

• Former National Lotteries Commission (NLC) board chairperson Alfred Nevhutanda asked the State Security Agency (SSA) in December 2018 to investigate the leaking of documents that exposed lottery corruption.
• The NLC’s company secretary at the time listed media reports she said were based on “stolen” information in an affidavit for the SSA.
• The SSA did investigate. It found the information was not a matter of state security and that the “prevalence of alleged corruption and irregularities” gave “ample motive” for the media to expose it.
• A new board and management has since taken over the NLC and thus far have taken measures to end corruption at the institution.

A State Security Agency (SSA) investigation found that the “prevalence” of alleged corruption and irregularities involving the NLC and its beneficiaries “provided ample motive” for exposure by the media.

The probe into supposed “information security breaches and sabotage of NLC operations” was undertaken after then-NLC board chairperson Alfred Nevhutanda wrote to the SSA in December 2018 requesting it to investigate.

Here is

• Nevhutanda’s letter,
• an affidavit by currently suspended NLC company secretary Nomphumelelo Nene supporting the request, and
• the security agency’s “confidential” findings and recommendations.

Nevhutanda asked the SSA to investigate the role of NLC staff in the alleged leaking of information, and Nene, in her affidavit identified specific media and reports that she claimed involved these leaks.

In the letter outlining its findings, the SSA told the NLC that while protecting state information was “a legal imperative aimed at protecting the sovereignty and integrity of the state” this only applied to appropriately classified information.

Although it did not say so directly, the SSA findings implied that the allegedly leaked information did not fall into this category.

Significantly, the SSA made it clear that the need to protect state information “does not prevent any individual from blowing the whistle on corruption or irregular or illegal activity”.

The SSA investigation found that the NLC information involved in the alleged breach was “sensitive and privileged in nature, but not classified in terms of the prescripts of the Minimum Information Security Standards (MISS)”.

“The leakage of the relevant sensitive official NLC information to the media does not pose a threat to national security,” the SSA said, adding that the impact of the breaches was reputational.

The SSA report found “no evidence of a factual and incriminating nature against any of the suspected NLC employees that could be identified from the information and data interrogated”.

It also stated that “the prevalence of alleged corruption and irregularities within the NLC and at its beneficiaries does provide ample motive to have such exposed in the media”.

Conspiracy claims

In 2020, Nevhutanda told MPs during a session of Parliament’s trade, industry and competition portfolio committee that there was “a conspiracy” in which information “stolen” from the NLC was sent to the US, where he claimed it was being sold to fund a smear campaign against the NLC.

He was repeating similar claims he had previously made in Parliament, which included ad hominem attacks on GroundUp and this reporter but was careful not to name either.

“I came here in this August house last year and reported to honourable members that information about our beneficiaries has been stolen and put in one state in America,” he told MPs.

“We called on the State Security Agency to come look into the matter because we are getting reports that our information is generating money for media platforms and journalists,” he said. “There has been talk, of course from one source, one media, that spoke much about proactive-funding,” Nevhutanda said (referring to GroundUp), but failed to tell MPs that the SSA investigation had been completed almost a year earlier.

Proactive funding was at the heart of the looting of the lottery. It side-stepped the normal grant process. The NLC could itself identify a project to fund and appoint a non-profit organisation to oversee it.

After Nevhutanda first told Parliament in 2018 that he had asked the SSA to investigate the supposed the South African National Editors Forum issued a statement saying that his remarks reflected “an extremely dangerous attitude where the media is being blamed for the NLC’s inherent problems”.

“Rather than investigating why millions cannot be accounted for, the NLC has instead tried to cast doubt on the integrity of the journalists involved and has asked the SSA to investigate their sources.”

Proactive projects made secret

Security flaws identified in the NLC grant funding system during the SSA’s investigation, appear to have been used as an excuse by the NLC to remove all proactive-funded projects from its central grants system.

“In or about 21 December 2019, the classification of all pro-actively funding projects was heightened to ‘secret’ and projects were removed from the grant funding system and maintained manually under the custody of [Tsietsi Maselwa] the NLC’s [then] Deputy Information Office, Executive Manager Legal in order to safeguard [the] information,” Nene said in her affidavit.

“There was a lot of internal discussion, with lots of back and forth, about what to do to plug the alleged leaks”, a source, who was in a senior position at the NLC at the time, told GroundUp. “In the end, the decision was taken to remove all the proactive projects from the system and limit access to a handful of people”.

Some in that handful of people were implicated in corruption.

Maselwa, who resigned from the NLC several years ago, has been implicated in corruption involving lottery funds. He received R4.3-million from lottery funds allocated to build a library and museum complex in Kuruman (see Taung Cultural Music and Arts Expo) which he used to build a house in an upmarket gated development in Pretoria. The property is one of several paid for with lottery funds that were frozen after the Asset Forfeiture Unit obtained a preservation order in December 2022.

The politically-connected Nevhutanda, who was appointed as the NLC board chairperson by former President Jacob Zuma in 2009 and was close to high-ups in the ANC leadership, former NLC former Commissioner Thabang Mampane, and ex-chief operating officer Phillemon Letwaba, have all been implicated in the corruption which overwhelmed the NLC on their watch.

Also implicated are former board members William Huma, who resigned after he was confronted with evidence of how he had profited from corrupt lottery grants, and Muthuhadini Madzivhandila, who has since died.

When a new administration, including the entire board and executive, took over at the NLC in late 2022 and early 2023, they discovered a “chaotic mess” in the documentation relating to proactive funding, much of which was paper-based. Key documents were missing. Files held for safekeeping by document storage company Metrofile had been signed out and never returned.

The NLC was able to recover copies of some documents from its Mimecast email archiving system and the laptops of their assistants and support staff.

News reports

In his 1 December 2018 letter, addressed to then SSA Minister Dipuo Letsatsi-Duba, Nevhutanda wrote: “The NLC has noted with grave concern possible information security breaches and the unauthorised use and/or dissemination of confidential information obtained as a result of performing official functions in the Commission by NLC employees. The activities are intended to undermine the integrity of the Commission while disrupting the effective functions [of the NLC] and causing insurmountable reputational harm to the Commission as the custodian of personal information entrusted to it by its beneficiaries.”

His request for the SSA to investigate was supported in an affidavit by suspended NLC company secretary, Nomphumelelo Nene.

Nene is currently facing a disciplinary inquiry after she was unsuccessful in legal action to set aside findings of irregular expenditure on her watch.

The purpose of her affidavit, Nene said, was “to record the events which transpired relating to information security breaches at the National Lotteries Commission”.

She listed various news reports which she claimed were the results of these “breaches” (see at the end of this article).

Nene said that a whistle-blower approached the NLC alleging that one of its employees, Sello Qhino, had “provided her classified NLC Information and persistently encouraged her to provide the information to GroundUp”.

Qhino, who blew the whistle on a series of dodgy lottery-funded projects in Kuruman after attempts to raise the issue internally were ignored, was subsequently fired.

Referring to an 18 November 2018 article in the Daily Dispatch about the misappropriation of Lottery funds, Nene said that the NLC identified and then suspended Zintle Rungqu. She was an employee in the NLC’s East London office, who was the partner and the mother of whistleblower Mzukise Makatse’s three children.

Rungqu and Makatse believe Rungqu was punished because Makatse blew the whistle. She was suspended and charged internally, with the NLC spending R470,000 on lawyers to represent it, but was found not guilty and allowed to return to work.

“The common factor in these articles is that [they involve] classified information relating to proactive funding projects,” Nene said in her affidavit.

When Runqu was suspended, Makatse moved out of the family home to take the heat off her and his children. Facing homelessness, he moved into an office in an empty factory belonging to a friend.

Both Makatse and Qhino are participating in an NLC reparation process intended to recognise the harm some people suffered at the hands of the NLC. Apologies and, in some cases, financial compensation are expected.

“Some individuals were really affected very negatively by this … This is really painful,” NLC Commissioner Jodi Scholtz told the Daily Maverick last year.

“I met a couple of these individuals. It was just so heart-wrenching that their whole lives have been turned upside down,” said Scholtz.

Among those she met were Qhino and Makatse.

Safe platform needed for whistleblowers

The SSA found the absence at the time of a proper channel for whistleblowers to report corruption led them to turn to the media.

“Failure to have a dedicated anti-corruption channel will result in employees presenting such cases outside of the NLC,” the SSA said in its findings.

“Given the magnitude of corruption in state institutions, it remains crucial that it ensures that the NLC complies with all security prescripts and that its focus is on ensuring that illegal and irregular conduct is adequately mitigated against and by ensuring an adequate channel for whistle-blowers to report untoward conduct without being intimidated.”

It recommended that the NLC establish a “safe channel” for employees to provide information on any “untoward activity” that would not prevent or discourage employees from blowing the whistle. A whistle-blowers policy, based on the Protected Disclosures Act 25 of 2000, is a requirement.”

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