Lottery Licence Bidder Accuses Minister of Favouring Ithuba

Minister Parks Tau has been accused of “frustrating” the award of the fourth national lottery licence in order to advance the interests of the present licence holder, Ithuba.

• A national lottery licence bidder wants the courts to force Trade, Industry and Competition minister Parks Tau to award the fourth licence.
• Wina Njalo, which is a subsidiary of Hosken Consolidated Investments, claims that Tau is frustrating the process in order to “advance the interests of the present licence holder”, Ithuba.
• The company seeks an order directing the Minister to announce the successful bidder before 9 May and to negotiate and conclude the licence agreement no later than 31 May.
• It further seeks an order declaring unconstitutional, unlawful and reviewing and setting aside a request for proposals for the temporary licence.
• The hearing has been set down for 22 April.

Minister for Trade, Industry and Competition Parks Tau has been accused of “frustrating” the awarding of the fourth national lottery licence in order to advance the interests of the present licence holder, Ithuba.

In an urgent court challenge seeking to force Tau’s hand to award the lucrative licence, worth an estimated R180-billion, bidder Wina Njalo (RF) Pty Ltd says the Minister’s approach to the matter is “so entirely irrational that it can give rise to only one conclusion: that the Minister is actuated by an ulterior purpose and is acting in a manner which will advance the interest of one party – Ithuba”. Wina Njalo is a subsidiary of Hosken Consolidated Investments, established for the sole purpose of bidding and ultimately operating the national lottery.

The company says the delay in awarding the fourth licence, and the Minister’s “irrational and unlawful” decision to extend the bid evaluation process by another year, and then to issue a new request for proposals for a 12-month “temporary licence”, are threatening the very existence of the national lottery.

“We bring this application in our interest and in the public interest to safeguard the lottery, which is a revenue generation mechanism which plays a critical role in depositing billions of rands to sustain good causes,” Wina Njalo CEO Dawid Benjamin Muller says in his affidavit in the urgent application lodged this week in the Pretoria High Court.

On 22 April, the company will seek an order directing the Minister to announce the successful bidder before 9 May and to negotiate and conclude the licence agreement by no later than 31 May.

It further seeks an order declaring unconstitutional, unlawful and reviewing and setting aside the request for proposals for the temporary licence.

Muller says the Minister has to date failed to advance proper reasons for not awarding the fourth licence, despite being repeatedly asked to do so, and has only indicated “certain unidentified matters” which require further evaluation and certain “unknown concerns”.

“He has also failed to put in place a revised timetable for the finalisation of the tender award, despite this being promised in writing by the National Lotteries Commissions (NLC) board seven months ago.”

Muller said the successful bidder was to have been announced in September last year and the licence agreement concluded in December for a “smooth transition” enabling the new operator to take over on 1 June.

But, without any legitimate reasons, the Minister missed all these binding milestones.

Muller said on account of the looming deadline of 31 May, which is when Ithuba’s licence expires, the Minister then took two further unlawful decisions: to extend the validity period of the fourth licence process for another 12 months, and to issue a new temporary licence procurement process.

“One of two consequences will arise, either there will be no national lottery operator after 31 May or Ithuba’s current licence will be effectively renewed, which is in contravention of the Lotteries Act.

“Unless an order is granted compelling the Minister to award the fourth licence, the national lottery may cease to operate for an extended period, or a temporary licence will need to be issued which violates the law and the Constitution.”

Regarding the temporary licence, Muller said it had been “carefully crafted” to favour Ithuba and the decision to issue the request for proposals appeared to have been made “hastily” and by the Minister alone, without consultation with the NLC board, as required by law.

“The structural design of the temporary licence request for proposals makes it virtually impossible for any new operator other than Ithuba to meet the relevant prescribed criteria within the tight deadlines and with the substantial capital requirements that will be required,” Muller said.

“With less than five months left of Ithuba’s licence, this has set the stage for an extraordinary, and ultimately unlawful, measure ostensibly aimed at preventing a lottery interruption but in fact by design or effect ensuring that Ithuba obtains an unlawful extension of its incumbency.”

He said it was not possible for any other bidder to compete with Ithuba for the temporary licence.

“Ithuba has a significant and field-destroying advantage in preparing the temporary licence application. For Ithuba, continuing with what it designed in 2013 and implemented over the past 10 years will be a relatively straightforward task. The same is not true for any other bidder,” Muller said.

He said it was also not financially viable for any bidder other than Ithuba to invest in a national lottery system that may only operate for 12 months.

“The stark discrepancy between the slow moving fourth national lottery licence process and the extremely expedited novel temporary licence process in respect of the same bidders, confirms that the further delay in awarding the fourth licence and any award of a temporary licence is irrational, unreasonable and for ulterior purpose or otherwise unconstitutional.”

Muller also submitted that the Minister’s “alleged concerns” over the fourth licence bidding and evaluation process were baseless because the temporary licence was confined to the bidders for the fourth licence.

He questioned how the Minister was able to make an “expedited decision” in one process, but not in the other.

“The approach is so entirely irrational that it can give rise to only one conclusion: that the Minister is actuated by an ulterior purpose and is acting in a manner which will advance the interest of one party – Ithuba.”

Muller said the company did not wish to litigate with the Minister.

“It has been patient. And it remains open to receiving an unequivocal assurance, to be confirmed in an agreed court order, which may have the effect of obviating the need for an urgent hearing.”

The application has been set down to be heard on 22 April. The respondents have until 11 April to file opposing affidavits.

GroundUp approached the Minister’s office for comment but received no response.

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