Lottery Licence Evaluators Had No Lottery Experience

• The committee that evaluated bids for South Africa’s multi-billion rand lottery licence consisted of people with gaming and casino experience but no lottery expertise, critics say.
• Major auditing firms refused to participate in the evaluation process due to “reputational risk” after the corruption that plagued the National Lotteries Commission under its previous leadership.
• Minister Parks Tau promised to investigate conflict of interest allegations after AmaBhungane revealed Deputy President Paul Mashatile’s sister-in-law co-owns a company in the winning consortium.

The committee that evaluated the eight bids for South Africa’s recently-awarded multibillion-rand lottery licence consisted of people with experience in gaming, horse racing, gambling and casinos – but none appear to have any experience with lotteries.

Insiders who GroundUp consulted pointed out that there is a difference between lotteries, gambling and gaming, which they say are two different kinds of operations and require different skills to operate.

With a lottery, where a large share of the proceeds goes to fund good causes, the operator does not participate. But with gambling, players compete individually against the operator, and it is in the operator’s interest to win against the players.

The commissioner of the National Lotteries Commission (NLC), Jodi Scholtz, told GroundUp that there were not many independent lottery experts in the country.

“Previously, the work [of evaluating licence bids] was outsourced to a competent service provider. But on this occasion, for a variety of reasons, it was very difficult within the time we had to get that external provider in place,” NLC chairperson Barney Pityana told the committee.

Instead, the NLC was forced to hire an independent recruitment agency after “big” auditing firms, which had previously evaluated consortia bidding for SA’s lottery licence, did not want to be involved in the process.

The reason was that they were concerned about “reputational risk” because of the rampant corruption that overwhelmed the NLC under its previous executive and board, according to Tintswalo Nkuna, NLC Executive Manager for Regulatory Compliance. Smaller firms were considered but did not have the expertise required, she said.

Nkuna was answering questions from MPs during a marathon four-hour meeting on Tuesday of Parliament’s trade and industry portfolio committee.

The committee had summoned Parks Tau, the minister with responsibility for the lottery, and the NLC to report back on the controversial awarding of South Africa’s R60-billion fourth lottery licence, and the equally controversial awarding of a 12-month temporary licence to Ithuba, the previous incumbent.

Grilled

Both Tau and the NLC were grilled during the meeting. MPs homed in on a report published the previous day by investigative journalism outfit amaBhungane that revealed how Deputy President Paul Mashatile’s wife’s twin sister, Khumo Bogatsu, is co-owner of a company that is a shareholder in the consortium, Sizekhaya, recently awarded South Africa’s multibillion-rand fourth lottery licence.

They questioned the extent of the due diligence that was done on the bidders and demanded to know if Tau was aware of Mashatile’s sister-in-law’s link to the bid.

Tau said the allegations of conflict of interest involving Sizekhaya would be investigated and did not discount the possibility of going to the next bidder [to run the lottery] if any impropriety was found.

“We will look at the allegations. It would be irresponsible of us to ignore what has been raised in the public domain by investigative journalists and the media,” he said. “But we must pass a test, and that test cannot be subjective. We must get appropriate advice as to whether this constitutes conflict of interest, political affiliation and other considerations.”

Tau told the committee that he had concerns about allegations of conflicts of interest against Sizekhaya and losing bidder Wina Njola, which were found to be unfounded.

There were also allegations that two members of Sizekhaya, Sandile Zungu and Moses Tembe, had close ties to the ANC and had close links to the ANC and MKP. He then appointed a quality assurance committee, which found that neither qualified as political office bearers under the Lotteries Act, and there was no evidence that either the ANC or MK possessed a “direct financial interest” in Sizekhaya or any of its shareholders.

Evaluation committee unmasked

Both the NLC and the minister declined to disclose the identities of the evaluation committee members, who were appointed by the NLC after it interviewed candidates on a shortlist compiled by the employment agency. The committee awarded the Lottery to Sizekhaya, in which online gaming and sports betting firm Goldsrush is a major shareholder.

Once the evaluation committee had completed its work, it submitted a report to the NLC’s board, which acted as an adjudication committee. It, in turn, made a recommendation to Minister Tau on who should be awarded the licence

GroundUp has obtained the names of the evaluation committee members. They are:

• Chartered accountant Andrew Mashifane, who Business Day revealed last week had resigned from the Independent Regulatory Board for Auditors (IRBA) after being suspended and fined for two offences. Mashifane, who describes himself as a financial and risk management and governance specialist, has no experience in lotteries, gaming or gambling.
• Mpho Leaderman Ramafalo, an attorney and one-time Gauteng Provincial Government head of gambling policy and legislation, who oversaw legalised gambling regulation. He was an executive director of Phumelela Gaming and Leisure Limited, which is involved in racing betting, until he resigned in 2017.
• Mokoduti Jennifer Bokwa, an attorney specialising in litigation and corporate governance, was South Africa Sun International’s general manager, gaming industry from 2010 to December 2022. She was also the general manager of hotel and casino operations at the Morula Casino and the Morula Hotel. Bokwa also served as chief executive officer of the Free State Gambling and Racing Board from June 2007 to June 2010.
• Thiran Thanapal Marimuthue, a consultant in gambling policy and corporate governance. He has extensive experience in the gambling industry, including as a member of the Gauteng Gambling Board for almost ten years. His other experience includes managing and overseeing regulatory technical compliance within the gambling industry.
• Jameel Golding, a senior IT executive with three decades of experience in strategic change management, information security risk management and financial control.
• Mziwamahlubi Sibongisene Mazwi, an SAA director and board member with a background in finance and business strategy, mergers and corporate finance.
• Anne-Marie Pooley, a gaming consultant and compliance manager for Aruze Gaming Africa, with 25 years of experience in the gambling industry. She is the former Horse Racing Manager for the Limpopo Gambling Board and Compliance and Licensing Officer for the Free State Gambling Board.

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