Lotteries Board must be reformed to uplift the poor

Note to editors: The following statement was distributed at a press conference held today in Parliament by Jacques Smalle MP, DA Shadow Deputy Minister of Trade and Industry, and Patricia Kopane MP, DA Shadow Minister of Social Development. 

The National Lotteries Board (NLB) needs a fundamental overhaul if it is to be transformed from an ANC slush fund into a means to uplift the poorest members of our society.

The NLB is responsible for the distribution of all funds generated by the National Lottery to deserving NGOs and charities. And yet, we have seen a growing trend of NGOs being overlooked in favour of ANC-affiliated organisations.

As a result, poor people suffer while party elites benefit.

Today, the Democratic Alliance (DA) launches its plan to reform the NLB. 

Minister of Trade and Industry Rob Davies has indicated that he will this year initiate a Parliamentary process to amend the National Lotteries Act. 

Once the National Lotteries Act Amendment Bill is tabled for discussion in the Trade and Industry Portfolio Committee, we will push for the proposals contained in our plan to be incorporated into the Bill. 

Political interference has seen ANC-aligned groups receive multi-million Rand grants from the NLB while thousands of deserving charities have been denied funding. 
 
These recipients include:

• In April 2010, over R41 million was paid to Makhaya Arts and Culture, an NGO which employs the daughter of the NLB chairperson, Alfred Nevhutanda. This grant was the largest awarded by the NLB to an arts and culture organisation in the 2010/11 financial year.
• A R40 million grant was made to the National Youth Development Agency (NYDA) to help fund an ANC Youth League talk shop held in December 2010.
• R1 million was paid by the NLB to COSATU to help fund its 25th birthday celebration, held on 4 December 2010. President Jacob Zuma used that platform, which had been paid for using funds that were intended for poor South Africans, to call on South Africans to support the ANC in the 2011 local government elections.

Meanwhile, NGOs desperately in need of funding, such as the following, have been denied support on spurious grounds:

Tshwane Child Welfare, which provides assistance to 28 000 children annually, received R7 million in 2008 and R6.7 million in 2009. In 2010 their application was denied due to an "administrative error", and in 2011 their application was denied because the NLB decided to only fund "first time applicants". They are now in financial trouble due to a lack of funding.

Phoenix Child Welfare Society applied for funds from the NLB, and was officially appropriated R19 million for 2011. But then the money was never paid to them. After enquiring as to why they never received the money, the NLB simply said that "only first-time applicants were being considered". All of their dependents will likely now be left to fend for themselves.

The Port Alfred Benevolent Society, which feeds and pays for the education of 260 families in Port Alfred's poorest area - the Ndlambe township - will not receive Lotto funding for the first time in 10 years, due to first time applicants being given priority. The entity will now have to close down as their entire operation is reliant on funding from the lotto. The 260 families dependent on the Society now have no form of support.

This is just plain wrong. 

The DA's proposals seek to address the political interference and inefficiency that has prevented the NLB from meeting the needs of the most needy and vulnerable South Africans:

Management of the Board

1. Forensic audit: The first step to reforming the NLB must be a forensic audit into all of its grant decisions for the last three years. Those who are guilty of misappropriating funds must be charged and prosecuted.

2. Depoliticise the appointment process: Cadre deployment has crippled the NLB. Currently, the Ministers relevant to each distribution agency are allowed to appoint the agency's board. New board members should be appointed free from political interference and based on their knowledge of the NGO sector.

3. Introduce new management: The current NLB management has failed to deliver effectively for a prolonged period of time. In the private sector, when the same managers fail to perform on a consistent basis, they get replaced. This is what needs to be done here. New management needs be brought in to start afresh.

4. Board members should serve full-time: Time is the most significant constraining factor holding back the payout of grants. The board members of the NLB's distributing agencies only serve for 1.5 days per month, which means grants don't get processed and money goes unallocated. The livelihood of many NGOs is dependent on NLB funding, and board members need to serve in a full-time capacity to ensure the processing of grants is as efficient as possible.

5. Appoint people with NGO experience to distributing agencies: The decisions made by distributing agencies in the last year must be seriously questioned. Appointments to distributing agencies need to be completely depoliticised. People from the NGO sector should be given preference to serve on the NLB distributing agencies, so that the interests of this sector are fairly represented when decisions are made.

6. Change the NLB's reporting structure: The NLB's distributing agencies currently report directly to the Minister of Trade and Industry. This makes distributing agencies liable to political interference. The distributing agencies' activities should be completely depoliticised. They should act as independent agencies only loosely connected to government. The current reporting structure, which makes the distributing agencies answerable to the Minister and not the head of the NLB, is particularly problematic and allows for political interference in the grant-approval process. Agencies should report to the head of the NLB, who in turn should account to Parliament.

Administration of grants

1. Allow multi-year allocations to deserving NGOs: Currently, all NGOs need to reapply for funding every year. This makes it almost impossible to do proper long-term planning. Multi-year allocations would also reduce the administrative pressure on the NLB and NGOs as fewer applications will have to be processed. It will also give NGOs the ability to plan their activities within a longer timeframe. This reform is vital to ensuring the continuity of NGOs.

2. Allow applications to be submitted throughout the year: The annual application deadline creates a bottleneck and places an enormous administrative burden on the NLB. The best way to ease this pressure is to simply allow applications to be submitted throughout the year. This would create a constant flow of applications at a manageable rate, and will allow for each application to be given the due consideration it deserves.

3. Increase transparency: Currently, it is very difficult for NGOs or the general public to access information relating to the activities of the NLB. There is no readily available information on the number of grants made at any particular point in time, and no clear description of the NLB's allocation priorities. This needs to change. The NLB should provide monthly updates via its website to provide the public and NGOs with information on important variables such as these.

4. Independent appeals process: NGOs have the right to appeal grant-making decisions by the NLB. The problem is that the same distributing agencies who denied access to funding preside over appeals of these decisions. This is problematic. An independent appeals tribunal should be set up to deal with these cases.

5. Modernise the application process: The application process requires significant paperwork and therefore places significant administrative burdens on the NLB. For example, an NGO applying for funding must fax documents to the NLB, which often leads to missing documents and rejected applications based on small administrative glitches. NGOs should have the option to apply electronically. This would allow for much faster and easier applications - and it rules out the risk of missing paperwork. Those NGOs that do not have access to the internet would still be able to use the traditional application process.

6. Conducting better oversight: Currently, the NLB does very little to monitor the use of grants by NGOs. The NLB therefore has very limited knowledge about the way NGOs are spending the money they receive from the NLB. This means the NLB has a very limited ability to track the impact it is making through its grant process. It is also not able to learn which NGOs perform well over time. The NLB needs to develop better oversight mechanisms to ensure that good NGOs receive more money.

7. Put forth clear funding criteria: Currently, NGOs are not sure by what criteria their funding applications are being approved or rejected. This has caused widespread confusion and unhappiness in the sector. There is a growing sense that funding criteria are arbitrarily applied by the distribution agencies. The NLB should put forward clear funding priorities so that NGOs can internalise what is expected of them and plan ahead.

8. Consistency: The NLB should be completely consistent in its use of criteria. Sometimes rural NGOs are favoured, sometimes urban NGOs are favoured and many times other arbitrary criteria are used to apportion the funds. This system does not allow for NGOs to function with the continuity they need.

9. Partner with development organisations: The NLB does very little to monitor those organisations that received grants. Currently, the NLB only has 4 compliance officers who monitor grant beneficiaries nationwide. This means that most NGOs are never monitored after they receive funding from the NLB. There is scope to partner with local capacity development organisations to overcome this challenge.

Poverty, and the government's inability to deliver basic services, has left hundreds of thousands of South Africans dependent on NGO assistance. 

NGOs form a vital part of our country's social support structure, and the NLB should do all in can to ensure that those deserving of financial support benefit from its funds.

We believe that, if the reforms outlined above are incorporated into The National Lotteries Amendment Bill, they will make a significant impact on the NLB's functioning, and the financial security of many NGOs. 

This will finally enable the NLB to become a force for social upliftment, rather than a vehicle for political patronage. 

Issued by the DA, January 25 2012

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