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The National Lottery and the non-profit sector

PART ONE: BACKGROUND TO THE NATIONAL LOTTERY
 
With the curious exception of the lucrative horse racing industry, betting on sports events, or gambling in any form, was illegal in South Africa prior to the democratic reforms in 1994. Gambling was, however, allowed in the nominally independent “homeland” states, which gave rise to a flourishing casino business.

Despite these prohibitions, underground gaming operations began to appear in the 1990s. At the same time, a variety of scratch card gaming operations were launched, which were used to help fund worthy causes. The Community Chest, Ithuba, and Viva, were all involved in these latter operations, and raised millions of rands for beneficiary organisations.

After the elections in 1994, the new government was charged with the task of managing the burgeoning underground gambling industry. To this end, a variety of government inquiries, including the Howard Commission and the Lotteries and Gambling Board, under the chairpersonship of Professor Nic Wiehahn, were conducted to inform government policy. The Gambling Board proposed that government acknowledge gambling as a “social reality”, and seek to regulate the industry and ensure that some of the profits from gambling are used to benefit the poor.

The gambling industry was also identified as an area where black economic empowerment could actively be championed. This principle informed the licensing of legal casinos (now restricted to a total of 40), as well as the tender to run the National Lottery.

In order to promote a culture of “responsible gambling”, the South African Advisory Council on Responsible Gambling (SAACREG) was established, composed of representatives from civil society and the gambling industry.1

Two organisations have primary responsibility for the National Lottery: the licensed Operator, that runs the Lottery itself, and the National Lotteries Board, which is responsible for overseeing the Lottery and looking after the interests of all parties concerned. Added to this we need to pay particular attention to the Distribution Agencies, which are appointed by the Minister but are, in effect, run by the Lotteries Board. These latter are responsible for the distribution of the good cause money.

1.1 The licensed opertor: Uthingo Management (Pty) Ltd

Three consortia bid for the licence to run the first South African National Lottery. The preferred bidder was Uthingo Management (Pty) Ltd, a consortium formed in 1996 composed of a variety of South African black economic empowerment partners, industry shareholders, and, controversially, state shareholders.2

The three “industry shareholders” bring considerable experience of the gaming industry to the consortium, and together own 30% of Uthingo. The shareholders are Camelot International, which operates the UK Lottery; Tattersalls, with a background in the Australian gaming industry; and GTECH, a gaming industry and online service provider.

The black economic empowerment partners own 50% of Uthingo, and control 80% of seats on the board. The partners are: the Black Management Forum Investment Co (Pty) Ltd (10%); the Disability Employment Concerns Trust (5%); Motswedi Technology Group (Pty) Limited (10%); NAFCOC Investment Holding Co Ltd (10%); NUMSA Investment Co (Pty) Ltd (10%); WDB Investment Holdings (Pty) Ltd (5%)

The two State shareholders are the National Empowerment Fund (5%) and the South African Post Office (15%).

The Chief Executive Officer of Uthingo is Humphrey Khoza. The current Chairperson is Dr. Barney Pityana.

As the Operator, Uthingo is responsible for the establishment and management of a national communications network, the selection, licensing and training of retailers, and all associated marketing activities. Although Uthingo is not responsible for the distribution of money to good causes, it has set up its own charity, the Uthingo Trust. The Trust invests in small-scale community projects, particularly programmes aimed at the youth, women, the disabled, and Aids orphans.3 The Uthingo Trust functions like any major social investment programme, and does not warrant particular attention in this report.

Footnotes:
  1. Details from the National Gambling Board of South Africa http://www.ngb.org.za/about.htm

  2. Details from http://www.lotteryinsider.com/lottery/uthingo.htm; http://www.nationallottery.co.za/IE/Profile/ WhoAreWe.htm

  3. The Sowetan, September 17, 2001.

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