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The National Lottery and the non-profit sector

1.7 Determining The Total Allocation
 
Due to the significant roll out costs involved in establishing the National Lottery, the Operator is not expected to be able to pay out 30% on all ticket sales immediately. Instead, the percentage given to good causes is only expected to average out at 30% over a seven year period. Thus, contributions are expected to rise from 10.16% in year one of the contract to 40.58% in year seven.

There is, however, some uncertainty as to how this “averaging out” has been determined. Whilst the first and last years percentages have been announced publicly,41 it is not clear whether fixed percentages for each of the seven years have been determined ex ante, or whether the Operator (Uthingo) has the discretion to adjust these within the limits imposed by the 30% average disbursement clause. Moreover, it is not clear what, if any, sanctions can be imposed if the yearly targets are not met.

The significance of this is as follows: if the Operator has the discretion to make only minimal payments to the NLDTF until well into the contract, then, in effect, considerable amounts of interest free loan capital have been made available. Some have speculated that, given the current percentage payments made to the NLDTF, this amounts to R200-R300 million per year.42

This arrangement could well be permissible under the terms of the contract entered into with Uthingo, and there is no reason to suspect that anything untoward is occurring. However, in the interests of transparency, it is vital that this issue be clarified publicly.

Attempts to get hold of a copy of the contract from Uthingo, the National Lotteries Board, or the Department of Trade and Industry, all failed. Brian Bailey, who has produced the most comprehensive financial analysis of the Lottery to date, was similarly unsuccessful in his attempts to get hold of the contract. The reason stated for this failure to disclose information is that (a) Uthingo is a private company, and cannot therefore be compelled to reveal information, and (b) making details of the contract public would give Uthingo’s competitors access to privileged information when competing for the license to operate the 2007 Lottery.43

1.7.1 Gross sales, prizes, and good cause determination

Based on figures released by Uthingo, as well as extrapolations based on the published average weekly Lotto and scratch card sales, Brian Bailey of the Helderberg Society for the Aged has prepared the following summary analysis.44 The figures should be treated as provisional only. There is still no reliable information for the total good cause allocation. Of great concern are the huge amounts of money available to good causes that have yet to be disbursed.

All amounts in rand
2-Jul-02
Lottery Scratch cards estimate TotalsLottery & Scratch cards
Gross sales 8,884,390,136 542,225,724 9,426,615,860
VAT paid to State 1,091,065,455 66,589,124 1,157,654,579
Net sales 7,793,324,681 475,636,600 8,268,961,281
Prizes paid or allocated 4,002,318,274 237,818,300 4,240,136,574
Licensee’s fees and profit—20% 1,558,664,936 95,127,320 1,653,792,256
Amount for good causes 30% 2,337,997,404 142,690,980 2,480,688,384
Interest “earned” on “G C” money 395,589,031 13,720,184 409,309,215
Total to be accounted for 2,733,586,435 156,411,164 2,889,997,599
       
Paid or allocated to date to Good Causes 301,419,575   301,419,575
       
The missing amount 2,432,166,860 156,411,164 2,588,578,024
       
Theoretical allocation
Charities 820,075,931 46,923,349 866,999,280
Less allocated (301,419,575) - (301,419,575)
  518,656,356 46,923,349 565,579,705
Arts and culture 820,075,931 46,923,349 866,999,280
Sport 820,075,931 46,923,349 866,999,280
Miscellaneous and costs 273,358,644 15,641,116 288,999,760
Net amount which should be available 2,432,166,862 156,411,163 2,588,578,025


Footnotes:
  1. National Lotteries Board (2001).
  2. Interview with Leon Isaacson, 23/05/2002.
  3. Interview with Brian Bailey, 12/06/2002.
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