Decision on new Lottery operator postponed by a year. But Ithuba’s licence expires in May

Minister Parks Tau has postponed announcing the new lottery operator for another 12 months. Illustration: Lisa Nelson

• Minister Parks Tau has postponed announcing the new lottery operator for another 12 months, marking the third delay since July 2022.
• The lucrative licence is worth about R180-billion over five years.
• The current operating licence held by Ithuba expires 31 May 2025, but the bidding adjudication period for a new operator only ends May 2026.
• This has created uncertainty over what will happen to lottery ticket sales and NLC grant allocations after May 2025.

The announcement of a new operator to run the South African lottery has been postponed for a further 12 months, creating uncertainty about the continued sale of lottery tickets after the licence of the current operator, Ithuba, ends on 31 May 2025.

A statement circulated by email to Members of Parliament by Minister of Trade, Industry and Competition Parks Tau announcing the extension of the “bid validity period” for the lottery and sports pools licence for a further year, until 31 May 2026, makes no mention of what will happen with ticket sales after Ithuba’s licence expires.

Worth around R180-billion over its usual five-year life, the operator licence has been referred to as “a licence to print money.”

The latest postponement for a further 12-months has come as a surprise. This is the third time that an announcement of the next licence operator has been postponed. The first time was in July 2022, ten months before Ithuba’s licence was due to expire on 31 May 2023, when it was extended by two years by former minister Ebrahim Patel.

Responding to a written parliamentary question from BOSA leader Musi Maimane last year on the extension of the Ithuba contract by Patel for two years to 31 May 2025, Tau said he had used powers granted to him by the Lotteries Act to extend an incumbent operator’s licence “for a non-renewable period not exceeding 24 months”.

Since only Ithuba has the infrastructure in place to continue selling tickets and run the lottery, it is unclear what will happen after Ithuba’s licence expires.

The minister may attempt to extend Ithuba’s licence for another year, which could lead to litigation by bidders, or the ticket sales will have to be suspended.

Will grants be affected?

GroundUp previously reported that the National Lotteries Commission (NLC) has contingency plans to ensure that it can continue disbursing grants for up to 12 months even if ticket sales, its biggest source of revenue, are suspended.

The reserve fund is meant to ensure ongoing grant payments and cover the NLC’s running costs if ticket sales are suspended. Its reserves also ensure that the costs of litigation by losing bidders, as has happened in the past, can be covered.

At the time that Patel extended Ithuba’s licence, the department statement said it followed a request from the new board of the NLC: “The Board in framing its request and advice to the Minister, had taken into account a number of factors including representations made by Ithuba that its business has been severely affected by the exceptional circumstances created by Covid-19.”

The sale of lottery tickets was banned at the height of the pandemic.

Informed sources also told GroundUp at the time that the new board, which is responsible for overseeing the bid, was consumed with dealing with rampant corruption that had overwhelmed the NLC under its previous board and executive.

The NLC allocated R1.36-billion in grants for “good causes” in 2020, R1.13-billion in 2021, R1.17-billion in 2022, but only R972.3-million in 2023 because of delays in adjudicating applications after new protocols were introduced to stop fraud and corruption. The NLC has not published its 2024 annual report, but grants allocated are almost certainly down for several reasons, partly because of the new anti-corruption measures.

Another reason for the reduced funding allocations is that there are only three distributing agency members to adjudicate grants, rather than the nine to 12 needed. The department has advertised for applications to fill these critical posts but has yet to make appointments.

Besides covering grants from its reserve funds the NLC will also have to fund its operating costs, which were R556-million in 2020, R534-million in 2021, R570-million in 2022 but then dropped to R469-million in 2023, when the new board and executive slashed the Commission’s high running costs.

What lies behind the postponement?

At the time of the previous postponement, the minister said: “I must also ensure that the owners and managers of the successful applicants are, as the Act states, ‘fit and proper persons’. In addition, I must ensure that no political party or political office-bearer has any direct financial interest in the applicant or a shareholder of the applicant.”

When he took over as minister he inherited the lottery hot potato, which included bids by people and organisations with links to different ANC-related companies and factions.

Tau has come under extreme political pressure from within his party, as well as from some members of the trade and industry parliamentary portfolio committee, with its ANC chair Mzwandile Masina leading the charge.

Besides calling for the NLC Board to be suspended and its Commissioner, Jodi Scholtz, to be dismissed, Masina has also called on Tau to investigate the highly-secretive licence operator adjudication process.

In a media release in December last year, Masina said his committee “fully supports the minister’s statement that further work will be done to ensure the credibility of this process which has come under public scrutiny in the recent past.”

“We implore the Minister to consider various options if awarding the new lottery licence becomes impractical before the expiry of the 3rd Lottery licence on 31 May 2025. Such options could include exploring Section 13B in the Lotteries Act which deals with issuing a temporary licence and/or considering the option of a ‘state led’ Lottery in terms of Section 13A of the Act amongst others.”

“The committee welcomes the Minister’s recognition that he has a duty to ensure that no political party or political office-bearer has any direct financial interest in the applicant or a shareholder of the applicant, which is an important aspect when considering the awarding of the National Lottery licence,” Masina said.

Toby Chance, a Democratic Alliance MP on the trade and industry portfolio committee, said in a statement after Tau’s announcement: “Tau says he is giving himself more time because ‘I have identified several areas that require additional evaluation to ensure that the successful applicant meets all legal and ethical requirements’.”

Chance said that Tau made his decision “without taking it to Cabinet and has elevated speculation around the credentials and possible conflicts of interest of some of the bidders, all of which have close ties to the ANC”.

Ministry spokesperson Yamkela Fanisi said on Sunday a response was being prepared to GroundUp’s queries but we had not received anything by the time of publication. GroundUp was seeking clarity on whether Ithuba’s licence will be extended again, and, if not, would ticket sales be affected. We also asked how the allocation of NLC grants to good causes would be affected and what contingency plans are in place.

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