Minister issues tender for 12-month temporary lottery licence
Critics say this favours Ithuba, the current operator
A closed request for proposals for a temporary licence to run the lottery has been issued. Illustration: Lisa Nelson
- Trade, Industry and Competition Minister Parks Tau has issued a closed request for proposals (RFP) for a temporary licence to run the national lottery for a year when the current licence expires in May.
- Concerns have been raised that only the present operator, Ithuba, has the infrastructure to meet the deadline and have the lottery up and running.
- The National Lotteries Commission (NLC) Board chairperson and the department have denied the RFP has been issued, saying the minister has not yet decided what to do.
Trade, Industry and Competition Minister Parks Tau has issued a closed request for proposals (RFP) for a temporary licence to run the national lottery for a year when the current licence expires on 31 May.
GroundUp has seen a copy of the RFP, dated 3 March, which was sent to already approved bidders inviting them to apply for a temporary licence to operate the lottery for 12 months, starting 1 June. We have also seen a copy of a letter Tau sent to the approved bidders explaining his decision to implement a temporary licence.
But his spokesperson, the NLC’s Board chairperson and the department’s acting chief operating officer have all denied that an RFP has been issued, saying Minister Tau is yet to decide on what will happen when the licence of the present operator, Ithuba, expires in less than three months.
Both the RFP and Tau’s letter have been watermarked with bidders’ names and details, apparently in an attempt to stop them from being shared. A source, who shared copies of the RFP document and the Minister’s letter with GroundUp, said they had done so “in the interest of transparency.”
Posing a question during an appearance by the NLC before Parliament’s trade, industry and competition portfolio committee on Wednesday, the DA’s Toby Chance said he had “reliable information” that an RFP had been issued.
But the minister’s spokesperson, Yamkela Fanisi, denied this. Fanisi told GroundUp that the minister had “not issued anything relating to [a] temporary licence. When we do, we will communicate and make people aware,” he said, adding: “The minister is still applying his mind on the matter [and] having made up his mind at an appropriate time he will communicate.”
The department’s acting chief operating officer, Nontombi Matomela, told members of Parliament during the committee meeting that she was not aware of any RFP being issued.
Barney Pityana, the NLC Board chairperson, also told MPs that he was unaware of the RFP when he answered a question about it during this week’s committee meeting.
“The minister has been looking at several scenarios regarding what can be done,” he told MPs.
“Our view, and the investigations that we have received from experts, is that it is possible to evaluate and adjudicate a temporary licence from June 1 to be valid and meaningful for at least 12 months. The information we have from experts is that this can be done. The minister is sitting with all the expert advice and will make an announcement in due course,” Pityana said.
Tau extended the bid adjudication period by a year late last month — but was silent on what would happen after Ithuba’s licence expired, leaving the prospect of ticket sales being suspended at the end of May.
The uncertainty around the failure to appoint a new operator has raised the possibility of lottery ticket sales being stopped if a new temporary licensee is not appointed in time or because of litigation by aggrieved bidders.
But NLC Commissioner Jodi Scholtz assured the committee that the NLC had contingency plans in place to use its reserves of R4.3-billion to ensure that it could continue issuing grants to good causes, as well as cover its overheads, if ticket sales were halted.
At the time he extended the bid period almost two weeks ago, Tau said he had identified several areas that required additional evaluation “to ensure the successful applicant meets all legal and ethical requirements” and to ensure the adjudication process is fair.
Tau has also hinted at the political makeup of the consortiums bidding for the licence as another possible reason for the postponement.
“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,” Tau said.
The temporary licence appears to be a workaround of a section in the Lotteries Act which only allows the minister to extend an incumbent licence once for 24 months. TThe former minister, Ebrahim Patel, previously extended Ithuba’s licence for two years, from 31 May 2023 to 31 May 2025.
But, in terms of a section of the Act, the Minister can issue a temporary licence for a variety of reasons, including if “the licence to conduct the National Lottery is suspended for any reason whatsoever.”
The decision to extend the adjudication period has left potential bidders, who have already expended significant time and millions of rands preparing their bids, fuming.
One bidder, who shared the RFP and the minister’s letter with GroundUp, said they were consulting with their lawyers about the legality of the extension. GroundUp understands that several other bidders are also considering litigation.
The NLC, which oversees the licence adjudication process, has already handed its recommendations to Tau.
Successful bidders for the Lottery licence are normally allowed a six-month transition to prepare to take over and set up infrastructure after an incumbent’s licence expires.
“It costs around R10-million to bid for the lottery licence and we have calculated that the winner will need to invest about R650-million in setting up the infrastructure, including the computer backbone to run the lottery and ticket sales equipment in at least 5,000 outlets nationwide,” the source said. They asked to remain anonymous as they feared their bid could be affected if it was known that they had spoken to the media.
“Only Ithuba would be ready to run the lottery the day after their licence expires,” the source said. “Who in their right mind would lay out millions of rands without a guarantee that they will be awarded the licence once the temporary 12-month licence expires? It wouldn’t make business sense.”
Similarly, Chance said in a statement that only Ithuba had the infrastructure in place to meet the deadline for the temporary licence to be up and running. “For all practical purposes, it is impossible for a new operator to get its systems in place before 1 June 2025,” he said.
“The only outcome of the [temporary] RFP could be a further extension of Ithuba’s licence, or the non-awarding of a temporary licence and the cessation of Lotto ticket sales. Neither of these scenarios is acceptable and goes to show that the awarding of the new licence has been bungled from start to finish,” said Chance.
In his letter, Tau asked the approved bidders to consent to the temporary licence. He said: “To begin, I believe that it is appropriate for me to record the following key principles that must always inform my approach in this matter.”
“The first is to make rational decisions. The second is to follow a decision-making process that is fair. The third is to protect the interests of those vulnerable members of society who receive funding from the national lottery. The fourth is to make an award that is in the best interests of South Africa and its socio-economic development, bearing in mind the objectives set out in the Lotteries Act and the Request for Proposal (RFP).”
Tau said he had found himself in a difficult position late last year after he considered the relevant reports about the licence.
“…I believed that I could not properly decide on the successful applicant because any such decision would not give effect to the requirements of the law… I had several issues of concern. I am sure that you would agree with me that deciding on the successful applicant in this context is neither lawful nor appropriate,” he said.
In his letter asking the approved bidders to consent to the temporary licence, Tau said: “So far, some applicants have indicated their agreement, others have not responded, one has asked questions to enable it to decide, and another applicant has indicated its consent is not necessary because the bids do not expire on 31 May 2025.”
He said, “All this shows that the legal terrain is complex and tricky. Despite these legal complexities, a practical approach is required. In the circumstances, I appreciate that more time may be needed to consider a response to the request for the extension. Therefore, I ask that all applicants reply by close of business on Friday, 14 March 2025.”
“If the present process of evaluation for the fourth licence is not completed by 31 May 2025, which one assumes is the end of the bid validity period, and one or more applicants do not consent to its extension, this will present us with a serious difficulty,” Tau said.
Bidders for the temporary licence will have to pay a R1.5-million non-refundable fee and a further R200,000 for a sports pool licence. They will also have to provide a R25-million bank guarantee or bond in favour of the NLC for the duration of the temporary licence.
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