Ithuba challenges Lottery licence award

Ithuba Lottery has challenged the lottery licence award to Sizekhaya, raising concerns over alleged political links. Illustration: Lisa Nelson

• A second court challenge has been launched against Minister Parks Tau’s decision to award the fourth lottery licence to Sizekhaya Holdings.
• Ithuba Lottery has raised concerns about alleged political connections between Sizekhaya’s shareholders Moses Tembe and Sandile Zungu and the ANC, including reported links to Deputy President Paul Mashatile.
• Ithuba Lottery also says Sizekhaya Holdings failed to meet the necessary requirements of immediate funding and seamless transition, evidenced by the minister’s need to grant a temporary 12-month licence.

Ithuba Lottery has initiated court proceedings seeking to overturn Minister of Trade, Industry and Competition Parks Tau’s decision to award the fourth lottery licence to Sizekhaya Holdings.

Ithuba Lottery, which bid for the new license, is the sister company of Ithuba Holdings, which has run the lottery in South Africa for eight years.

In June, Minister Tau used his special powers under the National Lotteries Act to extend Ithuba Holdings licence temporarily for 12 months, effectively giving Sizekhaya a year’s grace period in which to take over running the lottery.

Ithuba Lottery said this was proof that Sizekhaya had not complied with the Request for Proposals, which stipulated that the winning bidder needed finance in place and the ability to take over the running of the lottery in a “continuous and seamless” transition.

Ithuba Lottery also says there are indications that Sizekhaya’s shareholders have political links, which is also barred by the Lotteries Act.

Papers filed

Ithuba Lottery’s application, launched on 8 July in the Pretoria High Court, comes in the wake of a similar application by another failed bidder, Lekalinga, a Serbian-based company.

Both companies have directed that the minister provide reasons for his decision. Based on this, they will supplement their papers before the minister has an opportunity to file his answering affidavit.

Both applications hone in on similar issues: the financial and practical ability of Sizekhaya to run the lottery, and whether the minister properly assessed whether any political party or political office bearers hold a “direct or indirect financial interest” in it.

The eight-month delay in the announcement of the successful bidder by the minister, and his decision to issue a temporary licence because of it, has been mired by controversy and legal skirmishes.

The minister has never given formal reasons for the delay, only citing unspecified “concerns”.

He finally announced Sizekhaya as the successful bidder on 28 May, just two days before Ithuba Holdings licence was to expire on 1 June.

While other bidders cried foul over the temporary licence, Ithuba Lottery was the only bidder for it. Following court action by another bidder, Wina Njalo, the temporary licence was capped at five months. Ithuba Lottery said this was not financially viable and withdrew its bid.

With the lottery under threat of closure, Minister Tau then used his special powers to extend Ithuba Holdings licence for a year.

Grounds for challenge

In his affidavit, Ithuba Lottery chief operations and financial officer Louis Almero Du Pisanie says the court must review and set aside the award, and refer the matter back to the minister for a “fresh decision”.

He said the award was contrary to the express bidding terms and the requirements of the lottery act, since Sizekhaya lacked fully-committed funding prior to the award and has indicated that it will only secure funding by 22 October.

“Bidders had to have a comprehensive transition plan in place to support a full and prompt launch of the lottery,” he said.

Du Pisanie said Ithuba Lottery was 100% black South African owned, as was its technical support provider. All but one of its directors had been directors of Ithuba Holdings. “It’s bid was unmatched by any other bidder,” he said.

Du Pisanie said it had committed to ensuring that it could operate the lottery from 1 June and had all the finance needed in place. Meanwhile, Sizekhaya “had made it clear it required a period of not less than nine months” for the transition period and that it also needed time to secure funding.

Political connections

Du Pisanie said soon after the award of the licence, political parties and media reports raised concerns that Moses Tembe and Sandile Zungu – members of Sizekhaya’s main shareholder, Goldrush – had close connections to the ANC. This was followed by media reports that Deputy President Paul Mashatile had connections to Sizekhaya.

“We are not in a position to confirm the veracity of these reports, however they raise serious concerns,” said Du Pisanie. He questioned whether the minister had ensured “that no political party and no political office bearer had any direct of indirect financial interest in the successful applicant”.

“Indeed, given that he [Minister Tau] gave a subsequent media interview saying he needed time to investigate the allegations of political connections, it appears that he could not have applied his mind to this question prior to making the award.”

Ithuba Lottery had written to the minister about this, but he had not responded.

The minister has until early August to file the record of the decision in both matters.

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