Why Davies snubbed the lottery board

2014-12-07 15:00

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A plan to merge the National Lotteries Board and the National Gambling Board might be behind Trade and Industry Minister Rob Davies’ decision to disregard the lottery board’s recommendation to award the new lottery licence to incumbent Gidani.

Gidani has taken Davies to court over his decision to award the lucrative licence, which kicks off next June, to newcomer Ithuba.

Davies ignored the lottery board’s recommendation to award the licence to Gidani, which had scored lower points but would have paid out more to organisations supported by the National Lottery Distribution Trust Fund.

Professor Linda de Vries, chair of the recently suspended gambling board, said the trade and industry department, which oversees both boards, had “aggressively” pushed an agency rationalisation process in December last year.

According to documents, Davies had planned to merge the two entities or reduce the number of board members at the gambling regulator, which is contrary to the Gambling Act.

In a gambling board memorandum ahead of an April meeting, it said a merger of the boards would undermine the gambling board’s independence. “The [department of trade and industry] cannot be player and referee at the same time,” it said.

De Vries said her board, which was recently suspended pending an investigation into irregularities, first sent a response to Davies in February. “We have advised the minister and indicated [he] cannot unilaterally change the act and choose to reduce the board.”

The act requires nine board members – six appointed by the trade and industry minister and three by different ministries.

The lotteries board did not comment. But Davies’ department denied the rationalisation project affected the award. “The rationalisation project followed after the Gambling Review Commission, which had to look at the gambling industry issues ranging from proliferation to technological developments and the legal framework,” said spokesperson Bongani Lukhele. “The Gambling Review Commission recommended a merger as one of the options, together with a proposal that the gambling board be subsumed into the department.”

This did not happen as a policy decision was made to keep gambling separate from the lottery owing to differing objectives.

Ithuba was cited as a respondent in Gidani’s court application.

Although it is at the centre of the controversy, acting MD Charmaine Mabuza said the company won the bid “fair and square”.

She added: “I can’t really comment as the matter is before court. But I’m confident there’s nothing untoward.”

Mabuza’s company, Empilweni Payout Services, lost the Mpumalanga social grant distribution tender to Cash Paymaster Services, a subsidiary of Net1 UEPS.

Empilweni intervened as a friend of the court in Absa subsidiary AllPay’s battle to overturn the award, and the Constitutional Court ruled the tender was invalid.

Asked if she thought the lotto licence was meant to make up for that, Mabuza said it was adjudicated by different teams and panels. “We have our own ability to put together a bid?...?It doesn’t make sense.”

She feels Ithuba also scored higher points because of its security system.

A Media24 investigation last year found that an employee seconded to Gidani duplicated winning Lotto tickets, pocketing R250?000.

Ithuba’s operating platform is linked to an independent verification system.

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