The National Lotteries Commission (NLC) has given news organisation GroundUp and journalist Raymond Joseph an ultimatum to stop writing stories about who it gives funding to.
This followed a series of reports questioning some of its grant allocations.
It also appointed an independent investigator to probe the claims made in the articles and other allegations of alleged impropriety.
But GroundUp said it would not budge on the order to remove the content.
"We have already responded to them and said we're not going to take anything down," said GroundUp's editor Nathan Geffen.
"And we're going to continue to report on the lottery."
This followed a series of articles questioning the allocation of funding to certain Non-profit Organisations (NPOs) who were either not vetted for being up to the task they were supposed to carry out, or about directors who are allegedly associated with the Chief Operating Officer receiving funding on application.
The NLC is part of the Department of Trade and Industry and is meant to regulate the national lottery and other lotteries. The biggest one is the National Lottery, and the money that millions of hopefuls pay to put their lucky numbers in the draw, raises funds for good causes.
In letters sent to GroundUp on January 30, and February 1, the NLC's lawyers claim that the recipients are secret to the public, and said the publication should remove a list of investigative reports by Joseph which raised questions over some project funding.
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GroundUp, which focuses on social justice issues, disputes the NLC's interpretation of the regulation relied on to issue the take-down ultimatum and insists that the NLC's funding information should be open and transparent.
GroundUp wrote on its website on Monday: "The NLC also demanded that GroundUp remove 16 stories from its website, many of which exposed incompetence and probable corruption involving multi-million rand Lottery-funded projects."
In the initial letter the NLC's lawyers stated that the NLC was "considering" laying criminal charges. But in a follow-up letter, the lawyers said the NLC "intends" to lay criminal charges against Joseph and GroundUp for the contravention of Regulation 8 of the Lotteries Act.
The NLC contends that this regulation prohibits revealing grant application details and grants awarded.
Leaked documents were used
GroundUp understands Regulation 8 of the act to apply only to "distributing agencies" appointed by Trade and Industry Minister Ebrahim Patel, and not to itself or Joseph, who are not distributing agents.
GroundUp wrote that leaked documents were used in some of the stories the NLC wants taken down, reporting was also based on interviews with sources, on-the-ground reporting, leaked bank statements and publicly-available information.
This included the NLC's annual reports published on its website. It said other information about funded organisations was supplied by the Department of Social Development and records on the Companies and Intellectual Property Commission database.
One of the articles it wants removed is a report on a decision to cut funding to the Society for the Prevention of Cruelty to Animals, as the NLC shifts more focus to poverty relief.
Another of the stories regarded a boxing promoter with no construction experience granted R28.3m for a school construction project in Vuwani, where parts of the new school had to be cordoned off due to structural problems.
Sections of walls in front of some new classrooms at Vhafamadi High School have had to be propped up because of structural problems. (Raymond Joseph/GroundUp)
There were also questions raised about part of a grant for a drug rehabilitation facility that appears to have been sent to two Ocean Basket franchises instead. The NLC said it is investigating that matter.
In an open letter to Joseph and GroundUp published on its website, the NLC's board of directors stated that the information in the reports is based on incorrect information obtained in contravention of Regulation 8.
"We, as the Board of the NLC, refute the serious allegations made on the Commission's internal controls and grant funding processes," the directors stated.
The board invited anybody to come forward with information of fraud and corruption.
It said it would also appoint an independent audit firm to receive documents and information regarding "tainted" grant funding.
On Monday, the NLC announced it had appointed audit firm SekelaXabiso to institute an independent investigation into allegations of improper use of funds intended for good causes.
"This follows an open invitation by the Board, made to journalists and the public at large, to bring forward evidence of recent claims made in the media," the NLC said in a statement.
The NLC also said that it had been accused of "attempting to silence investigative journalism into corruption, and maladministration" and stated that this was not true.
It said, it had in fact invited Joseph, GroundUp and members of the public to report any corruption, fraud, and maladministration to an independent audit firm appointed by the NLC.
"The NLC must sadly report that Mr Joseph has declined this offer and prefers to rather obtain beneficiary information unlawfully incontravention of Regulation 8," the statement read.
SekelaXabiso will receive information, documentation and any other evidence directly at: Hotline: 0860 123 772; Postbox: NLC Fraud Hotline, P O Box 78, Bramley, 2090; or email: firstname.lastname@example.org.
This is in addition to the NLC's existing hotline.