Trade & industry minister Ebrahim Patel is involved in a nasty spat with the National Lotteries Commission that, if unresolved, could jeopardise licensing the next lottery operator.
The minister and the commission's board are also at loggerheads over his insistence that his representative on the board, Zandi Brown, act as interim chair. The board has rejected this as unlawful and in violation of corporate governance standards because Brown, who operates from Florida in the US, is not an independent director.
Patel has ignored letters from the board to authorise a request for a proposal that has been prepared to start the process of inviting bidders for the lucrative lottery licence.
The current licence, held by Ithuba, expires at the end of May 2023. The lengthy process of licensing a new operator should have begun by now, according to timelines drawn up by the commission.
The board wrote to Patel in July 2020 indicating that it had begun drawing up the proposal request. It wrote to him again in November to say it had drawn up the document and was ready to invite bidders to apply. Both letters were unanswered.
In the second letter, the board included a two-year timeline for the process of issuing a new licence.
In terms of the timeline, a conference with applicants must be held for two days, starting on February 22. Bidders need to submit their proposals by the end of July. The evaluation is between August 2021 and February 2022. The successful bidder will be named at the end of June 2022 and an agreement concluded.
The current operator needs to start a six-month handover to any new operator from the beginning of December 2022, before the new operator takes over at the beginning of June 2023.
This process cannot begin until Patel gives the green light to the draft request for proposal. Insiders at the commission said the process was cast in stone, but was being compromised each day that the minister ignores the commission.
Responding to questions from the Sunday Times, Patel's office said the coronavirus had affected many timelines, including a scheduled meeting with the board. It said the minister also had to attend to allegations of corruption at the commission and to restore the credibility of the institution. It said dealing with these matters had further affected timelines.
"Nevertheless, the process of awarding a lottery licence will be completed."
Patel's office said the minister was confident that the two-year timeline was sufficient to license a new operator.
"In our opinion, there is no reason to believe, with another two years left before the licence is awarded, that the process would not be completed by then."
Meanwhile, the board is standing firm in its insistence that Patel's selection of Brown as interim board chair is not lawful and that it undermines corporate governance rules.
In a separate letter to the minister, the commission said that though the Lotteries Act gave him the power to nominate a suitable candidate to chair the board, parliament would make the final recommendation.
The letter said there was no provision in the act that allowed the minister to appoint an interim chair of the board.
"The appointment of Ms Brown constitutes an exercise of power which is not stipulated by law," said the letter.
"The minister does not have inherent powers and is required to act in accordance with a lawful empowering source, and this is usually legislation.
"It is our individual and collective view that the appointment of Ms Brown as interim/acting chairperson is unlawful and beyond the minister's powers," the board wrote.
The commission also told Patel that in terms of the King 4 report on good corporate governance, Brown's independence was affected by her being the minister's official representative on the board.
But Patel is sticking to his guns.
In a letter dated February 1 - which his office shared with the Sunday Times - he pointed out that though the Lotteries Act did not expressly deal with the issue of how or who, could appoint an interim chair, he had sought legal clarity on the matter and was convinced that he had the "implied power" to appoint one of the board members as interim chair until a new chair was appointed.
The minister, together with the [commission], will make necessary announcements at the appropriate time
— Ndivhuho Mafela, National Lotteries Commission spokesperson
Patel said the board's interpretation, that directors could elect one of themselves to act as chair at meetings on an ad hoc basis, was incorrect and applied only when the board already had a permanent chair who was unable to attend a meeting.
He said Brown had been appointed to the board by his predecessor, Rob Davies, so her role as the minister's representative did not affect her ability to act as an interim chair.
"Accordingly, I ask that you reconsider your views and provide Ms Brown with the assistance and co-operation to ensure the board is able to operate effectively in the interim until such time as the vacancy can be filled," Patel wrote.
Commission spokesperson Ndivhuho Mafela said the relationship between the minister, as the shareholder, and the commission was confidential.
"The minister, together with the [commission], will make necessary announcements at the appropriate time."
President Cyril Ramaphosa has issued the Special Investigating Unit with a proclamation to conduct a probe of the commission.
The decision to direct the SIU was made after reports of fraud, corruption and maladministration emerged involving lottery donations to entities connected to senior staff members and their relatives.
Hangwani Mulaudzi was forced to resign as Hawks spokesperson last year after it emerged that a nonprofit organisation named after him had received R3m in lottery funds.
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