The Lotto has been given an 11th-hour reprieve, with trade, industry & competition minister Parks Tau confirming yesterday that he had granted a 12-month temporary licence to Ithuba Holdings, which kicks in from today.
The current lottery contract expired last night.
Ithuba Holdings were holders of the third lottery licence while Ithuba Lotteries which features six of its directors without its technology partner, IGT, applied for both the temporary licence and to be 4th lottery licence operator.
There were fears that South Africa might be without a lottery operator after the high court in Pretoria on Friday dismissed a variation order application by the National Lotteries Commission asking the court to amend its ruling that a 12-month temporary licence issued by Tau in March was invalid.
However, Tau said in a statement last night that he disagreed with the ruling and had appealed it.
Yesterday’s appointment of Ithuba appears to defy the court ruling, which found that a temporary licence could only be granted for a maximum of five months.
Ithuba had previously said a five-month licence was not financially viable.
This week Tau announced Sizekhaya Holdings as the winning bidder for the next Lotto licence. However, that licence only kicks in on June 1 next year.
In a statement last night, Tau said: “I am pleased to report that I have concluded, on advice of the NLC, successful negotiations with Ithuba Holdings and have signed a temporary licence agreement for them to operate the national lottery and sports pool on a temporary basis for a period of 12 months with effect June 1.
“The temporary licence will ensure the continuation of the lottery operations in the period that transition is required from the third to the fourth licence operations.
“I take issue with the judgment of the high court of May 21 which found that the ... request for a temporary licence was not valid, and have appealed this judgment.
“However ... the court accepted that it is in the public interest that the national lottery should continue to operate to raise revenues to fund worthy good causes, notwithstanding that the court was not satisfied with the RFP (request for proposal) process.
“Additionally, another court affirmed my power to appoint a temporary licensee in its judgment of May 30 by stating as follows: ‘It would be a surprise to the court that the minister is unable to appoint an operator, on a temporary basis, for a whole year. This is more so because the minister has more latitude in appointing a temporary operator, as opposed to a fully-licensed operator.’”
Tau said it was in the context of both the May 21 and May 30 judgments that he accepted advice from the NLC to appoint a temporary licence operator on an urgent basis.
“I am pleased that the national lottery operations will not be interrupted during transition from third to fourth licence operations and that worthy causes will continue to receive support,” he said.
After his company bagged the biggest tender in the country — estimated at R180bn — Sizekhaya Holdings chair Moses Tembe rejected accusations that links with the ANC might have played a role in its success.
“When we started we were clear that the pillars that would underpin our bid would ensure that the bid stands on its merit,” Tembe told the Sunday Times.
“Second, we conducted research not only in the country, but looked for the best practice, world-class technical partner who could work with us to put the best possible bid.”
This is not going to be a machine which makes everyone who is involved a billionaire. There is no shareholder in this business who will make a billion out of it
— Moses Tembe, Sizekhaya Holdings chair
Following the announcement on Wednesday, the EFF and Build One South Africa raised concerns over links between Sizekhaya and the ANC due to party member Sandile Zungu’s interest in the company. Zungu ran for the post of chair of the ANC in KwaZulu-Natal last year before withdrawing at the 11th hour.
“Sandile Zungu is a shareholder in Sizekhaya, he’s not even a director. He’s actually not involved in terms of running Sizekhaya,” Tembe said, noting that Zungu held no political office.
“On the basis of thinking that he has proximity to politics simply because he contested a position, really it’s not fair. The definitions around a politically affiliated person are quite clear ... One shouldn’t occupy any political office.”
He said although the company was ready for possible litigation, two of the losing bidders had congratulated Sizekhaya on winning the bid, which could indicate that not all the losing companies would head to court to contest Tau’s decision.
“We found it to be quite extraordinary so we are not expecting a barrage of bidders challenging [the award] ... It may be one or two at worst, which is quite wonderful actually,” Tembe said.
He said Sizekhaya was not in the lottery business to become overnight billionaires.
“This is not going to be a machine which makes everyone who is involved a billionaire. There is no shareholder in this business who will make a billion out of it,” Tembe said.
Good causes would be given top priority. “The biggest beneficiary of the lottery should never be the people who have been tasked with running [it],” he said.
Tembe said Sizekhaya was bringing a world-class team from China to work on the lottery.
The company had also committed to hand over the intellectual property of its lottery system design and innovation to the government to help create capacity for a state-run lottery.
Sizekhaya aimed to “bring excitement” by bringing back scratch cards and reducing the number of draws while increasing the size of the jackpot.
However, two losing bidders for the tender are considering legal action.
Ithuba Lotteries expressed its disappointment at not being granted the fourth licence, saying its legal team was considering “the next steps”.
“We believe this decision [to award licence to Sizekhaya] undermines the principles of localisation and inclusive economic growth set out in the RFP. As a 100% black-owned, South African operator, Ithuba Lotteries has invested significantly in developing the first African central lottery system, owned and developed for Africa by South Africans,” said Michelle van Trotsenburg, Ithuba Lotteries head of marketing and corporate affairs.
She said Tau's decision to choose Sizekhaya disregarded the progress made in building “a truly home-grown lottery ecosystem that empowers South African businesses, drives local job creation, and channels maximum revenue to good causes”.
Dawid Muller, CEO of another losing bidder, Wina Manje, said the company was disappointed that its “strong, responsible” proposal, which was “rooted in a compelling vision for a national lottery that is sustainable, inclusive and transformative”, had not been selected.
Muller said Wina Manje was in the dark about the rationale for selecting Sizekhaya.
“This lack of transparency raises important questions, particularly in light of the significant public interest and national importance of the lottery's operations. Upon receipt of this information, we will conduct a thorough review and assessment to determine our next steps,” Muller said.
Tau, who took over as minister following last year’s elections, delayed announcing the winner of the new lottery licence for about eight months.
The high court in Pretoria ordered him to make the announcement by Wednesday.
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