Our approach to materiality

Matters are considered material if they have the potential to impact our performance significantly and therefore our ability to create value over the short, medium and long-term. Our assessment of materiality involves identifying those matters that affect our regulatory mandate to create a safe and sustainable lotteries industry while protecting participants and maximising revenue to ensure a sustainable fund for good causes.

We pride ourselves on engaging extensively with our stakeholders to identify risk and opportunities. Our material matters arise from a variety of issues, such as interdependence on government policies, local and international market trends, as well as South Africa’s socio-economic environment.

Our Board engages with material matters in the development of the strategy and strategic risk review. The Board also provides oversight in ensuring that the NLC proactively addresses identified material matters. Our Executive Management ensures that material matters are managed appropriately and remain relevant.

Macro-economic conditions		With the persistent challenges facing the South African economy, including poverty and low levels of employment, as well as an urgent need for economic growth, we continued to face challenges in meeting the unrealistic demand on the NLDTF. We continue to look for innovative measures to maximise revenue while encouraging and channelling our valued beneficiaries to explore other forms of funding through the introduction of society lotteries and innovative projects to support the sustainability of their organisations (see here for more information).
Interpretation of legislation		Stakeholder interpretation of section 2A of the Act relating to proactively funded projects remains a challenge. The report under 91 provides a detailed overview and corporate governance framework of our proactive funding model. The interpretation of section 67 and regulation 8 section 2A became topical during the financial year, leading to the NLC responding to various stakeholders on its interpretation and implementation thereof (see here for more information).
Challenges in regulation		The Lotteries Act requires amendment to ensure that the NLC has full regulatory powers. These include the issuing of penalties for certain regulatory breaches and inspectorate powers to police and enforce the Act on illegal operations. Administrative penalties are tools used by regulators to enforce compliance with legislation. These penalties should be of a monetary value and be imposed without reliance on a court process for the enforcement thereof. Powers to appoint inspectors with all required enforcement powers to conduct inspections on illegal lotteries would assist in effective execution of the mandate of policing lotteries. Challenges identified by the Board in regulating the lotteries industry include conflicting legislation and different regulators for gaming and lotteries, which create ambiguity in regulation and a lack of enforcement powers to effectively regulate lotteries. Betting of the outcomes of the National Lottery games brings undue competition on the National Lottery reducing potential revenue generated to the tickets sales.
Online gaming		The lottery industry remains competitive, with licensed and registered local lotteries finding themselves competing with foreign lotteries due to online platforms. Online gaming is providing more options for consumers; however, it is also threatening the revenue generated by traditional lottery operators. The proliferation of online operators also poses threats to the restrictive legislated environment. The global lottery industry is coming to grips with the rapid changes resulting from online gaming and the use of technology. Within this context, the NLC is expected to regulate the lotteries and sports pools industry and curb the scourge of illegal lotteries. The NLC is further expected to advise the Minister on the issuing of the licence to conduct the National Lottery and sports pools while ensuring the National Lottery and sports pools are conducted with all due propriety; that the interests of every participant in the National Lottery are adequately protected and that the net proceeds of the National Lottery are as large as possible.
COVID-19		The COVID-19 pandemic has posed unprecedented challenges for the NLC, particularly concerning its impact on revenue for the 2020/21 financial year, as well as the way in which it has grown the depth of need that we seek to meet through our grant funding activities. The manner in which the pandemic has accelerated digital innovation and adoption is also of material importance to the Group. While many of these and other implications cannot be separated from existing material matters (for example, macro-economic conditions), the broad-reaching impacts of the pandemic have led to the Group elevating the matter to a stand-alone material issue. For more information on our values-driven response to the pandemic, please see below. For the risk implications of COVID-19, please see our risk management report on here.

Values-driven resilience through a crisis

The 2019/20 financial year ended with South Africa under lockdown in terms of the Disaster Management Act Regulations. The lockdown regulations were intended to curb the spread of the COVID-19 pandemic. The NLC offices were closed with staff working from home, resulting in the organisation deploying innovative and agile means of engagement with staff and stakeholders. This resilient response was enabled through our values-driven approach to business, as outlined below:

To be honest, open, accessible and fair in all our dealings, decisions and actions.

The NLC’s resilient and robust governance, risk and compliance procedures ensured that all response initiatives were handled with integrity, were accessible and proactively addressed stakeholder needs. The NLC maintained compliance with the Disaster Management Act and its regulations during this time, as the regulations were amended from time-to-time.

To take ownership of our responsibilities, to work effectively, efficiently, with professionalism, and ensuring a positive, sustainable impact on the communities we serve.

The safety and mental state of our staff remained a top priority. Our staff, through a human capital response programme, were supported during this challenging time in order to deliver world-class service to our stakeholders. The NLC’s technological architecture ensured business continuity and uninterrupted services to all our stakeholders. Our staff adapted with agility to the new normal as a result of tools of trade and systems already in place before the onset of the pandemic.

To provide a level of service that is of a high quality, is target-based and meets the expectations of all stakeholders.

Despite the challenges presented by the crisis, the NLC was able to achieve record turn-around times in all its activities.

To be sensitive to the needs of the community in order to initiate social upliftment.

The NLC continued to process grant applications and approved payments for projects in the year under review in order to support the sustainability of beneficiaries and assist those organisations in responding to the heightened needs in their communities. Service providers, who contribute to the economy through the creation of jobs, were also not disadvantaged as our finance division maintained optimal payment turn-around times.