The regulatory compliance division increased its efforts in protecting the public against illegal lotteries through identifying, investigating and closing down some of these activities, as well as through the adoption of the player protection strategy. The division continues to ensure that the regulator is central to shaping policy direction through engagement with stakeholders and policymakers.
Key stakeholders of the NLC’s regulatory function include lottery participants, lottery operators and other gaming regulators. The NLC strives to provide an enabling environment for licensed operators to conduct their affairs without a heavy regulatory burden to comply with. To this end, the NLC regularly engages with the National Lottery operator to ensure that regulatory requirements are streamlined and that National Lottery operations are conducted efficiently, while regulatory compliance is maintained.
As part of implementing one of the 2017 Indaba resolutions to increase the uptake of society lotteries as a means of fundraising for NPOs, a model for conducting society lotteries was created to assist NPOs. Compliance seminars are also held with organisations to create awareness on the requirements of the Lotteries Act.
The Board approved the participants’ protection strategy, which aims to ensure the achievement of the NLC’s legislated mandate to protect the interests of lottery participants. The strategy is implemented through workshops conducted across the country. Objectives of the strategy include:
| – | Identifying best practice in respect of participants protection in the lotteries sector. | ||||||
| – | Enabling NLC to make responsible play an integral part of its regulatory mandate and in so doing, minimise harm to society. | ||||||
| – | Stating clear rules for the National Lottery operator, society and other lottery operators relating to their operations to: | ||||||
| – | Ensure that interests of players and vulnerable groups are protected.
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Objectives of licensing of the National Lottery are contained in the Lotteries Act, being:
| – | Ensure the integrity of the National Lottery. |
| – | Ensure participant protection. |
| – | Maximise revenue for good causes. |
| – | Ensure implementation of social responsibility programmes, which include B-BBEE procurement, localisation and supplier development. |
These objectives inform how we monitor operator compliance with the licence and legal requirements. Over the years, the following outcomes have been monitored with regard to the National Lottery operators through various inspections, reviews and verifications to ensure optimum compliance and continuous attainment of the above objectives:
| Central tenets of the third National Lottery licence and licence to conduct sports pools | Outcomes | ||||
| Control environment | |||||
Ensuring that the licensee has a strong and effective internal control framework and adheres to high standards of corporate governance while demonstrating reputable conduct. |
Regulatory Compliance conducted relevant reviews to ensure corporate governance standards were upheld. The regulator was satisfied with the internal control environment as evidenced by an unqualified audit opinion for the period ended 31 March 2020. |
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| Lottery system | |||||
Ensuring that the computer-based systems necessary for the operation of the National Lottery are robust, reliable and secure, and ensure confidentiality, integrity and availability. |
Regulatory Compliance reviewed the systems necessary for the operation of the National Lottery and was satisfied that controls in place are in line with Licence requirements. Regulatory Compliance personnel are present at every system testing and when draws are conducted. |
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| Game operation | |||||
Ensuring that all games conform with the conditions described in the licence, provide all players with an equal chance of winning and are in good taste so as to not adversely impact upon the public perception of the National Lottery. |
The Board reviewed the Game Design and approved the launch or in some instances enhancement of existing games. The Board was satisfied that there was no overstimulation of the market and that National Lottery games were fair and safe. |
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| Prize validation and payment | |||||
Ensuring that validation and payment of prizes take place in a quick, secure and efficient manner without unduly inconveniencing players. |
Winner’s reviews were conducted during the period under review. Regulatory Compliance was satisfied that payment of prizes was done in line with Licence procedures after validation of tickets. |
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| Participant protection | |||||
There must be comprehensive and readily available information about all aspects of the National Lottery, particularly playing arrangements and guides for players. |
General protection of participants in place. Protection of winners, participants’ funds, prevention of underage play and implementation of complaints system were found to be adequate during reviews undertaken.
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| Retailing | |||||
Ensuring that a network of lottery outlets and secure alternate channels exist nationally, which are readily recognised by players as outlets in which National Lottery games can be purchased and where players can be served by well-trained staff who are knowledgeable about all relevant aspects of the operation of the lottery and comply with the associated codes of practice. |
Retailer reviews found that accessibility of retailer terminals, including in-lane tills, on-line platforms and hand-held devices were adequate. |
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| Marketing | |||||
Ensuring that the National Lottery offers fun and excitement to the South African public, providing players with an opportunity to win a range of prizes while at the same time benefiting good causes. That the National Lottery and its constituent games are appropriately and adequately publicised in both advertising and PR activities. |
Regulatory compliance was satisfied that the marketing spend was in line with Licence requirements and that the dynamic marketing campaigns were successfully rolled out. Marketing activities were moderate and aimed at all income groups. |
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| Revenue collection and banking | |||||
Ensuring that there are safeguards for the funds required to meet obligations to prize winners, with an efficient payments system, together with the assurance that revenue is accounted for in full and that the correct amounts are paid to the NLDTF. |
Regulatory Compliance was satisfied that adequate banking accounts were maintained and accurate records keeping of financial transactions relating to the sale of National Lottery tickets and payment of prizes won were maintained. |
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| Security | |||||
Ensuring that all lottery systems, processes, games, materials and premises are secure, and are resilient to all potential threats. |
Security reviews were conducted and security measures taken as well as vetting requirements found to be adequately fulfilled. |
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| Social responsibility and economic empowerment, localisation and supplier development | |||||
Ensuring that comprehensive and all-inclusive social responsibility, economic empowerment, localisation and supplier development programmes that comply with all relevant legislation are developed, implemented and maintained throughout the licence term. |
The Licence to operate the National Lottery stipulates that the Operator shall initiate and support opportunities for social and economic empowerment, affirmative action, employment equity and representation, training and skills development, promotion of small businesses and job creation, advancement of women in business, as well as winners counselling and financial advice.
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Significant efforts have been made in repositioning the NLC as a regulator. These include the following short-term interventions, which have already been implemented, and long-term strategic objectives that will be incorporated in our five-year strategic plan:
| – | Enhancing regulatory education and awareness through provincial workshops targeted at the general public and lottery participants in particular throughout the republic to achieve better participant protection and prevent underage and excessive play/problem gaming . We are also retraining and capacitating our employees regarding regulation and growing awareness on the mandate of the NLC, ensuring that they become better ambassadors of the NLC. |
| – | Provincialising or decentralisation of certain regulatory functions to provinces. This includes education and awareness, complaints handling and general regulatory advice, as well as certain monitoring inspections. |
| – | Creating general media awareness of participant protection and the NLC’s regulatory role through media releases, information dissemination on website, flyers/brochures, and on operator POS. |
| – | Developing formal long-term strategic objectives to achieve these aims and implementing once approved. |
Central to the mandate of the NLC is the regulation of the National Lottery and sports pools. Licences to operate the National Lottery and sports pools were awarded to ITHUBA in 2015, in terms of the Lotteries Act No. 57 of 1997, as amended.
As part of the ongoing regulatory work and delivering on the Annual Performance Plan target for the period under review, the following was conducted in regulating and ensuring the operator’s compliance with, and performance against the Licence Agreement and the Act:
All directors and staff of the operator, together with retailers who sell National Lottery and sports pools tickets, are vetted. The NLC also ensures that key contractors that conduct business with the operator are also vetted to ensure that the integrity of the National Lottery and sports pools are maintained, and players are protected.
The NLC receives proposals from the operator for new games or changes to existing games, the introduction of alternate channels of play and amendments to game rules and prize payout structures. These proposals are assessed and approved by the Board as required in the Act and the licences.
The operator submitted various proposals during the year under review, and the necessary approvals were granted once compliance with the Act and licences was verified. Before recommending approval on any proposals, the NLC considers the following issues:
| – | Player protection. |
| – | Projected returns to good causes. |
| – | Protecting player funds. |
| – | Legality. |
| – | Impact on the National Lottery and sports pools brand and intellectual property. |
| – | Rationale for the design of the game. |
| – | Marketing plan and market research analysis in respect of the game. |
| – | Analysis of competing products, such as promotional competitions, society lotteries and other games of chance. |
Protecting players is central to our regulatory mandate.
The following are some of the critical activities we perform to protect players:
| – | Ensuring that the operator pays prizes promptly by conducting regular reviews of payments to prize winners. |
| – | Protecting players against possible fraud by checking that the operator implements appropriate security measures to verify the identity of winners who claim prizes. |
| – | Conducting reviews to ensure that the operator protects the anonymity of winners, in line with licence requirements. |
| – | Approving and monitoring descriptions and procedures for key processes (e.g. draws and prize payments). |
| – | Ensuring that clear information is available to players, including information on games available, how to play and how to claim prizes. |
| – | Handling complaints from players should they be unhappy with the service they have received from either a retailer or the operator, after having exhausted the operator’s complaints handling procedures. |
| – | Ensuring that there are controls in place to protect players against excessive play. |
| – | Ensuring that there are controls in place to protect against underage play. |
Through inspections, reviews, certification and testing:
| – | We have ensured that all draws are fair, number selection is random, and results are accurately recorded. |
| – | Approved procedures that govern the way in which the National Lottery draws are carried out are implemented accordingly. |
| – | Every draw is overseen by independent auditors who also provide assurance that the draw is carried out correctly in line with approved procedures. |
| – | The operator is required to carry out periodic tests and re-accreditation of draw equipment/systems to ensure the randomness of draw results. |
| – | The recently adopted random number generator is independently tested and accredited for randomness and independence. |
We have ensured that the proportion of National Lottery ticket sales that goes to good causes, as well as any other prescribed payments, are transferred from the operator to the NLDTF in accordance with timelines specified in the licence.
For the period under review, we verified that the operator’s payments are complete and accurate.
The NLC monitors the reliability, security and efficiency of the National Lottery and sports pools central gaming system and network of terminals to ensure that every National Lottery and sports pools ticket bought is appropriately recorded and included in the relevant draw.
The system allows the NLC to agree sales figures and prize shares and make certain that the number of winners and prize amounts are accurate after each draw. The system also enables the NLC to confirm that monies due to good causes are correctly determined.
During the period under review, the following was monitored and verified:
| – | That the right prize allocation was made and paid across all games. |
| – | That the operator transferred prize money won, but not yet claimed, into the National Lotteries Participants Trust Fund (NLPT) to keep it secure for future prize claims. |
| – | That unclaimed and expired prizes were transferred to the NLDTF. These are prizes that have not been claimed within 365 days after the draw date. |
One of the critical regulatory tools for ensuring the protection of participants is the NLPT. The NLPT is established in terms of the Trust Property Control Act 57 of 1998 and was founded by ITHUBA Holdings (RF) (Pty) Ltd in accordance with the third licence to operate the National Lottery. The licence is a regulatory instrument provided for, under the Lotteries Act, to enable the NLC to fulfil its regulatory mandate of monitoring ITHUBA’s operations and ITHUBA’s obligations to procure a trust for the purposes of protecting prize monies payable to National Lottery and sports pools participants who have 365 days to claim their prizes, together with money for tickets bought in advance for multiple draws. The duty of procuring the trust is a key element of the regulatory function of the NLC as set out in section 10(1)(j) of the Lotteries Act.
The NLC Board, in its capacity as regulator, exercises oversight in accordance with provisions of the Lotteries Act, licence and principles contained in the King IV Code. The NLPT complied with all reporting requirements through the submission of quarterly reports, management accounts, income and expenditure statements, as well as annual financial statements within the stipulated periods as indicated by the Board of the NLC.
The Board of Trustees comprises of two nominee trustees, who are representatives of the NLC and ITHUBA respectively, and three independent trustees. The NLC, with consent from ITHUBA, appoints a maximum of three independent trustees. Trustees hold office for three years and are eligible for
re-appointment at the expiry of this period.
All independent and nominee trustees are deemed to be independent, having adhered to King IV Code principles of independence and criteria for connected persons as defined in the Income Tax Act. The majority of the trustees are independent as they have no material interest in the NLC, interest in the National Lottery operator, beneficiaries or suppliers. Trustees of the NLPT have fiduciary duties to the trust and its beneficiaries. The primary beneficiaries of the NLPT are participants in the lottery who are yet to secure their prize money, the NLDTF as a secondary beneficiary of interest on the funds that are paid to the NLPT, as well as unclaimed and expired prize money.
Trustees are required to complete an annual disclosure of interest. They are required to disclose interest at every meeting to ensure that circumstances that may give rise to a conflict of interest are managed and monitored effectively.
There were no conflicts of interest identified during the reporting period.
The trust administrator is appointed to service the trust for the duration of the third licence to operate the National Lottery. The trust administrator is accountable to the NLPT Board of Trustees for the performance of all financial, administrative, secretariat and clerical functions, as well as any duties that may be delegated by the Board of Trustees.
The Board of Trustees comprises five members, including the chair, Adv. Nevondwe. The Deed of Trust makes provision for a minimum of four meetings per year. During the financial year ended 31 March 2020, the Board of Trustees met on four occasions.
The table below shows the attendance of these meetings.
Committee Member |
Role |
Qualifications |
Date of |
Quarterly |
Special |
Adv. LT Nevondwe |
Chairperson |
Chairperson LLB LLM (University of Venda) LLD (University of Limpopo) |
1 April 2016 |
5/5 |
6/6 |
Mr PR Letwaba, CA(SA) |
Member – NLC Representative |
BCom Accounting CTA |
28 May 2015 |
2/5 |
3/6 |
Adv BE Mabuza |
Member – ITHUBA Representative |
BProc (NWU); LLB (Wits) LLB (Georgetown University) |
22 July 2015 |
5/5 |
2/6 |
Ms MT Ramuedzisi CA(SA) |
Member |
BBusSc (UCT); HDipAcc (Wits); MCom (Computer Auditing) (UJ); RA |
1 April 2016 |
4/5 |
6/6 |
Mr A Mahlalutye |
Member |
BSc Quantity Surveying (UCT); Masters in Business Masters in Financial Management |
1 February 2018 |
4/5 |
3/6 |
Special Board meetings and workshops include special meetings (AFS Approval, National Lottery Participant Trust Workshops,
Policy Review Sessions).
The NLPT Chairperson appeared before the NLC Board Audit and Risk Committee to report on the performance and financial information and other relevant matters concerning the trust.
We have monitored the National Lottery and sports pools website and other media to ensure the integrity of the National Lottery and sports pools information displayed therein. We also verified that trademarks, copyright. National Lottery and sports pools logos correctly appear on all National Lottery and sports pools materials displayed or made available to the public. This is to ensure that players are able to tell the difference between the National Lottery, sports pools and other gaming products available in the market.
Retailer inspections were regularly conducted to ensure that retailers comply with regulatory requirements, which include,
amongst others, that:
Physical security inspections and system security reviews and tests were performed to ensure reliability, security and availability of all National Lottery and sports pools systems and products.
The Act and licence agreement stipulates that the operator shall initiate and support opportunities for social and economic empowerment, affirmative action, employment equity and representation, training and skills development, promotion of small businesses and job creation, the advancement of women in business, as well as winners counselling and financial advice.
The operator is also required to show commitment to and comply with all B-BBEE legislation and undertake to localise its procurement of goods and services to the extent that it is reasonably possible, without having a detrimental effect on the running of the National Lottery and sports pools.
The operator has submitted the required progress reports on the above initiatives, and the NLC has verified the information reported.
The NLC has also handled complaints raised in connection with the National Lottery and sports pools. Complaints are reported to the NLC as a means of escalation after exhausting the operator’s complaints handling processes. However, the NLC accepts all complaints and forwards to the operator all those that require their preliminary handling. A follow-up is conducted to ensure that all complaints are adequately handled by the operator in line with the licences.
Society lotteries
The Act permits NPOs to raise funds through lotteries. Interested NPOs are required to register with the NLC. Through our education and awareness initiatives on this opportunity, we have noted an increase in organisations registering as societies. On registration as a society, a society is eligible to submit a lottery scheme to the NLC for registration. The Act allows an NPO to operate up to six schemes in a year, raising a maximum of R2 million per scheme.
The Act authorises the NLC to conduct inspections to ensure that society lottery activities are undertaken in line with the Act. The summary of society lotteries related activities conducted during the year is indicated below:
Society lotteries |
Statistics |
Number of Societies registered |
14 |
Number of schemes registered |
69 |
Number of exemptions granted |
5 |
Number of compliance inspections conducted |
43 |
Number of compliance seminars held |
39 |
The summary of revenue generated by the 69 schemes is reflected below:
Month |
Actual funds |
Actual funds |
April |
738 950.00 |
29 287 855.00 |
May |
403 363.00 |
1 266 509.57 |
June |
607 785.00 |
1 256 230.00 |
July |
1 523 000.00 |
163 500.00 |
August |
1 248 000.00 |
941 425.00 |
September |
874 260.00 |
1 502 354.00 |
October |
2 127 235.00 |
8 007 225.00 |
November |
– |
789 150.00 |
December |
1 702 097.00 |
– |
January |
2 127 235.00 |
7 206 075.00 |
February |
37 517 175.00 |
1 475 448.55 |
March |
4 040 786.00 |
851 600.00 |
Total |
52 909 896.00 |
52 747 372.12 |
Our focus for the new financial year will be to continue creating awareness on society lotteries and assisting NPOs who wish to run such schemes in complying with the Act.
Lottery schemes
As part of our enforcement mandate, we identified and were informed of various schemes that were advertised requiring public participation. It is only through detailed legal analysis that we were able to ascertain whether or not such schemes were lotteries, and, if so, whether they were permissible in terms of the Act or were conducted without prior approval of the Board, which would render them illegal.
Society lotteries that were non-compliant with the Act were identified. These were mainly run by profit-making companies with the assertion made that some of the proceeds from such schemes would benefit NPOs. We were successful in having such schemes declared illegal as they were contrary to the Act. These schemes were subsequently discontinued.
Competitions that were run as promotional competitions, but not in compliance with requirements of the Consumer Protection Act, were also identified as a form of illegal lotteries. Three major companies operating in South Africa had such competitions declared as illegal lotteries and the companies were instructed to discontinue competitions. These are considered to be key achievements for the NLC for the year under review, in delivering on our mandate of monitoring, regulating and enforcing on lotteries. Below is a table summarising the number of investigations conducted for the year:
Illegal lotteries |
Statistics |
Number of cases investigated |
335 |
Number of cases closed |
331 |
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Block D, Hatfield Gardens,
333 Grosvenor Street, Hatfield
Pretoria. 0083
Telephone: +27 (12) 432 1300
Email: info@nlcsa.org.za
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