Progress on the distribution of lottery

funds

Portfolio Committee for

Trade and Industry

16 October 2002

Introduction

• the dti is satisfied with the performance of the National Lottery and the National Lottery Distribution Trust Fund (NLDTF)

• To summarise progress to date:– The National Lottery was only launched in March 2000,

but by January 2001 R4.1 million was made available to 80 organisations.

– The Distributing Agencies in their first year of operation distributed over R220 million by March 2002 to 1240 organisations, and the amount allocated has to date grown to over R½ billion.

– Especially, when one considers that in the five years private lotteries were operating in South Africa only an estimated R30 million went to good causes.

• Despite these huge successes there is still room for a process of continuous improvement.

BackgroundHow does the NLDTF function?

Uthingo

NLB

NLDTF

DACharities

DAArt & Culture

DASport

DARDP

DAMisc

22%36

%

22%

5%15%

Weekly transfer

CentralApplications

Office

Monitors activities& approves games

NGOsCBOsApplications

Allocation and distribution of funds (average turnaround time is 6 months)

BackgroundHow much is allocated to the NLDTF?

• The allocation to Good Causes varies with the number of tickets sold.

• For every Rand spent on a lottery ticket:

• Between 10% and 40% goes to the NLDTF, with average of 30% over the 7 year License period

50c goes back to players

14c goes to SARS

23c goes to NLDTF

2c goes to profits

11c goes to operating costs

Highlights from

The dti review of the financial period

1 April 2001 to 31 March 2002

Allocations: 1 April 2001 to 31 March 2002

Category Available Allocated %

Charities R158m R106m 67%

Sport & Recreation R96.6m R70m 71%

Arts, Culture & Heritage R96.6m R46m 48%

Sub-total R351.2m R222m 63%

RDP & Miscellaneous R87.8m - -

Total R439m R222m 51%

Analysis

• Charities and Sports & Recreation categories both allocated more than 60% of funds available.

• Arts, Culture and Heritage was lower than other categories, but has picked up this year.

• RDP categories has not been used but forms part of a proposed amendment.

• Miscellaneous category is for emergency funding and its use is under review.

• Surplus in NLDTF will grow over time and will assist with the sustainability of fund over time e.g. the KwaZulu-Natal Lotto is still able to distribute funds, through Project Jumpstart, even though it no longer operates, because it built up a large surplus.

• A surplus will be held at the end of the licence period as a reserve.

Assessment

• The progress made is good.

• Need to increase awareness of criteria and application process through a more active media and education campaign to increase number of applications.

• Longer term grant system to be developed with reliable organisations considered.

• Need to consider different review processes for small and large grants.

• Review juristic person requirement.

• Inactive status of RDP category will be addressed.

Applications:1 April 2001 to 31 March 2002

Category Received Approved %

Charities 2254 853 38%

Sport & Recreation 535 250 47%

Arts, Culture & Heritage 742 139 19%

RDP 0 0 0%

Miscellaneous 0 0 0%

Total 3,531 1,242 35%

Analysis

• Overall approval rate appears low (35%), but due to identifiable problems.

• Arts, Culture and Heritage had a 81% rejection rate, but is now picking up.

• Reasons for rejections

15% did not meet the criteria in the Act and

were disqualified

40% did not complete the application forms

correctly, did not submit financial statements

or did not meet the requirements

10% are rejected on merit

Assessment

• Disqualification can be reduced by giving organisations 21 days to supply missing information and by providing more information and assistance to complete application forms

• Financial requirements may be too strict for small amounts – need to introduce differential requirements for small and large grants

• Legislation to be amended to allow for natural persons to receive funds (soup kitchens)

Geographical Spread Beneficiaries1 April 01 to 31 March 02 12%

4%

32%

14%

5%3%

3%

3%

24%

Eastern Cape Free State Gauteng

Kwa-Zulu Natal Limpopo Mpumalanga

Northern Cape North West Western Cape

R 0

R 5,000,000

R 10,000,000

R 15,000,000

R 20,000,000

R 25,000,000

R 30,000,000

R 35,000,000

R 40,000,000 Arts, Culture &NationalHeritage

Charities

Sport &Recreation

Geographical Spread for 3 Categories (April 2001 to March 2002)

Analysis

• Gauteng, Western Cape, KwaZulu Natal and Eastern Cape received 82% of allocations. The remaining provinces received 5% and less.

• Gauteng figure high, but also includes National Bodies with provincial presences.

• Possible reasons for high allocations for 4 provinces

NGOs in 4 provinces experienced in fund raising.

Low number of applications from other provinces or high rejection rates from other provinces.

Lack of awareness of funding opportunity.

No access to application forms as Central Applications Office is Pretoria-based.

Assessment

• Increase public awareness of the NLDTF in rural areas through radio “spots” and “talk shows” on community radio stations and other local media. We are getting applications from deep rural areas.

• Provide assistance to complete applications forms through helpline and radio shows.

• Give Distributing Agencies’ the ability to solicit applications.

• Develop a network of partners in rural areas who can provide assistance with the distribution and completion of applications.

Latest Statistics

NLDTF Allocations from 1 April to 17 September 2002

R 155,116,378

R 92,907,513

R 29,272,157

0%10%20%30%40%50%60%70%80%90%

100%

Total Allocation(R277,296,048)

Sport &RecreationArts, Culture &Natural HeritageCharities

Total Allocation: 1 April to 17 September 2002

10%

21%

11%8%

22%

13%

7%8%

AgedPeople with DisabilitiesChildren's HomesEarly Childhood DevelopmentCommunity ServicesChronic IllnessesDrug Abuse & CrimePoverty Alleviation

Charities: Areas of Funding

2.6%13.5%

0.2%5.2%

44.4%6.1%

27.9%

Creative DevelopmentEnvironmentFestivalsFilm Distribution & ProductionHeritageMajor ProjectsRural Grants

Arts, Culture & Natural Heritage: Area of Funding

62.3%

31.2%

6.5%

Upgrading of Facilities

Equipment & Kit

Capacity Building

Sports & Recreation: Area of Funding

Conclusions and matters currently being addressed

• We will be in a better position to assess disbursements at the end of this year, given the much higher levels of allocation in the first 6 months of this year.

• There is a need to be more proactive in reaching out and forming partnerships to facilitate applications.

• Certain amendments to the Act will be proposed to deal with the RDP and Miscelaneous categories and juristic persons restriction.

• Work will be done to stabilise the cycle of disbursements to assist NGOs and to reach out to all provinces.

• Consideration is being given to speeding up the smaller grant category..

• There has been an increase in disbursements in the current financial year and the implication is that as familiarity with criteria and application processes increases both internally and externally, the resultant impact will be an increase in the distribution of funds.

• The NLB and the dti have been analysing the patterns of the past financial year to identify gaps or short-comings that need to be addressed. This has led to a number of pro-active solutions being generated, including:– Communication plan to enhance awareness and

accessibility– Plans to increase capacity at NLB to handle

applications– Introduction of new and differentiated application

and review processes