Some of the shortlisted bidders for the lucrative national lottery licence are seeing red after trade, industry & competition minister Parks Tau decided to extend the bidding process by another year — a move they see as effectively granting a 12-month extension to current licence holder Ithuba.
In a statement released last week, Tau said he had “identified several areas that require additional evaluation to ensure that the successful applicant meets all legal and ethical requirements”.
He said the detailed nature of the assessments and the imperative to conduct them thoroughly meant he was not in a position to announce the winning bidder of the tender, valued upwards of R180bn.
Now some of the aggrieved bidders are threatening to challenge the decision.
Senzo Tsabedze, executive chair of the Umbulalelo Consortium, led by gaming, hotel and fleet management company Afrirent, said they were seeking legal advice. He declined to comment further.
Other shortlisted bidders include: JSE-listed Hosken Consolidated Investments (HCI), led by Jonny Copelyn and majority-owned by the South African Clothing and Textile Workers Union (Sactwu), an affiliate of labour federation Cosatu. Thebe Investment Holdings, half owned by the Batho-Batsho Trust — a known ANC funder, is also in the running; and so is Goldrush, which has ties to businessman Sandile Zungu.
The incumbent, Ithuba Holdings, is bidding to retain the licence it obtained in 2015, and if successful would be the first to do so since the inception of the lotto. Previous operators Gidani and Uthingo could not retain their licences.
It is not clear if Tau’s call automatically renews Ithuba’s licence by another year or if a temporary licence would have to be issued, but those privy to the process said they expected the department to gazette a request for proposals for a temporary licence this week.
In a statement, Tau said the extension was necessary not only for completing the review but also for ensuring that the process was fair and resulted in the selection of an applicant best equipped to handle the complexities of the National Lottery and Sports Pools Licence.
“I have identified several areas that require additional evaluation to ensure that the successful applicant meets all legal and ethical requirements,” he said.
Tau said the “complexity of conducting the national lottery, which supports vulnerable communities and those disadvantaged by unfair discrimination” required him to choose “an operator that will not only maximise the net proceeds from the national lottery and sports pools for good causes but also manage these operations with integrity and efficiency”.
But the minister did not explain what additional evaluation he was undertaking or why he needed a year to complete it. Business Times sent questions to his spokesperson, which were still not answered at the time of going to print.
A source close to a shortlisted consortium said the majority of the bidders are consulting with lawyers as to the legality/constitutionality of the extension.
A member of another bidding consortium, speaking on condition of anonymity, said they were perplexed by Tau’s decision.
The only logical conclusion they could come up with was that the process was being politically engineered to favour the current operator, Ithuba.
From what we understand, the consortium that scored the highest wasn’t the one favoured by the political powers that be — that’s why we find ourselves here. We’ll fight them
— Member of bidding consortium, speaking on condition of anonymity
“This is being done so Ithuba can continue operating. We expect an RFP [request for proposals] for the extension to be issued next week. None of us are going to bid because it doesn’t make sense to just come in for a year. The infrastructure and financial outlay [are] immense. It wouldn’t make financial sense. Ithuba has the existing infrastructure; they have a clear advantage.”
The consortium was weighing its options and most members were in favour of going the legal route, he said.
All the bidders have gone through a rigorous process, he said, including inviting the bid evaluation committee of the National Lotteries Commission (NLC) to visit their technical partners overseas.
To qualify for shortlisting, interested bidders have to partner with an international company that has technical expertise in operating the huge infrastructure required to manage a multibillion-rand lottery. It is understood some bidders have partnered with American companies, while some chose technical partners from Europe or China.
Since so much work and money have gone into the process, the bidder asked why Tau couldn’t simply choose between the bidders instead of going the extension route.
“From what we understand, the consortium that scored the highest wasn’t the one favoured by the political powers that be, that’s why we find ourselves here. We’ll fight them.”
Toby Chance, the DA’s trade, industry & competition spokesperson, said in a statement on Monday that Tau’s decision raised questions of legality on what happens after May 2025 when Ithuba’s licence expires, and at the end of May 2026, the proposed new date when the minister commits to awarding the new licence.
This would also affect the billions paid out in grants to various organisations each year by the NLC.
“The Lotteries Amendment Act states that a licence can only be extended for a non-renewable period not exceeding 24 months. The licence was extended already by former minister Ebrahim Patel on 1 June 2023 to expire on 31 May 2025. As Tau cannot lawfully provide another extension, two scenarios are possible: lotto ticket sales being suspended and grants frozen for a year, or the National Lotteries Commission using its accumulated funds of R3.9bn to pay out grants until the new operator is announced,” Chance said.
The NLC told the Sunday Times in January it had a contingency plan in place to ensure that funding of good causes continues. In 2024, the organisation allocated about R1.4bn to good causes, and expects to spend almost R1.5bn in this financial year, according to its financial statements.
Chance said Tau’s reluctance to choose a new licence holder raises more questions about the links the bidders have to various factions within the ANC. He also questioned why the minister needed another year to evaluate bids that were submitted months ago.
“Whatever company wins the bid, a court challenge by one or more of the losers is virtually certain,” he added.
In the statement, Tau said he was “deeply committed to overseeing a selection process that upholds the highest standards of integrity and fairness”.
“The successful applicant must demonstrate a commitment to our social responsibility objectives and the promotion of economic empowerment within historically disadvantaged communities,” he added.
This is the third time the announcement of a winning bidder for the national lottery licence has been delayed. In November, Tau said he needed more time after allegations of conflict of interest in the adjudication of the tender surfaced.
This was after Business Day reported that a former senior employee of Vukani Gaming, a subsidiary of HCI, was part of the team evaluating the tender.
In 2007, the lottery was put on hold for six months when former operator Uthingo challenged the awarding of the licence to Gidani in the high court.
In 2016, outgoing operator Gidani unsuccessfully argued in court that Ithuba did not demonstrate to then trade & industry minister Rob Davies that it had adequate financial resources to operate the lottery.
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