Posted: May 13, 2022
Recent press reports and public statements about the appointment of members to the board of the National Lotteries Commission (NLC) reflect misconceptions about the procedures applicable to the appointment of board members. Unfortunately, the website of the NLC at time of publication of these statements contained an inaccurate summary of the relevant legal provisions. Regrettably, this may have led public commentators or members of the media to misunderstand the position. The Department has drawn this to the attention of the NLC and requested that it correct its website.
The Department would like to clarify the following:
- The legislative prescripts pertaining to the appointment of board members;
- The context in which the four board members were appointed;
- The urgency to appoint the four board members;
- The process followed for selecting the four board members; and
- The credentials of the appointed board members.
THE LEGISLATIVE PRESCRIPTS PERTAINING TO THE APPOINTMENT OF BOARD MEMBERS
The Lotteries Act prescribes requirements for the appointment of the chairperson of the board of the NLC that are not applicable to the appointment of other members of the board.
The Act requires the Minister to appoint a chairperson who is a person with applicable acknowledge or experience connected with the functions of the board. The chairperson may only be appointed after the following has occurred –
- The Minister has by notice in the Government Gazette and in at least two national newspapers invited interested parties to nominate persons for appointment as chairperson;
- the relevant committee of the National Assembly, which is the Parliamentary Portfolio Committee for Trade and Industry (PPC) has undertaken a transparent and open process to consider the nominations;
- The PPC has made recommendations to the Minister for his consideration.
In addition to the chairperson, the Minister may appoint to the board –
- one member designated by the Minister; and
- up to five other members who have proven business acumen or applicable knowledge or experience with regard to matters connected with the functions of the board. These members must include a legal practitioner and a chartered accountant.
The Lotteries Act contains no requirement for an advertisement for the posts of other members of the Board. Likewise, the Act does not provide for the involvement of the PPC in the process of interviewing board members. The Act accords the Minister the power to appoint these members to the Board.
THE CONTEXT IN WHICH THE FOUR BOARD MEMBERS WERE APPOINTED
The context to the appointments of the four Board Members was informed by two factors. First, the vacancies on the Board and the Board’s inability to carry out its duties in light of the absence of a Board member who was a legal practitioner, as required by the legislation. Second, serious concerns had been raised in the public domain regarding the affairs of the NLC following detailed allegations of corruption that had emerged from a number of media reports and from the forensic investigation undertaken by the Department of Trade, Industry and Competition.
An SIU investigation was instituted into the affairs of the NLC and in a progress report tabled in Parliament earlier this year, a number of suspicious transactions were highlighted, including ones affecting family members of the NLC Chief Operating Officer (COO) and members of the Board at the time of the investigation. Based on information provided by the SIU to the Minister, he instituted proceedings against one Board member in respect of allegations that he benefitted directly or indirectly from grants, which the NLC paid to various NPOs and NPCs. The Board member resigned before the proceedings were completed. In addition, a member of the board passed away in February 2022. As its presentation to the PPC in March revealed, the SIU has evidence that at least two members of the Board during the period of the investigation and a senior official had directly or indirectly benefitted from NLC funding.
In addition, other governance concerns had emerged affecting public confidence in the Board. For example, the Department’s lawyers advised the Minister that the manner, in which disciplinary proceedings were initiated against the COO, Mr Philemon Letwaba, after the SIU had recommended such proceedings, was wholly inadequate and further illustrated the difficulties of restoring confidence in governance. Similarly, the Minister has been advised that the manner in which the Board has dealt with the SKX Proviti forensic investigation, on which R 9.6 million has been spent, raised ongoing concerns about its commitment to combatting corruption.
In addition, the Board had both failed to investigate adequately the improper use of funds and has actively resisted the endeavours of the Minister and the Department to get to the root of the corruption that has plagued the provision of funds to NPOs and NGOs. Further, the NLC had also refused to co-operate with a forensic investigation commissioned by the Minister into alleged corruption and litigated to prevent the Minister appointing forensic investigators. The Gauteng High Court has found that the Minister is empowered to appoint forensic investigators into the affairs of the NLC.
The NLC had sought to hide – and had refused to disclose – the information on beneficiaries who were granted funds by the NLC until specifically advised in writing by the Minister to do so. The Minister’s view in this matter was consistent with advice subsequently provided by Parliament’s Chief Legal Advisor to the Portfolio Committee.
THE URGENCY TO APPOINT THE FOUR BOARD MEMBERS
At the time the advertisement was published, there were already two vacancies in the Board and the Board was inquorate when another member passed away (on 7 February 2022); and in addition, one Board member resigned. The Minister thus appointed four persons to the Board for a fixed period of approximately one year, for reasons that are set out below.
The terms of office of the two remaining members of the previous board elapsed on 31 March 2022.
THE PROCESS FOR SELECTING THE FOUR BOARD MEMBERS
An advertisement was published calling on persons to serve as members of the board of the NLC. The closing date for applications and nominations was 6 March 2022. As this advertisement noted, the Department reserved the right to source additional candidates for consideration by the Minister for appointment of the Board.
In the light of the enormous challenges facing governance within the NLC, the Ministry identified four individuals of sound reputation and proven experience, who individually and collectively meet the statutory criteria to serve as members of the board.
They were appointed for a term from 24 March 2022 until 31 March 2023. The four members who have been appointed were identified by the Minister to commence the process of returning the NLC to sound governance. They were identified through a process of consultation and head-hunting to ensure that the new Board would have capacity to tackle what appears to be the deeply entrenched corruption that has plagued the operation of the NLC.
One of the four persons had been nominated for Board membership following the advert published for the original vacancy in the Board; a further person was designated in terms of section 3(1)(b) of the Act and the other two were identified based on their specific skills in light of the challenges facing the new board, in particular that relating to corruption.
None of the members of the Board are currently in the service of any sphere of government and the Board accordingly meets the statutory requirement that at least four members of the Board must be persons who are not in the service of any sphere of government.
THE CREDENTIALS OF THE APPOINTED BOARD MEMBERS
Careful thought was given to appointing an independent board with the balance of experience and expertise to address the immediate challenges faced by the NLC, while a lengthier process considers further nominees to the Board to fill the two additional vacancies and to appoint persons on the expiry of the new Board’s term of office.
Mr Willie Hofmeyr was chosen because of his legal expertise and considerable experience in dealing with matters relating to corruption and probity, which are essential during the period when the board will need to address the reports of the SIU and the public concerns relating to corruption. Mr Hofmeyr had previously run the Asset Forfeiture Unit of the SIU and is admitted as an attorney in South Africa (a statutory requirement for the board).
Ms Beryl Ferguson was chosen following her nomination through a public advert placed during 2020 to fill a vacancy that had previously occurred, and in light of her experience in governance and business matters, which include a period as a member of Parliament and extensive experience in corporate governance through leading and serving on boards and trusts.
Ms Precious Mvulane was chosen because of her qualification as a Chartered Accountant (a statutory requirement) and registered auditor. Her experience in oversight work includes having served on the audit, risk and ethics committees of numerous public and private sector institutions, which would aid in ensuring appropriate systems to manage and mitigate risk were in place.
Dr Cassius Lubisi was chosen because of his considerable experience in public administration (including as the Director General in the Presidency and Cabinet Secretary) and its relevance in particular, to the governance and oversight functions of the Board as well as the welfare-related responsibilities that the board may be required to provide oversight to.
In order to properly consider the public nominations and applications, as well as any further candidates that were headhunted, the Minister has appointed a panel chaired by retired Judge Dennis Davis to undertake a shortlisting process and recommend a list of candidates for interview and possible appointment. Further appointments will be made following conclusion of this process and consideration of its outcome.
The new board will be responsible for carrying out its functions in terms of section 10 of the Act, including advising the Minister on the issuing of any license. The Department is confident that the board will carry out its duties in an independent and transparent manner.
Bongani Lukhele – Director: Media Relations
Tel: (012) 394 1643
Mobile: 079 5083 457
WhatsApp: 074 2998 512
Issued by: The Department of Trade, Industry and Competition (the dtic)