Gaming the Lottery

Following the path of the Lotto millions in Vhembe

Where does the Lotto money eventually end up? We followed the trail of one local beneficiary mentioned and was rather surprised with the outcome. What we uncovered was a tale that included a music festival, dietary training workshops and a system where the real beneficiaries are not always mentioned. We also found a system that is as transparent as a toilet window.

The Lotto is the curse for those who cannot do maths, a clergyman once told me. It is a form of punishment for those who do not grasp the concept of odds and who will not accept the fact that the house will always win. In South Africa, the odds of winning the Lottery are 13.9-million to one.

The question is, however, what the house does with its winnings? More specifically – how much of the wasted millions has the National Lotteries Commission (NLC) invested back into the Vhembe District the past few years?

A few months ago, OpenUp, a civic tech NPO, built a tool that makes it possible to track every grant the Lottery has made since it was launched in 2002. “We build tools, open up data, and provide training that supports active citizenry and helps communities and the government work together,” OpenUp states on its website. The Lotto tool provides an easy-to-use interface to see which organisations benefitted from NLC funding and how much they had received.

Being curious and slightly adventurous, we set out to find out what had happened to some of the Lottery money. How did it change the lives of ordinary residents in the region? What is left to show of these investments into the health of our communities?

The first search phrase that was entered in the web-tool was “Vhembe”. Only one result popped up: Vhembe Health & Fitness Centre. This organisation received a total of R9,84 million in the 2014/15 financial year. This seemed like a good enough place to start, so we set out trying to find out what the project was all about and how it benefitted the community.

Vhembe Health & Fitness Centre

A quick Google search on Vhembe Health & Fitness pointed to a fairly well-known business with branches in Thohoyandou, Louis Trichardt, Seshego and Nzhelele. The company trades under the name Gym4U and belongs to Ndwelani (Junior) Makhado. The latest Companies and Intellectual Property Commission (CPIC) records shows that Mr Makhado is a director of five other companies, some of which are in the process of being deregistered.

It seemed strange that a private company would be a recipient of NLC funding. Gym4U’s motives, however, seemed noble, and on its website it is stated that the company’s vision is to: “provide health & wellness facilities and life style programmes to rural and peri-urban communities.”

A check revealed that Gym4U is definitely run as a commercial venture, with no “freebies” for the less fortunate in life. What, then, happened to the nearly R10 million of the gambling money that was seemingly paid into the bank account of Vhembe Health & Fitness Centre?

The next stop was the National Lotteries Commission to try and obtain some answers.

National Lotteries Commission (NLC)

One would expect that the NLC would welcome any media enquiries. The organisation, after all, has the responsibility to safeguard the money that so many residents gamble away, and ensure that it is properly used for “worthy causes”. The NLC, which falls under the Department of Trade and Industry, controls the purse strings. It has the task of evaluating requests for funding, and investing billions into projects that create jobs, alleviate poverty, promote the arts and support sport and build sporting facilities. Since the Lottery was launched in 2002, it has handed out grants of more than R22-billion to these causes. Hopefully, it also teaches people not to gamble away their hard-earned income.

So, surely the NLC would be proud of these “investments” and would love to discuss and showcase them?

Well, apparently not.

Our first questions to the NLC were emailed on 2 October to the liaison department. This drew no response, in spite of follow-up emails sent on the 4th and the 9th. On 13 October, an email was sent to the Commissioner of the NLC, Ms Thabang Mampane. Just when we were about to give up, Ms Mampane responded, on 17 October, instructing the NLC’s legal officer, Mr Tsietsi Maselwa, to handle our questions and respond. He subsequently promised to provide answers the next day.

On 23 and 25 October we enquired again as to when we could expect Mr Maselwa’s response.  On the 25th he replied, stating that he had already sent it. What followed was another couple of days of enquiring and either receiving no response or a “check-your-email” response. We offered different email addresses, but to no avail. All correspondence from the NLC arrived in the email box, but not the one with the answers.

On 27 October, another letter was sent to Ms Mampane, expressing our frustration with not being able to get any answers. It was also stated that the newspaper would be forced to print a story without input from the NLC, which would reflect badly on the NLC’s ability to conduct its business in a transparent and accountable manner.

This letter elicited a response and the answers were finally received the same day. The more demanding tone, however, did not go down well with the powers-that-be within the NLC. Ms Mampane, making her annoyance very clear, replied: “Please don’t use threats when you need information from us … we will deal with your threats below.”

A strange twist in the answers

The NLC’s answers provided some interesting angles to the story. For starters, the NLC denied funding a private entity, stating that the money had gone to a non-profit organisation (NPO). Vhembe Health & Fitness Centre was also not the recipient of the full amount. Two payouts were made to Vhembe Health & Fitness Centre: R2,5 million in July 2014 and R3 million in February 2015. The remainder of the money – R4 354 727,47 – was paid to Tshedza Arts, Culture & Sports Development (TACSD) in September 2014. Vhembe Health & Fitness Centre was merely used as a conduit to channel funds, the NLC said.

The concept of “conduits” and Tshedza Arts Culture & Sports will be dealt with a bit later, but for now the focus will be on Vhembe Health & Fitness Centre, but the NPO, not the private company.

It turns out that a Vhembe Health & Fitness Centre is registered with the Department of Social Development (DSD) as an NPO. The chairperson is also Ndwelani (Junior) Makhado. The deputy chairperson is listed as H Tshifhango, the secretary is M P Tshikukuvhe, the treasurer is L Makhado and the club general manager is D R Mulaudzi. The organisation was registered in September 2012, and in its first year of existence it had a total turnover of R6 000.

Interestingly, the constitution of the Vhembe NPO states that it was founded in 2004, the same year that the gym business was started. The vision of the organization is to “(educate) people from disadvantaged communities and (teach them how) to take care of themselves in order to maintain a healthy lifestyle.”

The Vhembe NPO applied for funding in the large grant category. This meant that at least two consecutive years’ audited financial statements had to be made available. Even though only one year’s financials – 2013 – are on record, the NLC gave no reasons as to why this was acceptable.

Tracking down the chairperson

Since the NLC clearly did not want to supply any more details on the projects, we set out to track down the owner of the Gym4U franchise, Mr Junior Makhado. This proved to be quite a challenge, as he did not respond to emails sent to his business and personal address. His business also refused to give out his cell phone number. With a bit of research, we obtained a number and we eventually managed to make contact on 7 November. He quickly offered to visit the newspaper’s offices for an interview.

It must be stated that Junior Makhado is a very charming and dynamic person. He may be small of build, but he projects a certain energy and charisma. He was quick to speak about his field of speciality, that of fitness training and promoting a healthy lifestyle. He learnt his trade as fitness trainer and later as manager at Virgin Active branches, he said. In 2002, he took the plunge and started his own gym in Nzhelele. A second gym in Seshego followed in 2004 and two years later the Gym4U opened in Thohoyandou. The branch in Louis Trichardt opened in 2010.

But the Lotto funding had nothing to do with Gym4U, he says. The money was not used to buy shiny new gym equipment or pay salaries. The NLC funding was earmarked for a project to teach rural people how to live healthy lives, he told us.

R5.5 million for diet training

According to Makhado, a series of training workshops was conducted in several areas, including Madimbo and Thohoyandou. During these sessions, the participants were assessed in terms of different factors, including their body mass index (BMI), and advised on how to follow a healthy diet. The activities also included fun walks, sports events and specific activities to include people with disabilities. A gala dinner was held to recognise some of the achievers, he said.

But R5,5 million is a lot of money, so Mr Makhado was pushed to give more details. He did mention that the team responsible for conducting the workshops comprised more than 30 people and provision had to be made for accommodation and transport, two expensive items.

Unfortunately, Makhado said, he was the victim of an armed robbery a few months ago during which his car, cell phone and laptop were stolen. All the information about the projects, as well as photos of the events, were on the laptop, he claimed.

We did not cover – nor were we invited to do so – any of the events. The NPO also never filed an end-of-year report with the Department of Social Development’s NPO Directorate, so no audited statements were available that could shed more light on the expenditure.

As a final question, Junior Makhado was asked why Vhembe Health & Fitness Centre was used as a conduit to channel NLC funds to Tshedza Arts Culture & Sports. “I was phoned and asked whether I would mind,” he answered. He did not object, and for this his NPO received R105 000 from the NLC, he said.

The NLC’s use of conduits

Few people are aware of the manner in which the NLC makes use of conduits to channel funds to “worthy” causes. This is primarily a partnership funding mechanism, which was revised in an amendment to the Lotteries Act in 2015. It is described as a creative means of reaching small community-based organisations that are not directly eligible for NLC funding by virtue of not having two consecutive annual audited statements. An established organisation with a track record with the NLC can then be used as a legal channel to fund and support the organisation.

The R4,35 million that went TACSD’s way was allocated under the “miscellaneous” category. According to the NLC, this category “caters for projects not falling under other sectors and/or where there is emergency and/or an urgent need.” The money was approved to implement a project for Heritage Week in 2014, we were told. “This was largely a heritage festival with (a) variety of activities, including traditional workshops, (a) fun run, kids day events, etc,” the NLC states in its answer.

Who is Tshedza Arts, Culture & Sport Development?

The name of Tshedza Arts Culture & Sport Development does not feature in the 2014/15 annual report of the National Lotteries Commission. The 305-page online report supposedly lists all beneficiaries, including Vhembe Health & Fitness Centre, but not Tshedza. It would therefore seem that the organisations benefitting via conduits are not mentioned. 

A Google search on TACSD  sheds very little light on who this organisation may be. No reference is made that such an organisation was involved in any heritage week activities in 2014 or even 2015 either.

The NPO Directorate’s records at first did not help much. The Tshedza NPO submitted an application for registration in January 2014. No financials were submitted and no narrative report was attached. The office bearers were listed as: S F Nesenhlani (chairperson), K H P Ragimana (deputy chairperson), J Ramodike (secretary), E Rampfumedzi (deputy secretary) and R Ragimana was listed as treasurer.

In its constitution, the TACSD lists the promotion of traditional dances, heritage and cultural activities as one of its objectives.

A further company search on the surnames provided a bit more detail, but not that much. The treasurer seemed to be the Venda musician, Rudzani “Shufflers” Ragimana. Unfortunately, “Shufflers” was not of much assistance. When he was phoned, he could not recollect any heritage festival of that kind and also stated that he was not aware of the TACSD.

Another glance at the signatures on the TACSD’s constitution provided a breakthrough. The chairperson’s surname is incorrectly spelt on the NPO Directorate’s records. It is actually Nesengani and the SF initials refer to Shandukani Nesengani, a well-known businessman and director of at least nine businesses.

A royal festival

A phone call to Mr Nesengani confirmed that he was the chairperson of TACSD. He was aware of the NLC funding and the Heritage Week celebrations. Nesengani did not want to respond to questions over the phone and asked that they be emailed to him. This was subsequently done, but for the first few days no response was received.

On Thursday (9 November), Mr Nesengani responded telephonically, but refused to answer any questions. He referred the newspaper to the NLC, stating that the Lotteries Commission had all the details of the project. “We are contractually bound by our agreement not to divulge information,” he said. According to Nesengani, he was advised by the secretary of the organisation not to speak to the media.

Even our argument that the NLC was only the funder of the project and that the custodian was the TACSD could not convince Nesengani. He was adamant that the NLC must answer questions as TACSD was only a third party. He did concede that part of the money was used for the 2014 Phalaphala FM Royal Heritage Festival, but said that the project had also funded other activities.

During the interview with Junior Makhado (which only happened after we managed to trace down Mr Nesengani), he also mentioned that NLC funding had to do with the September 2014 Phalaphala FM Royal Heritage Festival.

The Phalaphala FM Royal Heritage Festival is an annual event and was presented for the third time in 2014. The website of SABC2, one of the sponsors, advertised the 2014 festival as an event that “will bring out South Africa’s crème de la crème artists who will cater to every market. In celebration of 20 years of democracy, they will perform hits and legends in the music scene from the past 20 years. Expect to be blown away by the likes of Mafikizolo, Ringo Madlingozi, Oliver Mtukudzi, Khuli Chana and iFani, who will be accompanied by DJs such as Sphe & Naves, Fresh & Euphonik and the Naked DJ among others.”

The dates were 13 and 14 September 2014 and the venue was the Royal Gardens, Thohoyandou. Tickets for the show cost R150.

An NPO for a year?

As is the case with Vhembe Health & Fitness Centre, TACSD only submitted documents once to the NPO Directorate. The audited financial statements for the end of the 2014/15 year are also still outstanding. The Nonprofit Organisations Act of 1997 stipulates that every registered NPO must provide a narrative report of its activities, together with its financial statements, within nine months after the end of its financial year to the Directorate.

When the NLC was asked about the outstanding DSD reports, it absolved itself from all responsibility. “If legal obligations are not met on the side of the DSD, they should surely deregister the organisation and it will consequently not qualify on the NLC side as it would have been deregistered.”

So, it’s a case of “Tata ma chance, tata ma millions” if you don’t have an NPO number. But you only need to initially submit a constitution and a list of names of office bearers to get such a number.

The NPO Directorate was asked if “mushroom NPOs” are cause for concern and what steps are being taken against NPOs that seem to be in transgression of the NPO Act.

At the time of our going to press no response had been received.