South Africa’s Lottery faces nine-month shutdown

South Africa’s National Lottery Faces Potential Nine-Month Suspension Amid Legal Challenges

Significant uncertainties loom over the South African National Lottery, as a newly awarded eight-year license faces potential legal disputes, which could result in a suspension lasting up to nine months.

On May 28, Trade and Industry Minister Parks Tau formally announced the selection of Siyakhaya Holdings as the designated operator, effective immediately. This license encompasses responsible operations of both the National Lottery and Sports Pools. The announcement comes just days ahead of the expiration of the current license held by Ithuba Holdings on June 1.

Eight bidders competed for the lucrative R180 billion ($10.0 billion/€8.9 billion/£7.5 billion) contract, reflecting the high stakes involved in this vital sector.

Litigation surrounding the awarding of this license has already commenced. Critics are raising concerns about Siyakhaya’s alleged connections to businessman Sandile Zungu, a notable member of the governing African National Congress (ANC).

Led by consortium members, including tycoon Moses Tembe and Zungu, Sizekhaya also includes Goldrush Holdings, a prominent betting company, as a part-owner.

Judicial Review on Temporary License for the National Lottery

The immediate issue at hand is the continuity of lottery operations post-June 1, when Ithuba’s license will expire. In a bid to mitigate disruption, Minister Tau sought to issue a temporary one-year license. However, this attempt was challenged by Wina Njalo, an unsuccessful bidder, resulting in the Gauteng High Court ruling that any temporary licensing period could not exceed five months.

Ithuba remains the only viable option to operate the South African National Lottery without interruption; however, they have expressed that a five-month limit is financially unfeasible.

The Department of Trade, Industry and Competition (DTIC) and the National Lotteries Commission (NLC) are set to contest this ruling, fearing a significant operational gap until Siyakhaya can take over.

NLC Chairperson Barney Pityana highlighted the potential fallout in an affidavit, stating, “If the court does not intervene to extend the suspension period, we could see no lottery operations for a minimum of nine months starting June 1, 2025.” He warned that non-operation could cost R1.8 billion in community funding.

In the initial court hearing, Judge Sulet Potterill deemed the temporary license proposal as unconstitutional, favoring Ithuba. She noted that the Minister had failed to justify the delays in selecting a new operator.

In response, Minister Tau committed to announcing the new provider by May 28.

Who Is Sizekhaya Holdings?

Following their selection, Sizekhaya is actively establishing infrastructure and operational frameworks. The company, which boasts a consortium comprised of experienced business, gaming, and operational leaders, is partially owned by JSE-listed Goldrush, with Bellamont Gaming and Zungu holding additional stakes.

Sizekhaya will also partner with Chinese technology supplier Genlot for its operational necessities.

Moses Tembe commented, “South Africa has hit the jackpot with Sizekhaya. Our extensive gaming experience, combined with a collective vision for enhancing the national lottery for good causes, will ensure substantial growth in community benefits.”

He emphasized, “Our choice of a technical partner was strategic, aimed at minimizing foreign currency outflow.”

Responses from Ithuba and Political Rivals

Ithuba, the incumbent operator since 2015, is reportedly considering legal action in response to the Minister’s announcement.

“We are disappointed by the recent decision of the DTIC and NLC. This ruling potentially undermines the principles of localization and inclusive economic growth,” Ithuba stated.

They emphasized the local development of their game portfolio and their commitment to ensuring accessibility for all South Africans, maintaining that the Minister’s decision jeopardizes efforts to create a robust local lottery ecosystem that fosters small business growth and maximizes revenue for good causes.

Political opponents of the ANC have also criticized the decision, implying cronyism. The Economic Freedom Fighters (EFF) released a statement asserting, “Minister Tau has compromised a public asset, awarding a significant contract that appears to benefit friends within the ANC, raising serious concerns about state capture.”

Minister Tau Defends the Selection Process

In response to the backlash, Minister Tau defended the selection process, citing the necessity for due diligence in such high-stakes operations.

“It is regrettable that this situation has escalated to litigation. I am reviewing our options to appeal the court’s ruling, as I believe the decision reflects my commitment to transparency and fairness in awarding the license,” Tau stated.

He expressed optimism regarding the future of the lottery and Sports Pools under Sizekhaya’s management, emphasizing the anticipated benefits for beneficiaries of the National Lottery Distribution Trust Fund.