National Lotteries BoardPortfolio Committee Briefing

October 2004

Agenda

• Background

• Organisational Structure

• Financials

• Activities

Vision/Mission

To be a world class regulator and distributor of lottery funds

To ensure that that the national and other lotteries are run with the utmost integrity, that the interests of all players are protected, that the national lottery generates maximum revenues for good causes in a responsible way and that these revenues are disbursed expeditiously

VISION

MISSION

National Lotteries Board

NoraFakude-Nkuna

ShelleyThomas

AstridLudin

HenryMakgothi

NornanAxten

GeorgeNegota

Joseph Foster

The National Lotteries Act

• Establishes the National Lotteries Board• Sets up the process for awarding the licence• Establishes the National Lottery

Distribution Trust Fund (NLDTF)• Sets up the process of Distribution • Sets up process for Monitoring &

Regulating– Private & Society Lotteries– Promotional Competitions

Functions/Objectives

• Advise the Minister – on the issuing of Licence/s

– on the percentages allocated to good causes

– on the efficacy of Legislation related to Lotteries

• Protection of Players• Maximize proceeds to good causes• Administer NLDTF• Monitor & Regulate Other Lotteries• Manage the Central Applications Office

Uthingo

NLB

NLDTF

DACharities

DAArt & Culture

DASport

DARDP

DAMisc

22%36

%

22%

5%15%

Weekly transfer

CentralApplications

Office

REGULATORMonitors activities& approves games

NGOsCBOsApplications

Allocation and distribution of funds (average turnaround time is 3 months)

Structure

Operates the National Lottery

Organisational Structure

NATIONAL LOTTERIES BOARD

F a c to tum

P A In te rn a l A u d it

C o m pu tingO ffice r

F in a nce O ffice r

C F O

P A

H R M

C o m plia n ceO ffice r

L eg a l C o m m u n ica tio ns

P A M a ilro omA s s is ta n t

A s s is ta n t IT S up p o rt

G ra n t O ff ic e rs

C o o rd in a to r

G ra n t O ff ic e rs

C o o rd in a to r

G ra n t O ff ic e rs

C o o rd in a to r D C A ss is ta n ts

C h a rit iesM a na g er

G ra n t O ff ic e rs D C A ss is ta n ts

C o o rd in a to rS p o rts

G ra n t O ff ic e rs D C A ss is ta n ts

C o o rd in a to rA rts

C A O M a n a g er

C E O

National Lotteries Board’s Equity and Gender

Equity

Black81%

White19%

Gender

Female70%

Male30%

Financial Statements

NLB Balance Sheet as at 31 March 2004ASSETS

Non-current assets

Property, plant and equipment

Intangible assets

Current Assets

Trade and other receivables

Investments

Cash and cash equivalents

Total assets

 

EQUITY AND LIABILITIES

Reserves: Retained earnings

Non-current liabilities

Deferred income: Licence fees

Current liabilities

Accounts payable

Provisions

NLDTF assistance

  

Total equity and liabilities

2004

 717 984

18 900

736 884

 

519 397

125 706 467

202 942

126 428 806

127 165 690

-

 

227 848

 

126 425 276

512 566

-

126 937 842

127 165 690

 2003

1 172 653

162 737

1 335 390

 

27 833 865

87 118 136

6 239 599

121 191 600

122 526 990

 

4 600 495

 

455 697

 

115 728 105

222 252

1 520 441

117 470 798

122 526 990

Revenue

Operating costs

Operating deficit before finance costs

Finance costs

Operating deficit

Investment income

Deficit for the year

8 920 505

(13 756 980)

(4 836 475)

(766)

(4 837 241)

236 746

(4 600 495)

11 055 404

(11 869 166)

(813 762)

(3 101)

(816 863)

816 863

-

2004 2003

NLB Income Statement for the year ended 31 March 2004

ASSETS

 

Current Assets

Accounts receivable

Investments

Cash and cash equivalents

 

Total assets

 

EQUITY AND LIABILITIES

Capital and reserves

Retained earnings

 

Current liabilities

Trade and other payables

 

Total equity and liabilities

2004 

14 385 997

1 807 390 581

1 057 630 675

 

2 879 407 253

 

1 693 676 398

 

 

1 185 730 855

2 879 407 253

2003

37 053 974

1 461 370 978

708 404 915

 

2 206 829 867

 

 

1 653 310 881

 

 

553 518 986

 

2 206 829 867

NLDTF Balance Sheet as at 31 March 2004

Revenue

Finance income

Other income

Disbursement of funds

Assistance to the National Lotteries Board

Other operating expenses

Net surplus for the year

986 642 353

301 937 520

4 690 000

1 293 269 873

(1 244 844 629)

(8 045 328)

(14 399)

(1 252 904 356)

40 365 517

1 009 421 136

219 133 320

20 958 739

1 249 513 195

(734 452 855)

(11 400 000)

(13 717)

(745 866 572

503 646 623

NLDTF Income Statement for the year ended 31 March 2004

2004 2003

Budget  

2004/2005 2005/2006 2006/2007

Income 265 270 50

Grant 24,544 25,924 28,037

Expenditure 20,738

Cost/Disbursement Ratio

2%

98%

10%

90%

15%

85%

NLB UK NDA

Activities

• Regulation– National Lottery– Other Lotteries & Promotional Competitions

• Distribution of NLDTF

Uthingo

NLB

NLDTF

DACharities

DAArt & Culture

DASport

DARDP

DAMisc

22%36

%

22%

5%15%

Weekly transfer

CentralApplications

Office

REGULATORMonitors activities& approves games

NGOsCBOsApplications

Allocation and distribution of funds (average turnaround time is 3 months)

Structure

Operates the National Lottery

Regulating the National Lottery

• Retail Outlets• Payments to the NLDTF• Copyright and Trademarks• Player Relations• Advertising• Security• Systems• Banking and Record Keeping• Payment Security• Ancillary Activities• Directors, Shareholders and Subcontractors• Social Responsibility

Salient Lottery facts for the year ended 31 March 2004

Prize Winners

Millionaires

Rollovers

Highest Jackpot

Highest Prize

Average Number of Players Per Week

Total LOTTO Sales (incl. VAT)

Highest Weekly LOTTO sales

Total Prizes Paid

Total Contribution to NLDTF

43 033 473

89

24

R30 Million

R30 Million

4,1m

R4 094 300 637

R101 031 555

R2 026 713 820

R986 642 353

Contributions (average over 7years)

PRIZES49%

NLDTF30%

RETAILER5%

EXPENSES15%

PROFIT1%

Eastern Cape7% Free State

5%

Gauteng39%

Kw aZulu Natal14%

Mpumalanga6%

North West6%

Northern Cape2%

Limpopo5%

Western Cape16%

Ticket Sales Per Province (Rm)

Uthingo

NLB

NLDTF

DACharities

DAArt & Culture

DASport

DARDP

DAMisc

22%36

%

22%

5%15%

Weekly transfer

CentralApplications

Office

REGULATORMonitors activities& approves games

NGOsCBOsApplications

Allocation and distribution of funds (average turnaround time is 3 months)

Structure

Operates the National Lottery

Charities Focus

• Capacity Building

• Poverty Alleviation

• Community and Residential Programmes for – children

– youth

– women

– the aged

– persons with disabilities

– people affected by / infected with HIV/AIDS

– the terminally ill

– drug abusers

Charities Activity 

YearEndingMarch

No. of Applications

received

No. of Applications

Approved

No. of Applications

Rejected

Pending

2002 2255 849 1406 -

2003 4063 1357 2670 36

2004 3925 856 2302 767

Arts, Culture & Heritage Focus

• Major Projects of National Significance

• Rural Grants for projects designed to serve the community

• Creative Development Grants

• Festivals

• Film Production and Distribution

• Public Art

• Heritage: Architectural, Archaeological, Historical and Indigenous Knowledge Systems.

• Environment

Arts, Culture & Heritage Activity 

 

YearEndingMarch

No. of Applications

received

No. of Applications

Approved

No. of Applications

Rejected

Pending

2002 746 149 597 -

2003 1398 283 1097 18

2004 1838 680 48 1012

Sports Focus

• Capacity building for sports people, managers, administrators and coaches.

• Equipment and kit for teams and clubs.

• Upgrading of existing sporting facilities.

Sports Activity 

YearEnding March

No. of Applications

received

No. of Applications

Approved

No. of Applications

Rejected

Pending

2002 535 247 288 -

2003 1016 408 606 2

2004 1457 209 194 1054 

NLDTF DisbursementsActual Cash Paid 31 March 2004 (Mil)

2001 2002 2003 2004 Total

Charities 0 69.5 174.5 302.7 546.7

Arts 0 25.4 40.1 135.2 200.8

Sport 0 21.6 62.5 149.2 233.5

Miscellaneous 4.1 0 9.6 17.4 31.1

Total 4.1 116.5 286.8 604.6 1012.2

NLDTF CommitmentsGrants made but not paid (Mil)

Charities 483

Arts 386.6

Sport 261.4

Miscellaneous 0

Total 1131

Gambling Research

30.6 % Abstained from buying any

tickets

12.6 % Bought scratch cards

69.1%Bought lotto tickets

Participation

33,3 % were not interested (10,2 % of

total population)

27,6 % experienced a lack of money (8,4 % of

total population)

1,0 % had no access to retail outlets (0,3 % of

total population)

9,9 % do not gamble at all (3,0 % of total

population)

18,0 % advanced religious beliefs (5,5 %

of total population)

Reasons for NOT Participating

8,1 % find it unacceptable

11,0 % do not approve of lottery games personally

but have no objections to

participation by others

80,9 % find it acceptable

Acceptability

30,1 % buy lotto tickets once a week

6,3 % buy lotto tickets once every

two weeks

4,2 % buy lotto tickets less often

6,0 % buy lotto tickets once a

month

53,4 % buy lotto tickets twice a week

Buying Frequency (Lotto)

6,9 % buy scratch cards every day

35,4 % buy scratch cards every week

(once or more)

16,0 % buy scratch cards once every

two weeks

20,1 % buy scratch cards once a month

21,6 % buy scratch cards less often

Buying Frequency (Instants)

30,0 % would pay off a debt/bond

40,4 % would save it

40,9 % would purchase items for basic needs

22,5 % would purchase luxury

items

9,3 % would spend it on

entertainment

7,0 % would spend it on gambling or

buying lottery tickets

Allocation of Winnings

3,2 % spent R151 – R300

16,2 % spent R51 – R150

0,9 % spent R301 – R500

32,9 % spent R21 – R50 0,1 % spent R500 to

R1 000

46,7 % spent less than R20

Expenditure on Lottery

2,4 % spent more than R300

8,9 % spent R51 – R150

29,3 % spent R21 – R50

59,4 % spent less than R20

Expenditure on Instants

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Only a third (33,3 %) of allrespondents made provision intheir budgets for buying lotto

tickets and scratch cards

Those that did not budget (66,7%) confirmed their impulsive

buying behaviour

Household Budget Behaviour

Impact of Big Jackpots

10.7%

89.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

Only one in every ten respondents (10,7 %) reported that lotto

tickets are procured only if big jackpots are at stake

Nine in every ten (89,3 %) are more regular buyers and are not

particularly motivated to buy tickets with big jackpots

Extra Spend on Big Jackpots

1.8

3.6

10.3

67.3

17.0

0 10 20 30 40 50 60 70

Percentage

Five times more

Four times more

Three times more

Twice as much

More but less than twiceas much

8,6 % from other items10,8 % from luxury

items

63,6 % from household

necessities

22,9 % from savings

11,0 % from other entertainment

Expenditure Displacement

56.0%EQUAL

22.4%SAT ONLY

0.0%

20.0%

40.0%

60.0%

Expenditure Sat vs Wed

Influence of Good Causes

34%

YES 60%

More Playing Alternatives

33.5%

YES 66.5 %

ProblemGambling

Extent of Problem Gambling

• Used Gamblers Anonymous 20 Questions

• 1.2% of all Lottery Players exhibit potential

• 0.8% of the Population

• NCSG (2001) study shows 1.74%

• less than 0,5 % of household expenditure is allocated to lottery

Lottery games: 0.42%

Casinos: 0.91%

Horse/sports betting: 0.20%

Propensity to GambleLottery vs Other Modes

49 NUMBERS HAVE EXACTLY THE SAME CHANCE TO BE SELECTED

Yes60.0%

No40.0%

THE CHANCE OF DRAWING THE COMBINATION 1 2 3 4 5 6:

36.5

36.5

27.0

0 10 20 30 40

Percentage

Worse

The same

Better than the chance of draw ing 13 39 23 711 42

CHANCES OF GETTING 4 NUMBERS RIGHT IN THE NEXT DRAW IS:

66.2

33.8

0 10 20 30 40 50 60 70

Percentage

The same as alw ays

Better if you got 3 numbers right in the lastdraw and 2 numbers right in the previous draw

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

Low Cost High IntegrityHighly Skilled StaffResponsible PlayRestricted Market

Statutory ImpedimentsPublic RelationsIsolationLow Throughput

Throughput/ServiceNew Models of FundingAccessibilityPublic RelationsCollaboration

Illegal Lotteries/CompetitionsMoney Laundering/SyndicatesExcessive Play

Planned Impact

• Easier and Faster access to Lottery Funding in all sectors

• More Equitable and Sustainable Distribution

• More Responsible Lottery Participation