SIU investigation into lottery corruption hamstrung by red tape

Narrow terms of the original proclamation authorising the Special Investigating Unit (SIU) to investigate dodgy procurement at the National Lotteries Commission has hamstrung its investigations, despite the SIU having applied for an amendment to the terms 15 months ago. Photo: Steve Kretzmann

• The Special Investigating Unit (SIU) wants to investigate potentially massive fraud, corruption and circumvention of “procurement processes” under the previous National Lotteries Commission leadership.
• But the narrow terms of the original proclamation authorising it to only investigate dodgy lottery grants has hamstrung the SIU, despite it having applied for an amendment to its terms 15 months ago.
• An Institute for Security Studies report has found the Presidential Proclamation process is mired in red tape and these delays have frustrated the recovery of funds.
• The SIU is owed R1-billion by state entities.

Almost 15 months after the Special Investigating Unit applied for an amendment to the Presidential Proclamation authorising it to probe lottery corruption, the Department of Justice and Constitutional Development is yet to submit its recommendation to President Cyril Ramaphosa on whether to grant it.

The original October 2020 proclamation only allowed the Special Investigating Unit (SIU) to investigate grants made by the National Lotteries Commission (NLC) between 1 January 2014 and 7 November 2020.

Since then, several independent audits commissioned by the NLC have also uncovered fraud, corruption, and extensive circumvention of “procurement processes” running into hundreds of millions of rand.

But the narrow terms of the original proclamation have left the SIU hamstrung and unable to investigate the NLC procurement and appointments of service providers. The NLC is also unable to investigate potentially fraudulent or corrupt grants that fall outside the window of the 2020 proclamation.

A backlog of applications for SIU proclamations built up during the tenure of former Department of Justice and Constitutional Development (DOJCD) Minister Thembi Simelani, who was moved to the Human Settlements portfolio after she was exposed for “dubious” dealings involving VBS Bank.

A flurry of new proclamations has been granted this year following the appointment of her replacement, Mmamoloko Kubayi, in December last year.

But the SIU’s NLC application, submitted in April last year, has been gathering dust.

Red tape

An Institute for Security Studies (ISS) report on the future of the SIU, released last week, found that the proclamation process is mired in red tape. The resulting delays at the DOJCD “have sometimes amounted to several years”, according to the ISS.

“This has frustrated the recovery of funds, which can be hidden or dissipate quickly,” the ISS says. “In turn, this might delay the referral of cases to the NPA, resulting in the loss of evidence and slow down disciplinary processes for state employees”.

The ISS has recommended that SIU motivations for presidential proclamations should rather be handled by the Presidency.

Terrence Manase, spokesperson for the justice ministry, told GroundUp last week that the SIU’s NLC amendment application has not yet reached the minister’s office.

“The ministry acknowledges the seriousness of the matter and remains committed to ensuring that all allegations of corruption are addressed appropriately, within the confines of the law,” he said.

GroundUp reported in 2023 that the SIU was planning to ask for an extension of its mandate. It was submitted in April 2024.

Mashudu Netshikwera, who heads up the SIU’s team investigating the NLC, told Parliament in May that the application for an extension was submitted almost a year earlier in April 2024.

DOJCD spokesperson Kgalalelo Masibi told GroundUp that “the department is currently attending the request for an amendment”.

She said the DOJCD had “raised certain concerns with the SIU, which the SIU has since addressed. The department has completed its assessment of the request and will be advising the minister and the Presidency in due course”.

Millions in dodgy procurement deals await SIU

The findings of the independent investigations commissioned by the NLC’s new board and executive were key in formulating disciplinary charges against implicated staff, including NLC chief operating officer Phillemon Letwaba and former NLC company secretary Nompumelelo Nene.

Among the issues flagged in damning reports by the Auditor-General and the independent auditors were irregular expenditure on information technology and sky-high spending on lawyers. The NLC struggled to answer a written parliamentary question about its expenditure on legal fees, as key files with details of multimillion-rand litigation expenditure have vanished.

Another area of concern is the tens of millions of rand in spending on media and communications, with a disproportionate amount paid to the Sunday World newspaper.

Millions of rand in dodgy payments were also made to NLC service providers, including a nearly R500,000 payment to service provider Neo Consulting to investigate a computer hack that never happened.

ProEthics, which advised the NLC on ethics when the organisation was overwhelmed by rampant corruption, was used to circumvent procurement processes. The NLC paid ProEthics over R28.4-million. The company, in turn, said it paid other service providers, which it had no part in appointing, on the NLC’s instructions.

Bureaucracy not required by SIU Act

The Institute for Security Studies (ISS) report says the SIU is “unnecessarily hampered” by delays in the administrative processing of presidential proclamations.

First, the SIU had to assess complaints it received “against the requirements of the SIU Act to determine whether it had jurisdiction”.

If the complaint met these criteria, the SIU must then “submit a motivation for a proclamation to the President via the DOJCD.

“A Directorate in the DOJCD again assesses the motivation to see whether it meets jurisdictional requirements and is feasible,” the ISS report found.

“If so, the Directorate sends it to the Director-General of the DOJCD, who may escalate it to the Deputy Minister, the Minister, and ultimately the President for approval.”

These delays “frustrate the purpose of the SIU Act, which is to provide for the swift recovery of state funds. The process of approvals by different DOJCD officials has evolved through a series of executive decisions and is not required by the SIU Act.”

SIU owed R1-billion

Since 2001, 300 Presidential proclamations have been issued, the ISS said. “Of these, 164 (55%) have been issued since 2018, during President Cyril Ramaphosa’s administration. In the 2024/25 financial year alone, 49 proclamations were issued. Five proclamations have been reported to date in the current year.”

The SIU gets its funding from two sources: a budget from the DOJCD, and it can also bill the institutions it investigates for the services provided and retain these funds.

But many of its clients, which are all state institutions, were not paying for the SIU’s services, as they are required to do.

As of March 2024, the SIU had a debt book exceeding R1-billion owed by 272 state institutions, the ISS found. This led to the SIU launching Project Khokela in October 2024, with letters of demand being issued to these institutions for prompt debt settlement.

“Given the high number of new proclamations, the SIU is likely to face financial strain over the next 24 months. If unresolved, its financial reserves could be depleted in the foreseeable future.”

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