The ongoing lottery debacle

The press has been full of stories about the lottery in recent weeks. Love it or hate it, millions of South Africans queued to buy their ticket every week - and millions of rand flowed to the lottery coffers - some to be used for charitable causes. (Cl

Unfortunately, the lottery was suspended at the end of March 2007 due to problems with the issuing of its new operating licence. The courts ruled that the tender process was compromised and that the consortium which had been awarded the license not be allowed to take over lottery operations.

The tender process for the awarding of a licence to operate the lottery was riddled with inconsistencies and accusations of improper selection processes. Questions had been asked about the political affiliations of individuals, and the credibility of international partners, linked to the winning consortium. Gidani won the tender and would have taken over from the current lottery operator, Uthingo Management.

For now, the lottery will remain suspended until a new operator can be appointed. With so much money at stake, and so many legal options available to the rejected licence applicants, it is likely this matter will be tied up in court for some time to come.

Another egomaniacal government-appointed regulator

The National Lotteries Board was established in terms of the National Lotteries Act of 1997. Board functions are clearly stated in Section 10 of the legislation. Amongst their responsibilities is to ensure that "the National Lottery and sports pools are conducted with all due propriety and strictly in accordance with the Constitution, this Act, all other applicable law and the licence for the National Lottery together with any agreement pertaining to that licence."

In their obsession to rather focus on policing the entire financial services industry, the National Lotteries Board appears to have neglected their primary responsibility to ensure smooth and efficient operation of the lottery.

The result is that the national lottery has ground to a screeching halt - while the National Lottery Board focuses instead on a rather pointless legal campaign against First National Bank (FNB).

The board has already obtained a Pretoria High Court ruling to stop FNB from operating this fund.

Investors win either way

We don't believe that FNB's Million-a-Month account offers a viable 'savings' or 'investment' mechanism. It is a competition which offers a tiny chance of reward. People who channel their funds into such accounts are losing money in real terms.

A recent ruling by the Advertising Standards Authority confirms our view. They have banned an FNB television advert which uses the term 'invest' in relation to the Million-a-Month account. In ruling on a complaint brought to them by a number of television viewers, the ASA said "the advertising is misleading and must be withdrawn immediately and never used again."

We doubt investors will be any worse off if FNB is forced to terminate this product. And, on the whole, individual South Africans will probably be better off if the lottery does not return either.

For now, the FNB lottery is still up and running

While the National Lottery Board has made every attempt to stop FNB in its tracks, the Million-a-Month scheme remains in operation. The bank has petitioned the Supreme Court of Appeal for leave to appeal Decembers Pretoria High Court ruling.

The bank issued the following statement: "FNB has full confidence in the SCA's ruling on this matter as the bank firmly argues that the account does not constitute a lottery and that it offers an alternative incentive to motivate people to save."

Fanews Online believes that the classification of the bank's Million-a-Month account as a lottery is a trifle harsh. At the same time, FNB should be ashamed of marketing this product as an inducement to save. There is little justice in claiming that an account offering a near zero percent return constitutes saving. Anyone who places money in such an account is effectively losing money at the rate of inflation.

Editor's thoughts:
There is no such thing as a 'getting rich quick'. Despite this universal truth, there is a proliferation of casinos and competitions which convince South Africans to part with their hard earned money in return for the slimmest chance at instant wealth. Why are we prepared to 'gamble' our hard earned money in such an irresponsible manner? Send your comments to [email protected] .