South Africa: The House Shouldn't Always Win

Last Updated: 3 February 2012
Article by Michal Johnson and Jessica Griffiths

Without Prejudice December 2011

The National Lottery Board (NLB) holds in trust approximately R6 billion which it has accumulated over the last three years. Given that the NLB is now declining applications from charitable institutions based on "budgetary constraints", the duties of the NLB and their fulfilment need to be examined.

The National Lotteries Board Act 57 of 1997 established the NLB as a juristic person. In terms of s14(2)(e), certain amounts of the money raised by the National Lottery must be paid into the National Lottery Distribution Trust Fund (NLDTF), where it is held in trust for the purpose of distribution to a range of charitable projects.

The Act dictates that set percentages must be allocated to charitable institutions or other institutions promoting sport and recreation, arts and culture and miscellaneous other projects, which are intended to develop the community or uplift the poor. s28(1), s29(1) and s30(1) all emphasise that allocations of funding should be distributed "fairly and equitably amongst all persons who meet the prescribed requirements".

In order to give effect to this, the NLB is required to set up "Distribution Agencies" to consider applications for allocations by charitable institutions. Prior to the publication of regulations by the Minister of Trade and Industry, the Distribution Agencies developed and applied their own guidelines, often rigidly.

During August 2010, the Western Cape High Court was called upon to review decisions taken by the NLB to reject a number of applications for funding. These were rejected on the basis that they had not complied with the technical guidelines established by the Agencies.

The High Court, in adjudicating the matter of South African Education and Environment Project and Another v National Lotteries Board and Others, held that these guidelines were not prepared and promulgated in accordance with the Act and as such any attempt to interpret them as peremptory rules would be ultra vires and unlawful. While the guidelines were useful tools for the Agencies in the uniform consideration of applications, they could not constitute binding regulations. The court held that the guidelines served to restrict the power of the Agencies to distribute as much of the funds as possible in accordance with its mandate and the object of the legislation. The decisions were therefore set aside and the NLB was ordered to reconsider them.

The presiding judge also indicated that he had reservations about the effective functioning of the NLB. He expressed his dissatisfaction with the fact that charitable institutions had to wait so long for access to be granted to funds they were prevented from delivering much needed social services. The NLB lodged an appeal.

Following the initiation of the case (but before judgment was granted), two sets of regulations came into force during July 2010. The first of these was the Regulations Relating to the Allocation of Money in National Lottery Distribution Trust Fund. Paragraph 3 of the regulations sets out the requirements to qualify for funding. These requirements include that the entity must be a juristic person established for charitable, benevolent or philanthropic purposes, the entity's income and property cannot be distributed to its members except as reasonable compensation for services given, and the project must be financially viable and must produce significant results which would not otherwise have occurred.

On that same date, the second set of regulations was published: the Direction and Procedure for the Distribution Agencies in relation to the Distribution of Funds from the National Lottery Distribution Trust Fund.

Part I(2) of the latter regulations requires that the Agencies prioritise developmental needs, enhancement of social and moral responsibility, as well as economic viability of programmes designed to advance rural, underprivileged or poor communities. Further, at least 50% of the total allocation available for distribution to charitable institutions should be allocated to areas including training and infrastructure for the elderly, sick or vulnerable persons, orphans, and disabled and rehabilitation homes, and the provision of educational facilities, adult literacy programmes and mentoring skills development.

Part II sets out the procedure for applications and the adjudication procedures to be followed by the Agencies. The Agency may grant the application with or without conditions or reject the application and is required to advise the applicant within 30 days of its decision. If the application is declined the Agency is also required to furnish its reasons.

Despite the regulations coming into force more than a year ago, it has become apparent that, in practice, applications are not being addressed within the allotted time period and some organisations are waiting years for responses to their applications. Given that these organisations rely on funding for their continued operation, many may be forced to fold as a result of the NLDTF's failure to respond.

Contrary to what has been reported, most charitable organisations do not rely solely on funding received from the NLB but rather to cover only a percentage of their operating costs. We have seen in practice that when applying for a small amount, some applicants have been advised by the NLB to apply for their full budgetary shortfall only for the application to be declined altogether at a later stage.

In September the Supreme Court of Appeal heard the appeal filed by the NLB against the decision taken in the high court. In the matter of National Lotteries Board and Others v South African Education and Environment Project and Another, the SCA dismissed the NLB's appeal on the basis that the High Court was correct to find that the guidelines established by the Distributing Agencies should not have been applied in such a way as to prevent the NLB from achieving its legislative mandate. The court noted that the NLB has failed to meet its target of allocating the entire balance of the funds held in the NLDTF. The result is that there has been massive under-expenditure of public money, which it is required to allocate to charitable institutions.

Cachalia JA reiterated that the NLB holds public funds in trust for the sole purpose of allocating them to deserving institutions. The funds do not belong to the NLB to be distributed as and when it sees fit. The NLB is required to ensure that the entire balance of these funds is distributed to all institutions that make application and meet the necessary requirements.

Writing the majority judgment, he emphasised that there is an administrative duty on the Agencies to consider and justify every decision on an application individually. Where guidelines are applied too rigidly, it amounts either to a failure to exercise discretion or to an improper/unlawful exercise of discretion. The court stated that the rigid application of the guidelines is one of the main reasons for the NLB's under-expenditure.

In light of the Act, the regulations and the case law, it is evident that the NLB has a duty to distribute the funds held in trust equitably among all applicants that meet the criteria, and that each application must be properly considered against the requirements. It no longer befalls the NLB to make its own guidelines and employ them with an unfettered discretion.

Applicants who rely on such funding do have some right of recourse against the NLB, but this is only once the application has been declined or ignored. The applicant would be entitled to lodge an appeal with the NLB for the reconsideration of its application and thereafter would be able to approach the courts for judicial review of administrative action. However, as this can only occur once the application has been declined or ignored, and given that court applications can be so lengthy, this would not assist an organisation that is in desperate need of the funding.

Charitable organisations seeking funding should be in a position to apply for it without fear that a delayed response or unreasonable decline is inevitable. Every applicant who meets the regulatory criteria should be given a portion of the funding. In cases such as these, organisations should not have to gamble for funds in a situation where "the house" always wins.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions