The National Lotteries Commission (NLC) has cracked down on fees running into tens of millions of rands paid to lawyers, including fees paid in matters involving the Minister of Trade, Industry and Competition, and the media.

The NLC’s legal fees in the 2021/2022 financial year skyrocketed to R78-million, nearly twice as much as the previous year, according to the Auditor-General.

The NLC has also cancelled “irregular” Information and Communications Technology (ICT) contracts, new board chairman Barney Pityana told Parliament’s Trade, Industry and Competition portfolio committee last month.

“All irregular ICT and legal contracts were terminated on 16 September 2022,” Pityana told MPs.

And, responding last week to a written parliamentary question by Democratic Alliance MP Mat Cuthbert, Minister of Trade, Industry and Competition Ebrahim Patel said he had asked the NLC for details of expenses incurred for litigation or legal advice involving himself or any politician, media house or journalist, and the South African National Editors’ Forum (Sanef).

The background to this, and the steps taken by the NLC to clamp down on exorbitant legal expenses, are outlined in a recent memo to the NLC’s management from acting Commissioner Lionel October. October wrote that since the Auditor-General had declared payments to the NLC’s legal panel to be “irregular expenditure”, management should stop briefing the panel of lawyers on new or continuing matters. A new “competitive bidding process” for legal services … if still required” would be initiated, he added.

Auditor-General’s damning report

The Auditor-General noted in a confidential management report to the NLC on its findings for the 2021/2022 financial year, that: “As per the analysis of the financial expenditure for the NLC, we noted that legal fees increased by R37-million, which represents a 91% increase from the prior year,”. Legal fees had amounted to R78-million, which made up 31% of all goods and services that were procured, the Auditor-General said.

Based on a sample of legal fees paid out by the NLC, the Auditor-General found that 37% of these fees were for “disciplinary hearings” and “CCMA cases.” The next highest category, 30%, was for “legal opinion on corporate governance and review of regulation”.

The Auditor-General also highlighted issues with the NLC’s information technology spending in its management report.

“The status of information and communications technology (ICT) audit outcomes remain stagnant as they show no improvement in addressing the previous year’s audit findings relating to user access management controls.

Expensive legal battles

GroundUp has previously reported on the NLC’s legal expenditure, including litigation against former staff. Included in this earlier expenditure was almost R1-million spent on unsuccessful legal attempts to stop the publication of information about recipients of Lottery grants, including how much they had received.

At least R720,000 was spent on a failed legal battle with Ebrahim Patel, the Minister of Trade, Industry and Competition. The NLC had sent the minister a letter of demand giving him a 24-hour deadline to hand over a dossier with details of an investigation commissioned by Patel. A judge dismissed an application to have the appointment of the investigators illegal.

The NLC also spent R5.7-million in a legal battle with a former employee. Mzukisi Makatse, who was suspended and then dismissed after he was accused of insubordination when he refused to sign off on a dodgy 2017 grant for a music festival in East London.

Ndobela Lamola, Justice Minister Ronald Lamola’s former law firm, which acted against Makatse, earned R19-million over four years for legal work for the NLC.

Minister demands answers

In his answer to Cuthbert’s questions, Patel made it clear that he was not satisfied with the NLC’s response to his request for information, and said he had requested additional details about “specific matters covered in legal briefs.”

He said he had asked the NLC to furnish details of “the total legal and consultancy costs of the various matters involving the Ministry, “including but not limited to”:

• litigation on the appointment of an acting chairperson;
• litigation on disclosure of information and appointment of forensic investigators;
• litigation on the appointment of an NLC board;
• legal or consultancy advice sought on the powers of Minister or the Department of Trade, Industry and Competition relating to the previous NLC board, including its removal;
• legal or consultancy advice sought on the disclosure of beneficiary information;
• legal or consultancy advice sought on the appointment of forensic firm Nexia SAB&T by the DTIC and the appointment of the SIU [Special Investigations Unit] by the President;
• media consultancy or lobbying costs involving matters relating to the Ministry or the DTIC;
• legal or consultancy cost in relation to disciplinary proceedings commenced by the Minister against members of the Board;
• legal and consultancy costs of the various matters involving any member of Parliament; and
• legal and consultancy costs of the various matters involving any journalist or media house or Sanef.

Patel said: “The new board is currently reviewing the legal costs of the NLC. I will request the board to consider that the review should cover whether legal costs are justified; and to adjust future NLC budgets based on the outcome of the review.”

He said he would also ask for a review of work done by NLC’s legal unit, which has seven members of staff. DM

First published by GroundUp.