South Africa: Lottery Whistleblower Pays a High Price

19 September 2019

But evidence supports his allegations

When National Lotteries Commission official Mzukisi Makatse refused to follow an instruction to sign off on a multimillion-rand grant for a for-profit music festival he set off a chain of events that culminated in his suspension and subsequent dismissal.

Makatse believed that the grant, using the North West non-profit organisation Thato Community Crisis Committee as a conduit, was fronting by the Buyel'Ekhaya Pan African Music Festival in East London to sidestep a Lottery "cooling off period" that would have precluded it being funded two years in a row.

Makatse argued that the grant, which his line manager told him was proactive funding, was initiated by the NLC Board and he had not done the due diligence required by law to sign it off. The concept of proactive funding was introduced in a 2015 amendment to the Lotteries Act and allows the Minister of Trade and Industry, the NLC, or the NLC Board to award a grant without first receiving an application.

Responding to an email on August 4, 2017 instructing him to make the payment, Makatse wrote that the instruction "blurs accountability lines". He added: "How would I be able to explain myself if there was to be a query regarding the said project ... about me authorising payment without having done my own due diligence ... ?"

He received a letter of suspension the same day, in which he was told that there had been "frequent complaints" by colleagues "in relation to your general attitude, behaviour and your overall ability to perform your duties. It was signed by NLC Commissioner Thabang Mampane.

The grant was paid out within days of Makatse's suspension.

A subsequent probe by the NLC's Board into the Buyel'Ekhaya grant found that the allegations about the grant had "not been confirmed," according to a recent letter from DTI Minister Ebrahim Patel to Board chairman Alfred Nevhutanda.

"The DTI internal audit has noted the outcome of the Buyel'Ekhaya investigation and that the allegations have not been confirmed," Patel said in his letter.

Lost job, relationship, home and car

Blowing the whistle on the grant has come at a high personal price to Makatse. After losing his job, he fell into a depression which, he says, played a role in ending his relationship with his fiancée, who is also the mother of his two children. He also lost his car because he could not keep up payments and he now lives in a small room inside a factory belonging to a friend in an industrial area of East London, while he tries to get back onto his feet.

"I lost my job. I lost my career. I could not pay my kids' school fees. I lost my fiancée and I had to move out of my home," said Makatse, a qualified lawyer who has since set up his own practice in East London. "I used to see my kids every day. Now I see them once a week."

Makatse last year also wrote an open letter to President Cyril Ramaphosa entitled "No country for honest men".

In it he wrote how he had been subjected to "some of the worst forms of persecution, abuse and victimisation at my last place of employment just for being a whistle-blower. After an excruciating period of abuse and persecution from its senior officials, the National Lotteries Commission summarily dismissed me without a hearing. They acted in this brazen unlawful manner because I blew the whistle on the corrupt payment by Lotteries Commission's senior officials of over R6 million to a certain organisation that did not qualify to be funded. Instead of doing what any rational organisation would have done under the circumstances - to investigate the allegations and follow the letter of the law - my employment was terminated without the law being followed."

But Makatse has not taken his dismissal lying down and is suing the NLC for R10 million for unlawful termination of his contract which, his lawyers will argue, resulted in past and future loss of income, loss of pension, retirement funds and medical aid, the loss of assets and emotional pain and suffering.

After years of legal back and forth between lawyers, the matter will finally be heard in the East London High Court at the end of October. His lawyers and those of the NLC are due to meet shortly for a pre-trial conference to see if the matter can be resolved without going to trial.

Concerns with the grant

These are the concerns with the grant given to Thato Community Crisis Centre to fund the Buyel'Ekhaya festival:

The festival received funding two years in a row by using a conduit. No Lottery recipient may get funding two years in a row.

Thato, which received the second-year funding is in North West, but the festival is in the Eastern Cape.

Thato was set up for a different purpose from that for which it received the money.

The NLC accounting officer raised concerns about the grant and did not have the opportunity to do due diligence on it.

Precisely how much money was given to the festival remains unclear with NLC documents contradicting the Minister's response in Parliament.

It is unclear how much the NLC gave to the for-profit Buyel'Ekhaya festival, which has a star-studded programme and is offering VIP tickets for R2,000 for 2019.

According to the NLC's 2016 annual report, the festival received R4.8 million that year. It was granted to the festival's owners, Buyambo Cultural Organisation, which registered as a non-profit company in November 2017, according to company records. Its status at the time of the 2016 grant is unclear.

And NLC board minutes dated 2 September 2016 recorded that Buyel'Ekhaya was one of ten music festivals to receive funding from the NLC. The funding came from grants allocated to "aged projects" five years and older that had not been disbursed for a variety of reasons.

In a written response to questions posed in Parliament in 2018, (then) DTI Minister Rob Davies said that "according to the information ... from the NLC" the festival had received R5 million in 2015 and a further R6,054,220 in 2017. Yet the NLC's annual reports state that Buyambo received R4.6-million in 2016 and a further R400,000 in 2017. The second amount may be an unpaid tranche from the 2016 grant.

The festival also received R4.8 million via Thato Community Crisis Centre in 2017 according to the NLC's annual report. Why Thato was chosen as a conduit for the festival or how much it was paid for doing so is not clear. But in terms of NLC regulations, a conduit may only be paid a fee of R150,000 or 5% of the total grant, whichever is the lowest amount.

We were unable to contact the festival organisers. But Tish Loving of Mazwai Communication confirmed to the Mail and Guardian that Buyel'Ekhaya had received R5 million in 2016. Loving said the festival had applied for funding via Thato because of uncertainty about the (then) newly-introduced "cooling off" period.

"Buyel'Ekhaya is an annual flagship event, and we needed to ensure continuance. We looked for an organisation that did not share this predicament to ensure that funding is secured," she told the Mail & Guardian.

Conduits and Lottery grants

An earlier investigation by Gaming the Lottery, an international investigation into the worldwide Lottery industry, revealed how Lottopreneurs were using conduits to access multi-million rand grants.

Details on the application by Thato Community Crisis Committee on behalf of the festival were also causes of concern for Makatse. Thato was registered in 2011 as a North West Province-based NPO involved in "Prevention and education about HIV/AIDS" according to the Department of Social Development's NPO register.

But on its application for funding for the festival Thato stated that its main purpose was: "Promoting the preservation and development of indigenous Pan African culture in the form of music, fashion, arts, craft, song, dance, cuisine, as well as promoting and encouraging skills development through various development initiatives, thus contributing to the effective promotion of national identity."

In its grant application Thato said the festival would benefit 2,500 children, 6,500 youths, 1,500 people living with HIV/AIDS, 6,500 women, 150 adults with disabilities, 800 elderly, 200 unemployed and 150 homeless people. Although the festival is held in East London, Thato said that many of the beneficiaries lived in towns far away from that city.

And, while the festival took place in the Eastern Cape, Thato is based in a province on the opposite side of the country.

Thato's chairperson, Jeanette Viljoen, and secretary, Jacob Mogorotsi, both gave home addresses in Lichtenburg in North West on the funding application. But they gave an address in Gonubie East London for the NPO's offices, a private apartment. When we visited the apartment earlier this week no one was home. But tenants and workers said they were unaware of an NPO ever having occupied any of the apartments

An earlier investigation by the Daily Dispatch also found that the NPO was not operating from the address on the application and, at the time found that the apartment was unoccupied.

Attempts to contact Thato at the two phone numbers on the application were unsuccessful. The landline failed to ring, and a mobile number, which was the same one given for four Thato Board members, went straight to message. There was no response to an SMS with questions sent to the number.

In an interview last year Mogorosi (Thato's board secretary) told the Dispatch that he had little knowledge of the East London address.

He said Thato was "used" by Buyel'Ekhaya for their business plan. "They used us to get money. If I can recall, we only got a little money, a little more than R100,000 from them. I heard that we had an office in East London, but I don't know much about it. We never paid any rent for that East London office," he told the Dispatch.

The NLC failed to respond to detailed emailed questions about the grant and the dismissal of Makatse.

More about National Lotteries Commission

Ebrahim Patel recommends criminal case in Lottery debacle 06 September 2019

DTI washes its hands of lottery scandal 15 August 2019

Lottery-funded rehab centre unfinished after two years 12 August 2019

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