Rob Davies. Picture: TREVOR SAMSON
Rob Davies. Picture: TREVOR SAMSON

TRADE and Industry Minister Rob Davies’ decision to award the Lotto licence to Ithuba Holdings was irrational and put the funding of good causes at risk, said competitor Gidani Holdings in the High Court in Pretoria on Tuesday in a bid to overthrow the award of the multi-billion rand licence.

This is the third time Gidani has been to court in its battle to win back the lucrative eight-year Lotto licence.

Last July, Pretoria Judge Neil Tuchten set aside the award of the licence to Ithuba, but gave the minister a month’s grace, during which time Mr Davies re-awarded the licence to Ithuba, while trying to address the concerns Judge Tuchten had raised in his judgment.

On Tuesday, arguing before North Gauteng High Court Judge Billy Mothle, Gidani said the second award was still flawed and the minister’s decision-making process was irrational.

One of Judge Tuchten’s grounds for initially setting aside the licence was that it contained a guarantee by Ithuba of certain minimum payments each year, which would ultimately see R16.8bn being paid to the National Lottery Distribution Trust Fund over the eight-year licence period. Judge Tuchten said the guarantee put Ithuba at risk of insolvency.

When Mr Davies re-awarded the licence he removed the guarantee provision. But Gidani’s counsel, Azhar Bham SC, said in court on Tuesday that this did not address the minister’s original concerns and why he had asked for the guarantee in the first place.

The amount of money collected by the distribution fund lies at the heart of the Lotto model, said Mr Bham. The very purpose of the Lotto is to be a mechanism for collecting additional revenue — to fund good causes that cannot be funded by the fiscus, he said.

During the original tender process, Gidani had offered a higher percentage contribution of its revenue to the distribution fund than Ithuba. But Ithuba had promised that, although its revenue percentage contribution was smaller, the amount of money collected would be greater, because it would bring in, overall, more revenue than Gidani.

The minister had been concerned about Ithuba’s financing model and had therefore asked for the guarantee. While this guarantee was removed from the licence the second time around, Mr Bham said the minister had just "wished away the problem that gave rise to the request for a guarantee" in the first place.

He said when it came to Ithuba’s business plan, the minister had ultimately taken a risk on Ithuba. But it was a risk "so substantial" that it brought into question the rationality of the decision.

Mr Bham also argued that the minister took the decision the day before he received a crucial report into whether Ithuba had the financial resources to run the lottery. Sufficient financial resources is a requirement under the Lotteries Act.

Another of Judge Tuchten’s grounds for setting aside the initial lottery licence was a finding that Ithuba did not have sufficient financial resources.

The case is set down for hearing for the rest of the week. On Wednesday, the court is expected to hear argument for the minister.