1. NATIONAL INDABA 2015 Breakaway 3: Socio-economic impact of the lottery businesses on the South African economy

2. National Lottery Commission’s funding of, and impact on socio-economic issues One of the objectives of the NLC is to reduce NGO reliance on NLC funding, to promote NGO sustainability, and to encourage NGOs to diversify their income streams, in part, by facilitating capacity building. The NLC also seeks to be able to demonstrate long-term sustainable impact. The figures presented by the NLC are based on site visits conducted by the NLC monitoring and evaluation team and indicate the contribution of NLC funding to community development. The NLC was established in 2000, and by October 2015 (at 17 years of existence) had distributed R19.6 billion to 14 396 non-profit organisations. Of this 9.2 billion went to charities (7070 organisations), 4.7 billion to arts (1529 organisations), and 5 billion to sports (6442 organisations). NLC spend is aligned to the priority areas set out in the National Development Plan (i.e. infrastructure, education, healthcare, social cohesion, unemployment and poverty and inequality).

3. National Lottery Commission’s funding of, and impact on socio-economic issues For the period 2014 to 2015 the NLC reached 6303 beneficiaries through the formal employment creation programme, and 2447 through the temporary job creation programme. The way forward: The NLC seeks to – Engage in more “proactive funding” to increase the success rate of submitted proposals, and to enhance alignment between funded programmes and organisational strategy. This is made possible by the changes in legislation that will now enable the funding of organisations which were previously excluded from funding. – Create financially sustainable projects that will contribute positively to the socio economic challenges faced by South Africa – Move towards a transformational rather than a transactional relationship

4. South Africa: A socio-economic context SA faces major systemic and structural socio economic challenges. Firstly, extremely high levels of inequality (which have increased in the post- apartheid era). The top 10% of income earners receive 57% of overall remuneration. The top 5% earn 40% of overall remuneration. Approximately 70% of the population do not have regular incomes. Regular income provides political stability and the ability to solve problems without state assistance. At 70%, instability and social and economic vulnerability is guaranteed and likely to increase. Inequality prohibits economic growth because the top 10% spend their money outside the country, leaving no market for locally produced goods and no funds in the economy. A second problem is high rates of unemployment. Unemployment will continue increasing as a result of productivity related structural changes in the economy. Long-term strategies are required to respond to this.

5. South Africa: A socio-economic context The third problem that requires long-term strategic intervention is the unavoidable phenomenon of urbanisation. The strategic priorities for the country and for NLC funding should be aligned to respond to these challenges. The NLC cannot directly address the strategic problems, but it can contribute to the development of capacity and capabilities to increase employment and income, and fund programmes that provide social support (welfare/ social development) that is extensive enough to move people entirely out of conditions of poverty.

6. Key issues The following key issues emerged from group discussions and question and answer sessions, and informed the development of the resolutions that follow. – The NLC wants to focus its financial support to promote the sustainability of the organisations to which it extends financial support. – The NLC and its beneficiaries should place more emphasis on demonstrating and measuring the impact of funded projects and programmes. – The NLC is funding driven (i.e. it “pushes funds”), but it has not set itself targets in terms of the nature and number beneficiaries, nor has it developed a coherent strategy (or vision) of the extent of (or the specific) social and economic changes it would like to see in South Africa as a result of its funding. – Funding Early Childhood Development was emphasized by various participants (including the NLC) and recommended as a focus area for NLC funding. – The move from a transactional (handover money) to a transformational (have a relationship with the recipient that includes understanding the recipient’s challenges) approach will facilitate target setting by the NLC. It will also (through research to identify gaps) contribute to capacity building, impact measurement and financial accountability.

7. Key issues – The NLC should continue its education campaigns among intended beneficiaries to facilitate access (primarily through lessening the bureaucratic challenges faced by smaller organisations and improving the technical compliance levels of proposals submitted). – Given high rates of unemployment all funding should be directed towards programmes that can demonstrate sustained or long-term job creation.

8. Resolutions The NLC should fund programmes that have a comprehensive approach to social support or capability development (i.e. which address the causes and symptoms of the socio-economic context). An example includes a programme designed to respond to the needs of vulnerable children, that also focusses on support to the families, employment creation, facilitating access to education etc. The NLC should continue to prioritize funding Early Childhood Development initiatives. The NLC should prioritize support to vulnerable children (inclusive of all sub-categories). All funded programmes should be relevant to the African context. The is a need for the NLC to set targets, develop indicators, and implement monitoring and evaluation processes to measure the outcomes and impacts of the use of its funds. The same increased emphasis on monitoring and evaluation and impact should be extended to beneficiaries through the application process and subsequent interaction. NLC funding should be accompanied (especially when new or smaller organisations are funded) by capacity building initiatives to improve resource use, the sustainability of the organisations, and the impact of programmes.

9. Resolutions NLC funding should be tied to job creation. Proposals and funded organisations should demonstrate the number of permanent jobs created at market-related salaries. Job creation initiatives address the challenges of poverty and inequality in South Africa. This can also be extended to include entrepreneurship development. The NLC should keep a database of successes and failures and use the data to inform subsequent funding strategies, the selection of beneficiaries, and to enhance programme performance. Research and data generated by programmes can ultimately be used to direct government policy and implementation effectiveness, thereby addressing the systemic problems within the South African economy.