The National Lotteries Commission (NLC) has been advised by a forensic investigation to reclaim hundreds of thousands of rands in Lottery funds paid to ProEthics, a company hired for ethics advisory services. ProEthics is one of several entities named in a report by TSU Investigations Services, released in October 2023. This report uncovered procurement irregularities involving hundreds of millions of rands through documented instances of fraud, corruption, and circumvention of procurement processes.
Commissioned by the NLC, the report has contributed to disciplinary proceedings against several staff members. The TSU investigation revealed that ProEthics charged management fees to the NLC that it wasn’t entitled to and over-invoiced for third-party payments while keeping the excess. Furthermore, the firm failed to provide receipts for advance payments meant for corporate gifts. As legal action was being prepared against ProEthics and other entities named in the report, President Cyril Ramaphosa signed an amendment to his 2020 Presidential Proclamation.
This amendment authorized the Special Investigating Unit (SIU) to probe procurement issues at the NLC, a power previously restricted to cases involving questionable grant funding. The proclamation specifically targets 21 cases, including ProEthics, many of which the TSU was already investigating. Lesedi Bohang, the NLC’s Executive Legal Manager, stated, “Just when our legal team was ready to begin proceedings against ProEthics, we learned about the extended proclamation, forcing us to halt our legal actions since it takes precedence.
ProEthics was part of the NLC’s Corporate Governance Advisors panel from November 2019 to November 2022, during a time when the NLC faced intense scrutiny over corruption in lottery grant funding. The panel’s expenditure was capped at R7 million over three years.
However, between February 2019 and August 2022, the NLC paid ProEthics nearly R28.5 million. Over R10 million of this was intended for third-party service providers selected by then NLC Company Secretary Nompumalelo Nene or her subordinates, bypassing competitive processes. ProEthics either paid or was supposed to pay over R8.45 million to these providers between December 2020 and November 2021.
This practice was previously described as “payment laundering,” though the press ombudsman later categorized it as “circumventing procurement processes.” The TSU report also led to disciplinary action against Nene, who faced 143 charges and resigned after earning almost R6 million while suspended. Of these charges, 44 were related to the NLC’s dealings with ProEthics, categorized as “gross misconduct in the appointment of ProEthics for specific projects and irregular payments to third-party service providers.”
The TSU recommended that the NLC recover several payments made to ProEthics, including: A management fee of R207,377 was paid for the International Fraud Awareness Week, which falls outside the agreed service scope. There is a R96,348 variance between funds received by ProEthics for third-party services (R2,073,774 including VAT) and actual payments made (R1,977,426). A further R340,017 management fee was paid for the 4th Quarter Ethics Intervention, also outside the service agreement.
An advance of R64,000 for corporate gifts should be reclaimed if no supporting documentation is provided. R594,000 was paid to Ethics Monitor for an Ethics Risk Assessment facilitated by ProEthics, suggesting that ProEthics executed the service. The report also recommended reviewing other events administered by ProEthics, such as “Conflict of Interest Vetting,” “Hosting of virtual conferences in Sandton,” “Media monitoring,” and “Mental Health Day Conference,” for possible irregular administration fees.
ProEthics facilitated payments to participants at the 2021 International Fraud Awareness Conference. Director Janette Minnaar invoiced the NLC for nearly R90,000 for her participation and over R51,000 for developing NLC-specific ethics communication content. Other participants paid by ProEthics included: African Governance Solutions (Kevin Malunga): R360,000, unorthodox Media (Aldrin Sampear): R100,000, mosilo Mothebu: R330,000 for speaking fees, book purchases, and signing books.
