Thousands of small shop owners throughout South Africa are bearing the brunt of the national lottery freeze, with some reporting a dramatic loss of Saturday turnover and earnings.
“It is now the second Saturday with no Lotto and my turnover on those two Saturdays has dropped by as much as 50%,” says Jan Snyder, who runs Pasty’s, a convenience store in Durbanville.
“The commission I earned on the Lotto and scratchcards was enough to pay for one of my staff members every month. If we end up without the Lotto for much longer, we’ll have no choice but to let a staff member go,” says Snyder.
Shop owners will probably try to hold on to staff until the end of this month, the deadline promised by the department of trade and industry for lifting the freeze precipitated by the its controversial appointment of the Gidani Consortium to run the lottery in the place of Uthingo.
But there is little doubt that the businesses of thousands of marginal shop owners have been placed under pressure by the freeze. At least some of the pressure will be passed on to staff members, many of them casual, brought in by shop owners to take care of the peaks in customer traffic on Wednesday and Saturday evenings, before each of the biweekly lottery draws.
According to Shenanda Janse van Rensburg of Uthingo, 8 200 retail outlets in South Africa sold Lotto tickets. Of these, about 5 000 are independent retailers — owner-managed shops that do not belong to a chain.
Roelof Venter, group marketing director for Spar, agreed that the Lotto freeze is affecting the profitability of small retailers. The smaller they are, the harder it is for them to deal with the blow, he said.
In Snyder’s case, the Lotto added about R12 000 a week to his turnÂover. Of this, he banked 5% for ticket sales and 1% of cash pay outs. More importantly, however, were the side purchases made by customers standing in the lotto queue. Snyder estimates that about one in five Lotto punters bought something extra, bringing in a further R7 000’s worth of turnover per week.
Even if the margins made on Lotto sales are small, “going cold turkey” on thousands of rands of turnover is a big blow to the cash flow of a small shop, says Snyder.
Apart from the disruption caused by the freeze, shop owners have already sent staff members to Gidani for training on their new, smaller lottery machines. If Gidani does not survive the current round of selecting a Lotto contractor, the time and money spent on staff training will have been wasted.
Interestingly, shop owners would prefer Gidani to take over the lottery, because the consortium promises to pay them 6% commission on sales, and 3% on prize pay outs, as opposed to Uthingo’s 5% and 1%. Their system also saves banking costs for shop owners. This indicates that small- business support must have been at least part of the department of trade and industry’s evaluation of bidders for the lottery licence.
But the department, the guardian of small business in South Africa as well as overseer of the lottery, confirmed this week that it did not have an emergency plan in place to help small shop owners tide over the Lotto freeze.
Department Director General Tshediso Matona said, because Uthingo’s court application against the appointment of Gidani took the department by surprise, it had not planned for such an eventuality.
“In contractual terms, the real responsibility [towards retailers] is with Uthingo. We have no obligation, other than, of course, in terms of policy for promoting small businesses,” said Matona.
The court’s decision to set aside the appointment of Gidani is “highly appealable”, but the department had decided that, rather than get involved in a lengthy legal battle, it would focus on re-evaluating the bids, he said. “All our efforts are aimed at restoring the Lotto as soon as possible.”
The re-evaluation is a large undertaking, done through the National Lotteries Board, and involves “examining every single corner” of each of the bidders and their international partners, said Matona. But he believed that the end of the month was an “achievable timeline”. “We did not set ourselves a precise, to-the-ultimate-second target of the end of the month. We said ‘around the end of the month’. If we miss it, I don’t expect it would be a matter of weeks. At the most, it could be within a week [past the deadline].”
Matona said that the Lotteries Act does not allow the minister to extend Uthingo’s license temporarily, a step that would have exposed the department to a “vicious circle of legal challenges and counter challenges”.
Asked if the department would consider a rescue plan for small shops if the Lotto freeze continued for months, Matona said: “Normally, we don’t have rescue plans of that nature in the department. We would look at an industry, look at what the causes of its difficulty are and see whether current instruments — be they incentives or further capitalisation — can be leveraged. This is a small industry compared with the industries that we’re working with as a department.”