The South African Reserve Bank (Sarb) is probing the activities of a UK-based company in South Africa which is selling UK National Lottery tickets to South Africans in a possible contravention of the country's exchange control regulations.
While South Africa is gearing up for the biggest money sweepstakes in its history, when the national lottery is launched on Thursday, UK-based company Global Logistics is already marketing the UK version of the lottery on the South African market with prizes of up to £33-million (R333,3-million).
Lotto, South Africa's first national lottery, will offer cash prizes ranging from R25 to "a couple of millions of rand", depending on the size of the kitty, and will have its first televised draw on March 11.
Meanwhile Global Logistics is distributing pamphlets advertising the UK National Lottery and is inviting South Africans to play. The UK National Lottery is run by license holders Camelot and is known to be the richest in Europe with big prize payouts, at just £4 per entry (about R40).
Players, using their credit cards, can enter their six numbers for the draw by telephone, email, fax or the Internet's World Wide Web.
On Monday, Bruce Brand, head of the SARB's exchange control department, said there was no way that South Africans could play an overseas lottery because of Exchange Control Regulations.
Brand said the only "permissible" overseas transactions were for import activities.
He said that while the Sarb was investigating the activities of Global Logistics in South Africa, "it is difficult because they are based overseas".
Brand said: "It is possible that there are South Africans who are ducking the system and playing and winning the UK lottery. It is like speeding with a motorcar. If you don't get caught, you get away."
He said that he did not think that the competition of overseas lotteries posed a serious threat to the SA National Lottery.
In a precedent-setting case involving the Australian Lottery in July last year, the Sarb advised the Australians to withdraw an advertisement wooing South Africans to play their lottery.
The Australian lottery sought the advice of the Advertising Standards Authority (ASA) on the following questions after it ran an advertisement about its national lottery being run in South Africa:
- Are South Africans allowed to to participate in foreign lotteries?
- Is it legal for foreign lotteries to advertise their activities in SA?
- The prize money is in American dollars. What are the consequences for a South African who participates in this lottery?
The ASA referred these concerns to Sarb which responded: "In terms of Exchange Control Regulations, South African residents are not permitted to participate in overseas lotteries and the arrangements whereby South Africans are offered the facility to pay in South African Rand are therefore irregular and will not be allowed.
"Similarly, payment by means of any of the credit cards mentioned in the advertisement will not be sanctioned as the Reserve Bank has informed the credit card companies accordingly."
After the clarification from the Reserve Bank, the advertiser acting on behalf of the Australians voluntarily undertook to withdraw the advertisement and "never to place it in South Africa again".
However, Martin Ryman, the chief executive officer for Global Logistics, which facilitates PlayUKLottery on the Internet, said that they were not catering exclusively for a South African market.
Ryman said what distinguished their case from the Australians was that players all over the world used the Internet's web pages and paid in British pounds to play the UK Lottery.
"Our site, www.playuklottery.com, has been running since last year and we have had thousands of South African players. We have never had a problem with paying out winnings to South African players either," he said. "It is not illegal for South Africans to play and win the UK Lottery if they are, for instance, visiting London."
He said that the winner chose how and in which currency he would receive his payment.
Ryman said that many South African players had queried the Reserve Bank rules on the implications of playing and winning an overseas lottery.
He conceded that he had no answers about the laws and said he doubted whether the Sarb knew how to control transactions on the World Wide Web.
Global Logistics is not the only entity offering cash prizes to South Africans on the Internet.