The Terrible NLA-KGL Deal: NCA directs telecos to release data on KGL transactions

The National Communications Authority (NCA) has directed all telecommunications companies in Ghana to provide the National Lottery Authority (NLA) with information on all financial transactions related to KGL Technology’s operation of NLA’s 5/90 lottery.

MTN, Airtel Tigo (AT) and Telecel (Vodafone) are to furnish the NLA with records of funds that passed through the *590# short code, the Director-General of NLA, Mohammed Abdul-Salam, has told The Fourth Estate in an interview.

The NCA’s directive comes on the heels of investigations by The Fourth Estate, which prompted the NLA to write to KGL, the telecom companies and the NCA to reconcile accounts that have been unavailable to the NLA since 2019, when the NLA-KGL deal became operational.

As the issuer and regulator of the USSD short codes, the NCA’s directive is aimed at ensuring that the telecom companies comply with NLA’s request.

Mr. Abdul-Salam explained that the NCA’s directive also aims to prevent the telecommunication companies from giving the excuse that they cannot provide the data requested by the NLA without the authorization of their regulator.

“The NCA’s letter is to reinforce the position that they needed to make that data available to us,” Mr. Abdul- Salam told The Fourth Estate.

Investigations by The Fourth Estate had revealed that the state was losing revenue through a questionable series of licensing contracts that were signed between the NLA and KGL under the previous government. The contracts essentially handed over the NLA’s most lucrative business to KGL for what amounts to a pittance in commercial terms.

In 2024 for example, KGL made GHC3 billion in revenue from operating the NLA’s 5/90 lottery online via USSD. Per the licence granted by NLA, KGL was to pay a paltry GHC 157.6 million in total as license fees and contributions to the Good Causes Foundation, the corporate social responsibility unit of the NLA.

A 15-year exclusive license that was granted KGL mandates that the NLA and KGL shall conduct weekly reconciliation of revenues.

Paragraph 17 of the Exclusive Licence granted to KGL states: “The parties shall conduct weekly reconciliations on transactions (pre- and post-draw, revenue, wins, prize and prize payments) during the term of this licence. For the avoidance of doubt, the reconciliation is to ensure that there are no discrepancies in the financial records of the NLA and the Licensee (KGL), pursuant to Section 51 of Act 722.”

Despite this clear provision requiring reconciliations every week, such weekly reconciliations have never been carried out since the licence was granted to KGL in early 2024. As a result of the disregard for the weekly reconciliations, the NLA does not even know how much sales and revenue KGL is making from the sale of its 5/90 lottery.

When NLA wrote to demand the records from KGL, their reply was to request that the reconciliation be deferred to 2026. But NLA refused, insisting that the terms of the contract must be complied with. KGL then wrote to plead to be given additional time to submit the data.   

Background

In 2019, the then Director-General of the NLA, Kofi Osei Ameyaw, signed a controversial three-year contract with KGL Technology Limited to operate the NLA’s 5/90 lottery online via a USSD code. Upon expiration of the contract in 2022, Samuel Awuku (who succeeded Osei Ameyaw as director general) and his board renewed the contract with KGL for a 10-year period.

But before the expiration of the 10 years, in 2024, the then Director-General of the NLA, Mr.  Awuku and his Board, chaired by Gary Nimako Marfo, signed a new contract with KGL, granting the company exclusive rights to operate the 5/90 lottery online via USSD. This new contract is for 15 years (from 2024 to 2039) with an automatic renewal for another five years.

Mr. Awuku and his board also signed two other contracts for KGL to operate the 5/90 online lottery in Nigeria and Cote d’Ivoire. These two contracts were for 10 years each.

The Fourth Estate’s investigations revealed that annual revenue to KGL from the NLA’s 5/90 online lottery in 2024 alone was over GHC3 billion or over GHC250 million each month.

In an interview with the Group Chairman of KGL, Alex Apau Dadey, he confirmed to The Fourth Estate that the company’s 2024 revenue from the NLA’s 5/90 online lottery was over GHC3 billion.

Under the terms of the deal, however, KGL was supposed to pay a total of just GHC157.6 million to NLA in 2024, for all three contracts in Ghana, Nigeria, and Côte d’Ivoire. This amount was to be increased annually by just 10% each year. The amount that was to be paid in 2024 represented a paltry 5.2% of the revenue KGL generated from the NLA’s prime business.

The National Lotto Act, 2006 (Act 722) does not allow any private company to operate any form of lottery in Ghana. It makes the operations of the lottery in Ghana the sole preserve of the NLA. Section 4(1)-(2) of the law states: “A person other than the Authority shall not operate any form of lottery.”

“A person who contravenes subsection (1) commits an offence and is liable on summary conviction to a fine of not more than two thousand and five hundred penalty units or imprisonment for a term of not more than three years or both.”

The law, however, requires the NLA to contract private companies to sell lottery as Lotto Marketing Companies (LMCs).

The NLA Act also requires that all proceeds from the sales of lottery by LMCs should be paid into what is called the Lotto Account of the NLA. From this account, the NLA is then supposed to pay stipulated commissions to the LMCs.

The Fourth Estate’s investigations, however, showed that NLA’s deals with KGL are unusual at best and illegitimate at worst. First of all, KGL’s revenues do not go into the Lotto Account. In fact, the NLA does not even know how much KGL makes in sales. Secondly, while the law requires all LMCs to be paid a commission by the NLA, under the current deal, KGL is paying the NLA what the licence agreement describes as “revenue share.”   

In 2024, the NLA was paying LMCs a commission of 25% on their sales. In these exclusive and monopolistic contracts, what KGL paid the NLA in 2024 amounted to just 5.2% of the company’s 2024 revenue.    

Meanwhile, official documents from the State Interests and Governance Authority (SIGA) have revealed that NLA’s revenues have been on a steep decline from GHC366 million in 2015 to GHC296.58 million in 2023.