Lotto balls

Sus­pen­sion af­fects more peo­ple than any bank­ing cri­sis in 10 years

Finweek English Edition - - Creating wealth - BY ADRI­AAN KRUGER adri­

THE PLANS OF MIL­LIONS of South Africans to save for their re­tire­ment, pay for their kids’ ed­u­ca­tion and to buy new houses and cars have been dealt a se­vere blow. No, in­ter­est rates haven’t been in­creased and there are no prob­lems at an­other “as­set man­ager”.

It’s even worse. The weekly Lotto draws have been stopped and those cute lit­tle coloured balls have been locked away un­til our politi­cians can de­cide which of their pals can be awarded the con­tract and the mil­lions to run a com­puter sys­tem and short television pro­gramme each week.

If they don’t solve the prob­lems quickly Ge­orge will have to con­tinue work­ing un­til he’s 65, be sat­is­fied with sec­ond-hand cars and never be able to lounge around on a 46-foot Bavaria in the Caribbean. The same goes for the mil­lions who queue on Wed­nes­day and Satur­day af­ter­noons at cor­ner shops in SA to buy their Lotto tick­ets.

It’s crazy – but the mess con­cern­ing the lot­tery af­fects more peo­ple than any cri­sis we’ve seen in the bank­ing sec­tor over the past decade. Ac­cord­ing to the latest an­nual re­port of the Na­tional Lot­ter­ies Board, more than 6,3m lot­tery tick­ets are sold ev­ery week. And no­body has yet com­plained about the cost or bad ser­vice.

SA spent more than R4,1bn on Lotto and Lot­toPlus tick­ets in the year to March 2006 on the slim chance of be­com­ing an in­stant mil­lion­aire. The most that’s been wa­gered on a sin­gle draw was R116m, which pushed the jack­pot to more than R34m.

Within those fig­ures lies the truth con­cern­ing the lot­tery. The chance of win­ning is small, very small. In fact, it’s mad­ness to spend al­most R4,2bn on the chance of be­com­ing one of the 115 peo­ple who won more than R1m last year.

The to­tal paid to win­ners that got six num­ber right in the year to March 2006 was R355,8m, with an av­er­age pay­out of R3,1m. The big­gest win­ner in 2006 re­ceived R34,2m and the low­est R442 000. The low­est pay­out to date was when 33 win­ners all got six num­bers right on 15 March 2005 and had to share the jack­pot. Each got R111 000.

It still seems a lot of money to win for pay­ing just R2,50 for one line on a ticket. How­ever, the ques­tion re­mains: Is it worth­while to spend R4,2bn to try to win one of those R3,1m prizes. It seems that there’s truth in the say­ing that a State lot­tery is a vol­un­tary tax paid by math­e­mat­i­cally chal­lenged peo­ple.

Sta­tis­tics prove that it’s al­most im­pos­si­ble to pick six win­ning num­bers. There are more than 13m com­bi­na­tions to pick six win­ning num­bers from. To be pre­cise, you’d have to buy 13 983 816 lot­tery tick­ets to cover all the pos­si­bil­i­ties. One ticket would give you a 0,00000715% prob­a­bil­ity of win­ning the jack­pot. And 1 000 tick­ets at R2,50 each – at a cost of R2 500 – would in­crease your chances to 0,00715%. Still pretty close to zero…

The chances re­main ex­actly the same ev­ery Wed­nes­day and ev­ery Satur­day. It makes no sta­tis­ti­cal dif­fer­ence if some­one plays the same set of num­bers week af­ter week or tries dif­fer­ent num­bers. The num­ber of times a spe­cific lit­tle ball gets blown into the win­ning set also makes no dif­fer­ence. It’s all in the sta­tis­tics for­mula learnt in Stats 1 at var­sity.

The pos­si­bil­ity of pick­ing five num­bers and the bonus num­ber right is much bet­ter, be­cause we use seven num­bers from 49. The prob­a­bil­ity of win­ning the sec­ond jack­pot is thus much bet­ter at one in 2,3m, but the prizes are much less.

Sta­tis­tics also of­fer the op­por­tu­nity to see that the Lotto stays hon­est, be­cause over the longer-term there can’t be more win­ners than is sta­tis­ti­cally pos­si­ble.

How­ever, there are good ways to make money from the Lotto. The first method can be found in all the math­e­mat­i­cal pro­grammes that prom­ise to choose the win­ning com­bi­na­tions in any lot­tery world­wide. The In­ter­net of­fers hun­dreds, all with sev­eral let­ters from sat­is­fied clients say­ing how much money they’d won in the two weeks since they in­vested a few dol­lars in the pro­grammes.

No, don’t buy one of those. They’re use­less and can’t al­ter the sta­tis­ti­cal facts. The way to make money is to sell some sys­tem to gullible pun­ters.

An­other def­i­nite way to make money is to win the con­tract to man­age the Lotto. The con­tract is worth more than a month’s worth of prizes.

In the year to March 2006, to­tal sales of Lotto tick­ets was R4,18bn, of which R2,06bn was paid out as prize money and R1,27bn trans­ferred to the Na­tional Lot­tery Dis­tri­bu­tion Fund Trust for al­lo­ca­tion to char­i­ties and other or­gan­i­sa­tions that ap­ply for fund­ing.

That left R900m, from which Uthingo (it has man­aged the Lotto since is in­cep­tion) would have to pay op­er­at­ing costs, make a profit and pay its taxes.

That’s the prize play­ers were vy­ing for in court. Uthingo’s li­cence lapsed at end-March and the Gi­dani con­sor­tium was awarded the con­tract. Other ten­der­ers, cit­ing that proper pro­ce­dure wasn’t fol­lowed and al­leg­ing that sev­eral high-rank­ing ANC mem­bers held shares in Gi­dani, con­tested that.

The court ruled that the Min­is­ter of Trade & In­dus­try hadn’t in­ves­ti­gated the share­hold­ers of the dif­fer­ent bid­ders prop­erly. Con­se­quently, the min­istry was or­dered to re­view the process – which left SA with­out a le­gal lot­tery op­er­a­tor.

Those wish­ing to prove sta­tis­tics wrong are likely to visit casi­nos. Among the losers in the bat­tle are SA’s smaller re­tail out­lets, where more than 50% of Lotto tick­ets are sold ev­ery week and where pun­ters would also buy choco­lates and cig­a­rettes. Why only have one vice? And then there are the char­i­ties, which will have to make do with only 11 months’ worth of dis­tri­bu­tions.

It makes no sta­tis­ti­cal dif­fer­ence if some­one plays the same set of num­bers week af­ter week or tries dif­fer­ent num­bers.

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