Proudly South African was established in 2001, born out of the 1998 Presidential Job Summit convened.
DA MP Jacques Smalle yesterday told parliament's trade and industry portfolio committee that the grant was made two weeks after Nevhutanda's daughter began working for Makhaya Arts.
According to Smalle the lottery says there was no conflict of interest because Nevhutanda did not have anything to do with awarding the grant.
But Smalle says Madonsela "needs to identify whether political connections were used to channel money to any one of these organisations and whether the Lotteries Act was therefore breached in the process".
Meanwhile, the National Gambling Board - which regulates gambling on behalf of the government - has told the same committee that new research has found that South Africans do not gamble excessively.
The board's chief executive, Baby Tyawa, said the survey of 3500 people showed that 68% reported that they do not gamble at all.
Only 0,7% of city dwellers were found to be problem gamblers, with the number dropping to 0,5% of people in rural areas. The board wants the gambling law to be changed to include the horse racing industry.
Tyawa said the board faced major problems in that provinces had their own gambling laws and the board had no powers to enforce one gambling standard for the whole country.
"The board regulates and provinces chase revenue," she said.
While the board wanted to regulate bingo, "provinces have actually advertised, calling for more applications for bingo. We find ourselves in a fix now," she said.
Even though the national Gambling Policy Council is made up of MECs, its decisions are not legally binding and "provinces can ignore recommendations," Tyawa said.
The board also wants to be given the power to force internet service providers to block illegal online gambling domain names.
The popular game of fah-fee, played in many townships, is also going to come under government scrutiny. The board feels that even though people bet amounts as small as 30 cents in a fah-fee game, the organisers are taking in a lot of money, some of which is probably being laundered.