The South African Rugby Union (SA Rugby) has told politicians it faces the risk of collapse if it does not boost revenue.
“We don’t have a reserve fund, we’re a break-even organisation,” said SA Rugby president Mark Alexander in defence of a proposal to loosen control of its commercial rights through a deal with Seattle-based Ackerley Sports Group LLC.
If the organisation has to endure another crisis similar to that experienced during the coronavirus pandemic then “we’ll have to close our doors” he said in a presentation to the South Africa parliament’s sports committee in Cape Town on Wednesday.
The proposed deal with Ackerley, which will be voted on this week, has caused a storm of controversy and a string of front-page headlines. The loosening of local control over a team whose success as back-to-back World Cup winners and multiracial make-up has made the one-time icon of white supremacy under apartheid into a symbol of transformation has stoked concern.
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The country’s sports minister and the unions that run some of its biggest rugby teams, which are linked to a number of the country’s richest men, queried the benefits of the deal and the lack of South African participation.
SA Rugby, which has barely turned a profit for over a decade despite revenue climbing threefold, plans to sell a 20 per cent stake in a newly-created commercial-rights company for $75 million (€71.5 million). Ackerley would take three of the seven voting board seats in the company as well as have the right to appoint a chairman, effectively controlling the Springbok rugby brand’s rights, SA Rugby has said previously.
That would follow a trend among national federations of successful rugby teams, most notably New Zealand’s All Blacks, to raise funds from private equity. Other national rugby bodies are also struggling with their finances, with the Telegraph last month reporting that England’s organisation is set to post a record annual loss of about £40 million (€48.35 million).
The vote was postponed from October after a request from sports minister Gayton McKenzie that the government be briefed.
Rugby unions that run clubs linked to South Africa’s richest man, Johann Rupert, as well as Patrice Motsepe, the country’s only black billionaire, and pharmaceutical tycoon Stephen Saad, are among seven of SA Rugby’s 14 member associations that signed a letter in October opposing the deal.
The unions raised concerns about the fee structure and governance aspects of the deal as well as potential changes to SA Rugby’s commercialisation and revenue mechanisms, a copy of the letter published by Johannesburg-based Business Day showed. Local newspapers have reported some of them may come up with an alternative proposal.
SA Rugby generates about 90 per cent of its revenue from the Springboks brand and franchise competitions, which it uses to fund the development of young players and support the sport nationwide, its executives, including Alexander, told lawmakers. Almost half of the national team’s matches are played overseas and South Africa’s weak currency puts it at a disadvantage when competing against rivals and makes it difficult to retain top players that are “lured by lucrative contracts abroad,” SA Rugby said in the presentation.
The deal with Ackerley could see the creation of a fund to “protect” the sport, according to chief executive officer Rian Oberholzer.
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The Springboks won the last two World Cups and secured the southern hemisphere’s Rugby Championship in September. Despite the success, which also includes World Cup victories in 1995 and 2007, it lags behind the commercial income of its largest rivals.
SA Rugby generates $30 million (€28.5 million) in annual revenue through 48 partnership deals, compared with about $75 million (€71.5 million) generated by the All Blacks through fewer deals. SA Rugby is targeting sponsorship revenue of 800 million rand (€42 million) in 2027, about double last year’s level.
While the world’s premier rugby-playing nations include some of the world’s richest countries, the buying power of poorer South Africans limits income. A standard ticket to a Springboks vs Ireland match in Dublin in 2023 cost about €140 while the price for the match in South Africa where the Springboks clinched the Rugby Championship this year against Argentina was 750 rand (€40).
SA Rugby has tried to clinch a private equity deal since 2018 and Oberholzer said the fees associated with the proposal, a point of contention with SA Rugby’s member unions, have been negotiated down by almost 50 per cent.
“We are comfortable that it is fair and equitable in the light of similar transactions,” he said. – Bloomberg
