Why SA is in dire need of 'international equity partners'
SPOTLIGHT: SA Rugby did their damnedest to put a positive spin on a very desperate situation, but at least one big player in the industry has sounded the alarm.
While SA Rugby called the loss of ZAR7.9-million “modest” – portraying it as a triumph of some sort – it is confirmation of a 45 percent decline in revenues, caused by the COVID-19 pandemic, that tells the real story.
Even before this revelation, Altmann Allers, the controlling shareholder in the Lions Rugby Company, suggested: “something needs to change dramatically soon”.
In an extensive interview with @rugby365com, Allers made it clear that it is in the best interest of the game that SA Rugby remains on a sound footing.
“We will continue to search for solutions,” he said about the very complicated and diverse financial landscape of the domestic game.
Just a quick glance at the motley selection of models in SA’s four top franchises shows just how much work is still to be done.
The Stormers company (or Western Province Professional Rugby) is 100 percent owned by the amateurs – WP Rugby Football Union (through 90-odd amateur clubs – some who can’t even field three senior teams).
The Blue Bulls Company have made some dramatic changes and also produced impressive results with their model – where Patrice Motsepe (through African Rainbow Capital) holds 37 percent, Johann Rupert (Remgro) has 37 percent and the Blue Bulls Rugby Union 26 percent.
The Sharks have a similar model, but the only franchise with a truly international equity partner – Marco Masotti (through his American/MVM consortium) holding the controlling 51 percent, the KwaZulu-Natal Rugby Union 26 percent and SuperSport International 23 percent of the franchise.
The Lions Rugby Company have 74.9 percent in the hands of a single equity partner, Altmann Allers (through his company Foxbell Investments). The Golden Lions Rugby Union has the other 25.1 percent.
The Lions boss, Allers, said you can’t change the status quo in the middle of a pandemic, but added the rugby landscape will change “dramatically” in the next 10 years.
He pointed to the Sharks model and said there could be more international equity partners in the South African set-up in the near future.
“It [international equity partners] will be good for SA rugby and we may even see that not all SA teams will feature in the same international competitions.”
It is not just in South Africa where the financial situation has forced unions to look abroad.
New Zealand is courting American consortium Silver Lake, while Australia also made it clear they are open to an ‘international’ equity partner.
As SA Rugby pointed out, the franchises’ income streams were drastically reduced in the last year, making them reliant on the goodwill of their sponsors.
Not only have sponsors lost out on the value they could have gained out of their exposure as sponsors, Allers pointed out that selling advertising at stadiums also ground to a halt and in-stadium vendors lost out on their opportunities, as there were no spectators.
“Every franchise company will have an income stream through broadcast deals and sponsorships,” he told @rugby365com, adding: “On the expense side of the ledger there are players and management costs.
“Even before COVID, it was already a fine balancing act to stay in the black.
“Now, as a result of the COVID pandemic, we have lost many of the additional income streams.
“I have to say, the broadcasters and our sponsors – Emirates and Jonsson Workwear – have been very generous to the [Lions] franchise.”
While the sponsors were mindful of what was happening, they also had to take care of their bottom lines.
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“Those companies went through their own trials and tribulations.”
The Lions’ main sponsor, an airline company, is among the worst affected.
“The real problem is that your income has declined, but your expenses did not decline at the same rate.”
Allers pointed out that the salary reductions introduced last year, came to an end in December.
“Something needs to change dramatically soon, because at the moment you are paying international level salaries for domestic competitions,” he said.
“Those salaries were negotiated based on the expectation that we would be playing abroad.
“That [playing abroad] looked like a possibility as recently as last month.
“That is the situation we [the SA franchises] all find ourselves in.
“The other problem is not just your frontline players, but the additional players [fringe and junior squad members] who do not play in any competitions at the moment.
“The situation is getting more desperate, the longer the COVID situation continues.”
Allers said it is virtually impossible to keep players happy, because you can’t even organise friendly matches.
Another big issue is that SA franchises and teams could struggle when they eventually do face international opposition.
“In Europe they have played against teams and players of an international standard week, after week.
“We have been playing against each other.
“The Irish provinces are loaded with international stars and they face French, English, Welsh and Scottish teams loaded with internationals.
“Those teams could have an edge when we do eventually face them,” he said of the Pro16 – set to get underway in September.
He said it is not just a financial problem, but also a rugby welfare crisis.
“There are all those juniors who are not getting any game time. You can only train for so long.
“It’s like having a racehorse that doesn’t enter races or a car that is permanently parked. The engine has to be fired up or it will go into a decline.”
“If it continues for much longer we run the risk of losing a generation of juniors – those who have not played in any competition for more than a year.
“It will be the second consecutive year we won’t have an Under-20 World Cup.
“The financial situation will resolve itself over time.”
He said staging the British and Irish Lions tour, with spectators, could give the game a much-needed boost.
“We would like to see a bigger effort from the government to ensure spectators can attend games on the B&I Lions tour.
“It is a great opportunity to help the country lift its collective heads.”