SA Rugby counts the cost of European participation

NEWS: The South African Rugby Union are counting the cost of their franchises’ participation in European competitions as they reported a minor deficit despite a record income.

SARU reported record broadcasting and sponsorship revenues for 2022 but still reported a minor deficit because of its considerable investment to gain entry to Northern Hemisphere competitions, member unions were told at Tuesday’s Annual General Meeting in Cape Town.

Group revenues increased significantly to ZAR 1.54 billion (2021 – ZAR 1.28bn) thanks principally to increases in broadcasting (ZAR828m from ZAR 654m) and sponsorship (ZAR 396 million from ZAR 222m) income, but the Group’s pre-tax deficit of ZAR 2.62m included expenditure of ZAR 330m attributable to participation in the United Rugby Championship and European Professional Club Rugby (EPCR) competitions.

The increased broadcasting revenues were in part due to the higher value attributed to the 2022 Springbok calendar, featuring a home series against Wales as well as a Rugby Championship programme.

However, CEO Rian Oberholzer warned that broadcast revenue would be significantly reduced in 2023, in the absence of a touring Test team from the Northern Hemisphere and of a truncated Rugby Championship programme.

Broadcasting revenues were offset against the participation fees being paid by SA Rugby to gain entry to European rugby.

“From being a recipient of nett income from Super Rugby as a founding member of SANZAAR, we are now a nett contributor to European club rugby as our participation costs on the way to once again becoming a nett recipient in the medium term,” Oberholzer said.

“Historically, SA Rugby might nett around ZAR 160m from SANZAAR. But we are now in a situation where we are having to pay our way into an already established entity.”

Those participation costs – plus the responsibility of carrying all the international travel and accommodation costs of the SA teams – had amounted to R330m in 2022.

Mark Alexander, president of SA Rugby, said: “The continued investment in the URC and EPCR competitions is essential as we carve our way to full membership and shareholding, even though the financial aspect of this pathway is hurting us in the short term.

“The long-term goal and returns that will come will validate this position, both from financial and high-performance points of view. Our participation in the Vodacom URC and EPCR happened in quick succession and came at a significant cost to SARU, but the commercial opportunities to be realised within the next two to three years will render the competitions profitable and strengthen the financial sustainability of South African rugby.”

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Oberholzer warned that SA Rugby would have to continue with austerity measures in its other activities until the successful conversion to shareholder status at the conclusion of the 2024-2025 season.

The return to full rugby activity in 2022 also resulted in a return to pre-COVID levels of investment in the Springboks and other national teams (ZAR 347m from ZAR 280m) with additional camps and Rugby World Cup warm-up matches for XVs and sevens women’s teams, Junior Springbok men’s overseas participation, Under-18 series participation amongst other investments within the department.

The operational and commercial delivery costs associated to tournament commitments (including the URC and EPCR) also increased from ZAR292m to ZAR429m. There was also a significant increase in player insurance and image rights costs from ZAR 73m to ZAR 104m.

The expenditure was justified by improved results on the income side, said Oberholzer.

“It is testimony to the success of a winning, transformed Springbok team that the appeal of the team has probably never been higher,” he said.

“The anecdotal evidence supports the theory that the team and sport represents one of the few beacons of hope on South Africa’s troubled socio-economic landscape.

“To prove the point, nine new companies joined the SA Rugby family in 2022 while another five either renewed, returned, or added to their sponsorship portfolio within the sport – the appeal of the team and sport is in good health.”

At provincial level, distributions to SARU’s 15 members accounted for ZAR 285 million in expenditure, although the return to pre-COVID levels would only be possible in 2023.

“Each of the last three years has presented fresh and unprecedented challenges that required innovative efforts to resolve,” said Alexander.

“At stake was the very future of the game and, as we have previously experienced during tough times in rugby, it brought out the best in many at the coalface of rugby.

“The future of the game depended on how we responded to the challenges. The pandemic itself might appear to be under control, but the aftermath of it will be felt for years to come. Rugby was not insulated from the devastating financial challenges that resulted from the pandemic and many of those challenges remain.

“Loans to member unions of ZAR 84.7m in the accounts, highlights the need to continually address the financial health of the game – as is being required in every rugby federation in the world.”

Alexander said that the role of private equity investors in the sport at national and provincial level was extremely important and necessary.

“Private equity investment contributes in a significant way to our rugby ecosystem nationally,” he said. “We must ensure that everyone benefits on an equitable basis from our growth as an organisation – and that we don’t kill the golden goose within our franchises in the process.

“It stands to reason that the more we succeed in international competitions, the more marketable we become, and the more all rugby will benefit. We need to address ways to include the private equity structures in our decision-making processes, to ensure that everyone has a seat at the table, and always be mindful of how membership is constituted. I am sure we can find the model that will be to the benefit of the greater good of the game.

“Managing the sport’s finances is a daily challenge but our basic asset – the Springboks and rugby in South Africa – remains a blue-chip resource in the market.”

CLICK HERE for the full annual report for 2022