Turffontein – not viable?
Our 19 August 2014 article confirming that the Gauteng Gambling Board has set a date to adjudicate the Bookies’ dispute against Phumelela as well as Phumelela’s September 2011 Application for an Amendment of its Totalizator Licence Conditions generated a fair amount of comment including this letter from Adv Brett Maselle posing the question:-
Is Turffontein Racecourse About To Go?
THE PLAYERS
1. In September 2011 Phumelela Gaming and Leisure Ltd (“Phumelela”) caused a notice to be published in the Citizen Newspaper and Gauteng Provincial Newspaper in terms of which the public and readers were notified of Phumelela’s “APPLICATION FOR THE AMENDMENT OF TOTALISATOR LICENCE CONDITIONS” (“the notice”).
2. I was unaware of the notice and the Application until the Bookmaker dispute with Phumelela relating to Tellytrack was brought to the fore.
3. Having regard to the heading of the notice, Phumelela’s application for amendment, on the face of it, appears innocuous.
4. After having obtained a copy of the application – not from the GGB which refused me sight and inspection of the Application – I understand why Bookmakers lodged an objection. They had the wherewithal to appreciate that it may have serious and major ramifications for themselves and others.
THE HOUSE
5. The notice gave interested parties one month from 16 September 2011 to make objections should they wish. The main content of the notice stated that “Phumelela…….intends submitting an application to the Gauteng Gambling Board for the amendment of totalisator licence conditions. The application will be open for public inspection at the offices of the Board from 16 September 2011”.
6. I have ascertained that the Application to amend the Totalisator licence was heard in December 2011 (when most people are on holiday) and the GGB resolved to postpone the application sine die (i.e without a date) for further investigation. I have no idea why the application was postponed and what the investigations revealed, if anything.
7. I was recently informed by the BBG that Phumelela’s Application is being considered in October 2014.
THE DEAL
8. For now, I only intend to deal with one of the amendments which Phumelela seeks to make regarding its Totalisator licence. All of them are important and have significant ramifications.
9. Before I go into the amendment, I will first deal with some aspects of the historical relationship between Phumelela and the Racing Association (“the RA”):-
9.1. In 1997 the Gauteng Provincial Government and the Racing Industry including the then three Gauteng Clubs (Newmarket, Gosforth Park and Turffontein) entered into an agreement known as a Memorandum Of Understanding (“MOU”).
Racing’s ‘single corporate structure’
9.2. In terms of the MOU, the parties agreed to re-organise and restructure the business of the Racing Industry into a single corporate structure which would be listed on the Johannesburg Stock Exchange. The new company was required to have a broad base of shareholders with specific emphasis on previously disadvantaged communities.
9.3. The structure that was agreed in principle was, amongst other aspects, that:-
9.3.1. the assets of the Totalisator Agency Board, the Highveld Racing Authority and the existing clubs would be incorporated into a new company.
Making available the image of horseracing in terms of the stakes policy
9.3.2. a Racing Association comprising the owners, club members and other persons and groups agreed upon, representing racing in Gauteng would make available the image of horseracing to the new company in terms of a laid down stakes policy.
9.4. Insofar as licences were concerned it was agreed that “In order to provide protection to this new company it was agreed to investigate the possibility of providing an initial exclusive licence to the new company for a period of up to 10 (ten years)”
9.5. The new company Phumelela and the RA (which is a company not for gain) were both formed in 1997.
9.6. In January 1998 the RA concluded a deal with Phumelela to safe guard stakes that were to be paid. However, in August 1999 the first stakes agreement was replaced by a new stakes agreement due to other Provinces joining the corporatisation process. The stakes that are paid to owners arise out of this latter agreement which has, from time to time, been amended by the RA and Phumelela.
9.7. Phumelela does not regard any person or entity other than the RA as a representative body for owners. Simply, the RA and Phumelela have agreed in terms of the stakes agreement that only Phumelela and the RA have rights arising out of the stakes agreement. If you as an owner want to complain about the stakes agreement or stakes, Phumelela will not deal with you, it will only deal with the RA.
Racing Association ‘to ensure that racing continues to be conducted in Gauteng’
9.8. When the RA was formed it had as its Main Object the following:-
“The main object of the association is to advance and to promote the interests of the members of the association and of the sport of racing and in particular to ensure that racing continues to be conducted in Gauteng and any other provinces to which membership of the association is made available to standards not lower than those prevailing at the time of incorporation of the association; to promote the sport of racing in Southern Africa wherever appropriate; to ensure that stakes are paid on a basis agreed between the association and Phumelela; to protect the copyright of the audio and audiovisual transmission of racing; to ensure that the infrastructure of racing is satisfactorily maintained and operated and to ensure that the members continue to enjoy adequate facilities at racing clubs and at race courses and to strive towards a more racially representative membership of the association and participation in the sport of thoroughbred horseracing.”
(the bold is my emphasis)
SUITED
Arlington – the latest to go
10. Phumelela has closed or sold many racetracks. It has closed:-
10.1. Gosforth Park (Gauteng);
10.2. Bloemfontein (Free State);
10.3. Newmarket (Gauteng); and
10.4. Arlington (Eastern Cape)
11. The RA has done nothing to stop the sale or closure of the abovementioned racecourses.
THE CALL
12. In terms of Phumelela’s Application it seeks the clause which reads as follows to be removed in its entirety.
“The licence shall remain valid for as long as Phumelela Leisure and Gaming Ltd or any of its subsidiaries continues to hold a race meeting licence”
(clause No 14 of schedule B of the totalisator licence)
13. If you are unable to understand the direct consequence of the clause being removed, let me explain it to you in simple terms – if Phumelela succeeds in having the clause removed, it will no longer be obliged to hold race meetings in Gauteng Province. Simply, Phumelela can sell or dispose of the last racecourse in Gauteng (i.e. Turffontein) and keep its exclusive tote licence.
SEMI-BLUFF
14. I have set out below – word for word – Phumelela’s reasons for seeking this specific amendment.
“The facts set out below indicate that the validity of Phumelela’s totalizator licence in Gauteng should not be conditional upon it holding a race-meeting licence In Gauteng. Thoroughbred horse racing in South Africa is in decline. The number of registered breeders of thoroughbred horses decreased from 925 in 1998 to 453 in 2008. The number of trainers has decreased from 204 in 1998 to 187 in 2009. In 1998 there were 487 race meetings, 4,178 races, 7,377 registered racehorses and 49,310 starters taking place in these races. By 2009, there were 436 race meetings, 3,820 races, 6,455 registered racehorses and 42,103 starters.
The decline in horse racing has resulted in the closure, in recent years, of Newmarket and Gosforth Park racecourses in Gauteng, Bloemfontein racecourse in the Free State in 2005 and the Milnerton racecourse in Cape Town. Phumelela is only prevented by its racecourse conditions of licence from closing the Arlington racecourse In the Eastern Cape. Horse racing and totalizator betting operations in the Western Cape are incurring substantial losses.
Turffontein – ‘carried on at a loss’
In Gauteng, racing at Turffontein racecourse is carried on at a loss.There is an oversupply of racecourses in South Africa. In response to this development, the Gambling Review Commission has expressly recommended that market forces be allowed to dictate the number and location of racecourses and the number of races held in order to enable the sport to modernise and transform itself.’
Insofar as betting is concerned, only 1.51% of Phumelela’s gross betting income generated by its totalizator operations for the year ending 31 July 2010 came from on-course betting. Phumelela is required to fund the maintenance and operation of racecourses with revenue generated by its totalizator operations. Phumelela is also required to use a portion of this income to subsidise the South African horse racing industry. For the year ended 31 July 2010, Phumelela contributed R157,986,000 to stakes for horse racing. In the provinces in which it has horse racing operations, Phumelela stages the races from which other parties, such as bookmakers, generate revenue. However, its totalizator licence is rendered conditional upon the holding of a race-meeting licence in Gauteng. There is no similar obligation on bookmakers as a condition of their licences.
In fact, bookmakers divert revenue from horseracing. In 2009 bookmakers received 46% of all gross gaming revenues in horse racing but returned only 18.1% thereof to horse racing. In comparison, Phumelela and Gold Circle return 42.4% of their gross gaming revenues to horse racing. The effect of this is that in 2009 Phumelela and Gold Circle took in R1,2 billion in gross gaming revenue and returned R607 million to horse racing. In comparison, for the same year, bookmakers took in R411 million and returned R75 million.
The requirement that Phumelela’s totalizator licence is conditional upon holding a race-meeting licence in Gauteng poses a substantial risk to Phumelela’s totalizator operations in the province. Should Phumelela lose its race-meeting licence in Gauteng, for whatever reason, the totalizator licence will no longer be valid. in these circumstances, Phumelela will be required to cease its totalizator operations in Gauteng.
Phumelela generates the majority of its betting income from its totalizator operations in Gauteng. Without this income it is unlikely that it would be able to remain commercially viable.
Condition 14 also poses a risk to the Gauteng Provincial Revenue Fund. Should Phumelela cease its totalizator operations in Gauteng, the Provincial Revenue Fund will lose all the totalizator tax revenue which it currently receives from Phumelela’s totalizator operations.
Phumelela’s racecourse operations do not generate taxable revenue for the Provincial Revenue Fund as neither the Act nor the regulations provide for such a tax. The removal of the condition that Phumelela must hold a race-meeting licence does not raise the possibility of reduction in the revenue from taxation which the Provincial Revenue Fund will receive from Phumelela. For the aforesaid reasons, it is submitted that condition 14 of Phumelela’s totalizator licence conditions should be removed.”
(the bold is my emphasis)
THE RIVER CARD – WAKE UP AND SMELL THE COFFEE
15. You only need ask yourself …… Why would Phumelela want to remove the condition from its tote licence that it has to hold a race meeting licence in Gauteng?……Then ask yourself…..If Phumelela succeeds in removing the condition, what prevents it from ending horseracing in Gauteng or selling/closing Turffontein?
ALL-IN?
Where is the RA?
16. You will note that Phumelela only mentions itself and bookmakers. It forgets that owners, trainers and punters are the lifeblood of the industry. Phumelela only thinks of Phumelela. Owners spend and lose more money on horses each year than Phumelela does.
17. Where is the RA? I suppose another race course is about to be lost.
Brett Maselle – Concerned Owner
The Sporting Post’s attempts to contact Phumelela executive management on the matter have gone unanswered.
