![Milnerton training track](https://www.sportingpost.co.za/wp-content/uploads/2013/09/IMPI-At-The-Gallops_MG_3263_hamishNIVENPhotography.jpg)
Milnerton training track
Browsing through some old copies of the SA Racehorse, I happened upon a piece by Rupert Langerman written back in 1987. In it, he discusses how the face of racing was changing so that the focus was no longer on each jurisdiction’s local racing, but essentially on any race meeting across the country which gave the tote an opportunity to offer betting on it.
He comments: “One appreciates that the clubs are simply looking after their own interests; and they would be stupid not to if the demand is there; for after all, their primary concern is to make money to promote racing.”
It is an interesting comment, given how racing has continued to change and evolve since he wrote those words. We find ourselves in a situation where the advent of corporatisation spawned the formation of Phumelela, which controls racing in all parts of the country barring KZN and the Western Cape. The issues surrounding the Western Cape deals have been fairly widely publicised and with the recent High Court Ruling against Phindi Kema, it seems the way is now clear for matters to be finalised and for us to join the stable as well.
The reason for my bit of a ramble is that Monday, 9 September saw a meeting of all the WC Trainers and attendance was mandatory. Mr Rian du Plessis, CEO of Phumelela and Mr Larry Wainstein, CEO of the Racing Association, addressed the assembly. The gist of the meeting was to discuss the proposed sale of the Milnerton training facility. Of course, this isn’t a new subject as the sale of Milnerton has been bandied about for years. However, it has never come to much due to various zoning restrictions as well as more recently, objections from local residents. The subject was also raised and documented in some detail in last year’s Competition Commission Tribunal. I can almost hear the collective sigh out there “oh no, not that again!” Yes, sorry, that again. But bear with me as those documents actually contained quite a lot of information.
Firstly, the old Western Province Regional Racing Association (or Western Cape racing) has renamed itself Kenilworth Racing Pty Ltd since its divorce from Gold Circle KZN. Although Kenilworth Racing falls under the auspices of the Racing Trust, whatever the semantics of the various deals that are being wheeled, the long and the short of it is that the Western Cape has outsourced the running of its day to day affairs to Phumelela. For a fee obviously. In lieu of managing racing in the Western Cape, we have signed over 50% of any profits for perpetuity. Which is obviously not an issue, because to listen to the accountants tell it, the Western Cape runs at a whopping loss. Phumelela have also agreed to lend us a bit of money in order to get things up and running again. Well, quite a lot of it actually. Somewhere in the region of R60 million, if reports are accurate.
Of course, Phumelela is a company, not a fairy godmother and loans come with terms and conditions. And of course the expectation that the money will at some point be returned. Hence the discussion about Milnerton.
As we have all repeatedly been told, the Western Cape runs at a loss. Quite a substantial loss going by the figures presented to the Competition Commission – an average of something over R14 million per year since about 2009 as per the figures presented to the Competitions Commission. Having lent Kenilworth Racing a substantial amount of cash since taking over the managerial reins (need to make sure I get the wording correct there!), Phumelela would (fairly reasonably really), like to make sure that they are going to get their money back.
So, one of (got to be careful about the wording again) the suggestions being floated is to sell Milnerton. It is estimated that the sale of the training facility should realise somewhere in the region of R240 million, which sounds rather exciting. Until one starts doing a few sums. Worry not, I’m not terribly good at maths, so I’ll keep it simple. Assuming we get our R240 million, we will obviously need to pay a few fees, capital gains tax, etc. Then we need to repay Phumelela a projected R60 million (possibly a little more by the time all the dust has settled) to make good on our loan. We also have a mortgage on Milnerton, which was raised a few years ago for the purchase of the Modderriver property up the West Coast which stands at a reported R18 million. However, Modderriver is also reportedly for sale, and if we can realise R18 million for that, then at least we should be roughly square on that score, barring a few fees.
So, once we’ve paid off our various loans, mortgages and associated fees, should it all go ahead, I would take a conservative guess that we may walk away with around R150 million from the Milnerton sale. Which again, sounds like quite a lot of money.
![Philippi training track](https://www.sportingpost.co.za/wp-content/uploads/2013/09/philip-training-track-300x195.jpg)
Philippi training track
However, we now need to make it stretch far enough to accommodate the 800 or 900 horses currently housed at Milnerton. So we need to purchase some property (the most popular vote being for the Philippi area so that the current training facility can be expanded into a ‘super centre’). Then we’d need to undertake some extensive landfill work as large portions of the area are wetland. We’d need to construct a number of new tracks, with all the relevant drainage and irrigation, build stables and of course put up a fair amount of perimeter security fencing, given where Philippi is situated. We also need to hope that we can then make enough to keep up with the running costs, which are currently reported to run to somewhere around R5 million per annum.
Suddenly that R150 million doesn’t sound like quite so much, does it? I also feel it’s important that all the affected parties are all on board and all aware of what is being discussed as there are obviously far-reaching consequences with regard to the grooms, the trainers, assistants, jockeys, farriers and other racing folk who have built their lives around their place of work.
Look, I’m not saying that it’s a bad idea. In fact, it probably makes every bit of sense from a business perspective. I just find it odd that the Western Cape has felt the need to sell its soul for a strategy it should very well have been able to figure out on its own. I am also concerned that once we have sold Milnerton and spent the proceeds, we may still not be sitting with a profitable enterprise.
After all, to borrow from my Comp Comm documents once again, the reasons stated for the failure of the Western Cape to date were that “Gold Circle lacks the necessary strategic, managerial and financial resources necessary to sustain the conduct of the business of Gold Circle WC”. Having had a chat to Mr du Plessis on the subject, despite having Phumelela at the reins, we’re apparently still operating at a loss and likely to continue to do so for some time. It was in fact stated repeatedly throughout all the Comp Comm submissions and presentations that even after the proposed capital expenditures had been implemented, there would be no guarantees that the Cape would be profitable again.
So then what? Borrow more money from Phumelela? Which we will repay how? (answers on a postcard please). I know it’s an unpopular point of view, but I’m still of the opinion that we need to address the problem, instead of trying to stick a bandaid over the symptoms.
The problems, as I see them anyway, are not the lack of stakes, or the cost of keeping and racing horses. I would probably have to agree with the assertions made at the Competition Tribunal that we “lack the necessary strategic, managerial and financial resources necessary to sustain the conduct of the business of Gold Circle WC”. We can perhaps right the financial aspect by selling Milnerton, but I think the real crux of the problem lies in the managerial and strategic side of things.
Racing here certainly isn’t fun. It’s not warm, it’s not welcoming. It doesn’t give you any incentive to want to go. Or stay. Or heaven forbid, invite your friends. And until we can turn that around, I don’t think that any manner of training super centres are going to change anything.
I am also worried that we have handed ourselves over to an outfit who have profits and shareholder dividends as their sole operational goal. If the clubs of old had making money to promote racing as their primary concern, it is interesting to note that Phumelela states its mission on his website home page as being “To create exciting opportunities that facilitate informed betting on sport and other events”.
To me that, and their current proposed strategies of trying to squeeze money out of Bookmakers via television rights, cutting subsidies to trainers, and the fact that they have added somewhere in the region of R51 million in unclaimed dividends (or tote tickets for those of you having trouble reading between the lines) to their bottom line over the last 2 years alone, seems to bear out that their primary concern is to make money to pay shareholders. Not making money to promote racing. And that worries me most of all.