On race day horses, jockeys, grooms, trainers and racehorse owners converge to battle it out. But there is another head-to-head simmering behind the scenes — between racehorse owners and the company that runs their industry.
In the mid-1990s Jabu Moleketi, then Gauteng finance minister, began pushing for the corporatisation of horse racing in the province. At the time major turf clubs were registered as non-profit section 21 companies that belonged to their members — racehorse owners, trainers and lovers of the sport.
In 1997 Gauteng signed a memorandum of understanding with the racing industry, including representatives of the three major Gauteng turf clubs, stipulating that racing and betting in the province would in future be managed by one corporation, Phumelela Gaming and Leisure Ltd.
Following that, the Racing Association (RA) was established to represent owners and turf club members. Members of the three Gauteng turf clubs, Turffontein, Gosforth Park and Newmarket, and members of the Gauteng Racehorse Owners’ Association joined the association.
Phumelela states on its website that the “industry was in dire straits” when it took over, with most major courses failing to make a profit and public interest in decline. Until the start of corporatisation, horse racing had been the only form of legal gambling in South Africa. The site states that other forms of gambling were going to be legalised, which posed a threat to the racing industry.
The management of turf clubs in KwaZulu-Natal and the Western Cape went to another company, Gold Circle, and each of the two companies became a holder of a totalisator licence, granted for a 10-year term to allow them to get on to their feet. However, they still have the sole right to take tote bets on races in South Africa.
Shift
A shift in assets also took place. On April 1 1999 Phumelela took over the Turffontein, Gosforth Park and Newmarket Turf clubs and the assets of the former Transvaal Totalisator Agency Board and Highveld Racing Authority. Among the latter’s assets was the Randjiesfontein Training Centre, now the North Rand Training Centre.
According to the RA’s directors’ report for the year ending July 31 2001, the total net asset value of all these businesses and clubs was R115.5-million.
Phumelela issued an IOU for this amount and undertook to repay it to the association. The loan was interest free.
The company had since repaid the loan, the RA said. It had received the full amount in shares worth R25.4-million, the North Rand Training Centre, valued at R60-million, and a further R30.1-million in cash. Phumelela paid R20-million of this from the proceeds of the Newmarket sale.
Between 1999 and 2000 Phumelela also took over the assets, liabilities and businesses of the Bloemfontein Turf Club, the Vaal Turf Club, the Griqualand West Racing Club and East Cape Racing Club.
In KwaZulu-Natal and the Western Cape the clubs remained in their members’ hands.
Run down
In its 2010 annual report Phumelela said its aim was “to grow the sport of thoroughbred horse racing in South Africa on a sustainable basis and make it globally respected and desirable”. But trainers and owners insist that it has not done this — in fact, it has run down the industry.
Their view was summed up in a article by a furious Ian Jayes, long-time trainer and former chairperson of the Racehorse Trainers’ Association, in August last year on the website Sporting Post. Jayes said that corporatisation had been “an unmitigated disaster” and asked: ‘Where is Julius Malema when horse racing needs him?”
Jayes said that Phumelela had promised more racing opportunities for the horses and higher stakes — prize money for winning horses — after corporatisation.
However, the company had sold off racetracks, including Gosforth Park in Germiston, Newmarket in Alberton and the Bloemfontein Race Course, which had reduced “the opportunities for owners and trainers to make money [and] meant a dramatic loss of racing opportunities for our horses”.
Gosforth Park was sold in 2002 to Gosforth Park Properties for R18.5-million and turned into the Wesbank Raceway, with Peter Lindenberg as chief executive. It was subsequently taken over by a property developer. Jayes said: “We used to race at Gosforth on 26 Saturdays of the year.”
According to Phumelela’s 2005 annual report, Newmarket was sold in 2005 for R22-million to a property developer. Phumelela reached a deal with the new owners that it would continue to lease Newmarket for R1 000 a month to stage a maximum of 36 race meetings a year until May 31 2012.
However, in 2006, the Newmarket owners paid Phumelela R40-million to terminate the lease agreement. In February 2007 racing ceased and Newmarket was demolished. The land still stands undeveloped.
Phumelela also sold the Bloemfontein racecourse, purchased for R3.5-million in 1998, for R32-million nine years later. Jayes estimated that 26 races a year were held in Bloemfontein before its closure.
Wider appeal
Phindi Kema, a breeder and chief executive of Africa Race International, said that growing the sport meant getting more South Africans interested in it. “But where are they going to race? We need that culture of ‘it’s all about the horses and what’s good for the industry’,” Kema said.
“Australia has 300 courses. Yet, in our breeding programme, we’re supposed to compete with them.”
South Africa currently has 10 major courses.
Responding, Phumelela chief executive Rian du Plessis defended rationalisation in the industry. He said that despite the closure of the three courses the number of racing opportunities had increased.
“In 1996 [the year before Phumelela’s establishment] there were 128 Highveld fixtures, 52 Eastern Cape fixtures, 30 Bloemfontein fixtures and 18 Kimberley fixtures — a total of 228 in what now forms Phumelela country,” he said. “In 2012 we now have 148 Highveld fixtures, 68 Eastern Cape fixtures and 36 Kimberley fixtures — a total of 252.”
Jayes angrily disputed Phumelela’s claim that the industry was in “dire straits” and in need of rationalisation when it took over. “Dire straits, my backside,” he said. “Newmarket had R4-million in the bank. Newmarket and Gosforth were paying stakes and paying 16% in betting taxes. Today Phumelela pays only 3% in betting taxes.”
Jayes stated in his article that despite Phumelela’s enormous savings on taxes, it had made little investment in racing infrastructure and had also not contributed adequately to stakes.
Low stakes
This highlights another bone of contention — the stakes agreement between Phumelela and the RA. The agreement was a key motivator for the association’s members’ decision to sell their turf club assets to Phumelela.
Finalised in August 1999, the agreement stipulates the amount Phumelela must pay to owners if their horses win a place in a race. Many owners depend on winnings to survive in the sport.
One owner and member of the association, who asked to remain anonymous, said that it cost about R6 000 to train and stable a horse each month, excluding the veterinary bills.
“The stake paid for a maiden plate in Gauteng [a race for horses that have never won a race] are R75 000, which has to be split among the top five horses’ owners, jockeys and trainers,” he said.
He said that despite repeated requests he had not succeeded in laying his hands on a copy of the agreement through the formal channels from either the association or Phumelela.
Writing on the now-defunct internet racing forum, Scot Free Racing, owners and trainers highlighted their frustration over stakes. Said one: “If anyone thinks they are a good businessman or businesswoman — you will see that the financial figures for stakes do not add up. There is a serious problem.”
Responded another: “I must agree that something is seriously wrong concerning stakes and I too feel that the stakes agreement is not being properly adhered too. This has been posted previously.”
Du Plessis said that Phumelela could not change the agreement arbitrarily or short-change owners, as the stakes were audited independently each year.
He said that all paid-up members of the association were entitled to a copy of the agreement and that the association held two members’ forums last year “at which the stakes agreement was freely available for inspection by members present”.
Fort Knox
But Jayes strongly disagreed: “We’ve asked for an original copy of the stakes agreement; they’ve guarded it like gold in Fort Knox. They should also produce all copies of the agreement as it was amended.”
The Mail & Guardian requested a copy of the original stakes agreement and all amended versions but Du Plessis said: “The stakes agreement is a confidential document between Phumelela and the Racing Association and its members. However, any member of the Racing Association can obtain a copy from the Racing Association offices at Turffontein.”
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