Members of the Portfolio Committee on Sports remained sceptical in a meeting on Wednesday about the South African Rugby Union’s (SARU) proposed equity deal with a US consortium to sell 20% of the commercial rights to South African Rugby’s activities, even after assurances that the deal will be subjected to a vote of the President’s Council the (representative body of all SA Rugby Union Presidents).
Committee member Adv Shameemah Salie noted that in light of the sparse information about the deal presented to the committee, she finds it hard to support it. Adv Salie said it did not make sense that without reserves SARU would commit to making such a large financial commitment, which will work in the short term, but pose challenges in the long run.
Another Committee member, Ms Liesbet Mmolotsane, suggested that the deal has been crafted in such a way as to resemble some form of loan. “This sounds like a loan. If it is an equity deal, why are we paying back the partner? Why can’t the partner get dividends instead, as is often the case with investments? In which case, SARU should have been clear and stated that this was a loan. South Africans would not be asking the question they are asking now,” she stated. Ms Mmolotsane also said that the meeting posed several questions that remained unanswered and a follow-up meeting is needed for further clarification.
SARU had earlier told the committee it was considering entering into the equity deal as SA Rugby needs to generate more revenue. The committee heard on Wednesday that SARU needs revenue reserves to maintain its competitiveness on the field.
“The Commercial Rights Company (an entity created by SA Rugby to grow the value of its commercial activities) is there to expand the commercial value and maintain the growth. CRC’s focus is on commercial growth and brand monetisation. We have not sold ourselves to an outside company,” said SARU CEO Mr Rian Oberholzer.
CRC is currently 100% owned by SARU, but the sale of a 20% stake in CRC to an US consortium is currently on the table. SARU is not selling the Springbok emblem or colours, or any management or selection rights, the committee heard. Rather SA Rugby is devising a way to derive income from the commercial value of the brand by selling a minority share in the commercial rights to SA Rugby’s activities.
President of SARU Mr Mark Alexander said they were not licencing the Springboks intellectual property or brand. “There are a lot of challenges that necessitated that we enter into this arrangement. The investment in the URC (United Rugby Championship) did not come cheap. We play 50% of the games outside of the country and that has brought us a lot of challenges,” Mr Alexander said.
These challenges include keeping players in South Africa and the absence of reserve funds in the SA Rugby Union. Currently, 100 of South Africa’s professional rugby athletes play in the United States and another 60 play in Russia.
Members of the committee asked questions on various issues, including the involvement of the former Chief Executive Officer, Mr Jurrie Roux, in SARU’s affairs, SARU cash flow, commitments made to the possible equity partner, and debt management. The committee was informed that much of the deal is regulated by confidentiality clauses.
“This deal will allow us to generate income and grow the game in South Africa,” Mr Alexander said.
The Chairperson of the committee, Mr Joe McGluwa, said the beneficiaries of the deal ought to be South African rugby players, and that it needs to serve SA rugby. “The benefit should be to the unions that make up SARU,” he said.
Mr Alexander further assured the committee that no member of the executive council will get a commission from negotiating the deal.
Members agreed on the need for a follow-up meeting with SARU, and a subsequent visit to SARU headquarters.
Sibongile Maputi
4 December 2024
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