SA Rugby could face bankruptcy
SA Rugby will rely on the return of fans to the stadiums to stop it from going under. By
SA Rugby has done a remarkable job in keeping the sport afloat over two Covid-racked years, but it won’t be able to survive another year like the previous two. That is the dire warning from the governing body, which it will take to Parliament when it does a regular update to the portfolio committee on sport.
“SA Rugby has been in ICU for the past two years due to the cancellation or prescribing of revenue-generating events,” SA Rugby’s presentation warns. “Income in 2020 was 39% down on 2019. 2021 saw some recovery led by broadcast revenues but we are still 21% down on 2019 income levels.
“It’s now two years and two days since a South African rugby team was last able to sell unrestricted tickets. The professional game – and by extension all rugby – is in extreme crisis. Essential restrictions must be lifted to stop the haemorrhaging.”
In 2019, SA Rugby’s combined broadcast (R752-million) and sponsorship revenue (R347-million) was R1.1-billion. In 2020, because of the suspension of tournaments, tours and competitions owing to Covid-19, income plummeted to R668-million (R411-million broadcast and R257-million sponsorship).
In 2021, there was a slight recovery because of the British & Irish Lions tour and the resumption of Springbok Tests, despite the fact that they were played without fans.
Revenue recovered to R867-million from broadcast (R649-million) and sponsorship (R218-million) income in 2021, which remains R233-million off 2019 earnings.
“The Series against the British & Irish Lions in 2021 was completed, but without any spectators,” the report reads. “It was supposed to generate cash reserves to weather storms such as Covid-19.
“It helped, in that we will break even for 2021, but our reserves remain at zero. Repeating the ‘no-crowd’ policy of 2021 will lead to the sport bankrupting in 2022.”
In 2020, SA Rugby shaved R1.2-billion off its budget by cancelling competitions, cutting or mothballing development programmes, slashing salaries and shelving strategic campaigns. Though it was an effective short-term measure, it’s an unsustainable operational approach.
There is still a restriction of 2,000 fans in stadiums for games. Despite repeated lobbying by rugby and other sporting organisations, the sports ministry appears unwilling, or incapable, of revising this policy. SA Rugby, in a move that exposed its growing frustration with the limited-fan policy remaining unchanged for months, has started selling tickets for the Sevens World Cup in Cape Town later this year and Springboks Tests, as if stadiums will be back to capacity then.
“The time has come now for the government to open the stadiums,” SA Rugby president Mark Alexander told Sport24 this week.
“We need to save livelihoods now. Considering all the financial pressure we are all under from all parts of the country; we understand that government can’t fund [sports] organisations to the levels required to remain relevant.”
While rugby pleads for the return of fans, the South African rugby industry has also been reviewing the contracting model for players. At this stage the current salary cap, which limits franchise teams to a maximum annual wage bill of R60-million, is under discussion. Each of the 14 provinces has been submitting proposals about salary caps and contracting systems.
Clearly, some franchises would like to see the cap limit raised, some would like it to stay the same and others would like the cap scrapped altogether. But all these discussions cannot happen in isolation of the situation in the country, or avoid the fact that stadiums remain largely empty.
United Rugby Championship
On the field, there have been positive developments in the resumption of competitions. The Currie Cup and the United Rugby Championship (URC) are running concurrently and with success.
The URC is the flagship of the provincial game and a vital potential earner for SA Rugby. The mother body is also close to finalising the sale of an equity stake to CVC Capital Partners.
CVC bought a 14.3% stake in Six Nations for a reported £365-million last April. It guaranteed a cash injection of £95-million for the Rugby Football Union (England’s governing body) over the next five years and about half that for the Welsh, Irish, Italian and Scottish rugby unions. France will also receive £95-million.
The Six Nations purchase was CVC Capital Partners’ third acquisition in European rugby along with portions in URC and the English Premiership, in which it holds stakes of 28% and 27% respectively.
With shares in three high-profile rugby properties totalling more than £700-million, CVC’s cash will strengthen those leagues immeasurably. SA Rugby will benefit in terms of cash flow with CVC.
The URC is finally starting to feel like the tournament organisers envisaged after two years of Covid-related setbacks. Last weekend, South Africa’s four leading franchises hosted four overseas teams in the URC for the first time. The Bulls, Lions, Sharks and Stormers all won their matches.
The touring teams – Munster, Cardiff, Zebre and Scarlets – were understrength because many players were on Six Nations duty, but at least the cross-hemisphere fixtures are happening.
It was the first local glimpse of the potential of the URC and the possibilities it holds as a tournament with mass appeal and exciting new contests.
But the vast number of empty seats were also a reminder that the players and administrators can do their bit, yet without the backing of the national government and some sensible decisions about fans in stadiums, the sport still faces the prospect of collapse.
While rugby pleads for the return of fans, the South African rugby industry has been reviewing the contracting model for players