WESTERN CAPE HORSE RACING Phumelela rides to the rescue
Horse racing in the Western Cape has been rescued from the brink by a competition tribunal ruling opening the door for Phumelela to take over management of racing in the province. Phumelela’s challenge will be to stem the Western Cape industry’s losses, now running at R1m/month.
The tribunal overturned a ruling barring a transaction under which Gold Circle’s Western Cape racing and betting assets have now effectively been acquired by the Thoroughbred Horseracing Trust (THT). Gold Circle, which now operates racing only in KwaZulu Natal (KZN), and THT are nonprofit bodies.
For the survival of racing in the Western Cape, now in its fifth year of losses, the tribunal’s ruling was vital for another reason. “Relations between Gold Circle KZN and Gold Circle Western Cape had broken down irretrievably,” says Phumelela CEO Rian du Plessis.
Despite Phumelela’s success as owner of five racecourses in three provinces, Du Plessis says it will be “no walk in the park” turning racing’s fortunes around in the Western Cape. “Our priorities are to trim costs and add fuel to the betting engine.” The betting engine — the totalisator (tote) betting system — is operated on a national basis with Phumelela holding sway in eight provinces and Gold Circle in KZN.
The tote is fighting battles on multiple fronts. One battle, says Du Plessis, is to “level the playing field” between race track operators and bookmakers. Through tote revenue, he says, race track owners cover 88% of the cost of horse racing and bookmakers, despite generating more revenue than the tote, only 12%. In the year to July 2011 national tote revenue was R928m.
Another lurking threat faces horse racing. In certain quarters, says Du Plessis, there is a view that to improve competition the national tote should be abandoned in favour of totes in each of the nine provinces. “It would destroy odds for punters,” he stresses.
A tote is based on a pooling of bets, the bigger the pool the keener the odds. “No single province would have a viable pool of bets,” says Du Plessis. The same applies to the lottery which would not be viable if operated on a provincial instead of a national basis, he adds.
“We have also shown that on days when the tote pool is small a bet of as little as R10 000 can halve the odds on a race,” says Du Plessis. For good reason, he adds, totes in countries such as the UK, Japan, Italy, Ireland and Hong Kong are run on a national basis.
Another battle front for horse racing was opened up by the advent of limited payout machines (LPM) which have found their way into venues such as pubs. LPM payouts are set at a maximum of R500 and stakes at R5.
There are now 1 700 licensed LPMs in the Western Cape alone and licences for a further 3 300 are to be offered. “Gambling revenue from LPMs is already nine times the tote’s in the Western Cape,” says Du Plessis. “I doubt it is all incremental gambling revenue. LPMs are a threat to all gambling operations, even casinos.”
Also at threat are jobs, of which LPMs create precious few, argues Du Plessis. Horse racing provides 4 500 jobs in the Western Cape and 16 000 jobs nationally. It is also an efficient job creator. A study by research firm Economics Information Services found that in 2009 for every R1m of gross gaming revenue horse racing created seven jobs, 24 times more than the casino industry.
Du Plessis believes tax rates on gambling should be scaled, favouring sectors creating high job numbers and penalising those creating fewer jobs. “There need be no change in total tax revenue from gambling,” he says.
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