SA’s horse racing industry running out of steam
For over 50 years horse racing rode high as the only legal gambling game in town. That came to an end in 1996 when deregulation brought a flood of competition which has swept horse racing’s share of total SA betting revenue to less than 7%.
“Our horse-racing operations have run at a loss in most years since corporatisation of racing,” says Phumelela CE Rian du Plessis. “We would have been in deep trouble without local and foreign diversification.”
Corporatisation came in 1998 when Phumelela was formed out of the then three Gauteng racing clubs. Clubs in the Northern Cape, Free State, Eastern Cape and North West were added to Phumelela shortly afterwards. Of an original nine tracks, four remain.
In KwaZulu Natal, racing is controlled by Gold Circle, operator of two tracks. In the Western Cape Phumelela manages Kenilworth’s two tracks.
For SA horse racing, the saving grace has been the export of the 323 race meetings held by Phumelela and 177 by Gold Circle annually. “We hold race meetings 364 days a year and export races live to 40 countries,” says Du Plessis. “In overall racing revenues it is the industry’s lifeblood.”
Despite the industry’s challenges, Du Plessis is moderately upbeat. “On-course attendances were up 20% in our past year and prices being fetched at the Cape Thoroughbred sales have risen by 10%-20% in each of the past three years,” he says. “They are good indications of the sport’s health. It has turned the corner.”
Not all industry players share his optimism. “Our racing revenue was flat in the first five months of our financial year,” says Gold Circle CE Michel Nairac. Gold Circle closed one of its two Durban tracks, Clairwood, in August last year but has increased the total number of races, he says.
Peter Gibson, director of breed affairs at the Thoroughbred Breeders Association, puts the situation bluntly. “Horse racing is not in an entirely healthy state,” he says.
One of the big constraints facing race horse owners is stake (prize) money paid on horses placing in the first five positions. “Stake money is not going up in line with costs,” says Gibson. Nairac shares his concern. The result, says Gibson, is that small owners’ appetite to invest has dwindled. “The industry is being propped up by a few big owners,” he says. Among them are Markus Jooste, Gaynor Rupert, Roy Moodley, Bernard Kantor, Hassen Adams and Anant Singh.
It is to the industry’s determent, believes Gibson. “Competition is built on diversity,” he stresses.
A similar situation exists among racehorse breeders. “On the ground things are not all that great,” says racehorse trainer Paddy Kruyer, a 48-year veteran in the industry.
Breeding has become the preserve of what Kruyer terms a few “big corporate” breeders. “They have huge amounts of money,” he says.
“Smaller studs now do other things to make ends meet,” says Kruyer. “It could be sheep or wine farming but horse breeding now comes second.”
Though the total number of active racehorses remains stable at 6 500-7 000, the quality of SA’s horse population is suffering. The reason is African horse sickness (AHS).
“AHS makes it very difficult for breeders to export,” says Gibson. “It has an impact on breeders’ willingness to invest in new stock.”
The solution lies in replacing the current 80-year-old AHS vaccine, which has to be administered annually, with a permanent vaccine, says Gibson. “We could have one available in five years if there was enough money for more research,” he says.
Money is one of the industry’s big challenges. “Racing is costly,” says Du Plessis. “It costs us over R700m annually to stage races.”
There are solutions. One would be for bookmakers to cover more of the racing industry’s costs. “They account for 56% of horse betting revenue but under 20% of the costs of the sport,” says Du Plessis.
As another possible solution Du Plessis advocates a lower tax rate on horse racing and higher tax rates on less labour-intensive gambling such as casinos and limited payout machines. “On balance the total tax take would stay the same,” he says.
He has a strong argument. “Horse racing is a big employer,” he says. “It is 22 times more labour-intensive than a casino.”
AFRICAN HORSE SICKNESS MAKES IT DIFFICULT FOR BREEDERS TO EXPORT. IT HAS AN IMPACT ON BREEDERS’ WILLINGNESS TO INVEST IN NEW STOCK
PETER GIBSON