Private practice

Private ownership would change the face of South African rugby.

Russell Crowe is known around the world for his Oscar-winning performance in Gladiator, but in South Sydney he is most famous for saving their rugby league club. On 19 March 2006, the club members voted to allow Crowe and wealthy Australian businessman Peter Holmes á Court to buy 75% of the club for A$3 million (R15 million at the time), leaving 25% with the club members. The duo had needed 75% of the 4 000-member vote and they got 75.8% (32 more votes than required).

When Crowe and Holmes á Court took over, the South Sydney Rabbitohs were on the verge of bankruptcy. Since returning to the 16-team National Rugby League (NRL) Premiership, they had finished among the bottom-three teams for five consecutive seasons, including three wooden spoons. In other words, they were the NRL’s equivalent of the Border Bulldogs (who finished last in the 2007 Currie Cup First Division).

The Rabbitohs’ new owners spared no expense in attempting to turn things around, ranging from Armani suits for the players to a A$20 million stadium upgrade. More importantly, they signed several leading international players and recruited a top-class head coach. (Incidentally, Crowe also axed the team’s cheerleaders, replacing them with a drumming band after fans, including his wife, complained about the ‘inappropriate’ pre-match entertainment.)

In 2007, the Rabbitohs won their first three games of the season – their best start since 1972 – and were competitive in every Premiership game. They finished seventh on the log and qualified for the eight-team play-offs for the first time since 1989. That success has not come cheap, however. In January this year, the new owners reported a A$4 million loss in the first full year of private ownership – more than they paid for their 75% share of the club.

“Business-wise, we took a hit in the first year,” admits Holmes á Court, “but that’s in comparison to going out of business. From my knowledge of the organisation’s books, the club would have relocated or folded. Now we are in a position to really grow the business.”

Although Crowe and Holmes á Court have promised to sell the club back to the members for A$1 if they bail out, expect them to be around for a while.

“You’ve got to take a long-term view about owning a sports team,” says Holmes á Court, whose three-year business plan will conclude at the end of 2009. “Russell and I are taking an inter-generational timeline and view this as a long-term investment.”

That was evident when Crowe helped the club find a new sponsor just before the 2008 season began. He personally approached four banks, and National Australia Bank eventually signed a three-year, A$3.5 million (R26 million) deal.

South African rugby desperately needs a gladiator or two of its own. Nine of our 14 unions are virtually bankrupt – Border, Eastern Province, Free State, Griquas, Golden Lions, Griffons, Leopards, Pumas and SWD Eagles. The rest just about broke even in 2007.

Imagine if South African billionaire Patrice Motsepe, current owner of Premier Soccer League side Mamelodi Sundowns and the richest black man in Africa, bought a big stake in Border rugby and threw cash at the likes of Schalk Burger and Bryan Habana. How long would it be before Border were promoted to the Currie Cup Premier Division? How long would it be before they won the Currie Cup and then demanded a Super 14 franchise based in East London? Or imagine if Johann Rupert, another South African dollar-billionaire (who loves rugby), invested heavily in a team such as Western Province (who he supports). They would be almost unbeatable with their current structures and his financial clout.

However, Motsepe probably wouldn’t be happy to own just 75% of a rugby team. In 2003, the mining entrepreneur bought 51% of the shares in Sundowns and became the club president. The following year, he bought the remaining 49% shares because he wanted total control. All in all, he paid R65 million for the club, more than double its value.

Motsepe, for instance, couldn’t realistically hope to own 100% of a Currie Cup team because the provincial unions hold shares in their commercial companies (for example, the Natal Sharks (Pty) Ltd is a wholly owned subsidiary of the KwaZulu-Natal Rugby Union).

‘I can tell you now that the KZNRU will never sell its shares in the Sharks company [60%], because that’s where it generates all its income,’ says Sharks CEO Brian van Zyl. ‘The union has always shown good returns, even when the Sharks were struggling. Why would it sell its shares to a private investor?’

Van Zyl says that 100% private ownership isn’t possible in South African rugby because we aren’t truly professional. ‘Look at the national body,’ he explains. ‘You still have Saru, which controls amateur rugby, and SA Rugby (Pty) Ltd, which is the professional arm. The same situation applies in most provincial unions.’

Private ownership is already part of South African rugby, albeit on a small scale. South African Investment Limited (Sail) owns 50% of the Blue Bulls, 24.9% of Western Province and 5% of the Griffons. SuperSport owns 40% of the Sharks and 24.9% of the Cheetahs. Last year, Royal Bafokeng Sports Holdings (RBSH) acquired a 49.9% share in the Leopards and financial control of the union.

It’s a common misconception that Sail, SuperSport or RBSH could not buy more shares (and more power) in their unions. According to the International Rugby Board, they could increase their investment if they got written consent from Saru and the provincial unions in which they have invested.

Of course, Sail, for example, would not be able to own 100% of the Blue Bulls Company without buying the shares of the Blue Bulls Rugby Union (BBRU). Even if the BBRU was keen to sell its shares (which is highly unlikely), it would have to get permission from the clubs that make up the union.

SA Rugby magazine asked Bulls CEO Barend van Graan if he would support a move towards total private ownership. At first, he didn’t want to talk at all, saying we should rather speak to Sail. He finally relented, however, and admitted he was part of the team that worked on the Accenture report for Saru (which recommended private ownership).

Another misconception about private ownership is that it’s against Saru’s constitution, yet nowhere in the 70-page document does Saru forbid a private company or individual from owning more than a 50% stake in a union. Border CEO Leon Botha, when contacted by SA Rugby magazine, thought private investors could own only 49%. When told they could own more, Botha admitted he ‘would have to be crazy to turn someone like Motsepe away if he wanted to pump millions into Border rugby’.

Although provincial CEOs are tight-lipped when it comes to discussing private ownership, Saru president Oregan Hoskins is a vocal supporter of it.

‘My personal view is that private ownership is inevitable when you consider how sport is evolving,’ Hoskins says. ‘We need to change a few mindsets in South African rugby. When Sail approached Saru recently and said they were looking to invest in [English Premiership club] Saracens, we gave them our blessing. With so many South Africans in London, we think some good can come out of it.’

Hoskins dismisses concerns that the government would be unhappy about 100% private ownership of rugby teams because it would not be able to enforce transformation effectively. ‘Government already ensures that transformation takes place in the private sector, so I don’t see how privately owned rugby teams would be any different,’ he says.

Though South African rugby has been slow to take up private ownership, New Zealand is set to embrace it. The New Zealand Rugby Union (NZRU) recently met to discuss the state of the game and what could be done to reverse the player drain that has seen the likes of Luke McAlister and Carl Hayman sign lucrative contracts with UK clubs. One of the topics that came up for discussion is the private ownership of Super 14 franchises that currently belong to the NZRU.

‘Like it or not, the involvement of [millionaire businessman] Eric Watson in the Warriors [New Zealand’s NRL team] has generated excitement and interest as has Russell Crowe at the Rabbitohs,’ says Rob Nichol, head of the New Zealand Players’ Association. ‘We have to be bold to look at ways we can involve private capital and give them a stake in the game.’

Nichol says players should also be allowed to move across the three Super 14 nations. The Waratahs, for example, could sign Dan Carter from the Crusaders. Sydney has plenty of wealthy businessmen who would want to invest in a player such as Carter, so the Waratahs would be able to match, or come close to, what a UK club could offer him. While playing for an Australian team, Carter would still be eligible for the All Blacks and would still be involved in a tournament watched by New Zealanders.

Of course, if South Africa followed that route, there would be nothing to stop a local investor from buying a big stake in the Stormers and bringing Carter to Cape Town. Would Stormers fans care if a foreigner started ahead of a promising local player if it meant their team could win the Super 14 not just once but three years in a row? Winning is all that matters in sport these days. And winning is a lot easier when your team’s owner has deep pockets.

However, one of New Zealand’s leading businessmen, Craig Norgate believes the consequences will be catastrophic if their Super 14 teams are owned by foreigners.

‘There’s no doubt there would be considerable interest in owning a Super 14 team,’ says Norgate. ‘But most of it would come from wealthy overseas interests. They are probably the only ones who could pay the type of money [to buy and fund a team]. And we would end up surrendering one of New Zealand rugby’s last remaining strategic advantages.

‘They would want to own a team for vanity reasons like they all seem to do over the world. I’m not sure what the teams would sell for but it would be plenty – several millions of dollars – so that would be attractive [to the NZRU]. But the price in the long run would be too high.’

By Simon Borchardt

This article first appeared in the May issue of SA Rugby magazine. The June issue is on sale Wednesday, 14 May.