As investments go, it was hardly appealing. An outfit run by amateurs who had spent their way into debt and had mortgaged to the hilt its properties, among them a decaying Newlands HQ. The only asset worth a look was not a fixed one: a team of talented rugby players, the Stormers, and their coaching staff who understood the business of winning.
If the team — the union’s cash cow — was to continue to flourish, or even function, in an era of professionalism, drastic action would be needed to free it from the albatross of amateurs.
Last month, after more than a year of negotiations and cajoling, a deal was struck to sell the Stormers to a group of private investors for R148.23m. It was hailed as a relief for sellers Western Province Rugby Football Union, who received a cash injection to keep their heads above water, and the Stormers players, whose future was secured.
“There had been a lot of insecurity,” says Stormers head coach John Dobson, who initiated the search for that security.
The deal was anything but straightforward. Those amateurs, representing 102 disparate clubs that make up the union, had rules and a constitution that required a two-thirds approval for any sale. A quick agreement seemed unlikely with the members riven by factions and mutual distrust. In the meantime, the interest on the union’s mortgaged properties soared and it teetered on the edge of an economic chasm. A breakthrough came last August when 75% of the 102 clubs voted in favour of the deal which eventually closed last month.
“There’s a huge sense of safety,” says Dobson. A few days later the team would celebrate on the field with a 42-12 win at home in the United Rugby Championship (URC) over top Irish team Leinster.
It was not a commercial investment [but] on the philanthropic side of the family’s balance sheet, we were happy to look at it
— Johan le Roux
The process to save the union from bankruptcy was begun in 2021 when the South African Rugby Union (Saru) placed it under administration after the WP executive’s grandiose plans for recovery came to nothing.
At risk, too, were the Stormers team and coaches, who the following year won the URC, a demanding annual competition involving clubs from South Africa, Ireland, Scotland, Wales and Italy. Amid such turmoil there was an awareness that if the Stormers were to survive, the team would have to do so itself.
That is when Dobson and Dave Wessels, a former Super Rugby coach who’d been hired by the union’s administrator, became salesmen looking for a white knight. An equity process was begun by Saru, but the pair believed they could get something better. “We wanted equity in there for the long haul,” Dobson tells the FM.
In their second call to potential equity partners, they met Capitec founder Michiel le Roux, who directed them to his son Johan, who runs the family’s investment holdings, Fynbos Ekwiteit. “We need you to save Western Province rugby,” Dobson and Wessels told them. The Le Rouxs bought in, even though they quickly realised they would be investing in an unconventional asset class: passion.
“It was not a commercial investment,” Johan le Roux told Rugby365. But “on the philanthropic side of the family’s balance sheet, we were happy to look at it”.
Another investor, with similar sentiments, was the Ardagh Group, the Irish company that is big in the glass business and which bought Consol, Africa’s biggest glass manufacturer, for R1bn. Consol is also the biggest supplier of bottles to the Western Cape’s wine industry and was looking for a community investment.
The Ardagh interest seemed a good fit with the Le Rouxs and the region. They were joined by Nampak chair and Novus CEO André van der Veen, a former WP board member who had worked with Dobson and who had suggested approaching the Le Rouxs.
Ardagh and the Le Rouxs’ Fynbos Ekwiteit set up a 50-50 investment consortium, Red Disa, named for the flower on the Western Province rugby badge. It formed the majority with 71.5% of the shares and Van der Veen, with his Marble Head investments, held 2.5%. The Western Province union were granted 26% in the deal to take over the province’s professional team in an independent vehicle, Stormers Rugby.
Theresa Visser, a lecturer in business management at Stellenbosch University, who has been following the developments, says: “You can see that the guys who are part of that consortium were very open and upfront about why they were doing the deal. It’s not about return on investment for them, it’s about social responsibility and corporate social investment. They pretty much want to give back to the Western Cape and the Western Province.”
But will Dobson’s long haul have longevity? Up to a point, suggests Van der Veen, a businessman whose eye is on the try line and the bottom line. “Professional rugby in general is in trouble,” he tells the FM. “It’s got a business plan problem.”
He says none of South Africa’s four big professional teams (franchises in the sportswriters’ jargon) makes money “and they will continue to lose money”. A start, he suggests, is to understand “we’re in the entertainment business”. And to entertain, a team needs to put its best cast on the stage, which is why cutting player budgets is anathema. “It’s naive, because as soon as you cut player budgets, you compromise product on the field.” The “product”, he says, is “sacrosanct”.
If you’re going to manage everything through a town-hall meeting you’re never going to get constructive discussion
— André van der Veen
Spending priorities are where Van der Veen and his fellow investors are likely to bump heads with Saru, an archaic organisation that has changed little from the days when Danie Craven ran it with an iron fist and was not above gerrymandering to secure votes. Today it’s Saru’s general council, with its 15 provincial unions, that needs to be won over to ensure professional rugby’s long haul. Saru’s indulgence of the 11 smaller unions (and their votes) is to the possible neglect of the four big unions, the real money-spinners.
This does not diminish the importance of the smaller unions. Van der Veen says their rugby knowledge in developing players might even be better than the Test unions because they can put players through a nurturing process that the URC teams don’t have. “We’re running a machine.”
He says Saru needs to determine its priority to ensure strong teams. “You can say it’s the Springboks, but it’s [also a priority for] the four Test unions to have very competitive teams because they develop your Springboks.” Agreement on that priority, says Van der Veen, is a sticking point with Saru.
“Saru hides behind the general council,” he says. “It’s the way their legislative framework is designed. It’s a good system, but if you’re going to manage everything through a town-hall meeting you’re never going to get constructive discussion.”
He says Saru’s system of distributing part of the pie, most of it from TV rights, needs certainty; but it often varies. “We have to wait for their accounts to be finalised before allocations are voted on. That is ludicrous. You need to have certainty of income to determine expenditure. We should be able to balance our books; it’s not a difficult concept, but there is a reticence to engage in that discussion.”
Not that any of the four South African teams that compete in the URC are about to go on a spending binge. “There’s going to be no galacticos approach,” says Dobson, referring to the lavish spending of European football clubs, especially Real Madrid, on expensive signings. The only big-ticket item is the return of former captain Steven Kitshoff from Irish club Ulster.
While the immediate challenge for Dobson and his team is on the field, the coach knows that from the kit manager to CEO Johan le Roux, Stormers Rugby, which spends between R30m and R40m a year, will have to become sustainable. “From that side it is going to feel very similar, in terms of a budget, trying to make ends meet,” says Dobson.
Visser says the Stormers are also good for the local economy. “If there is a game at Cape Town Stadium ... the whole city jumps into action.”
Van der Veen, his fellow investors, and those in the other big four teams would probably like Saru to also jump into action. He says Saru can’t keep kicking the can down the road. It can’t keep expecting the equity investors to continue bailing out the teams. “At some stage,” he says, “there’s going to be a surprise.”
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