Money ball: How SA sport became big business

There was a time, in living memory, when many of South Africa’s major sports were run out of the proverbial old tog bag. Rugby from Danie Craven’s car boot (in at least two cases), cricket from a cottage on the grounds of Joburg’s Wanderers club or, in the case of financially stressed nonracial bodies, from the sitting-room of struggle icon Hassan Howa’s home in Heathfield, and football from a parking lot.

Today the three codes are multimillion-rand businesses, driven largely by TV.  It’s a big-money game. Last year, Star India paid an eye-watering $3.2bn for the broadcast rights for the Indian Premier League (IPL) for five years. Viacom18 paid about the same for streaming rights over five years. Taken together, that’s a cool R114bn for five seasons of cricket.

Closer to home, SuperSport announced on Friday it had secured broadcast rights for the IPL in South Africa. That came just 24 hours after the DStv channel said it would no longer carry the popular tournament, fuelling speculation that it couldn’t afford the sublicensing fee.

Still, it’s uncertain — in the major sporting codes, at least — who is in the driving seat: the medium or the message? As for the Cinderella sports, they attend the occasional ball, but often in the rags of their namesake.

The financial arrangements between TV networks, sports governing bodies and players can be opaque, but the product is there for all to see. Rugby in South Africa is top of the log with three World Cups and a host of significant trophies; cricket has won some and lost some, the defeats coming most notably in World Cup tournaments; football’s only significant triumph remains the 1996 Africa Cup of Nations.

The minor sports may together have bags of gold medals but each commands only a minuscule share of TV’s largesse.

No matter how wealthy or precarious the sport, however, all have had to pick themselves up from the near knockout blows dealt by Covid.

Bouncing back

The Springboks didn’t play a Test match in 2020, and in 2021 the British & Irish Lions visit, usually a money-spinner, was hosted in empty stadiums. That devastated the sport’s finances, says SA Rugby president and acting CEO Mark Alexander. It led to an estimated loss of R600m, compounded by a R500m deficit with the collapse of Super Rugby, a competition of provincial southern hemisphere teams, including South Africa, New Zealand and Australia.

Nevertheless, the pandemic opened a new, potentially lucrative direction into Europe for South Africa’s top provincial teams. The Bulls, Sharks, Lions and Stormers have joined the United Rugby Championship (URC) — an entrée to the Champions Cup, the world’s richest club tournament.

The move has been expensive, though. Alexander says travel costs alone are between R35m and R40m a year — the kind of bill previously picked up by Super Rugby organising body Sanzaar.

“We are buying a shareholding in the [URC] and European professional club rugby. From being a net recipient of income from Super Rugby in 2019, we are now subscribing to the two European competitions, which has meant a half-billion swing in our annual profit and loss.”

It’s the right move, says Alexander, but it’s “causing extreme financial pain”.

That could be offset if current negotiations see a deal struck between SA Rugby and CVC Capital Partners, an investment firm with $133bn in managed assets. One of the biggest investors in sport worldwide, CVC has a 14% stake in Europe’s Six Nations (£365m over five years), 28% in the URC and 27% in the English Premiership. As owner of the Gujarat Titans, it also has a $700m stake in the IPL.

Arrangements such as these tend to give private equity outfits like CVC a place on the team’s board and much clout with organising bodies (the Board of Control for Cricket in India, in this instance).

Private equity already has a hold in three of South Africa’s top four provincial rugby teams. Billionaires Patrice Motsepe and Johann Rupert own a controlling stake in the Bulls, Glasfit and Digicall CEO Altmann Allers is the majority shareholder in the Lions, and US consortium MVM Holdings is invested in the Sharks.

The Stormers, owned by the dyed-in-the-wool amateurs of the Western Province Rugby Football Union, are the only holdouts. 

Bulls CEO Edgar Rathbone says help from private equity is necessary in the sport. “The funding model in South African rugby is such that all the money is divided equally among the 14 unions, so you are only getting a small piece of that pie.”

He says the Bulls have “seen a significant rise in sponsorship revenue” and 55% growth in commercial revenue after private investment. Exposure in the URC will further benefit local teams.

South Africa-born Marco Masotti, the head of MVM, tells the FM he’d like a more transparent relationship between the equity partners and the decisionmakers at SA Rugby, especially regarding player workloads.

As it is, SA Rugby and players’ organisation MyPlayers have tried to introduce a 32-game cap as well as an eight-week rest a year for elite players. Bigger team squads and an increase in the SA Rugby salary cap — set at R67.2m for 2023 — would also ease the pressure.

If a global season is created, and the Rugby Championship is played in the Six Nations Test window during February and March, it would ease pressure on players and allow an off-season in July/August.

Down, but not out

When it comes to cricket, the crowds were back at local grounds this summer. They flocked to matches in the SA20 competition, cheered the Proteas in the women’s T20 World Cup and turned up in numbers for one-day internationals.

The SA20, which had been expected to take five years to break even, made a profit in its first year. That’s unsurprising, given that all six team franchises were awarded to IPL bidders, who paid an estimated collective $150m for 10 years. 

Still, it wasn’t an immediate financial game-changer for a sport recovering from two seasons lost to Covid and years of administrative upheaval.

“SA20 is important for us but we are still a few years away from it increasing our revenues significantly,” says Cricket South Africa (CSA) CEO Pholetsi Moseki.

While priorities may be changing, international cricket remains the bedrock of the game’s finances. More specifically, South African cricket relies on two main sources of income: television money and payments from the International Cricket Council (ICC).

Of CSA’s R778m in the 2022 financial year, R413m (53%) came from broadcasting rights and R256m (33%) from the ICC’s distribution, based on income from global events. Sponsorship came in at just R52m (6%). Considering that sponsorship accounted for 20% of revenue five or six years ago, there’s a major hole to be filled, says Moseki.

Cricket’s sponsorship woes can be traced to 2017, when a planned global T20 league collapsed, costing about R300m (including compensation to team owners and players). CSA then staged the Mzansi Super League in 2018/2019 and 2019/2020 without a television deal or title sponsor in place. That cost another R200m, says the South African Cricketers’ Association (Saca), which represents professional players.

Not helping matters was the CSA board’s failure to deal adequately with Thabang Moroe’s disastrous tenure as CEO. He was fired in August 2020 and, after difficult negotiations, a new board with a majority of independent directors was elected in June 2021. (Moseki was appointed full-time CEO in March 2022 after acting for 15 months.)

Still, the damage had been done: Standard Bank, whose sponsorship was believed to be worth about R70m a year, led a funding exodus, claiming its association with cricket was damaging its reputation.

That’s not to say sponsorship has dried up entirely: online gambling company Betway sponsors the SA20 and has naming rights for Test and one-day cricket; Momentum backs the Proteas women’s team; and KFC sponsors mini-cricket and T20 internationals. But there is, as yet, no replacement for Standard Bank as a major sponsor, and domestic competitions remain unsponsored.

All told, in its four-year financial cycle to end 2022, CSA totted up a deficit of R559m. And it’s not over yet: Moseki expects a loss of about R200m in 2023.

“We knew this year was going to be tough and that we had to ride the storm,” he says. “We are expecting an improvement in the next 18 months or so — and India are coming at the end of the year.”

That tour is estimated to be worth R1bn, which will make up for the losses.

Of course, any financial success for the organising body requires a strong national team. Though South Africa cannot compete with the financial muscle of the “big three” — India, England and Australia — the Proteas still need to be on top of their game if they want to get a look in.

“If you are not one of the top four teams in the world you will not get the best deals,” says Saca CEO Andrew Breetzke.

The pressure here is almost solely on the national men’s team. Revenue from television rights and the ICC disbursements are both linked to their performance. Breetzke tells the FM the Protea men account for as much as 85% of CSA’s revenue.

In its past financial year, CSA spent R77m on the national teams. The 20 nationally contracted male players have basic salaries of about R1.3m-R3m, to which can be added match fees, bonuses and a share of commercial rights. The 15 women on national contracts get R12,000 a match (against the men’s R14,000), and 50% of men’s fees for Tests and ODIs.

The country’s 15 provinces accounted for the bulk of the R539m spent on other professional cricket. “You need a strong domestic system,” says Moseki.

Joburg’s Lions, along with the Titans in Centurion and Dolphins in Durban, are considered the three most financially savvy provinces, but they too rely on CSA for a significant portion of their funding.

Lions CEO Jono Leaf-Wright is proud that the province last year turned a profit of more than R300,000 on revenue of R67m, despite being unable to sell tickets for matches at the Wanderers stadium because of Covid. Just the cost of maintaining the stadium is R18m-R20m a year.

Ultimately, though, cricket is about the people who play it. The basic earnings for male players at provincial level range from R180,000 a year for the lowest-paid Division 2 players to R1.1m for leading Division 1 players.

Much of Saca’s work is focused on players at the lower end of the scale, providing bursaries and educational opportunities for players in case they don’t hit the cricketing big-time. For the more established players there are opportunities for about 55 local players to earn additional income, ranging from R175,000 to the gobsmacking R9.2m paid to 22-year-old Tristan Stubbs.

A handful of elite players, among them Kagiso Rabada, Quinton de Kock and David Miller, command huge fees in the IPL — the world’s largest cricket tournament. South African players are also in demand in lucrative leagues such as The Hundred in England and the Caribbean Premier League. And former captain Faf du Plessis earns about R14m a year in the IPL. He has also played in leagues in Australia, England, Pakistan, the West Indies and Bangladesh.

For the most part, CSA allows star players to earn money in the IPL, even when South Africa has international commitments. But it insists that some national-level events — for example, the recent one-day matches against the Netherlands, which were crucial to World Cup qualification — trump IPL games.

Keeping the (foot)ball rolling

On the soccer front, DStv’s slicing and dicing of channels and slimmed-down, cheaper packages for the mass market have been a saviour for the professional game.

TV money sustains most clubs at a time of negligible sponsorship interest and dwindling gate takings. Even South Africa’s Premier Soccer League (PSL) is more dependent than ever on its relationship with title sponsor SuperSport.

That’s a couple of billion in the coffers. In 2018 SuperSport, for the third time in a row, secured the rights to screen PSL games, for 2019-2023 — for R2bn. It’s expected to snap up those rights again this year, when bidding opens for the 2024-2029 cycle.

But the game has also helped increase DStv’s subscriber base. Prior to 2005, the sale of decoders had reached a ceiling, restricted to an affluent, largely white market, enticed by English Premier League football, Super Rugby and Formula One. That changed with the introduction of the slimmed-down DStv Compact. It cost less than R100 in 2005; today a subscription of about R400 provides news and movie channels, local soap operas and Nollywood dramas, and football from the PSL.

When MultiChoice launched DStv Compact, it predicted the subscription service would add about 42,000 new households in 14 months. But this exploded once the broadcaster signed its first television rights deal with the PSL in 2007. Today, the pared-down service has about 3-million subscribers.

In another league

Outside the big three codes, the minor sports struggle financially, even though they punch way above their weight. Swimming, athletics, rowing, triathlon, canoeing, surfing and tennis, for example, have delivered all but one of South Africa’s 38 Olympic medals since readmission in 1992. 

Beyond the Olympics the smaller codes, including cycling and shooting, have claimed more than 120 world championship medals. Then there are 266 Commonwealth Games medals. And, at the African Games, Team South Africa had 1,050 podium placings.

One of the biggest beneficiaries financially has been the national women’s football team. Banyana Banyana was awarded R15m from the government for winning the African title last year — more than 10% of about R117m that the department of sport allocates to its 75-odd sports bodies each year. This was on top of the South African Football Association’s R400,000 payout to each player.

On average they received more individually than Tatjana Schoenmaker, who received R850,000 from the government for winning the 200m breaststroke in a world record at the 2020 Tokyo Olympic Games, and claiming a silver in the 100m. Surfer Bianca Buitendag, who won South Africa’s only other medal in Japan (a silver), received R220,000.   

The department of sport, arts & culture’s annual payments make allocations to “priority codes”, with nothing earmarked for high performance.

A further issue is the timing of payments.  The department’s financial year begins in April, but allocations to federations are finalised as late as November or December, with money paid only in January. This leaves the sports bodies with little time to spend their allocation before the end of March.  

“It’s a fiscal dumping exercise from hell,” says Colin Simpkins, secretary-general of Canoeing South Africa, which boasts more world championship medals — 54 — than any other code.   

The lottery, which should be the major benefactor of the Olympic codes, is no better. Olympic preparation takes place continuously in four- and eight-year cycles. But Lotto funding is allocated annually at best. Often the National Lottery Commission’s 12-month “cooling-off” rule means federations are eligible to apply only every other year.    

Essentially, this has meant a drip-feed approach to the funding of some sports.

Adding to the problem is that there is too little funding for preparing athletes, say coaches.  

“It takes anything up to 10 years to develop a professional tennis player who’s going to have a modicum of hope of success,” says Tennis South Africa (TSA) president Gavin Crookes. “You’re talking about identifying somebody at the age of 11 ... [but] they give you half the grant that you’ve applied for and then, when you apply in the next year for the continuation of that programme, they don’t allocate any funds to the programme. It’s very frustrating.”

When sport did receive decent Lotto backing, from 2009 to 2016, the South African Sports Confederation & Olympic Committee got more than R100m a year. On top of that a few select national federations, including rowing and swimming, were allocated R8m each annually from 2009 to 2012. 

Team South Africa won six medals at the London Olympics in 2012, equalling the country’s 1912 record for most golds (four). At Rio 2016 South Africa matched the mark for total medals, 10, achieved twice before, in 1920 and 1952. Those 16 medals made up 42.1% of the medals South Africa won at the last eight Games. Money made a difference. 

Last month, in a milestone for sport, the department brought federations together for an indaba at which it said it would change its funding cycle to three years. The lotteries commission is looking to change its funding model too.  

Sports bosses left the meeting buoyed, though much has now to happen. 

The department’s deputy director-general Sumayya Khan says the government has made a positive impact by investing in programmes to uplift sport, such as in women’s football and basketball. It has also recently started pumping money into a professional women’s cricket league. 

Kelvin Watt, director of audience-tracking firm Nielsen Sports, tells the FM the problem is that many smaller federations lack a product to take to market. “What makes the big three — and in some respects golf and tennis — different is they all own content,” he says. Sports such as swimming, athletics, hockey and boxing need to innovate their domestic competitions.

“Athletics is starting to get its head around these things, but it’s not easy,” says Watt.  “With their broadcast rights deal with SuperSport they’re in a better place.”

Rowing is rare among the minor sports in that it has a sponsor in RMB, which it acquired without TV content. But this doesn’t cover all the national squad’s preparation needs. 

When it comes to tennis, TSA has nine sponsors and nearly 35,000 subs-paying members, helping it to record a turnover of R29.6m last year. It is targeting 50,000 members and an ATP 250 event, which would bring TV rights, ticket and hospitality sales, and sponsorships. Just 20 years ago TSA was broke, but it is now healthy.

“It has to be run as a business,” says Crookes.

GolfRSA, which oversees the amateur game, has 140,000 members each paying annual subscriptions of R226. Its turnover is about R38m a year and the development board has a R17m budget funded largely by Dunhill Links and Remgro, which are owned by golf patron Rupert, He’s also been funding a national squad for the past seven years. 

Local players have won 27 international tournaments, including two British amateur titles, in the past three years. Before that only one South African golfer had won the British amateur — that was Bobby Cole, way back in 1966.

GolfRSA CEO Grant Hepburn says the organisation is about to embark on a sponsorship drive, linking with the professional Sunshine Tour, which is enjoying it s busiest season. On top of that, South Africa also hosts five DP World Tour events.

Athletics South Africa has an acting CEO  in Terrence Magogodela and two sponsors — international sports brand Puma and local hospitality group Southern Sun. It also owns popular products in the Comrades and Two Oceans ultra-marathons. 

Canoeing SA doesn’t have any such flagship event, but it can claim Hank McGregor, arguably one of the country’s greatest sports stars. Regarded as too old for the Olympics in 2004 when he was 26, he won 11 marathon world championships from 2003 to 2018, the year he turned 40. “He has never been given a cent by Lottery or the department of sport,” says Simpkins.

All told, the disparities in South African sports are stark. But few are being run on a takkie’s shoestring any longer. And they seem to have stood up after the Covid knockdown.