Phumelela & The Racing Association, Hand -Maidens?

I am an owner. I opted to resign from the Racing Association (“RA”) and have not been a member for approximately two years. In general, I am not pleased with the manner in which horseracing in South Africa is being administered by the operators, the National Horseracing Authority (“NHA”) and the Racing Association (“RA”). There is a complaint, which affects owners, which I need to bring to the fore.

In a recent letter to the Sporting Post, Rian du Plessis, the Group CEO of Phumelela dealt with issues raised by Ian Jayes who accused Phumelela of being the “willing hand-maiden” of the RA.  In this regard, du Plessis stated:

“As explained in the above, the Racing Association is not the “hand-maiden” of Phumelela. In fact quite the opposite. The Racing Association appoints the majority of Trustees on the Trust and in turn the Trust, through its significant shareholding in Phumelela, exercises significant influence over Phumelela. However, the most important protection mechanism for owners is the Stakes agreement between the Racing Association and Phumelela…”

I beg to differ with du Plessis’ answer to the “hand maiden” accusation and I set out below, one of the reasons why I disagree.

On 13 December 2010 the Sporting Post published an article under the headline Phumelela, RA and Racing Trust contribute towards stakes deficit” wherein the following was stated:

“Horseracing and tote betting operator Phumelela, the Racing Association  (the organisation responsible for looking after the interests of owners in Phumelela regions) and the Thoroughbred Horseracing Trust are contributing R4 million towards offsetting a R10-million shortfall in prize money for races at the five Phumelela racecourses in the 2010-11 racing season.”“Prize money in Phumelela regions each season is determined by a formula in terms of which a percentage of total tote betting turnover in the previous term goes to the stake pool. Unfortunately, turnover in 2009-10 was three percent down on the previous season, a significantly better outcome than in many other racing countries, and that has resulted in the current deficit.”“Instead of cutting stakes across the board to eliminate the shortfall, the Racing Association (RA) and Phumelela, in conjunction with the Racing Trust, investigated various other options to deal with the deficit.”“The RA is doubling the number of races in which it pays bonuses. There will be 38 such races at Turffontein and the Vaal in 2011, each with a R20,000 bonus for the owners if they are RA members. There will be 16 bonus races in Port Elizabeth, each with an additional R15,000 for RA-member owners, and four such races at Flamingo Park each with a R10,000 bonus.”

Owners who benefited and benefit from the RA sponsored “bonus races” are owners who are members of the RA. All other owners in South Africa are treated with disdain. They are explicitly prohibited from reaping this benefit because they choose or prefer not to be RA members.

I am of the belief that all owners should be treated equally. Since nothing has been done about the RA’s prejudicial and discriminatory practices regarding “bonus races”, I can only conclude that it is condoned by most or not many care about it.

In March 2009, and whilst a RA member I addressed an email to Clyde Basel who at the time was an employee of the RA. The email relates to “bonus” stakes and RA corporate governance issues.  I stated the following:

“As usual, I am addressing this mail to you as a member of the Racing Association.
You will recall that the Racing Association has notified its members of an initiative to provide bonus stake money in certain races to its members.
I recall seeing you on Tellytrack with the first Racing Association member who received the bonus. You had a large cheque in your hand which showed the Racing Association as the drawer of the cheque. This was handed over by you to the Racing Association member to signify that he was the recipient of the bonus payment.
I have a horse running on Saturday 28th March 2009 in the first race which has the added bonus to the stake money.
I am particularly worried that the stake bonus money payable to Racing Association members is money coming from the Racing Associations coffers. If this is so, neither I nor any member of the Racing Association can accept the bonus stake payment from the Racing Association.
The Racing Associations Memorandum of Association is absolutely clear in this regard where the following is stated:
“The income and property of the Racing Association whencesoever derived shall be applied and utilized solely towards the promotion of its main objects and the furtherance of its aims as set forth in the memorandum of association.

No portion of the income and property of the Racing Association shall be paid or transferred, directly or indirectly, by way of dividend, bonus or otherwise howsoever, to the members of the Association or to its holding company or subsidiary or any other person…”If the bonus stake money is coming from the Racing Association, I suggest that this initiative be stopped immediately as the members who have received the payments will become obliged to re-pay the money to the Racing Association. Furthermore, they can have a claim against you and the board for failing to act in terms of your mandate.
Please let me know the full details regarding this bonus payment and in particular, whether it is something that is being paid by the Racing Association either directly or indirectly.
I wait for your urgent reply.”

I received a response from Mr Basel, who was then Chief Executive Officer of the RA which said:

“The RA is aware that it cannot make a payment to one of its members. No RA income or property has been paid over to a member of the RA in contravention of its articles of association or its memorandum of association. The money used to reward a RA member is paid by Phumelela Gaming and Leisure Limited utilising a small portion of the money donated to the stakes pot by the Thoroughbred Horseracing Trust. The purpose of the bonus stake money is to incentivise membership in the RA amongst horse owners. The token cheque used in the presentation ceremony highlighted the fact that the bonus was paid to the winner as a result of his or her membership in the RA and does not indicate that the money was paid by the RA.”

If Phumelela is not the RA’s “hand- maiden” why:

–  is Phumelela paying the “bonus” stakes  to RA members and allowing South African racing to believe that it is paid by the RA?

–  have Phumelela and/or the RA and/or the Thoroughbred Horseracing Trust (“Trust”) failed to disclose to South African racing the full (and damning) facts?

–  is Phumelela involved in and condoned the RA’s discriminatory practices regarding owners insofar as stakes are concerned?

– have owners throughout South Africa not been informed of the Trust’s involvement in this “bonus” stake payment to RA members?

The correspondence I have exchanged with Clyde Basel (who is currently senior management with Phumelela) opens a can of worms, the lid of which has only been slightly lifted. There are many issues that remain unanswered on this small aspect of “bonus stakes”.

I hold my breath in anticipation of a complete, forthright and transparent answer from Phumelela and the RA.

– from Brett Maselle


Phumelela Responds to Jayes

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