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Cape Racing – The Future Is In Our Hands

Making some sense of what's happened recently

Cape Racing is a little like Cape weather: as the old joke goes, ‘if you don’t like it, just wait a few minutes’ and it seems we’re on the cusp of another seismic swing.

Although my horses are safely retired and I no longer have a dog in the fight so to speak, I still consider myself a stakeholder in local racing.  As such, I decided to attend the recent meetings discussing the future of Kenilworth Racing.  Old habits and all that.

Robyn Louw writes that having followed the previous round (which included the Gold Circle divorce and the Cape hitching its wagon to Phumelela), it is amusing to see many of the same faces, although the roles have shuffled a bit.  But some things are so old, they’re new again.

As most people have a very short shelf life in racing, memories are remarkably short (even among long-standing members) and history tends to repeat itself on a fairly regular basis.

If I were being cheeky, I’d say this is why the media is handy.  It writes things down and saves them for posterity.  Really.  Google is your friend and there is some interesting history available for those willing to look.

Despite the fact there have been three separate meetings representing three separate parties, perhaps the clearest take-home for me was that communication is a problem.  A big one.

To be fair, most people are busy doing far more interesting things with their time than focussing on racing politics, which is probably why we regularly find ourselves so shocked and appalled by things, but let’s start from the top.

 

Who’s who

First, a little admin.

I’m a bit rusty on my racing organogram so just for clarity, the Kenilworth Racing Board came into being in September 2011 after the Gold Circle divorce / de-merger.  KZN went their own way and the Cape / Kenilworth Racing placed all its assets in the care of the Thoroughbred Horseracing Trust and thanks to a management agreement, came to be run by Phumelela.  When Phumelela went into business rescue, 4Racing picked up the slack to provide essential services.

The current Kenilworth Racing board is four-strong and consists of Bradley Ralph (Chairman / Bidvest), Wehann Smith (KUDA / CTS / MOD Restructuring Task Team), Faeeza Heuwel (KR Racing CFO) and Althea Dlamini (Kuhumelela Chartered Accountants / ex WC Gambling Board).

The Racing Trust (or more correctly, the Thoroughbred Horseracing Trust) came into being in around 1998 as part of the corporatisation process.  It is a non-profit organisation and has as its object, “the protection and furtherance of the interests of the racing industry”.  It originally held a controlling share of 35.25% (or somewhere in the region of 27 million according to reports) in Phumelela shares (subsequently diluted to its current level of 25%) with share dividends spread across a number of racing activities.

The Trust has seven trustees, five of whom are nominated via the Racing Association.  Historically, one had to be nominated from the WPRRA, but as they have been absorbed into the national RA, this has fallen away.  The remaining two Trustees are nominated by SASCOC.

Our current Trustees are Mark Currie (Trust Chairman / Investec), Bradley Ralph (KR Chairman/Bidvest), Pieter Graaff (Lammerskraal Stud), Kevin Sommerville (Drakenstein Stud), Adv Clayton Vetter (Johannesburg Bar) and SASCOC nominees, Barry Hendricks and Qondisa Ngwenya.

Other important role players are John Evans, Phumelela’s Business Rescue Practitioner (BRP), MOD and their board of trustees (Julian Thomas, Victoria Freudenheim, Richard Dewes, Thomas Claiborne, Emma Callister, Nicola Beetham and Alec Berber), MOD’s Restructuring Task Team (RTT) which started life as a five-man team comprising Wehann Smith (KUDA, CTS, Kenilworth Racing Board), Brian Riley (Marquis Finance), Charles Savage (Purple Capital/Easy Equities), Mike de Kock (trainer) and David Abery (ex Petra Diamonds/Chairman of SAEHP).  The composition of the RTT has changed, but there hasn’t been much communication in this regard.  The RTT has as their mandate the safeguarding, re-capitalising, and restructuring of the racing industry in the wake of Phumelela Gaming (PGL) going into business rescue.

For the sake of clarity, the Racing Association Board, or more correctly, the Racehorse Owners Association Board, comprises Peter Riskowitz (Chairman), ably assisted by ST Dev Naidoo, Greg Kotzen, Desiree De Andrade, Philip Sarembock, Kevin Sommerville, Garth Towell, Natalie Turner (CEO) and Ashwin Reynolds.

Lastly, there’s the 4Racing Executive Team comprising Fundi Sithebe (CEO), Andrew Langham (CFO), Colin Gordon (COO), Patrick Davis (Racing Executive), James Saulez (Chief Digital Officer) and Lunde Bleni (Executive for Stakeholder Labour Relations and Transformation).

 

KR / Racing Trust – Thursday, 5 May 2022

We kicked off with the KR / Racing Trust meeting on Thursday, 5 May 2022.  The meeting was called by the Kenilworth Racing Board and the Thoroughbred Horseracing Trust and billed according to the official invite as an ‘engagement discussion’.

There was a relatively good turnout with a cross section of owners, trainers, officialdom (NHA, SASCOC, WC Gambling Board) and interested parties, as well as what sounded like a good number who joined via Zoom.

As seems to be the tradition for ‘family’ meetings, proceedings kicked off late.  Manning the table at the top of the room were Pieter Graaff, Faeeza Heuwel, Althea Dlamini, Bradley Ralph and Wehann Smith.

It was a pity that there was no official agenda, but perhaps the rather short lead time did not permit for one to be drawn up.

After the formalities by Bradley Ralph and a structural overview by Pieter Graaff, Wehann Smith gave an overview of Kenilworth Racing’s financial position, in the context of the Gold Circle de-merger and the subsequent Stakes Agreement and Sustainability Agreement structures that were put in place to safeguard Kenilworth Racing when the aligned with Phumelela.

With Phumelela going into business rescue, these structures have been cancelled, with the PGI dispute over the IP rights adding further misery.

This is when MOD and 4Racing entered the picture and commenced the process of negotiating with the BRP.  Although the Cape originally resisted, it eventually also came under the 4Racing umbrella under an informal continuation of the Phumelela management agreement.  It is perhaps worth stressing this point, as 4Racing have in fact never officially ‘taken over’ the running of Kenilworth Racing and the support they have offered, has been on an interim, ad hoc basis to fill in the gap left by Phumelela.

The finances made for scary listening.  Kenilworth Racing had an existing R50m facility with RMB.  This was taken out during the Phumelela era and they provided security for it.  When Phumelela collapsed (taking KR’s Sustainability Agreement lifeline with them), MOD came to the rescue, facilitating a R30 million extension to the existing RMB facility (bringing the total to R80 million) for which MOD have had to sign security for R42 million.

The Business Rescue process was anticipated to take 6 months, but ran to 18 months, during which time Kenilworth Racing continued to trade.  Covid and the Omicron variant in particular severely impacted the summer season and in February 2022, they had to loan another R13,5 million from 4Racing to allow them to pay salaries and continue trading to the end of the year.

The net result is that Kenilworth Racing will be posting a R25.3 million loss at the end of 2022.

There was some positivity by way of the PGI settlement, which will net Kenilworth R25 million (and Gold Circle were good enough to waive KR’s R4 million share of the legal fees, thanks to the efforts of Robert Bloomberg).  However, because Phumelela stood surety for the original R50 million loan, they are holding the settlement as collateral against the RMB facility.

There is a promise of further relief from MOD, who have stated their willingness to increase their surety from R42 million to KR’s full liability of R80 million, and extend the period to November 2024.  This will allow Phumelela to be released from their commitment to RMB and allow the R25 million PGI settlement to be paid over to Kenilworth, which will mitigate their losses for the year.  In addition, releasing Phumelela from their commitment will expedite the job of the Business Rescue Practitioner in issuing a final dividend, which may be worth R2 – R3 per share.

It was the consensus of the Kenilworth Board that there is a need to negotiate a sustainable future with the Trust.  Accordingly a three man committee comprising Mark Currie, Pieter Graff and Kevin Sommerville has been appointed to review any and all options.

The Q&A session started with what looked to be a lengthy contribution from Robert Bloomberg, but he was cut short.  After some input from the floor, the meeting was adjourned and we all went home bemused and concerned, but without entirely being able to put our finger on why.

Trainers / Robert Bloomberg Meeting- Monday, 9 May 2022

With Mr Bloomberg’s anticipated revelations cut short on Thursday, a follow up meeting was hastily convened by the local Trainers body at Vasco’s Taverna, attended by a core group of concerned stakeholders.

Mr Bloomberg painted a very bleak picture indeed, turning Thursday’s bemusement into cold panic and leaving most participants very sorely in need of a drink. Good job we were in the right place….  However, the long and the short of it was that he suggests following the Gold Circle model.

With all the contradictory information flying around, and everyone confused and upset, it would be fair to say expectations were high for Wednesday’s 4Racing presentation.

4Racing – Wednesday, 11 May 2022

As a young rider, my coach insisted that no matter where I took my horse – be it a Pony Club rally or a graded show – we were seen to be taking things seriously and were neatly and correctly turned out.  She said it was a mark of respect to the show organisers and my fellow competitors, adding that if things didn’t go well in the ring, at least we’d have the consolation of knowing we looked good!

4Racing arrived with a full team complement of CEO Fundi Sithebe, COO Colin Gordon, Chief Digital Officer James Saulez (via Zoom), 4Racing TV head Stephen Watson, Communications Manager Jermaine Craig who did MC duties and Charles Savage.  They were seriously dressed, well-prepared and businesslike – in short, thoroughly professional.  They even started on time, for goodness’ sake.

Fundi Sithebe kicked off the presentation by introducing 4Racing’s 6 pillar strategy. These consist of the Racing & Betting Product, Digital, Retail Model, International Distribution, Properties and Marketing & Sponsorship, underpinned by a strong focus on Transformation.

These were divided up among the team members, with each covering their area of expertise.

Because the name seems to have been in circulation for so long, it came as a surprise to realise that they have in fact, only been running things for 200 days.  Seen in that light, particularly given the severe distress of the business they took over, their achievements seem quite remarkable (to be fair, there have been other adjectives for the TV coverage, but we’ll get to that).

Colin Gordon ran through some of the challenges they have been met with including the declining horse population, the consequences of Rian’s bookmaker war and ageing / poor Tote and TAB infrastructure, as well as some of the strategies they are implementing to counter those.

Fundi covered the property aspect, illustrating how these assets could be diversified, not only to provide an additional income stream, but to leverage the advantages of multi-use facilities to potential new sponsors.  She also explained that by necessity 4Racing have stepped into a number of Phumelela’s contracts, including the provision of essential services to Kenilworth Racing until the business rescue process could be finalised.

James Saulez ran us through the digital strategy and while it’s not my area of interest, there seems to have been an enormous investment into the betting and digital products to improve matters for punters.  Encouragingly, they are also building in mechanisms to allow punters to engage and offer feedback.

Stephen Watson perhaps had the least enviable job in explaining the rationale behind the broadcast strategy, the rationale behind Racing 240, the challenges they faced in taking over the old Tellytrack equipment and teams, distribution rights – both local and international – and a few of the changes they have tried to date.  Although we do not have HD on the Multichoice channel, there is at least a channel and, it sounds, a better relationship with Multichoice into the bargain.  They have also secured a contract with the SABC to get racing out from behind the pay wall and available to the general public.  I particularly liked that they have moved staff from a rota system to retainers, to provide stability and security.

The Q&A included lively contributions and ran the gamut of the needs of the punter, the rumours about funding and the bonding the Cape properties, Kenilworth Racing’s financial status, the upliftment of grooms, industry Board structures, the relationship with Gold Circle in terms of the TV coverage, and the possibility of a single operator.

What the evening didn’t include was a sales pitch.  Which seemed to leave the audience somewhat bemused.

Which brings me back to my original point.

Talk, discuss, debate

 

Communication 101

What has been clear throughout this process – perhaps best illustrated by Mr Mark Currie joining the 4Racing session to explain that the point of the original Thursday meeting was to explain that Cape Racing is for sale – is that there is a serious communication breakdown all along the chain.

Cape stakeholders have very little grasp of the current financial situation, or the intentions of their Board. There is little grasp of how the various racing structures work and how to leverage them to make our collective wishes known.  While I lay the responsibility for that squarely at the door of the KR Board, I’d like to add that there is also a lack of understanding of how gracious the various decision making bodies are being in even bothering to include us all in the process – something that ought to be appreciated a little more – because as things stand, they really do not need any of us, nor our sanction to do anything.

There has been very poor management of expectations throughout, with all parties seeming to have wildly different expectations.  With no easy bridge to the middle ground, everyone has been left rather out of sorts.  Which is a shame as the intentions are good.

However, one has to start somewhere and Mr Ashwin Reynolds perhaps contributed the most sensible comment of the evening by suggesting the 4Racing meeting may have been premature.  He suggested the Cape should get together asap to get their house in order and get a clearer understanding of what’s going on before they can begin entertaining suitors of any sort.

In closing

Tough as they may have been to hear, Mr Savage’s comments were not as out of line as most people seemed to think and in fact, are probably long overdue.

Cape racing folks (and I include myself here) are an entitled lot.  Yes, we have all the stud farms, horse flesh, owners and tracks, but sorry folks, it’s not enough.  It never has been, actually, but we’ve got used to ponying up with various partners and letting them do the heavy lifting and we’ve become spoilt and complacent as a result.

Rather more dangerously, we seem to have lost the ability to run our business ourselves.

The bad news is, that’s not an option anymore, so it’s time to put our big girl (or boy, if you prefer the fit) pants on and start figuring things out.

4Racing have been very clear that they are a serious option – if we want them;  Mr Bloomberg favours the Gold Circle model;  there was a suggestion for crowd-funding to support a standalone strategy and there may well be others.  But all will present challenges and compromises and all will require work.

This is not a popularity contest – although if it was, Ms Sithebe wins my vote for her comment that her team SERVES its regions.  It’s been a sorely long time since I’ve heard that from any board member anywhere and I have to say, I liked it a lot.

What this is, is a serious business transaction and one that needs to be approached objectively and mindfully.

As Mr Savage reminded us several times, the power lies squarely in our hands.

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13 comments on “Cape Racing – The Future Is In Our Hands

  1. Donald Bradshaw says:

    Well researched , presented and sometimes witty article from which I now have a better understanding of the matters , institutions and personalities involved.

  2. Jack W.I.Mills says:

    Same old story egos and self interest have always been the problem instead of negotiating with one another join hands and do what’s best for the racing industry in the long haul. and for all that’s part of the racing industryfrom top to bottom. Instead of being opposition. Against one another. Work together for the future and survival of racing and everyone that’s part of it.

  3. George McDonald says:

    What company gives its manager half of its profits?
    That is what Kenilworth Racing thought was a good deal for them when they allowed Phumelela to control/manage their business.
    Does 4Racing have the same deal with Kenilworth Racing?

  4. Theodore John Roelofsz says:

    My teeny-weeny tuppence worth is this…
    Why all this hi-faluten legaleze whilst we on the ground know that in the long run, money will be siphoned to those who ARE IN THE KNOW,… GOT IN ON THE GROUND FLOOR,…KNOW SOMEBODY WHO KNEW SOMEBODY,…and WE, yes WE,…the groundly punter is at the end of that MONETARY FOOD-CHAIN,…and it is US…yes US,… who are being conned into feeding and keeping this mad game that we LOVE so stupidly ALIVE.
    Sadly we see the saga of BRP (business rescue practises) looming as failures…..right from the very beginning with SAA and the bottomless pit we… THE TAXPAYERS refilled time after time.
    Yes, you guessed and know this…..those Rbillions punted into the “RESCUE”, ended up in those AFOREMENTIONED FEW’s already filled pockets (board fees, salaries, bonuses, appearance fees, travel and accommodation, in the know dividends from insider trading… AND..AND..AND..AND..!!!!!!!

  5. Eric Fordred says:

    Once again I note with concern that these boards do not provide any representation for our customer base, being the Punters, wake up people look after your clients.. Perhaps Kenilworth Racing should be talking to Hollywood Bets and Gold Circle, because they, at least are doing something right..?

  6. Graham Martin says:

    No mention of Transforming this ridiculous M.R. HANDICAPPING system and doing away with the so called ” LINE HORSE”? You will not get punters returning until untill this is done!

  7. I agree entirely with Donald Bradshaw. This is the first article i have read on this subject which explains the issues clearly.

  8. Michael Jacobs says:

    Cape Racing needs to act soon. The longer they sit on their hands waiting for a miracle, the sooner they will cease to exist!

    The current situation is entirely of their own making, so pointless for Cape Stakeholders to feel aggrieved, outraged or hard done by! How had Cape Racing survived for the past +-100 years? Why has past partnerships worked out so badly to the detriment of Caoe Racing? Why can’t Cape Stakeholders act in their own best interests?!

    What is the solution? To race horses and bet! So go back to that, but START with the customer/punter, not with the trainer or the breeders or the jockeys, but with the customers! How do the small independent racetracks in England and Australia survive? Go and do some research! Forget about Mr Bloomberg’s dossier and past grievances, that’s not going to save Cape Racing, that’s history for the dustbin! What does the future look like!?

    What about diversification- Mr Hassen Adams had a grand plan to leverage the Kenilworth asset/property, have another look at that. How about a casino at Kenilworth Racecourse- use the property 24/7 instead of 3 or 4 times a month! Cape Town has a casino license in the surbuban area that was legislated years ago and was never exercised- there’s an opportunity. How about a public company to refinance and sustain Cape Racing if current suitors are not wanted?

    Bold moves are needed to save Cape Racing- so the movers and shakers must stand up and ACT! The majority of commenters here are only punters and customers, but we have a genuine love for the game and want it to survive! But where are the key players, those with real investment in the industry, those whose livelihood depend on horseracing? What are they doing to save Cape Racing

    1. Editor says:

      Somebody sent us this link about Newlands Cricket
      https://www.businessinsider.co.za/take-a-look-this-is-what-the-iconic-newlands-cricket-ground-will-look-like-r800-million-later-2020-11

      “For many years it became apparent that surviving on the revenue generated by match days was no longer an option and we needed to find a solution that would make a positive impact,” explains Tennyson Botes, WPCA Interim CEO. “The ground is currently only used an average of 35 days per year, but this development will see the NCG precinct being utilised all year round.”

  9. WILLIAM MILKOVITCH says:

    Mr. Jacobs, if you like you can phone me, after 8pm this evening and I’ll give you private info about the casino/redevelopment scenario or/and history

    If I remember correctly, have my number, don’t You, Sir ?

  10. Andrew Bon says:

    It’s all very well being politically correct but let’s get back to the original management of Western Province Racing. The old school tie entitling management to help themselves to whatever was on the cards like loads of bricks 🧱 and cement to alternative addresses on “ The Company’s Account”
    Then when the heat arrived the hospital pass, left the politically correct appointee, who was promoted to the level of incompetence, with no option but to act in the best possible manner known to her.
    This was simply not good enough to cut it. Western Cape Racing Has been a fiasco for many years and even the current marketing team are unconscious, to the point where they market Champagne when there is no water in the taps, just reflect on the Jan 1st 2022 Fiasco. So the harsh reality is just as obvious. The differential between DA governance in CT compared to the ANC incompetence in KZN is as glaring as Western Cape Racing Management compared to the slick, successful and phenomenal management of the JRA

  11. Santoro Arikum says:

    For any business to be strong and not just survive the orginagram needs to be strategized there are too many gambling establishments the state of economy and its citizens. There should be no additional gambling licenses issued, we need to work with what we have. Bring the interests of horseracing back, the advertising the linking up with stakeholders that we have now discarded, they were serious flamboyant advertisers for their brand ( eg J&B, Rothmans just to state a few) the population of SA has become so holy that no one drinks or smokes. This is all about entertainment, so grow the entertainment.
    The Cape as the best thoroughbred stud farms if you want to grow the value of your farm you need to also play a bigger hand. Get racing and good broadcasting back. Telly track set a standard for 4 racing to live too.
    The punting public must have the urge and excitement to go to the race course, take a lead from British, Australian, Asian and American horseracing.
    Stop with the egos look too a sustainable future.

  12. Adrian Holloway says:

    The saying….be careful what u wish for….suddenly springs to mind….more or less a year ago everybody was baying for the blood of the 3 musketeers ie Hyde…Moodley and Rowett…eventually we got the new 3 musketeers ie Fundi…Savage and Watson and we are all crying crocodile tears but we actually just got what we wished for…

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