Is It All Doom And Gloom?

'Industry Not Dying' - Rian Du Plessis

Despite a packed Greyville racecourse and the thrill of the Vodacom Durban July, news has emerged of J&B pulling out of its 39-year association with what is arguably the second-biggest event on the local racing calendar, Cape Town’s J&B Met, posing a question about the future of the sport.

J&B Met

Racing started in 1797 on the Green Point Common in Cape Town and has proved resilient, now being well into its third century.

The sport of kings, however, has undergone myriad changes over the years, including an interim board being formed to create what eventually became Phumelela Gaming and Leisure.

Horse of the Year - Variety Club's connections: breeder Anton Shepherd, owner Markus Jooste, trainer Joey Ramsden

Sport of the elite

Horseracing long maintained its position as a sport of the elite, but despite having shed that status to a large degree, it has been abandoned by many for quicker, cheaper and more accessible gambling alternatives.

Phumelela's Rian Du Plessis

Phumelela’s Rian Du Plessis

Asked whether he believed the industry was dying, Rian du Plessis, CEO of the only listed horse-racing company, Phumelela, said: “Absolutely not.”

But if the numbers of those directly involved are any indication of an industry in decline, they are telling.

South Africa went from 14 race tracks down to nine, and the number of registered breeders of thoroughbreds has dropped from 1400 to 200 in the past 20 years.

Despite the gloom surrounding the withdrawal of J&B’s sponsorship, Du Plessis said not much should be read into it.

The brand had “embarked on a new marketing strategy, which focuses less on brand awareness and more on the acquisition of new customers. It had nothing to do with the popularity of the event or the disassociation of horse racing.”

phumelelaHome

He said Phumelela was in the final stages of enlisting a new sponsor “that we are excited about … we are about to sign in the next couple of weeks”.

But despite the news of a new sponsor, there’s no doubting that the numbers involved in the sport are dropping.

Leon Smuts, a dealer for global markets at Rand Merchant Bank and a horse-racing industry analyst, said the lack of growth in the number of players in the sport had had an adverse effect on sponsors and the size of sponsorships, which were an important part of funding for racing.

Clairwood

Clairwood racecourse – disposed of

“Very little investment has taken place and in most instances there has been a disinvestment through the selling of assets [racecourses] and a reduction in the number of people employed.”

He said local operators were spending a lot more money, but not necessarily on racing-related investments, adding: “The sport has definitely not been growing.”

The corporatisation of horse racing was a requirement of the government when other forms of gambling were legalised.

Taxation on the sport had to be amended to allow for competition because, before 1997, betting on horse racing was the only legal form of gambling in South Africa.

Robin Bruss

Robin Bruss

Racing consultant Robin Bruss said the only way to make horseracing “truly sustainable” was by having a big thoroughbred export market.

“If we had, for example, a collective export market worth a billion rand a year, which is three times the amount of total prize money paid out, that would make the whole thing sustainable.”

Bruss said the only reason horseracing was still alive in South Africa was the number of extremely high-net-worth individuals involved in the sport.

Smart Call And company

“In most countries where the rich and famous race, it makes no difference to them if they lose a big percentage of their investment. As long as you have the willingness of the wealthy to keep on doing that for the love of the game, no problem.”

In Good Hands. Jessica Slack manages the Abington operation

Oppenheimer granddaughter Jessica Slack and her champion trainer Mike de Kock

Families such as the Oppenheimers, who acquired their wealth through vast mining interests, remain major participants in the sport, and have won numerous big races, some several times.

Bernard Kantor

Bernard Kantor – international owner

Many other super-wealthy people have joined the sport over the years, including Markus Jooste of Steinhoff, PG Bison’s Chris van Niekerk, and Bernard Kantor of Investec – and all are big investors in the sport.

Gaynor Rupert, Johann Rupert’s wife, has a large stud farm in the Western Cape.

Her Drakenstein Stud is on the wine farm L’Ormarins on the bottom slopes of the Groot Drakenstein mountain range.

Robert Bloomberg

Robert Bloomberg – ‘an elitist sport’

Robert Bloomberg, an attorney and consultant to the horse-racing industry, said it cost about R10 000 a month to keep a horse in training. “It is an elitist sport. Whichever way you look at it, people need spare cash to own a horse.”

He said that for money to remain in the industry, it was important that players made their bets on the tote, as opposed to bets with bookmakers.

Prize money for horse owners comes through the tote, while “bookmakers don’t contribute to the running of horse racing in South Africa”.

When one bets on the tote, the money goes into a pool, a percentage is taken by the industry, while the balance is paid out in winning bets. Payouts are determined by the number of winners.

With a bookmaker, however, one is given fixed, agreed-upon odds in advance and the bookmaker manages the risk by balancing his book accordingly.

“On all racing bets you pay 6% tax, so that is all the bookmakers are paying over,” Bloomberg said.

Bookmaker_odds_1625089cBookmakers were allowed to lay bets based on tote payouts, commonly termed the open bet, “which is killing the industry. They are doing it legally, but it is something that the government is looking at,” Bloomberg added.

According to a PwC gambling outlook report, horseracing in South Africa has grown less than 5% over the past four years, while sports betting in general is expected to overtake horse-racing betting next year, and account for 57% of the market in 2019, compared to 46% in 2014.

The report said the sports betting market was expected to continue to benefit from the growth in bookmaker outlets and expanding penetration.

Report  by Palesa Vuyolwethu Tshandu and Andrew Linder

  • Article reproduced by kind permission – Sunday Times Business Times

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