Cape Town — SA Rugby are playing the long game with regards to participating in the northern hemisphere, but they are sure that the benefits will be worth the wait.
That was one of the main takeaways from the organisation’s annual general meeting (AGM) in Cape Town Tuesday, where they reported that the group revenues for 2022 had reached R1.54-billion – an increase from R1.28b in 2021 – while the commercial interest in the flagship Springbok team is at all-time high.
SA Rugby reported a group pre-tax deficit of R2.62-million despite the increase in revenue, which was mainly due to their significant expenditure of R330m to ensure the five franchises – Stormers, Bulls, Sharks, Lions and Cheetahs – are able to play in the United Rugby Championship (URC), Champions Cup and Challenge Cup (EPCR) competitions.
With the franchises’ move to the north in 2021 after their departure from the southern-hemisphere Super Rugby competitions, SA Rugby won’t receive any dividends until they become full shareholders in the URC and EPCR competitions at the end of the 2024/25 season.
So, until then, they have to bare the brunt of the participation costs, as well as the responsibility of carrying all the international travel and accommodation costs of the SA teams, which came to R330m in 2022.
“The continued investment in the URC and EPCR competitions is essential as we carve our way to full membership and shareholding, even though the financial aspect of this pathway is hurting us in the short term,” SA Rugby Union president Mark Alexander said in a statement on Tuesday.
“The long-term goal and returns that will come will validate this position, both from financial and high-performance points of view. Our participation in the URC and EPCR happened in quick succession and came at a significant cost to Saru, but the commercial opportunities to be realised within the next two to three years will render the competitions profitable and strengthen the financial sustainability of South African rugby.”
SA Rugby CEO Rian Oberholzer added: “From being a recipient of nett income from Super Rugby as a founding member of Sanzaar, we are now a nett contributor to European club rugby (due to) our participation costs. (We are) on the way to once again becoming a nett recipient in the medium term.
“Historically, SA Rugby might nett around R160m from Sanzaar. But we are now in a situation where we are having to pay our way into an already established entity.”
But with SA Rugby able to host home Springbok Tests against Wales and Rugby Championship matches, there was an increase in broadcasting (R828m from R654m) and sponsorship (R396m from R222m) income, but Oberholzer said that broadcast revenue would be significantly reduced in 2023 due to the absence of a touring Test team from the northern hemisphere and a truncated Rugby Championship programme.
The investment in the Boks and other national teams returned to pre-Covid levels (from R280m to R347m), mainly due to the build-up to the women’s Rugby World Cup XVs and Sevens teams, while operational and commercial delivery costs associated to tournament commitments (including the URC and EPCR) also increased from R292m to R429m.
“It is testimony to the success of a winning, transformed Springbok team that the appeal of the team has probably never been higher,” Oberholzer said.
“The anecdotal evidence supports the theory that the team and sport represents one of the few beacons of hope on South Africa’s troubled socio-economic landscape.
“To prove the point, nine new companies joined the SA Rugby family in 2022, while another five either renewed, returned, or added to their sponsorship portfolio within the sport — the appeal of the team and sport is in good health.”
But helping to keep Saru’s 15 provinces going with distributions cost R285m and Alexander highlighted private equity investment as the way forward to overcome financial challenges in the sport — which has seen major clubs in England close down.
Of course, if Siya Kolisi’s Boks defend their Rugby World Cup title in France later this year, it would attract even further attention from corporates.
“Each of the last three years has presented fresh and unprecedented challenges that required innovative efforts to resolve. At stake was the very future of the game and, as we have previously experienced during tough times in rugby, it brought out the best in many at the coalface of rugby,” he said.
“The future of the game depended on how we responded to the challenges. The pandemic itself might appear to be under control, but the aftermath of it will be felt for years to come. Rugby was not insulated from the devastating financial challenges that resulted from the pandemic, and many of those challenges remain.
“Loans to member unions of R84.7m in the accounts highlight the need to continually address the financial health of the game – as is being required in every rugby federation in the world.
“Private equity investment contributes in a significant way to our rugby ecosystem nationally. We must ensure that everyone benefits on an equitable basis from our growth as an organisation — and that we don’t kill the golden goose within our franchises in the process.
“It stands to reason that the more we succeed in international competitions, the more marketable we become, and the more all rugby will benefit.
“We need to address ways to include the private equity structures in our decision-making processes, to ensure that everyone has a seat at the table, and always be mindful of how membership is constituted. I am sure we can find the model that will be to the benefit of the greater good of the game.
“Managing the sport’s finances is a daily challenge, but our basic asset — the Springboks and rugby in South Africa — remains a blue-chip resource in the market.”
IOL Sport