The on-field performances of the national rugby team, the Springboks, over the past eight years has masked the financial difficulties of the SA Rugby Union (Saru), with the union running against time to secure capital injection.
The need for capital injection and to build reserves for rainy days has resulted in Saru contemplating selling a 20% stake of its commercial rights, including that of the Springboks, to a US-based private equity entity Ackerley Sports Group (ASG).
The $75m deal, which was supposed to be voted on by Saru member unions last week, was delayed after push back from big unions, government and SuperSport.
The commercial rights are to be housed in an outfit called the Saru Commercial Rights Company (CRC) — which will manage and be responsible for the sponsorship, broadcasting, eventing, branding and licensing aspects of the sport.
The main concern about the proposed deal is its structure, seen to heavily favour ASG. Under the mooted deal, until ASG capital has been repaid (including preference) it retains full control of CRC decision-making, subject to a list of reserved matters.
ASG will also retain annual approval rights on Saru’s net operating budget and have observer status on the Saru board, influencing spending of invested capital.
Saru’s 2023 annual report, published in June, shows why the union is desperate to monetise its commercial rights and bring in private equity funding.
In the 2023 financial year, the union reported revenue of R1.44bn, with R731m of this coming from broadcasting rights, R425m from sponsorships and R105m from product licensing.
However, the entity’s operating expenses outstripped its revenue, coming in at R1.8bn, the biggest line item being commercial at R581m, while money spent on the sport was R459m.
A Saru spokesperson said the union was looking at the budget shortfall of nearly R150m this year.
“Budgets are under constant review but currently a budget shortfall of R140m is being addressed,” the union said.
To help it bring in more cash, Saru in June enlisted the services of sports marketing firm Wasserman to boost its international appeal, particularly in lucrative markets like the US.
Unions opposed to the ASG deal pointed to this as one of the issues they had with the transaction, arguing that “Wasserman is already engaged to expand sponsorship and global market access, which raises the question of ASG’s role in these efforts”.
Saru said Wasserman’s work did not clash with the spirit of the proposed ASG deal.
“They were appointed in June [when they were still called CSM, and were subsequently bought by Wasserman] but we had been speaking to them since the end of 2022. The contract is until the end of 2027,” a spokesperson said.
“It is complementary in that the objective is to globalise the SA rugby business, both in who are our commercial partners and how we do business in things such as digital engagement and fan experience, the platforms we use and how we deliver events.”
Saru’s annual report shows that from the onset of 2023, the organisation was confronted with a budget shortfall of R254m, a direct consequence of the “enduring impacts of the pandemic, our departure from Super Rugby, and our strategic investments in the north to preserve the professional game at home”.
Starting in 2026 in SA, the All Blacks will play eight games over two months
It said the financial setbacks experienced in 2020 and 2021 could not be offset through standard trading activities alone, as its resources for commercial endeavours had been significantly diminished.
“The path forward to recuperate these losses lies in securing a substantial cash infusion. The financial strain on our organisation is a direct result of the Covid-19 pandemic and our inability to fulfil our commercial rights, leading to a reduction of R540m in our projected total income forecast for 2020.
“The premature exit from Super Rugby and our investment in the northern hemisphere to save the professional game in SA had further impacted our finances. These investments cost R71m in 2020, R208m in 2021, R330m in 2022, R385m in 2023, and an expected expenditure of R410m in 2024.”
One of the events ASG is hoping to monetise is the “The Great Rivalry: Springboks vs All Blacks”.
Saru said the rivalry, which has its roots in 1921, had been under-monetised. Clashes between the two giants of world rugby have over the years been major draw cards for both broadcasters and spectators.
“In response to the enduring interest in this rivalry and a fresh approach to our annual test programme, the two organisations have agreed to a tour format that could rival or even surpass the British and Irish Lions tours,” reads the annual report.
“Starting in 2026 in SA, the All Blacks will play eight games over two months, including matches against the franchises, the SA A team, and three Tests against the Springboks.
“This tour has the potential to generate new revenue streams equivalent to or greater than those of the Lions Tours.”
Under Saru’s plan, the ASG tie-up will help it double sponsorship revenues from the existing level of about R450m/year by 2027, “if not before”.
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