Phumelela advises that due principally to a decline in TAB
tote revenue in the 2018-19 racing season and the withholding of the Gauteng provincial
levy, prize money at its racecourses will be reduced by around 13% from next
month.
More than half of the prize money at Phumelela tracks is
derived from a set percentage of TAB tote turnover, which is governed by a
stakes agreement between the company and the Racing Association, which
represents racehorse owners in Phumelela regions.
In terms of the agreed stakes formula, set percentages of
other Phumelela revenue streams also flow directly into the prize-money pool.
Total stakes for each racing season (1 August to 31 July) are mostly determined
by the monies generated by this prize-money formula in the previous season.
The amount allocated for stakes in the first five months of
each season is based on an estimate of the amount likely to be generated by the
prize-money formula in the previous season. Once the figures have been
finalised and audited, any adjustments needed to balance the estimated total to
the actual total are applied to prize money in the last seven months of the
season (January to July).
Prize money in the Western Cape is governed by an
arrangement in terms of which total stakes are set at 26% of the combined net
stakes pool in Phumelela regions.
After engaging with the Racing Association, Phumelela and
Kenilworth Racing wish to advise stakeholders that prize money will be reduced
with effect from 1 November 2019 in order to spread the impact across nine
months of the season, rather than waiting for the audited total and only
applying the reduction from January. Should the various audits, however, reveal
a higher-than-expected total, stakes would be adjusted accordingly from January
to July next year.
The stakes pool has been impacted by various factors,
including declining TAB tote turnover and a negative return from fixed-odds operator
Betting World. Added to that is the loss of the Gauteng Provincial Government
levy on winning bets with fixed-odds operators, 30% of which used to flow to
the stakes pool.
It should be noted that Phumelela is currently negotiating
with the Gauteng Provincial Government and the Gauteng Gambling Board in an
attempt to have its share of the levy reinstated. Simultaneously, Phumelela is
in discussions with the Gauteng Gambling Board and fixed-odds operators to
resolve the long-standing commercial dispute around the provision of
Tellytrack.
The other major impact on prize money is that the stakes
pool will not benefit from share dividends this year. Normally 80% of the share
dividends accruing to the Thoroughbred Horseracing Trust from its 26.7%
shareholding in Phumelela are added to the stakes pool. This amounted to some
R19 million for the 2017-18 financial years. But as a consequence of the
collective negative factors impacting Phumelela’s profitability, no dividend
will be paid for 2018-19.
The Racing Association, through its Stakes Committee
members, have engaged with Phumelela and Kenilworth Racing and innovative ways
of addressing the reduction in stakes have been agreed. Details are as follows:
* Reducing the number of races at midweek meetings to eight.
* Reducing stakes of selected major Grade 1 races, as well
as the majority of Grade 2 and Grade 3 race so as to lessen the burden on
minor-race stakes.
* Introducing different minor-race stakes levels in and out
of season on the Highveld and in the Western Cape (the Highveld feature season
runs from 1 October to the first Saturday in May, whilst the Western Cape
feature season runs from 1 November to the end of February)
* Introducing a lower stakes level for minor races
restricted to fillies and mares (with the exception of Maiden, Maiden Juvenile
and Juvenile Plates) across all regions
Full details of the new stakes levels can be viewed on http://www.sahorseracing.co.za.
The Racing Association has also taken a decision to change
the distribution of stakes in all races run in Phumelela regions (Highveld,
Eastern Cape and Northern Cape). With effect from 1 November, the winning
portion of the race stake will be reduced from 62.5% to 58% and redistributed to
pay down to 10th place as follows:
1st 58%
2nd 20%
3rd 10%
4th 5%
5th 2%
6th to 10th 1% each
In the event of less than 10 starters, any stakes not
allocated will be stockpiled for future distribution.
It is worth noting that as things stand the current stakes
pot receives zero revenue from TAB tote (open) bets taken with fixed-odds
operators. As an example, for every R1 million wagered on Pick 6s in the form
of open bets, R75,000 is lost to the stakes’ pot. The magnitude of the lost
revenue to prize money is highlighted by the National Gambling Board statistics
for 2018. They show that R3.9 billion was wagered on horseracing on the tote
versus R7.68 billion with fixed-odds operators, of which a substantial portion
can be attributed to open bets.
Declining tote betting turnovers on horseracing are a trend facing many racing jurisdictions around the world and are by no means unique to South Africa. That said, Phumelela is totally committed to engaging with regulators and fixed-odds operators to find solutions for the issues that have impacted so negatively on its business and the sport of horseracing.
Phumelela