Phumelela stakes reduction

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 from this Monday 14 October.

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 10^th place as follows:

1^st 58%

2^nd 20%

3^rd 10%

4^th 5%

5^th 2%

6^th to 10^th 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.