South African Rugby’s Financial Dilemma: The Controversial ASG Deal

Blockade of the Vote

Last week, the South African Rugby Union (Saru) faced significant challenges when members blocked a vote on a potential equity funding deal. This situation highlights the financial issues plaguing the sport.

A group of seven unions criticized the proposed deal with the American consortium Ackerley Sports Group (ASG). Their concerns led to a postponement of the vote and raised questions about the R1.3-billion offer.

Many reacted negatively to the idea of selling a 20% stake in Saru, particularly concerning the Springboks. Critics argued that it was wrong to give away a piece of South African rugby to outsiders. They highlighted that the R1.3 billion from ASG is effectively a loan that Saru will need to pay back over time.

The ASG Deal Explained

The deal offers ASG 20% ownership of a new Commercial Rights Company (CRC). While this may seem like a good opportunity for ASG, it also raises concerns. Rugby is not as appealing to investors as it once seemed. In this situation, rugby needs investors more than they need the sport.

If ASG can deliver on promises of commercial growth, Saru may benefit in the long run. Owning 80% of something valuable is better than having full ownership of a struggling entity.

Saru’s Leadership and Objectives

Saru approached this negotiation with the backing of its member unions. They had previously voted unanimously to proceed with ASG over Luxembourg-based CVC. This earlier decision did not receive much opposition.

However, the organization’s structure led to the current pause in negotiations. It is designed to provide checks and balances, ensuring that all voices are heard.

Saru’s leadership explained the reasons for seeking an equity partner. General manager Andy Colquhoun highlighted several objectives behind this decision. Firstly, Saru has no reserves. In the event of another crisis like COVID-19, the sport could face serious challenges. An equity deal would help Saru build financial stability.

Secondly, Saru continually faces budgetary issues, which are minor but persistent. Compared to some European counterparts and New Zealand, Saru operates on a smaller commercial scale. For example, sponsors for New Zealand’s national team earn eight times more than those of the Springboks.

ASG’s expertise could help improve Saru’s commercial prospects. They have promised to enhance digital engagement and fan relationships, areas where Saru has struggled.

Global Issues in Rugby

Rugby faces ongoing financial struggles worldwide. The sport often seems to be in crisis, grappling with issues like laws, health concerns, and solvency.

While rugby is popular, it is not as globally recognized as other sports. The foundations of rugby are built on a few strong national teams and leagues. Even within the strongholds of rugby in England, Wales, South Africa, New Zealand, France, and Australia, many are facing financial challenges.

Recently, the Rugby Football Union (RFU) in England released a study revealing the precarious state of Premiership clubs. Only three clubs—Leicester, Northampton, and Gloucester—are considered financially viable. English clubs collectively lost £30.5 million (R702 million) in 2022-23.

Many clubs exist only due to funding from wealthy individuals. Former England player James Haskell has emphasized that rugby must change its approach. If it continues on its current path, it risks an uncertain future.

The Broader Impact on South Africa

Concerns about club finances also apply to South Africa. The URC struggles to maintain a refereeing bunker review system, leading to mistakes impacting matches.

Australian rugby is on shaky ground and desperately needs the 2025 British & Irish Lions tour to stabilize finances. Welsh rugby faced near collapse in 2023 and remains vulnerable. Even New Zealand Rugby’s recent investment from Silver Lake has not delivered the expected results.

Investors in South African rugby franchises express doubts about the viability of their investments. One investor quipped that they did not buy a stake with hopes of profit. This sentiment reflects the harsh reality: rugby is not an attractive investment, and interest in it is waning.