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Almighty battle for survival of the Western Province Rugby Football Union

Almighty battle for survival of the Western Province Rugby Football Union
The Stormers celebrate winning the URC Rugby Championship final after defeating the Bulls 18-13 at Cape Town Stadium on 18 June 2022. (Photo: Anton Geyser / Gallo Images)

‘Prooo-vince… prooo-blems!’ is the familiar chant. More than a year after being put into administration after a series of catastrophic decisions, the future of the Western Province Rugby Football Union hangs in the balance. The 102 clubs that make up the General Council will have to do the right thing — or face the total collapse of a once-great rugby union.

The Stormers have lost only one of their last 16 United Rugby Championship (URC) matches. They are the defending champions of the multinational tournament and are currently fourth on the 2022/23 URC standings with a game in hand over two teams above them.

In short, they are well on course for the defence of their title.

On the field, performances and results are exceptional, but off the field, the future of the Western Province Rugby Football Union (WPRFU) remains precarious.

The biggest threat to the WPRFU is continuous infighting between a small faction of disgruntled clubs and the majority that make up the union’s General Council, who want to see the union returned to good financial health.

The WPRFU remains one bad decision away from disaster.

There has, however, been progress in stabilising the union after it was placed under administration on 12 October 2021, when the South African Rugby Union (Saru) invoked clause 29 of its constitution.

Staging a walkout

At a meeting on 13 September to discuss progress between the administrator and the General Council — the body made up of the union’s 102 clubs — a small faction disrupted proceedings and attempted a walkout. But the majority of clubs in attendance refused, citing that they wanted to stay and hear about progress.

It was a surprising show of solidarity from many clubs that have previously been in the “silent majority”. They stood by as one calamitous decision after another was made with their implicit or tacit consent.

It’s against this backdrop that Saru, through its administrator Rian Oberholzer, is trying to ensure the WPRFU’s financial future and ability to function as a going concern.

To achieve that, the most pressing issue is finalising the sale of the development rights to Newlands Stadium. If and when a buyer is found, the General Council will have to decide, by simple majority, to accept the offer or reject it. There is a high road and a low road.

If they take the latter, the WPRFU will, in all likelihood, face complete collapse because it won’t have the means to service its enormous debt.

Legal battles will commence, with a court likely to rule that WPRFU assets must be sold to pay off its creditors.

In a lengthy investigation into the current situation — a year on from the union being placed under administration — Daily Maverick has:

  • Heard from more than a dozen important role players to establish a rounded picture of where the WPRFU stands.
  • Established that a small group of disgruntled clubs believe the WPRFU has been “captured” by Saru, although to what end and whose benefit is not fully clear.

This group, whose identities are known to Daily Maverick, but who asked not to be named for fear of “victimisation”, could not provide any sound evidence of their claims.

The crux of their unhappiness appears to be that the previous WPRFU executive committee had agreed to sell the Newlands development rights to a developer named Staytus.

That deal was never finalised as then-president Zelt Marais refused to sign off on it because of suspensive conditions in the term sheet.

Daily Maverick has:

  • Investigated these claims and approached Saru and Oberholzer for answers.
  • Canvassed a wide range of club officials and other key role players in the Western Cape, the overwhelming majority of whom appear to support Saru and the administration process.

Tough environment

In the past month, two famous English rugby clubs — Worcester and Wasps — collapsed as their funding dried up and they were unable to service their debts and operate as a going concern. In England, the sport’s governing body, the Rugby Football Union, did not step in to save the clubs.

When the WPRFU reached the same precipice in October 2021, Saru did step in to save the union from complete bankruptcy (more of how the situation arose later). Had the mother body stood aside, the WPRFU and the Stormers would have ceased to exist after 2021.

Saru appointed Oberholzer, the former chief executive officer of the national body and a successful owner of a commercial sports marketing company, to oversee the administration process.

By invoking clause 29 of the Saru constitution, the entire executive of the WPRFU was immediately suspended and union president Zelt Marais, the chief architect of some of the most disastrous management decisions in South African sporting history, was ousted.

Oberholzer was, and remains, the only authority at the WPRFU.

It was a move that ruffled feathers for some factions of the General Council, the WPRFU’s ultimate decision-making body.

Oberholzer’s first task was to establish just how precarious the situation was from the inside. It was worse than he imagined.

On 12 September, a day before Oberholzer and Saru president Mark Alexander met the WPRFU General Council, Oberholzer sent a letter to remind delegates of his mandate and give them a progress report.

Oberholzer’s letter states that he “was appointed by Saru as the Administrator to assume responsibility for the affairs of Western Province Rugby, including four key areas of responsibility:

  1. To review and advise on the status of various Western Province property transactions (principally pertaining to Newlands Stadium) and to make recommendations for the way forward;
  2. To review and advise on the position relating to the relocation of Western Province Rugby to Cape Town Stadium and the contractual matters relating to this;
  3. To review and advise on the position of any proposed equity transactions for an investment into Western Province Rugby;
  4. To conduct a financial, operational and legal review of Western Province Rugby and to provide recommendations with regard to changes and improvements required to achieve long-term financial and operational stability for Western Province Rugby.”

Oberholzer added: “At the time that Saru placed Western Province Rugby under administration, the Western Province Rugby Union and Western Province Professional Rugby was in a terrible financial position” and that “it was likely that Western Province Rugby would cease to exist”.

But disgruntled WPRFU club members describe the placing of the union under administration and pushing through the sale of Newlands as “a heist” by the so-called rugby mafia to empty the coffers and leave the union an empty shell.

These parties couldn’t provide any evidence of this, other than claiming there was a valid offer to purchase the development rights to Newlands by Staytus, which the administrator rejected.

“Regarding the sale of Newlands, I discovered that the key assets of the Union had been mortgaged and bonds placed over the Union’s property as security for a loan that was made to the Union,” Oberholzer confirmed in his letter to the clubs.

“I reviewed the term sheets regarding the proposed sale of Newlands and I met with the parties that had expressed an interest in buying Newlands Stadium, namely WIA and Staytus.

“I asked both parties to provide proof of funding for the purchase of the properties. One party was not able to do this. The other party presented a proposal which I, in accordance with my mandate, referred to Saru Fincom for consideration.

“The proposal was not acceptable to Saru Fincom and they requested me to commence an independent RFP (Request For Proposals) process to identify any parties that may be interested in buying the properties.

“I appointed an independent third party to oversee the process and to solicit offers for the properties. I was not involved in the RFP process.”

Causes of WPRFU collapse

There are several intersecting threads that brought the WPRFU to this point, but a string of poor decisions and lack of foresight, especially under the former leadership before Saru took over, were key factors.

In late May 2020, ex-president Marais declined to sign off on the sale of Newlands development rights to Investec Property Division, which had taken more than a year to finalise.

The contract showed that Investec Property would take on all the risk. They are, after all, experienced property developers. The WPRFU would have no risk, but slightly less back-end return on sales.

Under the proposed Investec terms, the rugby union was set to be paid hard cash up front (R112-million). Instead of being partners in the redevelopment of Newlands, Investec would hold a 99-year lease on the land and would take on all the costs of redevelopment.

In return, the WPRFU would have a 5% share in any profits derived from that plan, plus a further 3.5% share from the resale of any units developed.

But Marais, who became president midway through the WPRFU/Investec courting process, walked away from the Investec deal hours before it was due to be finalised. Marais cited problems with the term sheet and suspensive conditions not being met.

A few weeks later, Marais presented the little-known Flyt as an alternative to Investec at a General Council meeting. He confirmed that he started negotiations with Flyt on 3 June 2020, creating the picture that he was not negotiating behind Investec’s back.

Investec had already advanced R50-million to the WPRFU in late 2019 after heads of agreement (HOA) were signed to help the rugby union’s cash flow. Five months on, Investec were out of the picture despite signing the HOA.

Titanic-esque disaster imminent

Marais sold the “Flyt” plan to the General Council on the basis that the WPRFU would receive an immediate R112-million loan from Dream World Investments (Flyt’s parent company) to cover its existing debts to Remgro and Investec Bank. The council backed Marais and walked away from Investec.

Dream World paid R52.97-million to Investec Bank on 21 August 2020, and on the same day paid R57.76-million to Remgro to clear its debts.

As security for the loan, 11 properties owned by the WPRFU were registered with Dream World. According to subsequent court papers lodged by Dream World at the Western Cape High Court in March 2021, the WPRFU “acknowledged that it was indebted to Dream World in the sum of R250-million”.

The WPRFU and Flyt became 50% partners in a new company set up with Flyt to redevelop Newlands and another plot called Brookside. Even though the WPRFU is not a property developer, it seemed to believe this was a better arrangement.

In the aftermath of this decision, six directors of the WP Board either resigned or were ousted, yet Marais sold the message that all was well.

Within five months, the Flyt deal turned sour over a dispute about the agreed valuation of Newlands, with Flyt suing for damages of R388-million and, of course, the repayment of its R112-million loan with interest.

Saru and other organs of the WPRFU tried unsuccessfully to salvage the situation.

Although the lawsuit has been put on hold as Oberholzer tries to navigate a solution, whatever deal is eventually struck, the first R220-million of the future sale of Newlands, and/or its 11 other properties, will be paid over to Flyt.

It was nothing short of a Titanic-esque disaster for the WPRFU by Marais, and enabled by the majority of the General Council.

Disgruntled clubs’ denial

At the 13 September meeting between Saru, Oberholzer and representatives of about 40 clubs, there was an attempted walkout by the 11 “disgruntled” clubs that don’t accept the authority of the administrator and Saru. They believe the union should be handed back to the General Council to run.

There also seems to be a level of denial by the “disgruntled 11” that Newlands needs to be sold to save the union.

When asked by Daily Maverick how they would solve the “Flyt problem” — in other words, come up with R220-million — they did not provide an answer.

The disgruntled faction appears to view the Staytus deal as binding, and they produced a letter from Growthpoint Properties to promote this position. Oberholzer and Saru have a different view (as stated in Oberholzer’s letter).

western province rugby newlands

A small group of people demonstrated outside Newlands Rugby Stadium in support of former WPRFU president Zelt Marais on 21 March 2022. (Photo: Gallo Images / Die Burger / Jaco Marais)

“It is WP’s property. The Exco is already suspended, but not the General Council, which consists of the clubs, who are opposing the idea of selling Newlands,” one unhappy member told Daily Maverick.

Oberholzer took a less emotional line.

“My financial, operational and legal review of Western Province Rugby uncovered an organisation in terrible disarray within financial irregularities, non-compliance, legal battles and general mistrust and disillusion,” Oberholzer’s letter of 12 September stated.

“My priority was to ensure that the organisation was restored to being run efficiently and in compliance with its obligations. This has been achieved, and as a result it has put Western Province Rugby in a far better position to deal with the City of Cape Town and Cape Town Stadium, potential property buyers and parties interested in buying an equity stake in WPPR and ensuring its long-term viability.”

The 11 clubs didn’t appear to represent as much of the constituency as they claimed.

Conflict of interest?

One claim against Oberholzer by the disgruntled clubs is that he has a conflict of interest. Requests for clarity about the nature of the conflict of interest were not answered by these clubs.

But another party did come forward, suggesting that Oberholzer is using his position as administrator to lay the foundations for his personal company, Access Management, to receive commissions or lucrative contracts from the WPRFU in future. It’s a bold claim without documented proof.

Oberholzer’s son, Lourens, who is running Access Management while his father oversees his duties as WPRFU administrator, has attended WPRFU meetings. This was also questioned.

It was suggested by the party that if Oberholzer secures an equity partner for the Stormers and professional arm of the union, Access Management would receive a commission.

When asked about these accusations, Oberholzer was unequivocal in his written reply.

“No commissions will be paid to any person or entity on the equity transaction,” Oberholzer told Daily Maverick via email.

“The administrator has, upon approval from Saru, appointed specialist corporate services consultants (Galetti Corporate Real Estate) for which they are paid a fixed fee. Access Management plays no role whatsoever in the equity transaction.

“Personnel within the Access Management stable are assisting the administrator, as is provided for in the mandate and explained previously (at no cost) per Clause 2 of the mandate of the administrator.

“To make it clear, Access Management earns no commission on any business that it may introduce to WP Rugby.

“Again, the administrator/WPRFU/WPPR uses various consultants (e.g. Galetti in property; BDO Inc for equity; Becker Kemp and WTC as legal support; Bridget O’Donaghue for Heritage matters) in the administration of the affairs of WP to assist with various aspects of the requirements on the administrator to deliver on his mandate.

“All these appointments are approved by Saru Fincom.

“I would outline again that Access Management Services (AMS) is in no way acting or appointed by the administrator/WPRFU and WPPR in any manner, and it would be a breach of the administrator’s mandate should AMS be appointed during my tenure as administrator.”

A Saru spokesperson also referred Daily Maverick to the mandate of the administrator, in a written response to the same question.

Visit Daily Maverick’s home page for more news, analysis and investigations

“The administrator shall act, always, in the best financial and commercial interests of the entities on behalf of Saru and, for the duration of the term.

“Clause 2.1.6 states the administrator shall be responsible for providing the staff and resources required for the provision of the services to be provided hereunder (the cost of which shall be included in the fee contemplated below);

“Access Management Services is a specialist sports management and consultancy firm. Its entire professional team assists the administrator in specialist roles to secure a stable future for Western Province.”

In another attack, the unhappy clubs tried to suggest Oberholzer was overstepping his mandate by not reinstating Exco members, after they were cleared in disciplinary hearings.

Although their cases are over, they have no standing at the WPRFU as long as the administrator is in charge. The Exco does not currently exist.

“The appointment of the administrator, under Clause 29.5, was incidental to the disciplinary processes that were ongoing,” a Saru spokesperson said in an email response to Daily Maverick about the disciplinary hearings.

“The appointment was as a result of legal, financial, constitutional and procedural concerns and lack of governance within the WPRFU entities.”

Heritage hiccup

In another unforeseen hiccup in proceedings, former Springbok captain Wynand Claassen, representing a consortium of four “concerned” individuals, submitted an application to have Newlands declared a heritage site.

If successful, the entire RFP bidding process and the sale of the stadium and other properties could be scuppered. If that happens, the WPRFU will collapse permanently.

Because of the heritage application, the RFP process has stalled. Several interested buyers submitted bids.

Daily Maverick has learnt that one was in the region of R450-million for all properties, while others were a mixture of bids for Newlands only, or Newlands and Brookside.

The heritage application was a strange development, considering Claassen has no apparent vested interest in WPRFU affairs. It has led to speculation about his motives.

In an interview with News24 earlier this year, Claassen denied he was “trying to be nasty”.

“Once the heritage site is granted, then they can’t just go and do anything with it… they have to rethink their designs and their development,” Claassen told Sport24.

“Then you’ve got to come up with (new) applications of how you’re going to develop it. It’s not that we’re trying to be nasty… the thing is, I can’t understand that nobody considered keeping it as a heritage site.

“We aren’t saying they must still play rugby there. Obviously, that won’t happen — we realise that. We’re trying to look after our heritage. There’s not much left. People don’t care. They just knock things down, and we are concerned about that.

“We want to preserve what was there and let it remain part of the history.

“We only heard about it (the sale of Newlands) late, and we didn’t put in a bid because we didn’t have the money. I can’t understand why capable people and rugby folk didn’t consider that,” said Claassen.

Oberholzer admitted that the heritage application has delayed the process of finalising his role and returning the WPRFU to the General Council.

“Unfortunately, before the RFP process could be completed, a third party submitted a heritage application to the City of Cape Town with the aim of preserving Newlands Stadium and potentially preventing demolition,” Oberholzer’s letter to the clubs confirmed.

“I have appointed an expert heritage and environment specialist firm to assist Western Province Rugby in dealing with this application. It is anticipated to be a 120-day consultative process.

“Once this process is complete, I will refer to Saru Fincom for a decision on the way forward in regard to the possible sale of the properties. For now, I am encouraged that there are companies that have expressed an interest in buying the Western Province properties.”

That means the process of securing a buyer and releasing the WPRFU from administration by the end of this year won’t happen until the first quarter of 2023, at the earliest.

Spooked bidders

The heritage application has also spooked bidders, who have all put their bids on hold pending the outcome of the heritage process.

This has the very real potential to sink the process and collapse the WPRFU. It would be ironic, considering Claassen claims to want to “look after our heritage” by initiating a process that might completely destroy this heritage.

The other tasks for Oberholzer are to find an equity partner for the professional arm of the union and to renegotiate the Cape Town Stadium deal with the city. The terms of that deal were not favourable to the WPRFU.

Daily Maverick understands that the original HOAs signed by the WPRFU leadership were unsustainable.

It is understood that under the existing HOAs, the union pays the city a R1.5-million rental fee per Stormers game, regardless of crowd attendance.

That has been altered to a sliding scale, meaning for crowds of 20,000 or less, the WPRFU pays less than half that fee. It gradually escalates as crowd attendances increase.

In terms of equity, the Stormers are lagging. The Bulls sold a 74.9% stake to Patrice Mosepe and Johann Rupert’s Remgro. Successful businessman Altmann Allers bankrolls the Lions and US consortium MVM holds a majority stake in the Sharks’ franchise.

MVM wanted to buy into the Stormers in late 2020, but it was yet another deal that fell through after more bungling by Marais.

As a consequence, several high-profile players such as Siya Kolisi, Pieter-Steph du Toit and Bongi Mbonambi left the union.

western province rugby

Salmaan Moerat of the Stormers in action during the United Rugby Championship final against the Bulls at Cape Town Stadium on 18 June 2022. (Photo: Anton Geyser / Gallo Images)

And despite being URC champions, the Stormers have not yet secured a private equity sale, although Daily Maverick has learnt that there are several interested parties.

“In consultation with SA Rugby Fincom, BDO have been appointed to conduct a RFP to solicit bids for an equity stake in WPPR. While I am not involved in the RFP process, BDO have advised me that they have nine parties interested in bidding for the equity stake,” Oberholzer revealed to General Council members.

“BDO are currently overseeing the due diligence process with these bidders. Following due diligence, the process will enter into the binding offer phase and contract conclusion and approvals.”

By the book?

Although Saru and Oberholzer have been attacked on social media and through some media outlets, extensive investigations by Daily Maverick have been unable to unearth evidence of malfeasance.

There are certainly unhappy individuals, but that source of unhappiness appears to be personal agendas being stumped by an environment looking out for the best interests of the WPRFU.

It’s been years, perhaps decades, since that has been the sole focus of union leaders.

Saru and Oberholzer appear to have operated by the book, while not giving in to bullying tactics from some clubs. Considering the mess they inherited, it’s perhaps best to leave the last word to a rank-and-file club member we canvassed, who supports the developments of the past year.

“My club supports the process that Saru was forced to take up more than a year ago,” a club president who asked to remain anonymous told Daily Maverick.

“It was never going to be an overnight process and a quick fix. Saru needed to take stock, and then start clearing the administrative and financial woes the WPRFU faced.

“If you have any appreciation of good governance and of sustainable processes, you’ll know that restoring WP Rugby to a formidable entity will take time, effort and a multitude of resources.

“But as General Council members, we are eager to get the WPRFU free of administration, and we are eager to operate in a system that will allow us to get back to our core business, which is club rugby.

“We have to support Saru in this process until they are sufficiently confident to hand it back to us.” DM

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Comments - Please in order to comment.

  • Paddy Ross says:

    Surely a suitable obelisk type structure commemorating the heritage of Newlands could be included in any future redevelopment of the site rather than risking the winding up of WPRFU.
    Does Oberholzer submit his report to SARU or to WPRFU? Can SARU overrride the myopic members of the General Council of WPRFU?

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