Imagine waking up one morning to news that the Blue Bulls are no longer in existence and henceforth they will be referred to as the Blue Stormers. Loftus Versfeld will be a monument of what was, Newlands will be the official home ground of the Blue Stormers. It is simply unfathomable, and yet within South Africa’s football regulatory framework this is a lived reality.

A decision to acquire another football club should not just be a business operation allowing the club to achieve better financial results. Sporting performance should be an integral part of that regulatory framework, yet it is not. The core idea of sports is brutally assaulted, it is unproductive and likely to erode the value of the Premier Soccer League (PSL).

The effect of mergers and acquisitions (M&A) in the top division of the South African professional football league (currently called “DSTV Premier League ” or just “Premier Soccer League”) since 2019 has had a poor impact on the sporting performance of the clubs concerned.

Consider this: Bidvest Wits’ PSL status is bought by Tshakhuma Tsha Madzivhandila Football Club (TTM FC), and moves to Thohoyandou and ultimately into the ether.

In the heart of Johannesburg, circa 1921, the students’ representative council at Wits University in Johannesburg formed a football club. The club competed in a variety of tournaments and leagues before eventually winning promotion to the National Football League in 1975 — then South Africa’s top domestic league.

Wits Football Club produced some of South Africa’s finest players — including goalkeeper Gary Bailey, who went on to play for Manchester United and England.

On the cusp of its centenary, a team that featured with iconic regularity at the highest level of South African football disappeared into the ether when TTM FC, a team based in Limpopo, completed the acquisition of Bidvest Wits, including all its players.

Just two years before that, in 2017, TTM FC purchased their GladAfrica Championship status — the second tier of football in South Africa — from Milano United FC.

After barely surviving relegation, TTM FC disappeared, after a successful acquisition by Marumo Gallants FC, only to reappear again in the GladAfrica Championship after purchasing Royal AM, who were the disputed champions of the second-tier division in the year 2020/21.

Incidentally, Royal AM now have PSL status after swallowing a club founded in 1969, Bloemfontein Celtic — a club known for its unparalleled community-driven support base, a club that introduced us to foreign nationals who acquired legendary status in SA football, including the likes of Ernest “Wire” Mtawali.

Herein lies the fundamental problem: despite the growing commercialisation in football and the importance of financial results, the main goal of a football club is no longer its sporting performance. The final rank in a given league season is of no consequence, whereas the result of M&A (and other managerial decisions) in many sectors is simply measured by their financial effects; in the case of sports clubs, this approach should not be the only lens through which these transactions are analysed.

Yes, one can argue that a club is just a business entity operating to maximise the owners’ profit.

However, the alternative model of organisational behaviour of a sports club is based on its competition with other clubs in the same division with the goal of winning the most matches and achieving the highest number of points. It is also based on community affinity. The fans themselves form the brand and identity of the club.

The latter model implies that sporting performance is the most important criterion for management efficiency of sport clubs. Concentrating only on sporting performance, the effects of M&A in the PSL look disappointing, with poor results for the new entrants and a near-perfect extinction of institutional integrity.

Mergers & acquisitions in the PSL should be subjected to the Competition Act

It is worth mentioning that M&A in South Africa are broadly regulated by the Competition Act, which regulates all merger activity within the republic. What the Competition Act prescribes are some thresholds for notification, with the lower threshold for notification set at R100-million for revenue or asset value of the target entity and a combined value of the acquirer and target of R600-million. 

For any M&A activity falling below the minimum thresholds, the Competition Act prescribes that such mergers are still notifiable, provided the Competition Commission calls for such notification within six months of the consummation of a merger. Since the Competition Act requires that mergers should be assessed for their effect on competition as well as public interest, the merger activity between football clubs within the PSL may trigger notification mainly for their potential effect on the public interest.

The public interest criteria stipulate that mergers should be considered for their effect on employment, sector or region, small businesses as well as international competitiveness. For mergers of football clubs in South Africa, which involve mainly the relocation of such clubs, there may be grounds to consider the impact on the public interest. For instance, a merger that relocates a team from a region would inevitably affect small businesses in the region, the ability of the region to attract tourists and many other consequences.

It is evident that there are other public interest considerations that cannot be ignored.

It therefore requires the PSL to align its merger regime with the Competition Act such that considerations for approvals of change of ownership go beyond the narrow commercial considerations. Alternatively, the Competition Commission should consider looking into these kinds of mergers, for some have huge implications for the public interest as prescribed in the Competition Act.  

Failure to act now may not only ruin the sanctity of the game but also precipitate the demise of South African football as we know it, with a devastating impact on the economic value chain which local football teams inadvertently facilitate in communities. DM