Horse racing company heads for court
PHINDI Kema is a very persistent lady. Not content with her submissions to the National Consumer Commission and the Competition Commission, she has initiated court proceedings against the Gauteng provincial government.
14 September 2012 | Sasha Planting. The Citizen
Kema, a race-horse breeder and the managing director of Africa Race Group, has filed an application with the Gauteng Equality Court challenging a memorandum of understanding between the provincial government and the Gauteng Horse Racing Industry in 1997. The agreement was signed by then MEC for finance Jabu Moleketi and representatives of three Gauteng Clubs and resulted in the transfer of Gauteng’s racecourses to a new company, Phumelela Gaming and Leisure, for a nominal sum of R1 each.
The agreement also resulted in the transfer of the Totalisator Agency Board to Phumelela. Kema is also challenging the fact that 50% of betting taxes collected by the Provincial Gambling Boards are transferred back to Phumelela.
Though the agreement was initiated by discussions with the Gauteng racing industry, other racing clubs came on board and ultimately eight racecourses were transferred to Phumelela.
“I believe these issues are in contravention of the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000. It is simply not fair,” says Kema. “It discriminates against other players in the industry and against SA taxpayers.”
Kema has been fighting this battle for about three years now. The issue arose when Phumelela offered to sell her company, Africa Race Group, the Arlington Racecourse outside Port Elizabeth for R50m. But the inclusion of a suspensive condition in the agreement killed the deal for Kema.
“Phumelela demanded that Arlington be operated under its totalisator licence. It said it had exclusivity for this licence. I did not find this acceptable as it meant that Phumelela would be in control of my betting business and fixtures relating to the racing business.”
She lodged a complaint with the Competition Commission. On the face of it Kema has a point. Does it make a difference though to argue that at the time the deal was stuck, the horse racing industry was far from professional and was in dire financial straits?
At the time it was decided the industry needed to be restructured into a single corporate entity which would be listed. It would have a broad base of black shareholders. To some extent there is broad based black investment in Phumelela.
Shareholders include The Thoroughbred Horse Racing Trust (35.26%), Gride Investments (the commercial arm of the SA Sports Confederation and Olympic Committee), 5.03%; Dihla Investment Holdings (4.87%) and Vela Phumelela Investments (4.54%).
Attempts to solicit comment from the Gauteng government and Phumelela were not successful.
Previously, the company has said that horse racing in SA avoided a bleak future thanks to its efforts – it has created a platform for the long-term sustainability of horse racing in SA, it said. Similarly the racing clubs in KwaZulu-Natal and the Western Cape rationalised their operations to create Gold Circle.
Phumelela’s results for the year to July will be released in the next six weeks. However, if results for the six months to January are any indication, times are tough in horse racing – local profits before tax were down 49%.
But Kema argues that regardless of profitability, any market which facilitates the operations of just two players (Phumelela and Gold Circle) is inherently unfair.
The Gauteng provincial government has seven days to decide if it will defend the court action.
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