This despite on Thursday announcing a three-year multimillion-rand sponsorship deal from property firm Redefine.
City Press
A 140-page forensic report compiled by accounting firm KPMG last year, and other documents in the possession of City Press, paint a dismal picture of the Golden Lions and its marketing and managing company, Ellis Park Stadium (Pty) Ltd (EPS).
The report shows that Golden Lions rugby nearly lost its most prized asset – Ellis Park (Coca-Cola Park) – and the company managing Ellis Park was so mismanaged that it had exposed its directors to possible criminal prosecution.
The last financial report (2010) shows that its total liabilities exceeded its assets by R73 million.
According to the documents and a reliable source close to the developments, Golden Lions rugby owes different parties about R90 million.
This is far less than their total income of around R44 million from the SARU-SuperSport television rights and stadium naming rights from Coca-Cola.
The money is shared with Ellis Park World of Sport (EPWOS), the Ellis Park stadium management joint venture that also incorporates Johannesburg Stadium and the Standard Bank Arena.
The union reportedly makes about R400 000 per home game (13 games per season) on gate takings. This depends on SuperRugby/Currie Cup match attendances, which average about 15 000 before match expenses, including EPWOS’s share.
All suites income goes to EPWOS.
There is a huge shortfall to cover players salaries and the operations budget of about R90 million per annum.
Another disturbing revelation was the disparity between the salaries of black and white players in the Golden Lions.
Springbok Butch James earned over R3 million for the 2011 season in contrast to flyhalf and Currie Cup final man of the match Elton Jantjies’s less than R500 000.
The KPMG report also raises questions about the deal brokered in 2007, where EPS entered into agreement with Orlando Pirates and a little-known empowerment company, Inza.
The deal gave Pirates and Inza 51% of EPWOS, leaving EPS with 49%.
Inza is said to have been brought in by Kevin de Klerk as BEE partners before he became Golden Lions president.
The KPMG forensic report makes serious reservations about the EPWOS deal. It states the company didn’t have a VAT number nor complied with PAYE, income tax nor did it operate the necessary company bank account since inception in 2007.
Instead, it used the EPS bank account and VAT number to bill clients, which was illegal according to the Companies Act and also exposed its directors to criminal investigation.
Furthermore, rugby revenues had been passed through to EPWOS, leaving EPS/Lions exposed to undeclared tax and liabilities.
The report also points out that Pirates had played very few of their games at Ellis Park, contrary to the shareholders agreement.
EPWOS had a staff complement of 40, with CEO Paul Appalsamy earning R1 million a year.
None of the three EPWOS general managers identified by KPMG seemed to be properly qualified for the positions they hold. The general manager of operations was a former paramedic and fire instructor, it said.
EPWOS has never declared any profit or paid dividends.
The union’s financial affairs were also brought under the spotlight by the high court liquidation application filed by Guma-TAC (Gumede and Ichikowitz) in a lawsuit where they claim R11 million from the Lions for money loaned to pay players’ salaries in December 2010 and January 2011.
In an earlier (January 2012) media statement, Guma-TAC stated that “had the Lions failed to pay the players’ salaries over this period, it would have led to the breach of players’ contracts, which would have led to an exodus of key players, if not all. Furthermore, the loans enabled the Lions to sign top international players, such as Butch James and Lionel Mapoe, and to pay the 24 amateur feeder clubs their grants. Without Gumede and Ichikowitz money, the Lions would not have won the Currie Cup.”
They said the union borrowed the money to pay the salaries of players after they signed a conditional deal in 2010 that they would purchase a 49.9% stake in the rugby franchise, which heralded a new dawn for the Lions and rugby transformation.
The deal fell apart towards the middle of last year.
Ichikowitz and Gumede claim the EPWOS deal was a bad business one for the Lions as it resulted in EPS ceding control of an asset and its income.
EPWOS made a loss of R14 million in 2008 and showed a profit of R10 million in 2010 – thanks to the 2010 Soccer World Cup – although the amount paid by FiIFA was the subject of a dispute. The Golden Lions won last year’s Currie Cup and are now about to embark on their 2012 Super Rugby campaign.
Announcing the three-year sponsorship deal this week, De Klerk said: “We project to be cash flush in months – we are not saying we are not – but this has gone a long way in alleviating the situation at the Lions.”
He did not respond to any questions about the KPMG forensic report or allegations of bankruptcy by Gumede and Ichikowitz, but claimed in other media interviews this week that the pair were behind a media campaign against the club.
Neither Gumede nor Ichikowitz would comment this week.
I wish this stories can end, WE need Transvaal/Lions in SA rugby
Rehashed reports that keep on being dragged up.
KdK stated in person at Thursday’s presser that there are NO FINANCIAL problems at the Lions.
Having said that, maybe an interim audit could clear it up. Mind you, I have a feeling the Union must be either close to or in the middle of an audit right now, so maybe the truth will come out.
As a related issue, in 2007 the GLRU (under Andy Turner as CEO) decided that all EOY financial statements would be made public, and this was in fact done for a couple of years, but I don’t recall it happening in the last few years.
I also hears that the club’s allowances have been slashed, and I can assure you all that the club’s got next to nothing before.
Austerity measures? Where are the Greeks?
I am tired of all this. It’s time for this nonsenseto end.
3 @ Lion4ever:
Yip… it’s just re-hashed over and over… and over.
Would be interesting to know WHEN the Liquidation Application against the Lions is going to be heard, and then get copies of the Founding Affidavit of Guma Tac as well as the Opposing Affidavit of the Lions.
There appears to be agendas and counter agendas at work here.
If the Liquidation Application is withdrawn by Guma Tac… which I suspect might be the eventual situation… then leave things be and just concentrate on rugby.
City Press is one of Media24’s publications but it is focussed on Black and Lower LSM readers, so I suppose it is a vehicle of sorts which cater and which would flavour that type of readership and bow a bit towards those political views and aspirations.
Must say, the Lions don’t make it easier on themselves either, if I were them and convinced of our solvency I would publish our view of Financial Matters of the Union and it’s subsiduaries in good detail.
The GLRU’s silence on the matter could be construed, and currently is, that they might indeed be factually insolvent, just hoping to trade out of it by means of their new sponsorships and future performance as well as equity partner alliances.
We are fed ONE SIDE of the story the whole time, countered only by emotional denials of that story by Kevin de Klerk, in stead of providing substance to the denials.
Must also say, the series of Lions Super Rugby Contenders Articles are way overdue, like their Union… I’m beginning to worry if they HAVE players left or whether our esteemed Lions reporters are still awake and interested…. hehehe
Like I said over the w/e, I believe that the this story and the Kings entry to S15 next year are inextricably linked, and that this story is going to be rehashed in different forms for some time to come yet. There are journo’s/’investigative reporters’ and certain insiders that are/will use this story as a point leverage for the justification of the Kings Debacle. I also believe other agenda’s will come out or continue, such as the merger of certain unions, the inability to fund unions effectively (I saw this about the Cheetahs one over the w/e, read into it what you will) and the perceived weaknesses of some unions. We will see the so called big 3 i.e Stormers, Sharks and Bulls alienated and turned into pariahs and seen as the rich bullies of rugby. We will see the squeaky clean Kings with their 3 year building and brilliant transformation plan as the angles of SA rugby by those with the say in government. And so the gravy train will roll on and on, stopping only to spew and regurgitate some other trash on the unsuspecting public.
What it really boils down to is gutter journalism at its worst, bourne out of desperation to sell a story.
5@ grootblousmile:Are you doing a Sharks article still?
7 @ Just For Kicks:
Yip, I will…. wanted to do them at the same time as the Lions Articles appear, so that we don’t just have a 1-Franchise flavour for that week / few days.
And the statement about the disparity in salaries between Butch and Elton. It would be a better comparison between Elton and Jaco. I wish I was earning what Elton is. That’s not too shabby for a player thats only been pro for 2 years.
9@ Lion4ever:I suppose it was warranted though, how else was Butch going to pay the Keo back for all those unsold books?
@ grootblousmile:
Bit difficult to put out an article at the moment. New venturers make things a bit tight at the moment.
9@ Lion4ever:
Have to agree. Butch has “been there and done that”, Elton still has to prove himself for some time yet.
I wish the main stream media would stop sensationalising and report FACTS.
On the other hand though, the Lions / GLRU lack of approachability does not help matters.
I was hoping that with KdK replacing Ferreira and the subsequent departure of Ou Maans things would improve, but it appears not.
Ah well, we live in hope, and die in vain
What were we saying beginning of last year?…..oh yes….”Where there’s smoke…there’s fire.” What is Kevins job…is it up to him to comment on finances? having better gates would help….Ellis park is no longer a viable product in my humble opinion. They should have moved ages ago. SAB could bring back Lion Beer and pay them for the logo…so not directly involved in the game, but providing some of their huge quantities of cash to get a South AFrican Institution out of trouble. SAB now the 2nd biggest grossing brewery in the world…In fact with recent acquisitions in China they may have become no 1!. Where the marketing guys, they could start their own television station….if they got the buy in to family entertainment for middle class families on the reef the franchise would be huge. Clearly it begins at the top and they lack strong positive leadership.
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