The South African Rugby Union’s 2012 annual report shows that full executive members of its executive council were awarded massive salary and bonus increases, even though the union suffered a huge slump in profits last year.

Page 51 of the annual report reveals that SARU’s after-tax profit plunged 87% to R2.347m in the year ended December 31 2012, down from R18.554m the year before.

Finweek

However, that didn’t prevent full executive council members (ie those with full executive status as opposed to non-execs) from having their collective salaries increase by 21% to R3.379m in 2012, from R2.785m the previous year.

Not satisfied with that pay rise, full executive members of SARU’s executive council were also awarded cumulative bonus increases of 107% for a total windfall of R1.591m, more than double the R769 218 in bonuses paid the previous year.

“There was a clarion call by government last year for business executives to tighten their belts in recognition of the tough times being faced by the economy,” Bantu Holomisa, a member of the parliamentary portfolio committee on sport and avid rugby fan, told Finweek.

“It looks as if SARU didn’t respect that call at all. You cannot justify increasing executive bonuses by that amount when the money in SARU’s kitty hasn’t increased by a similar margin.”

What’s more, the 107% increase in annual bonuses for full executive members appears to have gone to just two people, SARU’s chief executive officer Jurie Roux and chief financial officer Basil Haddad. 

SARU’s general manager for corporate affairs, Andy Colquhoun, confirmed in an email to Finweek that all members of SARU’s 13-member executive council “are non-executives with the exception of the CEO and CFO, who are full-time executives”.

That means the 107% bonus increase to R1.591m for 2012 would have been split between Roux and Haddad. Fees for the rest of the executive council increased just 6% to R3.935m, although their allowances for the year rose 18% to R295 197.

Finweek asked SARU in an email to explain why the executive council was rewarded so handsomely, despite the fact that profits had slumped.

The following response was received from Colquhoun: “The 2011 profit was abnormally high, and well above budget, due to significant cost savings achieved following the cancellation or deferment of projects which were not aligned to SARU’s new strategic direction.

“The 2012 profit was in line with the budget approved at a general meeting, as required.

“SARU uses a recognised grading system for all staff, including senior executives, and salary levels are set using appropriate national salary surveys as a benchmark.

“Where necessary, the services of independent remuneration consultants are utilised. SARU’s H R & remuneration committee, whose members are all independent, recommends and the council approves all salary increases, which are market related.

“SARU’s senior executives participate in a performance bonus scheme, also recommended by the committee and approved by the executive council.

“Various performance objectives with very clear deliverables and outputs (including financial control), are set and strictly assessed each year to determine performance bonuses.”

Page 41 of SARU’s annual report also suggests that a big reason for the union’s drop in profitability last year was the 20% increase in operating expenses.

The breakdown of this rise in operational costs is described in the annual report as “costs associated with hosting the SA versus New Zealand test match at FNB Stadium and the IRB Junior World Cup (6%); national teams (4%); development of the game (4%) and staffing costs (3%)”.

Finweek asked SARU for more clarity on why the cost of the test match between SA and New Zealand at FNB Stadium had been singled out from other test matches; however we had not received a reply at the time of going to print.

A quote from SARU CEO Jurie Roux in a press release forwarded to Finweek by Colquhoun appears to suggest that SARU’s finances were also impacted negatively by loans made to its 14 provincial unions.

“The overall position remains reasonably healthy – despite the macroeconomic situation,” Roux was quoted as saying in the press release.

“However, cash reserves (R10m), are significantly lower than those of the previous year, due partly to an increase in loans and advances to and amounts receivable from provincial unions, and partly to non-recurring capital expenditure incurred mainly on the relocation to new premises.”

One of the biggest increases in SARU’s expenses appears to be its overall salary bill. According to page 73 of the union’s 2012 annual report, the total salary bill for all staff increased 40% to R52.129m for the year ended December 31 2012, from R37.262m the previous year.

At least some of that increase would no doubt have gone to buying out current Springbok Coach Heyneke Meyer and several members of his support staff from their previous contracts with the Bulls Rugby Union.

Then there was also the fact that former Stormers director of coaching Rassie Erasmus was named as SARU’s high performance manager. Given the coaching credentials of Meyer and Erasmus, it’s probably fair to assume that neither of them would have come cheap.

SARU’s 2012 annual report also reveals that it has a “contingent liability” in respect of a legal claim by Kagiso Vantage, a subsidiary of Kagiso Media that operates advertising on the electronic billboards along the perimeter of the playing fields at Kings Park and Newlands rugby stadiums.

Finweek was unable to get comment on the matter from either SARU or Kagiso Media, but a press release issued by the latter on February 27 does shed some light on the matter:

“Kagiso Vantage sells advertising space to SARU at Newlands and Kings Park that is then utilised by SARU sponsors to display branding, trade names and product advertising,” Costa Constantinou, CEO of Kagiso Vantage, was quoted as saying in the release.

“Invoices submitted to SARU for payment for this space relating to games played in 2012 have still not been paid. Until these outstanding invoices are settled and additional outstanding matters resolved, Kagiso Vantage will not sell any more advertising space at these venues to SARU.”