GLRU is insolvent - reports

2012-02-12 14:59

Jacques Pauw - City Press

Johannesburg - Golden Lions rugby is hopelessly insolvent.

This despite on Thursday announcing a three-year multimillion-rand sponsorship deal from property firm Redefine.

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. 

City Press

  • Maaifoedie - 2012-02-12 15:11

    Get rid of this embarrassment and replace them with the EP Kings!

      Tallica7 - 2012-02-12 15:40

      This is a management issue not a team issue! Read property!

      gerhard.nel - 2012-02-12 16:11

      "This depends on SuperRugby/Currie Cup match attendances, which average about 15 000 before match expenses, including EPWOS’s share." Get more supporters in the seats. It will not solve the issues but it will go a long way. If your a Lions supporter maybe it is time to go watch the matches.

      Marius - 2012-02-12 16:16

      And now they are trying to save their backsides by getting their buddies in the other big unions to threaten boycotting next year's S15 if they fall out, while they can't even pay their own players salaries. Just get rid of them and send their best players down to PE to be incorporated into the Kings

      Tom - 2012-02-12 20:11

      Further embarrasment will follow, maybe bigger embarrasment if the Lions are replaced by the Kings.The Kings can't even compete in the Currie Cup B-section. Geeeeesh Maaifoedie your name says it all.

      Thomas - 2012-02-12 22:47

      Marius,Marius!! You are now showing us how stupid you really are!!!! The Kings have 50million rand sponsorship and still can't win the 'B' section. Your plan to send the Lions players to the kings defeats the whole concept of the Kings being representative of the EC area!!!! What will we call them "THE LION KINGS" Idiot!!!!

      Willem - 2012-02-13 06:54

      @Tallica NO MONEY NO TEAM

      Marius - 2012-02-13 07:13

      @Thomas. The Kings have not received a single cent of that 50 million sponsorship you are talking about yet. The sponsorship is on condition that the Kings take part in the S15, because the sponsor wants the exposure. Furthermore some of the better current Lions players like Killian, Jantjies and Maku comes from the Eastern Cape anyway, so they will just be returning home.

      Brevan - 2012-02-13 11:01

      Also, the EP kings play in the CC, the Southern Kings (EP, SWD and Border) will play Super Rugby. So CC has nothing to do with it.

      Ruan - 2012-02-13 13:40

      Kings al the way!!! they are giving the big guns a tough time and they dont even have a 1/10th of the budget. You oaks complaining against it know nothing of rugby, the kings cannot do worse, plus benefits far out way the negatives. your arguments are still irrelavent, for the good of rugby in the south african context the eastern cape needs to be developed. Take cricket for example, the warriors are one of the top teams now, same principal applies!!!! Think boys, think, stop trying to pull all the other guys down so that you can feel better about your own teams!!

      Thomas - 2012-02-13 20:56

      Marius, that 50mil wasn't even incentive enough to get them in the Currie Cup, which is where your next Super team must come from!!! Brevan the ruling in SANZAR is, your nations strongest teams are meant to compete in Super Rugby!! All SARU has to do is implement a Promo/Relagation system with the teams competing in the CC, playing each other to meet the bottom team of the 5 franchises in a playoff!!! I doubt the Kings will even qualify to be in the playoffs!!!

  • Francois Petzer - 2012-02-12 15:35

    Surely the stories behind this story,wich only a couple of people are aware of,wil see plenty of epwos staff,and x staff,and contractors prosecuted

  • Bielie - 2012-02-12 15:43

    "Another disturbing revelation was the disparity between the salaries of black and white players in the Golden Lions." This is pathetic reporting. You are implying racism by comparing the salary of a multi-cap, world cup winning Springbok with that of a youngster who has yet to play his first test. If you want to lend substance to your allegation, you must report the salaries of other black and white players as well. You, Jacques Pauw, are a sad excuse for a journalist. You are a blot on the reputation of every decent and honest journalist at City Press. I sincerely hope that your bosses have the backbone to give you the dressing-down that you so richly deserve. Shame on you!

      Danie Van Loggerenberg - 2012-02-12 16:42

      Well said Bielie. Why does he not tell us how much more Waylon Murray earns compared to Michael Bondesio. A Springbok and Super Rugby veteran versus a player new to top rugby. We as Lions supporters see rugby players and not colour. Elton is the next king of flyhalves, but still young and R 500 000 for a 21/22 year old is damn decent. Wish the Guma people never tried to get involved with the Lions. Article is in bad taste and written with some anger towards the Lions.

      jandreleroux - 2012-02-12 17:29

      Agree Bielie. This is exactly the kind of half truths that people like Malema et al on the one hand and the Right Wingers on the other hand use. You just change a word here or there and are not really lying just shading the truth! Just enough to incite the masses! But we will never here from the Journalist or from his bosses!

      Honest Raymond Makoi - 2012-02-12 20:16

      Its just a shame that more comments are on racism than the real issue of financial misgivings of the lions management! This what is wrong with this country!

      brionyl.french - 2012-02-13 06:42

      I agree... News 24 reports more spectualtion that reality and actual news, I mean in the end yes there is a vast difference between Butch James and Elton Jantjies salaries, but one is a Springbok and been playing for many many years where as Elton Jantjies actually didnt do too badly for a year, now he has a year of experience under his belt he can get more and once he is worth R3 million then pay it, But they seriously were ripped with Butch James, I wouldnt pay 5cents for that armless idiot.... In the end this isnt a racial thing, this is a speculatory report of what someone thinks is news... The real news is happening around us whilst we have dreamers thinking up drivel to spread amongst the masses within our country.

  • jandreleroux - 2012-02-12 16:26

    The Kings should bail out the Lions. Then they merge and become the Lion Kings and end up as a record breaking show on Broadway!

  • Jan - 2012-02-12 17:16

    The empty stadiums, awoll players and poor team spirit should have served as a warning some time ago. They should have acted then! It will be a pity to see them drop out in this manner.

  • Danny - 2012-02-12 17:31

    As a Lions fan who actually goes to matches, how did we expect to remain sustainable as a union with empty grounds and such a small conributing fan base? Why has the union not looked to open half the ground to schools for a nominal or zero entry cost, with a view to building future supporter bases? We should be building on the success of last season and really setting up some ways to bring more people into the stadium as well as looking to build a bigger fan base (which may even make us more attractive to sponsorships)

  • Nico - 2012-02-12 17:35

    this is way a number of the senior management has already left the union over the last year or two. as soon as we get rid of the other bad managers we will be ok. and the attendance will be a lot better this year! GO LIONS!!

  • Andrew - 2012-02-12 20:24

    Marius: you are a tonsil - good for nothing!! Having the EP Kings in the the S15 is a joke - they can't even win the the Currie Cup 1st Division, in fact they got hammered 43-12 in the final by Boland which means that they are - at best - the 10th best team in the country. What will the Crusaders do to them? If they want to compete in the S15 let them start by being competitive in the CC Premier division, and let them EARN their right to play in the Premier league first. And finally, if they are to play in the S15 with their OWN players - I'm in need of a good laugh.....

      Marius - 2012-02-13 07:39

      Andrew, no team can do that without money in the professional era. The Kings have a 50 million sponsor lined up, but only on the condition that they form part of the S15, because the sponsor wants their TV exposure. With that kind of money at their disposal, anything is possible. As far as winning the 1st division, they did that in 2010 on a shoestring budget. Last year, they slipped up in the final pool game against Boland which gave Boland the home final, on a bonus point difference over the season. Both teams finished with the same number of wins and losses by only losing one game each and that was against each other in the away game, but earlier in the year they won the Nations Cup in Rumania and in the tornament they beat Georgia by a bigger margin than Scotland could in the World Cup. The same Scotland that beat the Boks 9 months earlier.

      Brevan - 2012-02-13 14:28

      It is not for EP Kings to be included in the S15, it is for the Southern Kings (EP, Border and SWD). So EP's performance in the CC has nothing to do with it. They will most likely be the only truly regional team in the S15 as apposed to a team dominated by one big union. Having said that, I don't agree with the existing union being told at the start of this season, that they're fighting for thier survival. What will then happen is that once a team's chances of making the play-offs diminish. They'll start resting players for key games only and may concede games that other SA teams would require them to win, or which could cost other SA teams playoff spots or automatic qualification etc.

  • Mike - 2012-02-12 21:43

    I thought black people are the only ones who are guilty of incompetence and mismanagement, and maybe even corruption. Because that would be the accusation on this forum if the management in this instance were black.

      Marcell - 2012-02-13 00:08

      Paul Appalsamy klink soos a all in all indian. Dit is die probleem, te veel indians en te min chiefs.

  • Patrick - 2012-02-13 03:03


  • brionyl.french - 2012-02-13 06:38

    Gosh poor team, get rid of the idiots in the high places and make some serious cut backs, maybe look at opening Coca -cola park up for some events instead of Soweto, i mean please... I will never go to FNB stadium....its on the other end of Johnannesburg.

  • Vernon - 2012-02-13 07:38

    The Golden Lions management is an embarresment to South African Rugby and as a result should have their franchise taken away from them and it should be given to the Kings . I am sure Josh Struass and a couple of other players will enjoy the sunshine at the coast and Michael Killian will return to his home province

  • JoffeyCampino - 2012-02-13 10:29

    Let us be honest...franchises should be run like businesses... this has nothing to do with Rugby but Arsenal moved to the Emirates Stadium worth a deal over 389 mil pounds....their manager Wenger announced that he needs to make a profit of about 20 mil each season. Now taking that in consideration are The Lions doing that? if you are giving more out than what you are making surely something is not right, The Lions need a better business model, perhaps getting more black fans interested in games would help Even though he drew up the comparison of Jantjies and James as being a bit racist, it really doesn't make sense to pay a player that amount of money and not being able to play half of the games, if you are in financial problems surely using players from your academy would benefit them more, and Jantjies is a prime example...The Lions can't compete against the big spending of the Bulls, Sharks and Stormers. If the Cheetahs are getting it right to sustain themselves, where are the Lions going wrong? as far as "Bulls" being relegated and replaced by the Kings, that is a joke...the Bulls are making money and it would be silly to consider the revenue that would be lost to Super Rugby if they were, and same goes for the Sharks, Stormers....the only two teams that are in threat is the Cheetahs and Lions

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