Covid-19 the straw that broke the horse’s back – Racing Association’s Mike de Kock and Charles Savage

Directors of the Racing Association, Mike de Kock and Charles Savage, discuss the devastating impact of Covid-19 on the horse racing industry in South Africa, the thousands of livelihoods which depend on the resuscitation of the industry, the impending demise of the sport in South Africa and the necessary steps that will have to be taken in order to steer the industry away from rock bottom. – Nadya Swart.Welcome to Mike de Kock. Mike, nice to have you on the program. I know that you're probably talking to us from the training centre. Are you guys still able to train your horses?.___STEADY_PAYWALL___.Thanks, Alec. Yes, horses have got daily needs. They are athletes – they have got to be fed, cleaned and watered every single day. Their boxes have got to be cleaned out. Their welfare is of paramount importance to us – not only the human side, but the horse side of things – to keep them going, as they are our livelihood and life blood and when I say 'our' – I'm talking about myself as a trainer, jockeys and especially grooms..The numbers that are thrown around is that 60,000 people are dependant on horse racing in South Africa for a livelihood. Is there any way that you can support that?.Yes, there's probably even more people. If we just start with the horse born on the farm. So, there's a foal at foot with his mother. There's a groom that looks after him. There's a farrier that takes care of him. There's a vet that takes care of his and mother's needs as well as the stallion's needs. There's the farm that the horse grows up on – it's got to be managed. There's the food that's got to be grown. Someone's got to drive the tractor, someone's got to put fuel in the tractor. That horse then goes to a sale. There's a sales company and all that goes with a sales company. That horse then gets sold. Then it goes into training to a trainer like myself. We have a groom that takes care of it, vets, farriers. It's got to eat, so there's agriculture, the food that's produced, the feed companies, the transport companies getting the horse to the races. The horse then gets to the race. There's a racetrack that needs to be maintained. There's hospitality at the track. There's betting, so there's bookmakers. There's betting shops – hundreds of them. There's advertising, there's media, there's print media, there's TV media – it goes on and on and on – the amount of lives that that one single horse touches. It's probably more than 100,000, in my opinion. Depends on how far you want to extend it – you can even extend it to your Uber driver that drop you at the race..Charles Savage is also on the board of the Racing Association with you. Charles, we know you at Biznews for EasyEquities. We won't be talking Easy today, we'll be talking racing, however, and I want to just ask you if you really are that besotted about this industry, that on your Twitter page – you have a horse (I hope not a donkey) that's having a look at the track in front of it?.That's a very nice shot of a very average horse..How did you get into this industry? But, more specifically – how did you get into the governance of this industry?.I grew up with it. My father raced horses and it sort of gets into your blood – and once it's in your blood, it stays. How did I get into the RA – you get voted on by the membership of horse racing and so just about 18 months ago, Mike and I were both voted on to the RA. There were specific stakeholders in the industry that wanted more assurance and understanding of what was going on and specifically wanted Mike and I to give our inputs and views. That was 18 months ago, so that's how we got involved..We've got quite a lot of questions that have come through for both Charles and Mike, if you can take us through this. There's Phumelela's share price – it was suspended on Friday at the equivalent of 41 cents – equivalent of R40m in market cap – compared with the last 10 years. So, it's not something that has just happened. In the last 10 years – this share price has underperformed the Johannesburg Stock Exchange by 95% and if you have a look at the notice that was put out yesterday about business rescue, it now says that the board of directors of Phumelela are no longer in control of the company. The person in control of the company is a Mr John Evans. Moving on to this – and that's from Business Day this morning – Oppenheimer's help prevents horse racing industry collapse. Mary Slack and Jessica, her daughter, are the people who have put in the R100m to get (presumably) racing back onto its feet or at least to continue. Just from your perspective Mike, did this money that Mary and Jessica put in come as a surprise to you?.Absolutely not, if one knows Mary and Jessica and that family. For Mary, first and foremost – she has a love for the game, a love for horses. They have massive breeding operations, where I can tell you now – they don't make any money out of. But it's the people. Mary did not want to see unemployment. She loves this industry and she's a great South African. Her key thing – the welfare of the animal and the welfare of the workers – is her first and foremost concern..There is a question from Steve Reed for both you, Charles: Do you believe that any individual with strong ties to Markus Jooste and or Phumelela executive and management team should be involved in the restructuring task team in any capacity? .That's for you Charles..Look, the bottom line is that you've shared the graph of the share, Alec, and Phumelela's demise hasn't happened overnight. It's been an industry that has been under threat for some time. It's tried to sort of sidestep its racing's demise by adding more revenue streams, but then it found itself in a perfect storm – a lot of which is self-inflicted. I think some of the management decisions and the control which Jooste had over the industry had a very negative impact and it suffered severely from that. But, you can't eliminate everyone because they trusted in Markus Jooste. If we did that, pretty much every asset manager in this country would have to resign too. There needs to be a 'truth and reconciliation' in racing, it needs to face its past – be honest about it. And then it needs to form a new future with trusted individuals. And it certainly has to think about giving people a second chance, because if it doesn't – it's going to eliminate a huge part of a very small industry. It's not a big industry anymore, and if you got rid of everyone that was attached to Jooste (in one shape or form) there'd be very few people left. So, as I'm sure people want him to be held accountable – they will be held to account – but we've got to give people a second chance, is my view. .So, it was interesting – an interview that I did with Thys du Toit last week (it was a follow up on a webinar that he'd done at his company), and in the last little bit (like the last five or six minutes) – he really, really took off at Markus Jooste & Co and said, ' but if these guys from Steinhoff have not been arrested yet – when are they going to be arrested?'. He reminded us it's almost three years since the debacle started. So, I guess at some point in time – the South African public might lose its quest for revenge. But, it's no time soon and surely – with the racing industry – it's even more, because he dominated the industry for so many years as the leading owner etc. .There's a question here – more of a comment – from Joe de Marter who says; 'I disagree 100%; Phumelela and its demise has ZERO to do with Covid-19, Covid-19 is a symptom, not the cause'. Thoughts?.Racing was heading in this direction, but Covid-19 was the straw that broke the camel's back – there's no doubt about it. And even if Phumelela was on safe ground pre-Covid, it wouldn't have survived this. If you just look globally at horse racing; I saw Irish racing is considering the same outcome – the equivalent of business rescue – and the UK horse racing industry is being bailed out, so it's very convenient for those who would have wanted to see horse racing's demise to say that it's got nothing to do with Covid. Covid has impacted incredibly on the industry and yes, horse racing was in a decline and needed intervention (it needs a new way of doing things) – but you can't ignore the fact that Covid was definitely the death knell, and even a safe Phumelela – a good well-run horse racing industry – would be in a lot of trouble today..Michael, from your perspective; you've trained winners all over the world – Dubai, South Africa (obviously), the UK, the US… How important is South Africa in the racing world?.I think we rank sort of in the top six or eight. At one stage, we used to be a lot higher in terms of ratio of expenditure and stakes, but that's obviously gotten worse and worse as the years have gone by. But, our horses have performed and won group races all over the world, Alec. I've raced in probably 10 or 11 jurisdictions in the world with South African horses running very well all over – winning group races in Singapore, Hong Kong, Dubai. So we're up there. It's a very important industry and it's an industry that has massive potential for growth in terms of exports. We've been held back the last 8 to 10 years due to African horse sickness, as you know, with exports. It's more paranoia (I think) because it is deadly, but also – remember – not a contagious disease. So it would be akin to not allowing anyone from a malaria country to travel. We've done a lot right. But again we haven't sold ourselves well (except up until now into the international market in terms of what we do in biosecurity etc). So, we have a big role to play in the world markets – especially in the east, I believe. Our horses are competitive in terms of buying as well. I mean, if you see in Australia – the sales average is probably about 350,000 or 400,000 dollars at their main sales. Where ours would be that in rands – 350,000, 400,000 rands. So you can see the value that we are, but the problem is we have not played on a level playing field and we haven't been able to export properly for the last 10 years. We've had to do it via Mauritius, which is not a great thing in terms of the welfare of the horse. .Well, maybe all of this – they say that you should never waste a good crisis. Perhaps those that make the decisions or make the rules will wake up now to the potential of this industry. There are so many questions – I'm going to ask you guys for some quick responses. Will share manipulators at Phumelela be brought to book? Charles? .It's a job for the JSE. If anyone's done wrongdoing – the JSE will investigate it. .Mohammed Sheikh asks what action, if any, will be taken against the previous directors of the Racing Association? .I'm not sure what he's referring to. As Directors of the RA, we are unaware of any wrongdoings by previous directors. So, for us – I'm not really sure what he's referring to. .We will act if we do find something..Do you think this is rock bottom for racing?.There's no doubt – this is as close as you'll ever get to never coming back and I don't think the racing industry fully understands that. Mike and I, because we're close to it, understand that well. We were pretty much days away from the end of racing in this country. You can't go lower than this, because lower than this would be shut down. And I think this is a crisis that we can use to restructure and reform and build a trusted industry, and it's a great opportunity for horse racing to redefine its future and that's not going to be easy, but it is much easier now than it would have been five years ago..Michael, Mary Slack's hundred million has to come with some strings attached? .With Mary – there's no strings attached. I can tell you that now, first and foremost, it's going to be survival. But Charles will be better placed to tell you how it will be utilised and what expectation there is. .The R100m is really to make sure that the business rescue practitioner has got the capital to ensure that horse racing can survive for another six months. And that's typically sufficient time for a business rescue practitioner to do a deal in business rescue to see the business survive again. So, there were some conditions – none of them are draconian. They are normal for a standard business rescue practice and there's nothing extraordinary about them. And as Mike said, Mary's commitment really was to save jobs. When you want to save jobs your conditions are less draconian than what they might have been if there was another capital provider..Final question comes from Joe de Mater who says, 'I never wanted to see horse racing's demise, but the UK and Ireland are also victims of bookmakers plundering the sport'. So, I suppose there's lots of intricate issues that need to be addressed and focused. But Charles, I'd like to ask you a question: some months (perhaps years) ago, you were crossing swords with the Jooste group (I think it was at the time of the Western Cape racing being hived off) – did you get any insights then that you're going to be able to apply now that this industry is in a crisis and it can now be resuscitated?.The thing that we tried to stop back then was that we wanted Gold Circle to stay together and that was the KZN region and the Western Cape, because we realised that they couldn't stand apart and the bottom line is that that's borne out now. Racing – as an industry – has to come together under a single banner. Right now there are three organisations; Phumelela, Kenilworth Racing and Gold Circle. They have to come together, and – importantly – in order for them to come together, there has to be a trusted council of people that are going to lead that coming together. Horse racing is the most divided, untrusted industry I've ever been involved in – I've never seen an industry so divided and so untrusting of each other, and central to our turnaround is going to be to find a team that we can trust in and that brings all of those organisations together and races under a single banner. Failing that, we'll just fail to race a few years from now..Robyn Louw says just a thank you to Mike, Charles, the Racing Association Board and the task team for everything that you are doing. And here's another question: this is not a scenario that is going to be completely sorted out in a short space of time, but from the task team's perspective – what is the number one identified action that you'll be focusing on? Perhaps, that's a good way to close off. Mike?.We've got to get back racing. It's very, very important. That's where it all starts, Alec – get onto the track as soon as possible and then we can get the economy of racing going again. Without the horses racing – nothing's going to happen..Phumelela wasn't asking for a heck of a lot – only 65 people on the racecourse to conduct a whole meeting. Why is government so reluctant to allow this?.They won't let e-commerce and racing is a far cry from e-commerce, and racing hasn't done itself any favours. It's a misunderstood sport and we have not communicated with the government well in our past and so many of them probably don't even know we exist. Sadly. We haven't helped ourselves at all. But as Mike said, if we don't get back to racing – then this industry is going to get smaller and smaller and literally for every month that we don't race – I reckon we're going to get 10 to 15 percent smaller (every month). And it's already a small industry, so we've got to get back to racing. To that question – once we get back to racing the income streams will start, the economics of racing will recover, and then we can do a deal in business rescue with the business rescue practitioner to pull the parts of the business out of business rescue. But, until there's any racing – there's no revenue and racing's demise will just get worse..Charles Savage, Mike de Kock – thanks for your contribution to Rational Radio this week.

Covid-19 the straw that broke the horse’s back – Racing Association’s Mike de Kock and Charles Savage

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