Future of Stadiums: Host Cities, SA Football Association & SA Rugby Union briefings

Sports, Arts and Culture

16 August 2010
Chairperson: Mr B Komphela (ANC)
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Meeting Summary

The City of Johannesburg said that managers for the stadiums were procured in 2007, and in 2009, Stadium Management SA was appointed to manage the FNB, Rand, Orlando and Dobsonville stadiums. This management company was responsible for the full commercial and operational management of the stadiums, and the role was described. Challenges included the naming rights for FNB/Soccer City, the need to procure contracts between the relevant Premier Soccer League (PSL) teams in order for each stadium to have its own anchor tenant, as well as a partnership between relevant stakeholders, including the City, public and private sectors.

Manguang had cost R350 million to upgrade, mostly by upgrading and increasing seating capacity, as well as concession areas and storage, media facilities and office facilities. The stadium was built with both rugby and soccer sporting codes in mind. An additional two soccer matches per year were included in the roster. In the construction phase, the stadium had lost revenue, but projected income over the next two years would recover this. However, the cost of electricity was a major expense. There was apparently a profit, and the asset value of the stadium had increased, which attracted investors. This stadium was considered sustainable, if organisers and patrons agreed to move away from just soccer and rugby, and to include other sports. There was a need to secure more high profile matches, to review the financial model, and focus on non-sporting events. 

The Polokwane Peter Mokaba stadium faced challenges in regard to its geographic position, the economic demographics of the area, and that it only attracted 15% of the PSL games. It was not possible to built multi-sport features, because of the need to remain within budget. In order to attract sponsorship, it would need to have two events attracting more than 15 000 people a month. There was a large maintenance budget, of which only a portion could be met by the City of Polokwane. Post-2010 planning was behind and there was not yet appointment of a management company. This stadium was ideally placed for agricultural events, and could also be used by other neighbouring countries. Revenue opportunities in advertising and sponsorship were available.

City of Cape Town had appointed Sail Stade France Operating Company to manage the stadium, after a public tender process. A 30 year lease was set to commence on 1 November 2010. The current operational and maintenance costs totalled R46.5 million. This did not include the proposed sinking fund that would provide a capital source for replacement of large parts of the stadium that would ordinarily not fall under the standard maintenance budget. Two types of business were undertaken. Challenges included the unprecedented electricity hike, the need for a revised transport management plan, restrictive zoning and safety and security requirements, and the need to secure an anchor tenant. In order to be sustainable, this Stadium would have to draw 13 to 20 events each year. The development of a partnership between the V&A Waterfront and other nearby tourist destinations would also help to promote the stadium. An operating cost subsidy would be needed to help the stadium stay viable until it started to become independent and profitable.

Cricket South Africa bemoaned the fact that it was not consulted prior to the stadiums being built, which meant that almost all included in this presentation were not suitable for cricket matches, due to their size.

Mbombela Stadium in Nelspruit outlined the different management concepts that could be used to govern and manage this stadium, and said that the three possible options for this stadium were management by the municipality, the management by a stadium operator, or setting up a Stadium Trust to appoint a stadium management company, in conjunction with the City of Nelspruit. A draft business plan had been put together. The fixed operational costs were set out, as well as the potential revenue. It was projected that, if the stadium achieved all its events, it would make a profit over the next five years. Concerts, conferences, weddings, and other events were also planned. Short term interventions were outlined, and the presenter stressed that government funding should not be cut, that competition between different stadiums should be regulated, that international matches should be allocated to smaller federations, the building and maintenance of fan bases should be encouraged and the inclusion of a lottery category for stadium events should be considered.

Ethekhwini Municipality outlined the ways in which it planned to make the Moses Mabhida Stadium sustainable and cost effective. It was never intended to be a soccer-oriented facility, and its multiple revenue streams included tourist attractions, inside the stadium, as well as links to the Big Swing, sports precinct and beach. Suite holders were important to generate revenue. Unique approaches were needed to ensure that organisation of events were in line with event legislation. Although the stadiums showed the potential to raise income, there was a need for a comprehensive management plan. 

Nelson Mandela Bay Municipality briefed the Committee on the proposed plans for this stadium, and said that it proposed to install two anchor tenants. There was a need to finalise waste treatments from the stadium, and secure more non-sport events. If the stadium did not achieve its projected events, then it would show a loss, and would need help from the sports federations. The area around the stadium had much development potential. It had the potential also to make a significant difference to the economically depressed area of Port Elizabeth.

City of Tshwane outlined the future events for its three stadiums, and skills development through a local football academy, together with approaches to local business. Challenges included the reduction in the demand for Loftus Stadium, as well as the proposed funding of the Academy, and the need to strike balance between the business and developmental priorities of managing the stadiums.

The South African Rugby Union briefed the committee on the problems facing this Union and the cities of Cape Town and Durban. Although letters were written to the Department of Sport and recreation in 2007, nothing was done, and the Committee was now having to try to address the problem with hindsight. He discussed the proposed move of the Sharks, which he thought needed input from SARU, and said that the situation in Cape Town was out of hand, with talks having broken down. The position of Western Province Rugby Union was also discussed. 

The South African Football Association, briefed the Committee on its challenges and the opinion of the Association on the sustainability of the stadiums in the long run. SAFA was not consulted in the original planning stages of the stadiums, and believed that many were not sustainable, since they would require very aggressive business plans. SAFA was in a difficult position as it did not own any stadiums, and would have to hire stadiums, which were often not cleaned of rival branding before being handed over. Soccer received considerably less revenue than rugby. These issues would have to be addressed.

Members noted that there was a need to recognise different conditions, asked about the grassing of stadiums,  the cost charged by security companies, who owned the stadiums, and questioned the moves to secure anchor tenants. Members wanted to know if the stadiums could be altered. Members cautioned that claims for help by the relevant Municipalities had to be treated with delicacy, as sustainability should be achieved with as little government spending as possible. The lease agreements that were awarded at a token fee of R1 per year must be explained. The tender processes in Cape Town were discussed, and the Committee noted that it expected a comprehensive report so that the Committee could seriously consider the direction of sport in South Africa. Department of Sport and Recreation (SRSA) needed to co-ordinate the efforts of the different federations. The lack of consultation of Cricket South Africa was deplored. The position of the vendors outside the stadiums, the awarding of the tender to a French company in Cape Town, and the absence of SASCOC were questioned.  Members were interested in the current situation around the expected payment from FIFA, whether TV rights would be sustainable, and commented that it was yet too early to approach National Treasury. Members said there was a need for cooperation between all relevant parties, that SAFA should be meeting with FIFA to address the monopoly, and that the stadiums and SAFA must ensure that the legacy was built upon. Members agreed that stadiums should become multi-functional, believed that financial backing was necessary to develop a strong national soccer team, that sponsorship was a pressing issue, and that the Local Organising Committee Head should address the Committee.  

Meeting report

Future of Soccer stadiums post 2010: Briefings by host cities
The Chairperson noted that the Portfolio Committee, in conjunction with the relevant municipalities and sports bodies, wished to determine the future of the different stadiums that had been renovated or built from scratch, for the purpose of hosting the 2010 Soccer World Cup. The relevant host cities were asked to brief the Committee on their proposed sustainability plans for the different stadiums.

City of Johannesburg briefing
Ms Sibongile Mazibuko, Executive Director, City of Johannesburg, briefed the Committee on the proposed plans for the stadiums in Gauteng. These stadiums included Soccer City (the FNB Stadium), Ellis Park, Orlando Stadium, Dobsonville Stadium, Rand Stadium and Ruimsig Stadium. Ms Mazibuko stated that the purpose of the City of Johannesburg’s plan was to reduce potential financial strain caused by the stadiums, to dispel the public perception of the stadiums becoming white elephants and to enshrine the legacy of the 2010 Soccer World Cup.

Managers for the stadiums were procured in 2007, when refurbishment and renovations were undertaken, so that they could be present and consistent right the way through the developmental stages of the stadium’s construction, into the later running and organising of the stadiums. In 2009, Stadium Management SA (Pty) Ltd (NSSA) was appointed to manage the FNB, Rand, Orlando and Dobsonville stadiums. This management company was responsible for the full commercial and operational management of the stadiums, including naming rights, event sales, sponsorship, partner programmes, marketing, suite and hospitality sales, catering, utilities and full maintenance.

Ms Mazibuko said that the role of the stadium manager included liaison with the private sector, evaluating the naming rights of the stadium, selling of advertising space, securing of a liquor license and organising suite concessions. Most importantly the manager had to ensure that the stadium was managed in such a way that it remained open and accessible to the public and local communities.

Some of the current commitments of the various stadiums in Gauteng included 10 ABSA Premiership games for both FNB and Orlando Stadium.  Dobsonville and Rand Stadium had 10 matches by Moroka Swallows and Kaizer Chiefs respectively. FNB stadium had 8 Premier Soccer League (PSL) fixtures set for 2010/2011, with between three and four fixtures for Orlando, Dobsonville and Rand stadium each. Ten rugby games had been scheduled to be shared between FNB, Orlando and Ellis Park. Two international music festivals had also been scheduled for the FNB Stadium.

Some of the other events scheduled to occur in the Gauteng venues included local schools sports tournaments, the establishment of a gymnasium, wellness center, conference facilities, open days, athletics tournaments and other cultural events.

Some of the challenges facing the Gauteng venues included the issue of the naming rights of FNB/Soccer City, the need to procure contracts between the relevant PSL teams in order for each stadium to have its own anchor tenant, as well as a partnership between relevant stakeholders, including the City, public and private sectors. Ms Mazibuko was confident that, with the help of the government, the Gauteng stadiums would become sustainable venues that would allow for great events to take place in Gauteng.

Mangaung-Bloemfontein Briefing
Mr George Mohlakoana, Chief Executive Officer: 2010, Mangaung, briefed the Committee on the ways in which the Free State Stadium had been upgraded, and the plans for the future. The stadium upgrade cost R350 million and this was mainly targeted at the upgrade of the seating areas, as well as some other areas that needed attention. The stadium had been in existence since 1952 and had been under a 20 year lease agreement with the Free State Rugby Union since 2001. Ownership also lay with the Mangaung municipality.
The seating capacity was increased from 38 to 45 thousand, with an additional 500 seats added to the VIP area. More concession areas were created, as well as additional storage, media facilities, office facilities and the addition of two video screens.

The stadium was built with usage by both rugby and soccer sporting codes in mind. An additional two soccer matches per year were included in the roster. In addition to this, one Bafana Bafana, and one rugby game were also added to the roster. Additional income was expected from ticket sales, parking, revenue advertising and corporate suite rental.

During its construction/renovation phase, the stadium lost revenue of about R8.3 million. The projected income for the next two years exceeded the lost revenue. This was expected to continue, due to the newly included revenue streams. Mr Mohlakoana added that some of these statistics were out of date and that in reality the cost of running the stadium had increased from R4 million to around R6 million, mainly due to the increased cost of electricity, as well as inclusion of the new facilities, insurance and the new screens. The revenue had also increased, but even excluding the revenue from the World Cup, there was still an apparent profit.

Mr Mohlakoana drew attention to the fact that the asset value of the stadium had increased, thanks to the upgrade, and that as a result this attracted investors.

Mr Mohlakoana concluded that the stadium was sustainable, but would need a mind shift from its organisers and patrons to move away from just soccer and rugby, and to include other sports. A concerted effort by the stadium stakeholders to secure more high profile matches would vastly benefit the stadium. A review of the financial model would be required to better serve the new stadium, with regard to its higher asset value, as well as some focus on non-sporting events, to help draw revenue for the stadium and keep it sustainable. Mr Mohlakoana drew attention to the fact that both Banana Banana and the springboks usually did very well in the Free State, and that this should attract the teams to the stadium as an international venue.

Polokwane Briefing
Mr Ndavhe Ramakuela, 2010 Director, Polokwane Municipality, briefed the Committee on the proposed plans for the Peter Mokaba stadium in Polokwane. Mr Ramakuela outlined some of the challenges that faced the stadium with regard to its geographical position, its economic demographics, the population and accessibility, the fact that it only attracted 15% of the PSL games and the cost of hosting rugby and soccer games.

Mr Ramakuela stated that many of the features that would have allowed the stadium to become a multi-sport complex had to be foregone, in order to keep the stadium’s construction under the R900 million budget for the World Cup. Some of these features included a museum, retail shops, a science centre and elements of the roofing.

Mr Ramakuela stated that in order for the stadium to attract sponsorship, two events attracting more than 15 000 people were required a month. As well as this, the maintenance budget for the stadium was estimated to be between R20 and 25 million, of which the City of Polokwane could only provide R17 million by way of budget for the stadium’s upkeep.

Mr Ramakuela commented that the main focus of the city of Polokwane had been to complete the stadium to FIFA’s requirements for the World Cup, and that therefore its post-2010 planning was behind schedule. This fact, in conjunction with limited financial resources, meant that any further spending of budgets had to be done judiciously.

A management company had not yet been appointed, but documents that were intended to facilitate the hiring of a long term management company were in the pipeline. Mr Ramakuela also commented that the city of Polokwane was approaching various sports bodies to hold high profile games in the stadium, as well as approaching various PSL and first division teams who currently did not have official home stadiums, and who therefore might be interested in making Peter Mokaba Stadium their base of operations. Interest had also been shown by commercial entities in securing the stadium as a venue for trade shows and expositions. Mr Ramakuela added that as Polokwane was the capital of an extensive agricultural area, the stadium was ideally placed for agricultural events.

Polokwane was fortunate in its proximity to Botswana, Zimbabwe and Mozambique, as well as other close African countries. Therefore Peter Mokaba stadium could offer itself as a venue for events to these countries, where they could not provide a suitable venue themselves. Mr Ramakuela continued that the stadium was an outstanding example of creative engineering, and therefore would be an important landmark for schools and students of architecture and engineering.

Mr Ramakuela indicated that there were revenue opportunities in the form of advertising and sponsorship, particularly in the naming rights of the stadium. This sponsorship could generate up to R10 million, but smaller stadiums could expect much less than this. Local stakeholders would need to be approached in order to achieve the optimal sponsorship and advertising partnership.

Mr Ramakuela reiterated that the Peter Mokaba Stadium was behind in its planning process and therefore a decision as to the sustainability of the stadium could not be addressed at this time. The stadium, however, had many positive attributes that supported its goal for a sustainable existence, but was also faced by many challenges.

City of Cape Town Briefing
Mr Lesley De Reuck, Director: 2010 Operations, City of Cape Town, briefed the Portfolio Committee on the plans for the Cape Town Stadium, as well as the status of some initiatives currently in place. He noted that the City of Cape Town (CCT) had appointed Sail Stade France Operating Company to manage the stadium, after a public tender process. A 30 year lease was set to commence on 1 November 2010.

Mr de Reuck outlined what the management company was required to provide as part of its lease agreement. This included a business plan and event strategy, planning, training and resourcing of employees, testing of the operational systems, engagement with stakeholders, maintenance of the stadium’s facilities, pitch management, cleaning, procurement of sponsorships, liaison with the City of Cape Town, the organisation of events  and the maximisation of stadium usage.

The current operational and maintenance costs, including the management of the adjacent Green Point Park, totalled R46.5 million. This did not include the proposed sinking fund that would provide a capital source for replacement of large parts of the stadium that would ordinarily not fall under the standard maintenance budget.

Mr de Reuck described the two types of activities undertaken at the Cape Town Stadium. These included core and non-core activities. Core activities consisted of Bowl or Stadium events, suite sales, and advertising rights. Non-core activities included conferences, concessions and peripheral opportunities.
Mr de Reuck outlined some of the challenges facing the Cape Town Stadium. These included an unprecedented electricity hike, as well as the need for a revised transport management plan for the surrounding area. Restrictive zoning and safety and security requirements, as well as the securing of an anchor tenant, were also challenges.

In terms of sustainability, Mr de Reuck commented that the stadium would need to draw at least 13 to 20 events a year. Suite rentals, concessions, and supplier rights needed to be addressed in such a way that they would optimise the efficient running of the stadium, and there was a need for the operator to develop two self owned events. The stadium complex had to be developed in order to help convert the site into a multi-activity destination, with a proposed gym, medical and fitness facilities being put forward as options. The development of a partnership between the V&A Waterfront and other nearby tourist destinations would also help to promote the stadium as a destination for people to visit outside of sporting events.

Mr de Reuck stressed that for the stadium to be viable, an operating cost subsidy would be needed. This fund, in conjunction with the proposed sinking fund for capital element replacement, would help the stadium stay viable until it started to become independent and profitable.

Mr D Hugo, City of Cape Town, added that the projections on profitability of the stadium showed that it was likely to make a loss over the next two years, with break even being achieved in the following two years of 2012/13. It should show a profit in 2014/15. This, however, would only be possible if government subsidized the stadium.

Cricket South Africa (CSA) briefing
Mr Gerald Majola, Chief Executive Officer, Cricket South Africa, briefed the Portfolio Committee on the viability of using the newly built and refurbished stadiums for cricket matches. Mr Majola stated that there was not much he could say, since almost all of the stadiums included in the briefing were unfit for cricket, except for Moses Mabhida Stadium. Mr Majola said the minimum size regulation cricket pitch was 137.16 metres square of the pitch, indicating the width of the field, and 149 metres from straight boundaries to straight boundary. The boundary rope was also required to be 2.74 metres from the perimeter fence, so as to facilitate advertising. Although Moses Mabhida Stadium was the right length, being 184 metres, its width was too short to comply with the International Cricket Council’s standards of 137.16 metres. Mr Majola stated that it would have been preferable for Cricket South Africa to have been consulted before the construction of the stadiums, in order that it could have helped ensure the potential for each stadium to become a multi-sport venue.

Mbombela Stadium briefing
Mr Neil, Project Director, 2010, Nelspruit, gave a quick review of the events held at this stadium during the World Cup, and commented that all parties could be proud of the events put on display by Mbombela Stadium, as well as other stadiums in the country.

Mr Fourie outlined some of the different management concepts that could be used to govern and manage this stadium. These included management by the municipality, a commercial operator, a resident team, or by a nonprofit organisation. He continued by stating that some of the aims and goals of the management of the stadium would have to include the continued use of the stadium, its accessibility, the cost effective generation of income to cover expenses, and managing the stadium in such way as to keep it as a sustainable venue.

Mr Fourie outlined three alternative models for managing the stadium. These included management by the municipality as an in-house department, the management of the stadium by a stadium operator, who would run the stadium as a semi private venture, or setting up a Stadium Trust, who would in turn appoint a stadium management company, in conjunction with the City of Nelspruit. A
management company would have to include, in its responsibilities, the day to day running of the stadium. It must also undertake the increase of activities at the stadium, ongoing facility maintenance, as well as preventative maintenance, the staging of events, and generating income to fund these events. Mr Fourie commented that a draft of a business plan had been put together to serve this purpose.

Mr Fourie highlighted some of the fixed operating costs of the stadium, including running costs, facility maintenance, service provider contracts, and salaries. Some of the income related expenses included promotions for events, security, cleaning, technical support and the expense of erecting temporary installations. While these expenses were extensive, Mr Fourie also laid out some of the opportunities for the stadium in terms of potential revenue. These included naming rights, branding, income from an anchor tenant, major events, sales of suites, ticket sales and advertising.

Mr Fourie estimated a net income from events of R11.4 million per year, while projecting a profit for the stadium of over R18 million for the next five years. This was of course based on the assumption that the stadium would get all of its proposed events. These included one Banana Banana match, two PSL matches, two stadium events, two events by the commercial managers, half of a home team’s eighteen matches, ten local club matches and ten local school matches. In terms of rugby, a similar number of matches were scheduled to take place, including Springboks, Super 14, Currie Cup and local school and club matches. Some planned entertainment events that had been planned included concerts, as well as conferences, weddings, and other events.

Mr Fourie reported that out of these planned events, 18 soccer matches had been finalised, while 28 rugby matches had been confirmed for the stadium. A total of 52 other non-sporting events had been confirmed.

Mr Fourie concluded that some of the short term interventions that could be made in order to ensure the sustainability of the stadium included the furnishing of the suites, so that they could be rented out, the use of the indoor hall for conferences, the acquisition of an athletics track so that the stadium could cater to other sports like athletics, the acquisition of kitchen and catering equipment, and the upgrade of surrounding school buildings for the sports and arts academy.

Mr Fourie further recommended that, in order to make this and other stadiums sustainable, government funding should not be cut, competition between different stadiums should be regulated, international matches should be allocated to smaller federations like South African Football Association (SAFA) and South African Rugby Football Association (SARFU), the building and maintenance of fan bases should be encouraged and the inclusion of a lottery category for stadium events should be considered.

Ethekhwini Municipality Briefing
Ms Julie-May Ellingson, Head: Strategic Projects Unit and 2010 Programme, Ethekwini Municipality, briefed the Committee on the ways in which the Ethekhwini Municipality was planning to make the Moses Mabhida Stadium sustainable and cost effective in the future, as well as how the Stadium was developed into its current form. Ms Ellingson commented that the initial goal when constructing the stadium was never that it should be a solely soccer-orientated facility, but rather that the stadium was intended to play a role as core structure of a complex that would supply other services and facilities of a sporting nature. The stadium was intended to be a multi sport venue that would allow the public and local communities access.

The stadium was intended to have multiple revenue streams, while also serving a role as a tourist attraction for the City of Durban. The stadium was also able to be upgraded to seat 80 000 people for future use. The stadium was designed for multiple uses, apart from as a sports stadium. Some of the features that had been added to the stadium included a sky car that travelled up the arch, a sky walk for people to walk up the arch, and tours provided by the stadium to show off the stadium’s different facets. These three tourist attractions had alone generated over R6 million so far.

Ms Ellingson argued that for the stadium to be sustainable, the focus of the stadium had to include more than just the sport. Another attraction to the stadium took the form of the Big Swing, created through a private investor, for which rental was paid to the stadium. Some of the other facilities provided in the stadium design included a sports precinct, medical facilities, a large retail precinct and a link to the beach front. This was done so as to situate the stadium in a sustainable urban space. The links were intended to funnel people into the stadium, so as to keep it both relevant and visible. She noted that this exposure to the public would help to create better sports development.

Ms Ellingson continued by highlighting the fact that stadiums were very complex economic entities, and that therefore a management plan must be carefully implemented. Stadiums had both sporting and non-sporting events that required a diverse set of skills, including events management, engineering and business skills. Ms Ellingson drew special attention to the suite holders and the role they played in generating income for the stadium. In this regard the suite holders had to be given professional service.

The Moses Mabhida Stadium, like all stadiums in the country, was unique, and therefore required a unique approach to implementing the management strategy. In keeping with the uniqueness of the stadium, she felt that the City should have oversight of the management of the stadium, and that the institutional model for the stadium should be based on sound business principles.

Ms Ellingson said that the events at this stadium should be organised in such a way that they were in keeping with event legislation. Because the events legislation would have such a huge effect on the ways in which events were organised, this would lead to greater costs. She argued that these costs need to be acknowledged and that some of them would come in the form of fixed or individual event related costs. Ethekhwini Stadium had earned at least R20 million since June 2009. The stadiums showed a potential for great income, but, depending on the amount to be paid by FIFA, this could change in future.

Ms Ellingson commented that the Moses Mabhida stadium had secured international soccer matches, as well as local PSL matches and a T20 cricket match for January 2011. This decision was taken as the Moses Mabhida stadium could sell more tickets for this event than Kingsmeade Stadium. She added that there was a potentiality for the Sharks rugby side to play some of their games at the new stadium. Greater revenue potentials were due to the higher profile of this stadium.

Ms Ellingson said that there was a need for a cohesive management programme for all stadiums in the Ethekhwini municipality, including Moses Mabhida, Chatsworth, Kings Park, Kingsmeade and King Zwelethini stadiums. All of these venues needed to be shown equal consideration in terms of their maintenance, as well as their multifunctional potential. She suggested that a minimum rental fee be worked out for each stadium, as well as minimum ticket sales amount and a maintenance programme fund so that maintenance would not be neglected. The inclusion of TV rights into revenue streams could also be a good source of income to the stadiums, which at the moment did not see any of this revenue.
Ms Ellingson concluded that a positive attitude to the stadiums was necessary to make them viable. There was also a need to keep all the stadiums efficient and competitive. There was a need for assistance from the National Fund, in order to facilitate the running of the stadiums, until such time as they could make money on their own.

Nelson Mandela Bay Briefing
Mr Stephan Pretorius, Chief Executive Officer, Nelson Mandela Bay Stadium, briefed the Committee on the proposed plans for the Nelson Mandela Bay Stadium in Port Elizabeth. Mr Pretorius stated that for a stadium to be successful, it required the installation of a quality operator, as well as an anchor tenant to attract spectators. Nelson Mandela Municipality had proposed installing two anchor tenants - one soccer team and one rugby team - to achieve this. Mr Pretorius added that the event programme needed to be thoroughly developed so that the stadium could deliver a quality product to its patrons, and, in so doing, ensure the commercial viability of the stadium. The revenue generated in this way should be used to reinvest in the stadium so that it became world-class.

Mr Pretorius  added that a development and managerial process was developed leading up to the World Cup, which including getting a liquor license, managing the pitch, ensuring that the stadium was clean, electrified and provided with all relevant utilities. The stadium was then given over to FIFA for the World Cup. The stadium, as it stood now, was in the process of being handed back to the Nelson Mandela Bay Municipality, and steps were being taken to secure a management company to oversee the operation and maintenance of the stadium. Currie Cup fixtures had been organised to occur at the stadium after the World Cup, as well as large private events, such as product launches and funerals.

Some of the challenges facing the stadium included the need to secure an anchor tenant, preferably a soccer team from the PSL, to secure some more non-sport events, the need to address the pitch quality, and the need to finalise waste treatment from the stadium. The stadium had also been used as a venue for students whose school had burnt down.

The financial situation showed that if the stadium does not get all of its potential events as forecasted, then a loss of R3.6 million could result. In the best case scenario, it could generate a profit of R1.3 million, was expected by 2011, but help would be needed from the sports federations.

Mr Pretorius commented that the area around the stadium had lots of developmental potential, with the lake next to the stadium, as well as the proposed development of a BMX track, a walking track and a museum. These developments were intended to provide recreational facilities for the local community.

Mr Pretorius added that consideration should be given not only to the stadium, but also to the position of it in relation to the community and surrounding urban spaces. He concluded that the Nelson Mandela Bay Municipality had built the stadium in an economically depressed area, and that its potential would have a significant impact on the economy in the area.

City of Tshwane Briefing
Mr Godfrey Nkwane, Chief Executive Officer: 2010 Unit, City of Tshwane, gave a briefing on the plans forecast for the stadiums in and around the city of Tshwane. He began by outlining the future events of Loftus Versfeld, Lucas “Masterpieces” Moripe Stadium and HM Pitje Stadium. Each of these venues would host 20 rugby games, 15 Super Sport United matches and 15 Mamelodi Sundowns matches respectively.

The strategic plans in relation to the Tshwane stadiums included bringing all of the stadiums into compliance with international standards around quality and operation. This included the expenditure of R130 million for the Loftus stadium, as well as the forging of close relationships between the City and the Blue Bulls company, that would hopefully facilitate a better working relationship in  future.

He outlined that the majority of the budget was spent on maintaining the event infrastructure of the stadiums, in order to ensure a lasting legacy. This was further facilitated by the liaison between local communities and the stadiums and City, as well as clubs playing at stadiums other than their usual home grounds.

Skills development was addressed through the proposed establishment of a football academy, modelled on the Blue Bulls Rugby Academy. This was further facilitated by an approach to local businesses to help fund this Academy, as well as the inclusion of the University of Pretoria in hosting games. Some of the challenges outlined by Mr. Nkwane included the reduction in the demand for Loftus, as well as the proposed funding of the Academy, and striking a balance between the business and developmental priorities of managing the stadiums.

South African Rugby Union (SARU) briefing
Mr Oregan Hoskins, President, South African Rugby Union, briefed the Committee on the problems facing the South African Rugby Union (SARU) and the cities of Cape Town and Durban. Mr Hoskins identified Cape Town and the Ethekhwini Municipality as having problems around the relationship between the provincial rugby unions and the stakeholders involved with the establishment of the new stadiums.

Mr Hoskins stated that, in anticipation of the problems to be discussed at this meeting, he had written a letter to the Department of Sport in 2007, asking for their intervention in the matter. Regrettably, he had never received a reply to this letter. He stated that this problem should have been addressed before the stadiums were built, and that it was unfortunate that the Committee was now having to “work in reverse” to try to correct the matter.

Mr Hoskins had followed the media reports about the discussions between Ethekhwini City Manager Dr Michael Sutcliffe and Mr Brian van Zyl, Chief Executive Officer, The Sharks, concerning the proposed move of the Sharks from their present stadium to the new Moses Mabhida Stadium. He had anticipated the problems. He thought that the Sharks would face massive difficulties in moving to the new stadium, due to the suite configuration in the new stadium being completely different, and also being not suitable for the needs of the rugby team. He argued that the issue could not be left to Dr Sutcliffe and Mr van Zyl, and needed input from SARU and other relevant stakeholders.

Mr Hoskins said that the situation in Cape Town was completely out of hand. The problem was referred to SARU when talks between the relevant parties broke down. He was of the opinion that parties were talking past each other and that as long as this continued, there would be no solution of integrating these two stadiums into the sports event calendar, as they should be.

Mr Tobias Titus, President, Western Province Rugby, addressed the Committee on the events leading up to the creation of the problem now facing rugby in Cape Town. Mr Titus stated that Western Province Rugby made a bid when the new Cape Town Stadium was built. However, he claimed that it was advised to pull out of the tender bid, by the eventual winners of the tender, and were thus locked out of the talks surrounding the new stadium. Western Province Rugby was eventually advised, by a consultant that it should, for financial reasons, stay at the Newlands Stadium. At Newlands, Western Province Rugby gained R10 million a year, so there had to be serious consideration of how it might benefit from moving to the Cape Town Stadium.

South African Football Association (SAFA) briefing
Mr Leslie Sedibe, Chief Executive Officer, South African Football Association, briefed the Committee on the challenges facing the South African Football Association (SAFA), and the opinion of the Association on the sustainability of the stadiums in the long run. Mr Sedibe commenting that SAFA was not consulted in the original planning stages of the stadiums built for the FIFA World cup. It was his opinion that the stadiums were in many cases not sustainable, and he drew specific attention to the aggressive nature of the various business plans presented so far to the Committee.

Mr Sedibe said that SAFA was in a difficult position with regard to organising events, due mainly to the fact that, unlike some of the other Sports Federations, it did not own any stadiums, and did not have access to long standing fan franchises. In order for SAFA to host an event, it would typically have to hire a stadium. This presented SAFA with a problem, because due to the tenancy it would then have no legitimate right to the revenue generated by the leasing of suites. Added to this was the fact that each event SAFA hosted had to involve a separate leasing agreement.

Mr Sedibe continued that these circumstances contributed to a feeling of “homelessness” in SAFA. He also commented on the accessibility of soccer as compared with that of rugby, and addressed the impact of this upon the revenue gained by his organisation, relative to other sporting bodies. Mr Sedibe stated that the cost of one rugby ticket was eighteen times the cost of a soccer ticket, with rugby tickets being priced at around R360, whilst soccer tickets were priced around R20.

Mr Sedibe continued that one of the major difficulties encountered by SAFA was the issue of stadiums that had not been properly cleaned at the time they were handed over to SAFA, including clearing away of rival branding, which created difficulties with SAFA’s sponsors. He said that SAFA was also prevented from receiving any revenue from food and beverage sales, as well as match concessions and parking. These activities were usually outsourced by the stadium management, but Mr Sedibe was confident that this would be unnecessary as SAFA could provide these services. He added that SAFA needed to own its own concession and catering rights.

Dr Irvin Khoza, Chairman, Premier Soccer League, added that in his opinion, there would be no legacy of football if these issues were not addressed. He proposed that an agency be set up to oversee the sustainability of the stadiums, as well as seeing to the home base needs of the teams working and training in these venues.

Discussion
Mr L Suka (ANC) commented that the differing economic conditions in Ethekhwini and Nelson Mandela Bay Municipality would necessarily require different approaches and different consideration of the circumstances and sustainability of these two stadiums. They should not be compared superficially. He also asked for clarity on how the grass type of the pitches of the stadiums would change, if indeed it would change, post 2010.

Ms T Sunduza (ANC) had a similar query.


Ms Ellingson replied that the grass used at Moses Mabhida Stadium was in the process of being changed to a mixture of kikuyu and rye grass.
 
Ms Mazibuko added that the pitch at the FNB stadium had also been seeded with rye grass.

Mr Pretorius stated that the pitch at Nelson Mandela Bay Stadium was in the process of being converted into a semi-synthetic pitch.

Mr Suka asked how much security companies charged per match, noting that the teams were required to provide their own security. He also asked for clarity over who owned the stadiums (which was addressed in the following presentations).

Ms Ellingson replied that security companies were usually paid around R300 000 per game, and that the teams were required to pay for this, not the stadiums.

Mr Suka further asked for clarity on what was to be done regarding the lack of an anchor team in the Nelson Mandela Stadium.

Mr Pretorius answered that the stadium had just signed the Eastern Province Kings as an anchor tenant for soccer, but that the stadium was still looking for a rugby anchor tenant.

Mr Suka also asked for clarity as to whether the stadiums could be altered. He acknowledged that this could be difficult, and perhaps too expensive, but needed to know if it was theoretically possible, as the Committee still had to discuss this point.

Mr Suka also commented that claims for help by the relevant Municipalities had to be treated with delicacy, as sustainability should be achieved with as little government spending as possible.

The same point about government spending was brought up by many of the delegates.

Dr Sutcliffe stated that the National Fund had a responsibility to contribute to making the stadiums sustainable and could not walk away. He also commented that the taxpayer should not have to pay for the stadiums.

Mr Suka also asked that the issue of lease agreements being awarded for a token payment of R1 a year must be explained. This question was echoed by numerous other Committee members.

The Chairperson asked that Mr Hugo must explain how the system worked.

Mr Hugo replied that these agreements were set in place so that if the stadium operator did not make any money, then the lease for that year would not be a significant drain on an already apparent loss in earnings. If the stadium operator in question did make a profit, then 30% of that profit would go to the stadium.

Mr Suka asked Mr Hoskins what he had written to the Ministry in 2007.

Mr Hoskins replied that he had asked the Minister to intervene in the problems that Mr Hoskins foresaw, and not to wait until after the World Cup.

Mr de Rueck added that while he could not comment on the tender process in Cape Town, he would be prepared to meet with the Western Province Rugby Union whenever possible.

Mr Suka commented that a comprehensive report should be expected, and that this meeting should lead the Committee to seriously consider the direction of sport in South Africa. He added that the Department of Sport and Recreation (SRSA) needed to co-ordinate the efforts of the different federations. Presently, there appeared to be a vacuum in leadership, although the Department should be taking responsibility for sport in South Africa.

The Chairperson agreed with this comment.

Ms Sunduza asked what steps were taken to include the vendors outside the stadiums in the future plans for the stadiums. She also asked what the current status was on the naming rights, with regard to Soccer City/FNB Stadium.

Several other Committee Members also raised this question.
Ms Mazibuko replied that the vendors outside the Soccer City Stadium had been allocated space to set up their shops, as well as being given certain degrees of training in order to help them manage the differing clientele, between rugby and soccer events. She also added that the current name of the Soccer City Stadium was officially “FNB Stadium”, due to the signing of a lease agreement giving the rights to First National Bank.

Ms Sunduza asked why Cricket South Africa had not been consulted in regard to the building specifications of the new stadiums.

The answer to this was given later in the meeting, when it was agreed that the exclusion of any consultation with sports federations other than soccer had been a mistake, and that it was regrettable.

Ms Sunduza asked why the tender to operate the Cape Town stadium had been awarded to a foreign company.

Mr Hugo and Mr de Rueck answered that in fact SAIL Stadefrance Operating Company was in fact a partnership between a South African firm (SAIL) and a French firm, with the majority of the team managing the stadium being South Africans. They further added that the contract was awarded by public tender and that this company was considered the best for the job.

Ms Sunduza asked what was meant by a ‘clean’ stadium. She expressed surprise that SAFA only rented suites, and did not own them.

Mr Sedibe explained that “clean” referred not only to the refuse having been removed and the stadiums being in a state of cleanliness, but also that all rival branding and advertising should have been removed.

Ms Sunduza finally commented that the absence of South African Sports Olympic Committee (SASCOC) was significant, as it surely had a role to play in the discussions.


Mr C Frolick (ANC) said that the projection of future events from each stadium should be clear and easy to understand. He also asked that the relationship between the Sharks and the Ethekhwini Municipality should be clarified.

Mr Hoskins remarked on his opinion about the proposed move of the Sharks to Moses Mabhida Stadium.

Dr Sutcliffe added that the Sharks were a big business, and that they would need to be handled with care in order for parties, stadium management and the Sharks to get to a position where all parties were happy.

Mr Frolick also asked what the current situation in regard to the expected payment from FIFA, as well as the nature of the TV rights of the stadiums, and how this would contribute to a sustainability model.

Dr Sutcliffe replied that the TV rights, if included as an expense incurred by the stadiums, would disqualify the sustainability of that stadium. The maintenance costs for the TV systems would be far too high relative to the amount of money that could be earned through selling the rights.

Mr Frolick also commented that that the stadium delegates were asking for assistance from National Treasury too soon, and that they should only do so when there was a clear sustainability model in place.

Dr Sutcliffe responded by saying that stadiums very rarely made a profit and that the assistance of the National Treasury was paramount to ensuring that the stadiums became viable business entities. He added that the rate payers should not have to bear the brunt of maintaining the stadiums.

Mr Frolick asked about the situation in Cape Town in regard to the rugby teams and the Cape Town Stadium.

This question was partially answered by Mr Titus and Mr Hoskins in their comments to the Committee about the problems surrounding rugby and stadium management.

Mr D Lee (DA) commenting that there was a clear need for co-operation between all relevant parties in the management of stadiums in future. The creation of a clear sustainability model was equally important. The size of the pitch would have been important in determining the viability of these stadiums for cricket. He asked whether Cape Town and Durban were the only two cities that were experiencing problems with rugby teams and their access to new stadiums.

Mr Hoskins confirmed that indeed it was only Cape Town and Durban who were experiencing the problems, as they were the only two cities with already existing Rugby stadiums within a short distance of the new stadiums.

Mr Lee commented that it was incumbent on SAFA to provide a team and necessary development for the Nelson Mandela Bay Stadium. SAFA needed to meet with and address FIFA on its monopoly, and their behavior. He concluded that the Committee and delegates should bear in mind why those stadiums had been built, and be mindful of the true nature of our investment.

Mr G Mackenzie (COPE) reminded the Committee that the ultimate issue that was under discussion in the meeting was the legacy of the World Cup. The stadiums and SAFA were responsible for ensuring this legacy would not be destroyed by mismanagement and over spending. He further asked what the status was of the Lions Rugby team, and whether they would be moving to Soccer City/FNB.

Ms Mazibuko replied that the Lions would stay at Ellis Park, but that they were allowed to play wherever they liked.

Mr Mackenzie noted that if Nelson Mandela stadium was intending to develop a tourist hub around the lake next to the stadium, a clear tourism plan, including a financial model and a development plan for the lake, would be needed.  He added that for the Super 16 to be commercially viable at Nelson Mandela Bay, the issue of selling suites was paramount.

Mr Mackenzie asked if the four stadiums outside of the Durban City Centre were multi sport venues, as well as whether the Ethekhwini  Municipality would be able to upgrade these and the Moses Mabhida Stadium. He also added that perhaps a baseball promotion would be a good idea, both to promote this sport, and to earn revenue for the stadium.

Ms Ellingson agreed that these stadiums must become multi functional in order to become sustainable. Any upgrades undertaken must make business sense. She also agreed that a baseball promotion would be a good idea.

Mr Mackenzie concluded that it was clear that the relevant stakeholders had not been consulted in Cape Town and Durban, and that this presented a significant problem. This was regrettable, as the country should enjoy a legacy of success from the 2010 FIFA World Cup.

Mr M Dikgacwi (ANC) asked what plans were in place for the next three years. He also proposed that the relevant stakeholders from Cape Town, Ethekhwini and SARU should meet to discuss the problems in the two cities.

Mr Dikgacwi added that unless financial backing was found, he did not foresee that a strong national soccer team would be developed. The sport had to be developed at all levels of the game, and through all communities in South Africa, with the necessary financial muscle.

Mr J van der Linde (DA) commented that the Committee needed to receive the report from the Director General. He agreed on the pressing need for sponsorship, as this was the main way of controlling expenses. He was also of the opinion that the Danny Jordan, Head of the Local Organising Committee, should address the Portfolio Committee, in order to give an understanding of how the situation was between the Department and FIFA. He also called for an audit of various entities, including the stadiums, fan fests and the funds spent by FIFA.

Dr Irvin Khoza, Chairman, Premier Soccer League, replied that there was indeed an audit taking place at the moment. He also commented that much of the money expected from FIFA was event-related, and that therefore there was little left over for development.

The meeting was adjourned.

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