Transformation in Horse Racing Industry: input by National Horse Racing Association, SA Grooms Association & Minister of Trade and Industry

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Trade, Industry and Competition

10 September 2013
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

This meeting, which was attended by the Minister of Trade and Industry and members of the Portfolio Committee on Sport,  was a follow-up on previous meetings when the South African Grooms Association (SAGA) expressed concern about the slow transformation in the horse racing industry, and its lack of recognition by the National Horseracing Association (NHA). The NHA highlighted that horseracing was a complex industry that spanned three sectors; agriculture in the breeding and raising of horses, sports when the horses were run, and gambling (trade) which was a spin-off from the racing. The industry was in financial decline, making it difficult to attract new owners and trainers to invest, and without funding, few transformation initiatives could be run. Domestic prize-money was too low to sustain growth, and yet it was impossible to run horses internationally due to a three-year ban on exports, because of problems with vaccines and international recognition. The current gambling and taxation regime resulted in horseracing accounting for about 7.2% of all gambling turnover, yet paying 13.3% of the tax, effectively subsidising casinos and private bookmakers. NHA quoted statistics to show that it was attempting to address transformation, through employment in the Thoroughbred Breeders Association (TBA), the setting up of a Stud Farm Grooms School, interns being sent overseas, recognition of the training programmes internationally, and setting up of 10 cooperatives, with 7 members each. The board and staff were more representative. It had changed its Rules to give more recognition to grooms and had drafted a Code of Conduct for their protection. In the gambling sector, the tote operators had substantial improvements in their BEE scorecards, ahead of time. There were few black trainers, largely because the business was unprofitable, but 64% of trainees at the Jockeys Academy were black. NHA also offered career training, learnerships, work riders’ programmes, syndicates and contributions to research. NHA expressed concerns that SAGA had made threats, both of assault and illegal strike action, and demanded union funding but was unable to prove membership and satisfy other requirements. NHA could not resolve the labour concerns, as it was not the employer, and for the same reason maintained that a recognition agreement would not be possible. However, it was prepared to negotiate on other concerns. NHA suggested a revision of the Tote’s business model, its taxation and relationships to other forms of gambling. It also welcomed the Minister’s apparent intention to appoint a Commission of Inquiry to inform an appropriate and equitable dispensation, and welcomed the recommendations in the Portfolio Committee’s report of March 2012. It agreed that the NHA should be granted statutory recognition. It asked that all betting operators, who derived benefits from the integrity of the sport, should contribute to the costs of maintaining the inquiry. It recommended the disallowance of the Open Bet. NHA also urged government to appoint a Commission of Inquiry into horseracing to inform the restructuring and transformation of the industry.

The South African Grooms Association (SAGA) disputed some aspects of the NHA’s presentation, particularly the assertions about membership of SAGA, and maintained that the refusal to recognise SAGA, although other associations were recognised, was racial. Grooms had no voice to address their concerns and needs. Whilst it was true that there were certain training initiatives, these were not successful because the bodies offering training would dictate to the trainees and many were being trained in areas in which they had no interest. It was noted that no black trainers or jockeys had emerged. The SAGA had reported the Phumelala tote operator to the Public Protector because it failed to use certain funding as was intended, for the grooms’ housing. During discussions it was emphasised that there were clearly factual disputes between the bodies, but this Committee was not a court, and should not be calling for proof or attempting to judge the issues.

The Minister of Trade and Industry suggested that one aspect not raised in relation to the gambling industry was that prior to 1995 it had enjoyed a monopoly but was now losing business to other forms of gambling. He clarified that he had not stated that he would appoint a Commission of Inquiry and that this was merely one suggestion raised in public hearings. The Gambling Review Commission Report recognised that the industry was constrained by the licence conditions, and recommended that they and the funding model be changed, but this still had to be referred to the Gambling Policy Council in October, and perhaps would lead to amending legislation. He cautioned against blanket assertions that the Department of Agriculture must simply deal with vaccines and said that exports was a trade issue as well. He noted that the labour issues clearly had to be addressed, and his Department was clearly insistent on proper labour relations promoted, and for stakeholders to be included in the process. Whilst he noted the requests of the NHA, he made a strong statement that the Department would only have “the appetite to assist” if it could see proper transformative processes. He urged all stakeholders not to keep repeating their previous positions but to look for a more inclusive and harmonious model. He wanted to clarify that horseracing was not a priority industry, and that there was limited input that government could make.

Further debate followed, when Members raised questions on the willingness of participants to come to the negotiating table, and queried if a multi-disciplinary task team could be set up. The COPE member agreed with the need to achieve a unified, transformed and representative industry, but was disturbed by his perception that SAGA was driving the Committee’s decisions, and felt that SAGA’s actions had to be tempered. An ANC member questioned what a Commission of Inquiry could achieve, and urged that the employers and employees must act together to make the industry succeed. The tote operator Phumelela countered that it would welcome such a Commission as it felt it had been unfairly judged and had nothing to hide, and also clarified that the main problem with SAGA was that it had not submitted the documentation requested to back up its assertions for registration. A trainer gave a statement of how grooms operated and asserted that they treated their grooms fairly, for the most part, and that if they were found to violate any labour conditions, they were banned from running their horses. The Chairperson’s main concern was that in 2011 NHA had asserted that there was “no problem in recognising” SAGA and that this had created expectations, and asked why NHA did not simply make good on that. NHA’s present incumbents requested a transcript of that meeting to check the context. The National Gambling Board said that it was finding itself in an invidious position, being expected to mediate although it had no mandate to do so, and that the full context for both sides’ assertions must be considered, including the fact that SAGA felt it was being discriminated against, and therefore emotions were running high. The Gambling Board said that conflicting information had also been presented to it.

Having heard the discussions, the Minister suggested that further input would not serve any purpose, and said that, having heard the current attitudes, he was unwilling to endorse any proposal that the NHA become a regulatory body. However, he made the offer that the Department come up with a facilitating structure, which would meet with all stakeholders, including the unions, and then submit a set of recommendations on how NHA could become a body to which all stakeholders happily subscribed. The majority of the Committee welcomed that proposal, with COPE expressing its unhappiness that it still felt that the NHA was being forced into a position.
 

Meeting report

The Chairperson welcomed the Minister of Trade and Industry, and noted the presence of the Chairperson and Whip of the Portfolio Committee on Sports. She noted an apology from the Chairperson of the Portfolio Committee on Labour.

National Horseracing Industry briefing: Status of transformation in the industry
Mr Robin Bruss, Analyst, Northfields Bloodstock, and member of the National Horseracing Association (NHA) noted that he had been involved in the racing industry for 40 years. He wanted to give an overview for context, since many people did not understand the nature of and different components of the industry.

He thought that the horseracing industry had made some valiant attempts to transform, but an ongoing undercurrent was the historical nature of gambling and the way the industry had been structured to date. The main problem was a structural issue of underfunding. This meant that the industry could not afford to set up inclusive structures to meet all people in the industry. Over time, from 1995, around 85 000 jobs in the industry had been lost.

The horseracing industry was quite unique, in that it spanned three sectors. Breeders bred horses, in the agricultural sector, to sell them for sport, and then gambling was based on that sport. He noted that R9 billion a year was bet on horseracing, yet all three components of the industry were in decline.

Domestically, prize money was too low to sustain growth. If horses were able to race internationally, it was possible to raise this, but regrettably the Department of Agriculture, Forestry and Fisheries (DAFF) was in disarray with exports, and the industry had already been through a three-year ban and was facing another one year. The Thoroughbred Breeders Association (TBA) had posted losses of R18 million in 2011, and R4.5 million in 2012, which meant that it could not fund others in the industry. Racing South Africa (RSA) had been formed so that quarantine research and trade initiatives could be funded, but this was affected by the three–year ban. There was a mere trickle of exports, and it took seven months to deliver a horse overseas, compared to 10 days in other countries.

The sport of horse-racing still existed because the horse-owners were willing to lose R580 million per year. However, it was difficult to see how these losses could possibly attract new entrants of owners. The group race winners (only 3% of all horses) made money, but, as stated, the only way to make up the losses was to send horses overseas. He cited the comparison that the Durban July prize money was R3 million, but the Dubai Cup prize money was US$10 million.

The horse racing was essentially funded by gambling and owners’ contributions. Sponsorship was very small and nobody was paid for intellectual property. All other sports relied on multiple revenue streams. Transformation could only be sustained by the willingness of owners to lose money in the sport, unless some other solution could be found.

Mr Bruss described the third component of the industry; the gambling operators, who were, at the moment, Phumelela and Gold Circle. The carry-over of colonial era operations was hindering the sport. These two operators had made few profits, with trading losses being more apparent. Any profits had been based on tax dispensation, rationalisation, closure of tracks and sale, and reliance on the uncompetitive totalisator (tote). The tote had to fund three major costs – the costs of live racing, providing the purse money, on which all participants were dependent, and the total cost of the National Horseracing integrity services, to which independent bookmakers did not contribute.

He noted that tote betting was taxed, and there had been arguments around the need for a level playing field. Betting on horses accounted for 7.2% of all gambling turnover, but there was inequity because this type of betting paid 13.3% of all national gambling tax. He suggested that there was a need for an investigation. Old tax rates applied to different forms of gambling. He tabled statistics and pie-charts (see attached document) showing a comparison of revenue and tax for the tote and the casinos, with the latter accounting for 85.2% of gambling turnover yet only 75.3% of the tax. He noted that over the last six years, horse-racing had paid a higher percentage of its earnings into tax. The casinos’ taxation was the reverse, so there was unfair treatment.

The effect of this distortion was a shortage of cash flow, and this was being felt by all sectors in the industry. Most of the employees were unskilled and therefore most vulnerable to retrenchment when industry showed decline. Horseracing employed 23 times as many people per gambling rand than casinos. For this reason, government should be looking after the grooms, with mechanisms that helped to pay for them. Mr Bruss summarised that the NHA was suggesting a revision of the Tote’s business model, its taxation and relationships to other forms of gambling.

Mr Bruss noted that transformation was, as far as possible, being addressed but reiterated that the industry was severely hampered by lack of funding. He suggested that the recommendations of the Portfolio Committee, made in March 2012, should be adopted, and welcomed the Minister’s apparent intention to appoint a Commission of Inquiry to inform an appropriate and equitable dispensation for racing, leading to a sustainable growth path, to avoid collapse of the industry altogether.

Mr Denzil Pillay, Chief Executive Officer, National Horseracing Association, said that he would indicate what each sector had achieved. The breeders were essentially the farmers, and the Thoroughbred Breeders Association (TBA) were employing 50% people of colour. There was a Stud Farm Grooms School, intended to educate at least 40 employees per year and there was an intention to roll out another programme in KwaZulu Natal and the Karoo. There had been 50 international interns, who were sent overseas, and the training programme had been given international recognition. There were also 10 cooperatives, with 7 members each. Breeders wanted to have more coops, but there was, once again, not enough funding. The cooperatives would purchase young horses and sell them later as yearlings. He cited a particular co-operative raised horse, which would be racing in Dubai in 2014, which showed that the cooperatives had the potential for success.

The grooms in the breeding sector had been using the agricultural labour unions to express their needs.

In the gambling sector, he said that there was not a full understanding of the degree of transformation by the bookmakers, because they were not reporting to the HRA. However, it was possible to assess transformation in Phumelela and Gold Circle, who operated the tote. Phumelela had a BEE scorecard of level 3, and by October 2013 it should have reached Level 2, two years ahead of time, which illustrated its commitment. Gold Circle was currently a Level 4 contributor but its Board had approved plans to achieve a Level 2 status.

The National Horseracing Association (an NPO) had four persons of colour and one female on the Board. Its staff were 47% black. It had, in addition, created three positions – which were limited by colour – where people could earn a stipend while developing a knowledge of the horseracing sector at large. The NHA was open to all, and there was recognition of prior learning, with evaluations being allowed in written or oral format.

He noted that at a previous meeting, the South African Grooms Association (SAGA) had raised some issues before the House, specifically problems of assault and abuse. The NHA had now amended its rules to address these problems. The grooms could be represented at inquiries. Grooms would be able to be registered.

In regard to owners’ certification, Mr Pillay reiterated that racing horse ownership was overall showing a loss of R580 million, so such ownership remained unprofitable, and people were unwilling to enter the business. In the trainers’ business, only 0.04% were people of colour, and that was again because this was not a profitable business. 64% of people at the SA Jockeys Academy were of colour.

The initiatives within the industry were described, which included career training, learnerships, work riders programmes, to teach grooms the skills to ride on the racetrack, with races programmes specifically offered for work-riders. There were attempts to promote informal racing in Eastern, Northern Cape and Northern Natal. The NHA was also trying to promote syndicates, to reduce the costs associated with ownership. There were contributions to African Horse Sickness and Equine Research Centre, to improve the health for horses, and to move the industry to a point where it could export.

He noted that whilst the SAGA members had raised some concerns, their actions were also of concern.

The Chairperson interjected to say that unless there were cases pending, she would prefer that the words “alleged” be used.

Mr Pillay said that he had submitted correspondence to the Committee Secretary, which supported what he would now detail. Actions raising concerns included threats to trainers and their lives, which was supported by documentation, threats of strike action at the Summer Cup and J&B Met, and demands for funding of R10 million from racing operators. The racing industry had conducted some surveys, which indicated that of the 2 197 grooms, only a very small number were affiliated to the SAGA, none being affiliated in the KZN region. KZN and Western Cape grooms belonged also to other unions.

Mr Pillay noted that when the NHA engaged with the SAGA, the primary issues raised were labour issues. Discussions were held around this, when NHA made it clear that it could not deal with labour matters, as it was not the employer, and only later were issues of training and development were raised. Despite the schools and education programmes, the grooms actually wanted career development programmes.

The SAGA asked the NHA to sign a recognition agreement in which SAGA was officially registered. However, once again, Mr Pillay said that because NHA was not the employer, and because recognition agreements were usually entered into between employer and labour unions, it was not sure that it could do this. The NHA recognised the contributions by the grooms, and the issues they had raised had led, as he had said already, to the NHA revising its rules, and drafting of a Code of Conduct. If there were complaints laid by the grooms, around assault, abuse or contraventions of the rules, the NHA would consider representation for the grooms, depending on the complexity of the complaints.

Mr Pillay summarised that the industry supported the recommendations for horseracing and betting contained in the report by the Portfolio Committee. However, there were also some further interim proposals. The industry agreed that the NHA should be granted statutory recognition. All betting operators, who derived benefits from the integrity of the sport, should contribute to the costs of maintaining the inquiry. It recommended the disallowance of the Open Bet. NHA also urged government to appoint a Commission of Inquiry into horseracing to inform the restructuring and transformation of the industry.

Discussion
Mr G Hill-Lewis (DA) asked how the trainers were represented on the NHA and if they had a collective organisation.

Mr Pillay said that trainers were not represented on the Board of the NHA, which was made up of elected owners. He said that there was no organised body representing trainers.
 
Mr Louis Goosen, Race Horse Trainer, Vaal Trainers, said that all trainers were independent businessmen who employed grooms. It was difficult, therefore, to have a body of trainers. There was a National Forum of Trainers, who took up issues raised by its trainer members, but it was not a formal body. NHA tended to accommodate any problems raised by trainers quite well.

Mr David Furness, Company Secretary, Gold Circle, added that provincially there were some organisations, such as the Trainers Association in KwaZulu Natal, and the Western Cape Owners and Trainers Association. He was not aware of others in other provinces. 

Prof de Vries, Board Representative, NHA, said that trainers, through their informal engagement of groups, had engagement with the NHA.

Mr Hill Lewis said his next question followed on from this. NHA had maintained that it was not the employer, and that recognition agreements should be signed with employer associations. If there were indeed several associations, he wondered why the negotiations had not been held between trainers and employee associations, rather than between the trainers and the Department of Trade and Industry (dti).

The Chairperson suggested that the answers to these questions be explored later.

Mr G McIntosh (COPE) expressed his extreme concern, as a farmer, about the potential being lost for export of race-horses, and said that this was fundamental. He noted that there had been some discussion on how to reform the totes, and that was another matter. He was concerned about the apparently radical attitude of the SAGA, noted the small number of members, and said that if it was resorting to violence and murder, that was extremely worrying for the industry.

The Chairperson cautioned Members and said that nobody had, as far as she had been aware, accused of murder.

Mr B Radebe (ANC) said that some serious allegations had been raised against grooms and he suggested that they be given the chance to engage.

Mr Peter Gibson, Chief Executive Officer, SA Equine Trade Council, said that racehorses accounted for 25% of the exports. There was potential for inclusion in the Olympic games and it was necessary to solve the export problems. He noted that the Minister had been asked to adopt a protocol around funding. However, it was necessary also to recognise that the issues leading to the outbreak of African Horse Sickness were related directly to chronic lack of funding, and lack of proper investment in an internationally accepted vaccine. There had been some fruitful discussions with the dti.

The Chairperson noted that the three-year ban was related to African Horse Sickness, rather than lack of funds, and this had led to the export challenges. No lack of funding had been mentioned in the earlier correspondence, but it appeared that there were problems around classification of the disease.

Rev W Thring (ACDP) commented on the tax structures and asked if the inference was that the horseracing fraternity was partially subsidising the casinos.

Mr Bruss responded that it was indeed difficult to understand the reasons for the differences The horseracing industry thought that it was were subsidising and that the playing field was not level. He did not think it was deliberate, but something that had developed over time. The tote in all jurisdictions battled to complete, yet in South Africa the tote was expected to fund all other forms of gambling, and this model clearly could not work. Twenty years of decline indicated the need to change the whole structure. It would be very difficult simply to adopt an overseas model, because this was a different forum, which was why the NHA proposed that a proper and detailed Commission of Inquiry was needed. No inquiry in the past had solved the problems. He urged again, on behalf of horseracing as a whole, that Parliament and the dti get this right.

Mr G Selau (ANC) asked if similar presentations had been made to the Portfolio Committees on Agriculture or Sports. This was not a matter that could be discussed by this Committee in isolation from the others.

Mr Pillay said that the NHA had not been given the opportunity to present to any other body.

Mr Corra, (ANC member, Portfolio Committee on Sports) asked if horseracing was affiliated to SASCOC, as the umbrella body of sports in the country.

Mr Pillay confirmed that NHA was not a member of SASCOC. Thoroughbred racing had never fallen under the Department of Sports and Recreation, but rather under the Department of Trade and Industry (dti).

Mr Bruss said that nobody had been able to define whether horseracing was primarily a sport, a business industry or gambling. The dti took ownership of the Registered Equine Trade Council, under which grooms on stud farms would fall. There was not a clear flow. One of the main issues for a Commission of Enquiry would be to define and explain the issues.

South African Grooms Association (SAGA) briefing
Mr Simoto, Chairperson, South African Grooms Association, said that many of the issues had been discussed in the past. He thought that there were inaccuracies in the NHA report, specifically around issues of development. The issue of the stakeholder associations was causing confusion. The SAGA had spoken to Mr Pillay, as representative of the NHA, who confirmed that there was currently no association recognised by the NHA. However, this was incorrect as there were indeed some that were being recognised. The NHA was the regulating board in the horseracing industry, and it should be looking after all objectives in the horseracing industry. Grooms had decided to form their own association to address their specific concerns that were not being given support elsewhere and this association was . supposed to be recognised. On 4 February 2013, SAGA had produced a draft recognition agreement. When the matter of labour issues was raised, clauses that spoke to the labour issues were then removed, by agreement, and something else was included to speak specifically of development. To date, however, no recognition was given. Mr Simoto stressed that recognition was very important, so that the grooms had a voice to express their problems. He reiterated that recognition was given to some grooms, jockeys, trainers and breeders, but when it came to SAGA, a fully-black organisation of grooms there was no recognition and he was sorry to state his belief that this was a racial issue.

Mr Simoto pointed out that grooms were an essential part of the industry, and yet none of the benefits were filtering down to them. A claim of theft in respect of money that should have been put into grooms’ development had been laid, with the Public Protector. NHA was refusing to recognise the grooms and they had no forum to express their concerns, which included ill-treatment and assault by trainers. He himself had been assaulted. Failure to recognise the association was contrary both to the Constitution of the country and the founding documents of the NHA. He asked why government had ignored the grooms and appealed to the Minister to rectify the problems, repeating that this was essentially a racial issue.

The Chairperson clarified that the grooms had been requesting recognition since 2011. This Committee’s relationship with the racing industry, and its work on gambling, had started some time ago. She noted that there had been substantial correspondence, as well as written submissions from the National Gambling Board.

Mr Augustine Sayiti, Member of SAGA, said that he had been working as a groom since the early 1980s. A union had been formed, the Stud Workers Unions, which had asked for a school, so that grooms could become trainers, and then jockeys. This was funded by a private owner and there was good communication with the owners’ association at that time. The school was formed and was successful. However, when another Chairperson took over the NHA, the position altered. A Grooms Jockey Academy was set up, but despite grooms having been trained, only one groom – who was white – had become a jockey, whilst his classmates remained grooms. One groom who came into the industry later, was, after very few months, promoted far faster than anyone else. The others were not accredited. The main problem was that the academies would insist on grooms being trained in the way the academies saw fit, and would not take account of the aspirations of the grooms, so that many of the grooms who were students were being trained to do something that did not interest them, and that was why the training centres were not successful. A particular graduate, who had applied for a trainers’ licence, did not get it, and this was apparently because he was black.

Mr Simoto emphasised that he was not mistaken when stating that this was a racial issue. He posed the rhetorical question of how many grooms had been licensed as trainers, saying that there were no black trainers. As to the membership issue, he said that on 14 February 2013 he had submitted documentation to the National Gambling Board (NGB) showing that SAGA had a membership of over 1 000, but yesterday the NHA, after approaching a handful of people, drew up its own list in which it claimed that SAGA had only 73 members.

Mr Ian Jayes, Adviser to the SAGA, wanted to clarify the allegation of theft. He said that prior to the ANC government coming into power, there was a Horse-Racing Development Fund, set up by the Provincial Administration in Gauteng, funded by a tax sacrifice from the Province. The Clubs had to apply for grants from that Fund. When the new dispensation came in, there was R34 million in that Fund. The Gauteng Province saw fit to give a company with shareholders (Phumelela) R34 million of public money, which was a questionable decision at the outset, but he stressed that of that R34 million, a portion was supposed to have been earmarked to provide housing for grooms. Phumelela undertook to provide the housing, but nothing was done to build the accommodation. Instead the money was put into its accumulated deposits. He said that this needed to be investigated.

Mr Jayes said that he had been a trainer until March 2013, when he was given notice by Phumelela to vacate the stables. The problem with horse-racing was that certain powerful cliques and bodies gained control and this gave rise to problems. He would endorse the NHA becoming a statutory body, and he believed that it should have Chapters, for owners, breeders, jockeys, trainers and grooms, so that all stakeholders in the industry would be represented, by election. That should be the controlling body for horse-racing.

Mr Simoto added that Mr Jayes was dismissed because of his support for the SAGA.

Discussion
Mr Corra wanted to know the reason for the refusal of NHA to recognise the SAGA. He also wanted more details on the development programme.

Mr Radebe asked for clarity on the alleged threats.

Mr Simoto said that this was not correct and he asked for documentary proof, if it existed.

Mr McIntosh said that the trade union landscape had in some instances been characterised by violence, intimidation, threats and conflict, and if it was true that threats had been made, that was very serious. He wondered why charges were not laid if there were allegations of assault.

Mr Simoto said that the grooms’ association had, where there had been assaults, complained to the NHA.

When the Chairperson clarified that the question related to charges being laid at the police station, Mr Simoto said that SAGA preferred to refer the matter to the NHA, instead of the police station. 

Mr McIntosh said that NHA claimed that SAGA had only 73 members affiliated to it, out of the over 2 000 grooms. Whilst he was concerned that the Committee could not resolve disputes of this nature, he asked Mr Simoto if the figure of 73 was correct.

Mr Simoto said that the figure was not correct.

Mr Z Wayile (ANC) thought that Mr McIntosh’s approach of questioning one side’s assertion against the other would not assist. The Committee must begin to rise above all other issues and provide strategic direction. Blanket statements and accusations should not be made against trade union movements and attitudes. This Committee could not resolve everything.

Mr Thring noted that Mr Jayes was dismissed because of his support, and he asked if there was proof of that.

Mr Jayes clarified that he was given notice to vacate the stables and he had voluntarily not renewed his licence thereafter.

The Chairperson cautioned that this Committee was not akin to court proceedings, and Parliament was not part of the judicial system. She stressed that it was not within the mandate of the Committee to conduct an inquiry into disputes of this nature, nor demand proof of any allegations.

Minister of Trade and Industry briefing
Dr Rob Davies, Minister of Trade and Industry, said that the dti was involved in two aspects of the horseracing industry; one by regulating the gambling side of the industry, and the other in relation to exports. This had a knock-on effect into the DAFF.

He agreed that there was a bigger question about the horse racing industry in South Africa in the context of gambling. He suggested that one of the reasons for the decline in jobs from 1995 was related directly to the status of gambling. Prior to 1995, the only form of legal gambling was horse-racing and casinos had existed only in the former homeland states. When that changed, horseracing moved from a monopoly position to one where it had to compete with other forms of gambling, and obviously these would affect infrastructure and jobs. Similarly, online gambling was likely to take a slice of the casino market. The market was not growing infinitely and if one segment went up, another would go down.

Dr Davies questioned the statement that he was to appoint a Commission of Inquiry. That was a proposal made in the hearings of the Portfolio Committee, but it was not stated in the Committee Report, and he had not announced any intention to appoint a Commission.

The Report of the Gambling Review Commission was that the industry was constrained by the licence conditions, which, according to that Commission, should be changed. It was suggested that the horseracing industry should be allowed to dictate numbers of races and tracks, and that the funding model be changed by allowing integration of other forms of gambling, like limited payout machines. These were endorsed by Parliament. However, because gambling covered national and provincial competencies, the matters had to be referred to the Gambling Policy Council, which met from time to time, and the dti would present proposals there in October. Some changes would be required to the legislation, and it was unlikely that these could be finalised before the Fourth Parliament came to an end.

In relation to the exports, Dr Davies noted that he had participated in the visit to the United Arab Emirates (UAE) and noted that it was also possible for horses to be quarantined. Similar issues had been raised with the European Union. He cautioned against statements such as “DAFF must solve the problem”. There may be some solutions in vaccines but exports were essentially part of international trade negotiations. The mere fact that a point had been raised did not necessary mean that a decision had been taken to follow through on it.

Dr Davies noted that there were expectations that all sports should show increasing representivity, yet only in this year did the first black jockey win the Durban July. He thought that there were issues around the labour issues to be clarified, and whether the labour relations involved the NHA or the trainers directly. He noted Mr McIntosh’s assertion that unions were becoming increasingly fond of resorting to violence and wildcat strikes, but said that the answer to this lay in strengthening the institutional collective bargaining mechanism. It was not for dti to prescribe how recognition in the labour field took place, but it did want to see labour relations respected. In the broader sense, SAGA members were clearly stakeholders in the industry and dti would like, as part of broader transformation, to see all stakeholders included in the processes.

Dr Davies confirmed that he had noted the requests of NHA. Dti was happy to proceed, but would like, as a quid pro quo, to see some transformative process in the racing industry. He was not speaking so much of ownership of the companies, which he acknowledged was in a difficult state, but if NHA was not prepared to offer career pathing, then dti’s “appetite for offering assistance” to NHA would be reduced.  Horseracing was called “the Sport of Kings” and, as a sport, it was not for dti to get involved in the nitty-gritty of how the industry ran. However, it was possible for dti to ensure that conditions were adjusted that made that industry, according to the analysis of the Gambling Review Commission, into one that was inclusive and transformative.

He summarised that essentially his message was that the industry could be helped, but some form of transformation must be seen. All stakeholders, instead of merely repeating what had been said previously, must think again and try to find a more inclusive and harmonious model for the industry. It was not a good sign when allegations of assault were being bandied about.

Mr McDonald Netshitenzhe, Chief Director, dti, confirmed that the Report of the Portfolio Committee had been analysed by the dti, and a new policy draft would be ready for the Gambling Council by October. Everything recommended by this Committee would be effected in the policy draft, and it would then follow the processes.

The Chairperson said that, as with all Committee Reports, the statements made in this Report had been carefully crafted after extensive consideration of a number of issues. In this case there was a request from the Minister to consider four issues – which included regulation of the industry, possible amendment of the gambling legislation, and consideration of whether it would be possible to establish a Commission although the latter was still under consideration

The Chairperson said that she had earlier asked the stakeholders to try to moderate their statements, and she reiterated that this Committee’s mandate was to try to facilitate the resolution of disputes. However, this Committee was not a court. Matters had been under consideration for a long time. She asked everyone to listen carefully to others, in a responsible manner. The Committee needed to take matters forward and take a decisive stance on issues raised not only by grooms, but other stakeholders in the industry.

Discussion
Mr B Radebe (ANC) expressed appreciation for all input, and the fact that all stakeholders were together in the same venue. He thanked the Minister and dti for engaging on the issues. The Constitution enjoined everyone to work together to build a better South Africa and that meant being inclusive. It was distressing that the same issues were still in existence, but at the same time he urged that people should not, on the one hand feel that they had to resort to threats because on the other they felt that they were being denied an opportunity to create a trade or profession. The problems were clearly outlined, but he questioned whether there was in fact the willingness to take matters forward. Government was clearly serious about the issues, but it could not do anything if the participants in the industry were not equally serious and if the sector remained untransformed. He asked how quickly the NHA was likely to be transformed into a statutory body. That would allow for government to make input and have it controlled.

Mr Z Wayile (ANC) said that there were issues to be dealt with in the short and longer term. He agreed that cooperation was required from all stakeholders in the industry, and all must be involved. There were issues of transformation, inclusivity and labour relations that this meeting may not be able to address. He wondered if a multi-disciplinary team should not be set up in government, to respond to some of the immediate issues. Parties here today should consider “relations by objective exercise”, perhaps drawing on examples from the mining sector, to ensure that the social partners talk to each other and understand the bigger objectives of government. There had not been clarity on the minimum conditions. Any actions taken must be for the wellbeing of all. Finally, he noted that black economic empowerment issues were important, and they must be promoted in every sector. Not only an overall headcount of board and staff was needed, but also a closer investigation into who was controlling what in the value chain, and who was benefiting, in the different categories.

Mr McIntosh agreed with the need to achieve a unified industry. However, it must be remembered that black economic empowerment and transformation happened most easily where an industry was actually growing. According to this presentation, the horseracing industry was in decline. He agreed that few people would want to become a shareholder in a business that was going down, and government would have to deal with the fact that horse-breeding was failing. He also noted that a social compact was needed. He had the sense that the SAGA grooms, whilst clearly vital to the industry, were more in the nature of a lobby group than legitimate representatives of their industry. Finally, he noted that the industry was driven by entrepreneurs in the free market, and many people here may not fully appreciate the nature of entrepreneurs willingly accepting risks that may lead to losses. However, he agreed that they should do their best to advance representivity.

The Chairperson quipped that this was the first time she had heard of entrepreneurs being willing to make a loss.

Dr Davies said that there was some truth in this; many people entered the sector with the intention of making money, but many more saw horseracing as more of a hobby.

Dr Davies said that he wanted to clarify what government could be expected to do. He was not sure what the Portfolio Committee or Department of Agriculture were actually doing, but said that there was a need to be realistic about what government could offer for the industry. This was not a manufacturing industry, nor did it fall within the five priorities of government. The Minister had endorsed the Gambling Commission Report that suggested that certain matters could be improved. However, the unique nature of the industry also gave it substantial links to agriculture and in that sphere the dti could not interfere. He had raised some of the problems at the UAE trip. He said there was a need to accept the reality that there was not likely to be a major inter-governmental forum set up.

Having said that, he reiterated that the recommendations would be taken through to the Gambling Policy Council and that might result in some matters being taken up in legislation. He reiterated that if the industry sent through a stronger message about inclusivity and a sense of transformation, that would inspire the dti to do more.

Mr Selau agreed with many comments raised earlier. He agreed fully that most of the decline was probably related to the competition from other forms of gambling. He questioned what a Commission of Inquiry would achieve; the facts seemed to be straightforward and he had no clear sense of what the industry actually wanted such a Commission to address, nor did he know what this Committee was being asked to do in relation to competition. Issues around labour and sharing had to be carefully handled to avoid destroying the industry, but that was not something the Committee could do, and the participants must, themselves, sort out their own relationships. Only employers and employees acting in concert would make the industry succeed.

Rev Thring noted that the ACDP was in principle opposed to gambling, but from a pragmatic viewpoint understood that it was in place, and was thus in favour of regulating it to ensure protection of the public. He agreed that if the NHA was to become an inclusive, regulatory body, this could solve some of the challenges. If that was not achieved, then the issues would not be solved.

Mr Radebe said the Minister had correctly highlighted that the stakeholders fell into different sectors, and asked who should initiate an enquiry.

The Chairperson summarised that Members, in their comments, had recognised the complex nature of the industry, agreed on the need for resolution of the issues, and felt that transformation and inclusivity must be addressed.

Mr Riaan du Plessis, Chief Executive Officer, Phumelela, and Board Member of NHA, noted that there were essentially three issues; one residing under each of the Departments of Agriculture, Sport and Trade and Industry. He explained that Phumelela managed Kenilworth Racing, who staged 15% of horse racing, and other races, and Gold Circle managed 25% in KwaZulu Natal. He noted that under the ongoing Powerdex rating, Phumelela would achieve Level 2 rating, ahead of time. Phumelala represented 60% of total businesses regulated by the Gambling Board. Gold Circle was slightly behind, but it too was on track to meet the required Level 2 by 2015.

He noted that Kenilworth Racing, the new owner of racing in the Western Cape, which was managed by Phumelela, was 100% owned by the Thoroughbred Trust, which spent over 50% of its annual revenue on transformation initiatives in the sport. In all aspects of BEE that were licensed and regulated by dti, Phumelala was on target or ahead. It was fully unionized, through SACAWU, and there had been stable relations with the union for the last five years. It strongly supported a Commission of Inquiry, if it could be done, because the tote owners felt that they had been found “guilty without trial” of not transforming, despite the fact that they had submitted update reports every year specifying exactly what they were doing. He was worried that the Minister did not appear to have been apprised of this. He urged that all aspects must be examined, and said that Phumelela had nothing to hide.

Mr du Plessis wanted to speak to some of the disputes between NHA and SAGA. In his capacity of picking up 60% of the bill for funding of the NHA, he said that, to the best of his knowledge, the NHA had actually been unable to ascertain that SAGA had ever been registered as a union by Mr Simoto. Mr Simoto had claimed R5 million for SAGA as a union. In response, the lawyers had asked for the articles of association and a list of the paid-up monthly members, but nothing had yet been submitted.

He also noted that two and a half months after the tragedy at Marikana, Mr Simoto had embarked on a campaign to organise an illegal strike and had himself encouraged grooms to disrupt the Summer Cup. Mr du Plessis had submitted, to the Committee, a flyer in English and Xhosa, setting out SAGA’s statements prior to the J&B Met. As a director of the NHA he had no difficulty in principle with recognising the grooms and he was the first to suggest that a Code of Conduct be created for their protection. However, he could not support a person who called for wildcat strikes, nor would he be happy for the NHA to enter into an agreement with an unregistered union. Two other unions where grooms were registered were the Food and Allied Workers Union and SACA (he was not sure what this acronym represented) in KwaZulu Natal. He maintained that Phumelala subscribed to good corporate governance itself, had stable labour relations and it was “unbelievable” that it was being asked to give legitimacy to an institution that was not similarly compliant

Mr du Plessis wanted to clarify the position of Mr Jayes. He said that Mr. Jayes was the subject of an independent inquiry, prior to his joining Phumelala. The firm of attorneys Werksmans had been asked to check, and came to the conclusion that there was nothing irregular about that inquiry, yet Mr Jayes persisted with his allegations of wrongdoing on the part of Phumelela.

The Chairperson noted a letter dated 5 September, which she was seeing for the first time today, and noted that she had not had a chance to study it, but would do so.

Mr Jayes said that he wanted to expand on earlier comments about African Horse Sickness. Horses were obliged to be vaccinated twice a year, except in the Western Cape, which had been an African Horse-Sickness free area, and where the horses should in fact not be vaccinated. South Africa had been extremely close to having the ban lifted, when suddenly there was another outbreak of African Horse Sickness in Western Cape, and the question was how this occurred. He maintained that there was not a single sign erected warning people not to take unvaccinated animals into a vaccine-free area. Despite all the concerns around exports, nothing was actually being done to control the virus. He pointed out that it was not the racehorses that brought the virus in, but polo ponies and riding horses.

Mr Peter Gibson, Chief Executive Officer, Racing South Africa, responded to Mr Jayes that there were indeed signs demarcating the border of the African Horse Sickness, but it took three years for official approval to get them erected. Vaccination was permitted within that area. African Horse Sickness was endemic to the country, but the rules prescribed that there must be export from a sickness-free area. However, DAFF was not able to enforce the Act properly, and the same difficulties were apparent with the red meat and ostrich meat industries. He pleaded that the fundamental aspects of the way in which South Africa exported agricultural products had to be addressed. The greatest beneficiary from a proper export ability would be the sports sector, not only horse-racing.

Mr Jayes said that every stakeholder in the industry deserved to be treated with respect, responsibility and accepted as part of the overall management of the industry. That must include grooms, as although they may not put money into the industry, they worked very long hours and were dedicated to their horses. Many trainers treated their grooms well, because they relied on them. He suggested that there should be a register of all grooms in the country. Trainers and jockeys had to be licensed, and owners had to have colours, so at the very least the grooms must have a register, which would promote responsibility and respect and a wholly different industry could emerge.

Mr Simoto reminded the Committee that SAGA was not a union, but an association, similar to other bodies in the horse-racing industry. It was aware of the dispute around the labour issues, and knew that its members would have to join a separate union to deal with these. However, it was still seeking recognition, and since 2011 there had not been any direction given to SAGA as to why it was not being recognised, despite the NHA’s own assertion that it was willing to recognise the industry. He reiterated his concern that this was a racial issue. He agreed that he had requested funding. He asked why government was failing to get to the main point; when would recognition be given? He also questioned who would facilitate the development of the industry, on behalf of the grooms, if not SAGA in a recognised form.

The Chairperson said that if other associations were recognised, it seemed strange that this one was not. She understood that not every trainer was employed by one farmer, so their situation did not seem, to her, much different from the grooms. It was quite correct that during an earlier meeting of this Committee, a former NHA official had confirmed a desire to recognise the grooms’ association.

Mr Goosen, Chairperson, Vaal Trainers Forum, noted that his Forum consisted of 18 racehorse trainers, each with their own yard, and each of whom employed grooms. He had entered into a contract of employment with each groom, which had nothing to do with NHA or Phumelela, and these contracts were fully compliant with the legislation. He noted that any labour union with 51% membership would be given a recognition agreement. Nobody in the racing fraternity was being held to ransom. Owners may have “leisure money” to pursue their hobby, but the position of trainers and grooms was that they were self-employed. The vast majority of his grooms were from Eastern Cape, and would be battling if he did not offer them work. He would be the first person to stand up for the rights of any groom who had been assaulted, and he was very concerned about these assertions. He said that, strictly speaking his stables were actually overstaffed. He, like other trainers, were offering several benefits to their grooms and he assured the Committee that there had been substantial efforts to transformation. He also assured the Committee that if any groom transgressed any labour rules, Phumelala would take steps to stop those trainers from running their horses, and if this happened, the owners would find another trainer. \Operators would not tolerate anything but good behaviour from the grooms, so he questioned many of the claims had been made.

The Chairperson asked Mr Goosen if he was a member of a trainers’ association.

Mr Goosen said that there was not such an association in the Vaal area; he thought there might be one in KZN but he did not know how it was structured. He belonged to the Horse Racing Association, because he was also a part-owner of horses, but reiterated that there was, to the best of his knowledge, no official trainers’ association. He questioned why Mr Simoto had been raising the issues with the NHA, which was essentially a regulator, and thought that the issues should have been raised with the trainers. This had never been done properly; the only approach to the trainers had been threatening letters sent to individual trainers.

Mr Themba Maraita, Acting Chief Executive Officer, National Gambling Board, said that this was a long-standing matter. NHA had said in the past that it would not have a problem in principle with a recognition agreement, and this was confirmed in a meeting on 5 September 2012. However, the NHA had said that it needed to review the guidelines and functional structure, determine if there was a need for regional structures, determine if it was compulsory for grooms to belong to the SAGA, consider how it was to be funded, and consider the framework within which the association would operate. There were other labour matters that, as mentioned, were raised but excluded from discussions.

He thought that part of the problem was that NHA created an expectation by agreeing in principle to a recognition agreement. However, that must be seen in the right context. The grooms were essentially concerned that they did not have a voice. It had only come out in this meeting that there was some form of association for trainers. The NGB found that inconsistent information had been fed to it, and it was also concerned that the NHA was not speaking to SAGA directly, but rather trying to channel matters via the NGB. He said that it was clear that the two parties had to speak directly to each other. If trainers had a forum, then they at least were able to engage with NHA. However, if the grooms, on the other side, were excluded, then they were frustrated, which led to their emotions running high, and this had led to, perhaps inappropriate, claims of victimization, threats and racial connotations. Whether or not the parties could reach agreement, or merely agree to disagree, they had to talk. NGB could not mediate.  He added that there were a number of issues raised in the Report, some did not link neatly to the recognition problems, but others related to whether there should be a fund, and who should administer it.

The Chairperson asked the NHA why it did not simply honour its previous public announcement that there was not a problem in recognising SAGA. The message was coming out very clearly that it wanted the issue to be resolved.

Mr Pillay said that at the time the NHA had met with the Committee in 2011, there had been nothing in its Rules about grooms. That had since been amended, so that there was provision for them, and for assisting them. The NHA was considering registration of grooms, and their representation at inquiries, depending on the complexity of the latter.

Mr Pillay noted the statement that was apparently made by Mr Rob de Kock in 2011, but asked that he be provided with a transcript so that he could see the context in which the statement was made. He had asked the NGB for this on 7 May, but it was not provided. The NHA had clarified the reasons why it did not believe that a recognition agreement, in the form that SAGA wanted, was possible, but it had also indicated its willingness to hold further discussions.

The Chairperson noted that passions were running high, and said that she did not want to close this meeting without reaching some way forward.

Dr Davies suggested that nothing would be served by hearing more inputs at this stage. He said that the NGB had been trying to facilitate but it was not a facilitating body. He wanted to clarify that, given the current attitudes, he was unwilling to endorse any proposal that the NHA become a regulatory body. However, he was offering that dti should come up with a facilitating structure, which would meet with all stakeholders, including the unions, and then submit a set of recommendations to the NHA as to how it could become a body that all stakeholders accepted as well-functioning. That must include recognition of all stakeholders. He encouraged all components of the industry to change their antagonist attitudes. The dti wanted to see an inclusive and transformed industry in place.

The Chairperson welcomed that offer

Mr McIntosh wanted to distance himself from some of the remarks made “on behalf of the Committee”. He sensed that the industry was discomforted because it was essentially being “frogmarched” into a situation, despite having met BEE requirements and making substantial efforts, and he recognised their efforts. He would not support a certain position being adopted on the assertions of SAGA, which had doubtful legitimacy. He would, however, agree that the NHA should meet with the grooms. 

The Chairperson reminded Mr McIntosh that this Committee was not a Court.

Mr McIntosh still did not agree with some of the Committee’s comments.

The Chairperson said that the Committee was saying that transformation and inclusivity imperatives had to be met. The Committee was also emphasising that the NHA had previously asserted that there was “no problem in recognising” the grooms.

Mr McIntosh answered that Mr Goosen and Phumelala had given a clear picture of what was already being done. Whilst he had no problem with transformation and inclusivity being met, he would not support the fact that it was apparently SAGA’s assertions that were driving the Committee’s decision.

Mr Radebe urged that nothing should be seen as spoiling the very valid and useful proposal from the Minister. The Constitution protected individuals and violation of anyone’s right should be attended to. However, he agreed that the mandate of the Committee was not that of a court. He disagreed that anyone was being “frogmarched” and said that this Committee had the right to subpoena anyone to come and give evidence. It was critical to build a united and democratic society and the Committee was not taking sides. He appealed for support for the Minister’s proposal to appoint a facilitator.

The Chairperson noted that nobody had disagreed with the proposal by the Minister. There had been many people who had seen Manco separately, but there was a programme to try to ensure that the industry was not jeopardised, because it was an industry of South Africa, not one for individuals.

The meeting was adjourned.
 

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