Pay back the money — to the racing game

Rubbish governance got a comeuppance last week – and not only in the election. Judgment was handed down in the Johannesburg High Court that gave horse racing a significant victory in its long-running battle with the Gauteng provincial administration.

Judge Stuart Wilson set aside a 2019 amendment to gambling legislation that removed the provincial racing operator’s share of a tax on bookmaking betting.

This income was estimated to be worth R75-million a year to operator Phumelela back in 2019. So, a conservative estimate of the loss to the company over the following five years would be north of R500-million.

And the court order is retrospective. Not only will the Gauteng government have to start paying the tax immediately, it must hand over all the loot it has kept for itself over the years – as well as interest – before 1 December 2024.

Collapse of Phumelela

Judge Wilson said the action of former MEC for economic development Lebogang Maile in changing regulation 276 of the Gauteng gambling law “was plainly unfair and irrational”.

It was also catastrophic, playing a major role in the collapse of Phumelela in 2020. The Covid lockdown dealt the killer blow, but the company was already in deep distress by then.

A business rescue process resulted in Phumelela being delisted from the JSE and being replaced as the racing operator in Gauteng and Eastern Cape by a new entity, 4Racing. 4Racing took over the legal action and will be the recipient of the money.

Fundi Sithebe, CEO of 4Racing, commented: “We believe the judgment is fair and beneficial to the whole industry. 4Racing has always maintained that betting revenues are needed to contribute to the transformation of the industry, and to provide better conditions for its workers – this outcome will go a long way in achieving this.

“We also look forward to continuing to build strong relationships with all regulators and driving greater impact in accordance with our mandate.”

Levy on punters’ winnings

The Gauteng government hasn’t responded to requests for comment – perhaps understandably in the post-poll ruckus. An appeal against the judgment is possible.

Regulation 276 was framed in 1997 when horse racing was corporatised in negotiation with the government. It provided for a 6% levy on all punters’ winnings from bets placed with bookmakers – with 3% going to the province and 3% to Phumelela.

Phumelela used this levy as operating capital to keep the game running for more than 20 years.
In 2019, following a complaint, the Public Protector issued a damning report on the racing industry. This report was widely seen as misinformed and deeply flawed.

The report recommended that Phumelela’s 3% levy financial lifeline be cut as it supposedly only benefitted rich people, a drastic step that the MEC was not slow to take – doubtless topping up a fiscus being drained by maladministration and malfeasance.

Former public protector Busisiwe Mkhwebane was subsequently suspended and impeached for being incompetent; MEC Maile was redeployed; but the court review of their work dragged on until last week.

Judge Wilson can have the last word on the fiasco: “Taking a step back, it is hard to imagine a process more festooned with the rituals of fairness and rationality, while being so obviously devoid of their content.”