A couple of months ago I gave an overview of the state of South African football to a foreign entity wanting to learn more about the country’s sports.
Part of the conversation was what clubs may be a possible take-over target – Bidvest Wits didn’t even feature in that category. So how did we miss this?
Well, the truth is I have no idea how this came about. I am not privy to the circumstances behind this sale but it got me thinking.
This week, in a conversation with a group of football journalists, I was also asked about the profitability of PSL’s professional football.
Again, this got me thinking if Wits could suddenly be sold presumably because the numbers were no longer adding up.
What does that say about the clubs in the bottom half of the league?
That football is indeed a tough business, and at the best of times, it is a fact.
According to a Uefa club report, 2018 was only the second consecutive year that the European clubs, the most lucrative of markets showed, an aggregate profit.
If you look at the middle- to low-income European football market –which is closer to where South Africa is commercially – less than half of the clubs show a profit.
In South Africa, I expect that not even a handful of clubs make a profit. The biggest driver of the move towards profitability in Europe was the implementation of the financial fair play (FFP) regulations.
This was implemented as part of Uefa’s attempt to protect football from its reckless clubs. The FFP rules essentially seek to enforce a prudent financial management discipline that ensures clubs to live within their means especially those with deep-pocketed owners.
I am surprised that Fifa has not followed suit and adopted this, so it’s implemented across the world. I think it’s a fantastic idea that all responsible football leagues, federations and club must adopt.
Had it not been for FFP, football in Europe may well have sunk deeper into the financial mess. At some point, the aggregate European football losses were nearly 10% of its revenues at €1.6 billion (R32 billion).
Why you may be wondering, am I rambling on about European regulation instead of addressing the issue at hand?
Well, part of any federation and league’s responsibility is ensuring that the integrity of the game is preserved. Doing so requires a good review of the financial position of the league and its clubs.
It is in both Safa and PSL’s interests to accelerate to full implementation of club licensing, which should include submission of audited financial statements and annual financial warranties and guarantees.
This is one of the ways of managing the risks the league may be facing. I am not sure how much of this is already in place but the Wits sale is perhaps the strongest sign for football leaders, that a much more robust licensing programme is now overdue.
That said, the sale of statuses and sports teams is as old as an organised sport. While the leagues cannot stop these transactions they can influence how they are done and on what conditions they are implemented.
Gumede is a global sport business professional who has worked with, consults and advises local and global right holders and brands on sports marketing, economics and commercialisation. He runs a sport economics blog called Sport Boardroom. He writes in his personal capacity.
- Twitter @SgwiliG