Absa Premiership

Financial report highlights devastating loss of Absa sponsorship to PSL coffers

Absa Premiership trophy (Gallo Images)
Absa Premiership trophy (Gallo Images)
  • The PSL's Annual Financial Report reveals just how devastating the loss of Absa as an anchor sponsor could be to the future of South African soccer.
  • The report reveals that despite surpassing a record R1 billion in revenue the PSL recorded a surplus of just R64 438.
  • The financial report also confirms that the loss of Absa's R140 million a year funding would be a major blow if a new sponsor isn't secured.

The Premier Soccer League’s (PSL) Annual Financial Report reveals just how devastating it would be for South African football if the soon-to-be formerly known Absa Premiership fails to find a new anchor sponsor.

After the recent R140 million bombshell dropped by Absa on the Premier Soccer League, South African football faces an uncertain future.

With reports from as early as January predicting the acrimonious end of the 16-year partnership between the banking giants and South Africa's top-flight, a contingency plan to find a big-money sponsor replacement will need to be secured soon.

Suggestions are that Absa's decision to end its sponsorship deal was due to financial constraints suffered in a volatile economic climate.

Added to these already uncertain times is the economic fallout of the Covid-19 pandemic that has shrunk the global economy to levels last seen following the Great Depression in the 1930s.

It remains a major doubt whether any company would be in a position to step in and cough up R140 million to have its name affiliated to a sport.

Absa's decision could not have come at a worse time for a league currently suspended and unable to supplement its broadcasting partner with live sporting content.

In November 2019, the PSL boisterously announced record revenues, when, for the first time ever, it surpassed the R1 billion mark.

This led many to believe the league was in a healthy position to potentially ride out this storm of financial uncertainty.

However, the PSL's financial reports reveal that while posting record-setting revenues, their actual profit margins paint a picture of concern regarding its sustainability.

Financial summary

In the Annual Financial Report for the year ended 31 July, 2019 performed by an independent auditor, figures reveal that the league only made a net surplus of a little over R64 000.

The PSL last season recorded an annual net revenue of R1 005 845 732 - an increase on the previous year's total of R940 009 850.

However, the league's expenditure is listed at R1 020 349 840 with a deficit from operations of R14 504 108.

The expenditure includes administration costs, competition expenditure, grants, development expenditure and marketing and media costs.

A finance income of R15 543 556 before tax leaves a total comprehensive income for the year of R64 483.

That represents a slightly improved scenario than 2018's loss of R1 525.

This definitively shows the tightrope the league is walking when balancing its figures.

The picture becomes even clearer when taking a closer look at exactly how the PSL generates the income that pushed it over the R1 billion mark.

Revenue:

Sponsorship income: R358 989 927

Broadcasting rights: R600 000 000

Supplier contributions: R20 843 613

Revenue from tournament gate takings: R23 045 111

The above information confirms the staggering R600 million-a-year sum that broadcaster SuperSport pays for TV rights in a five-year deal agreed in 2017.

Revenue from sponsorship contracts:

Absa: R136 366 666

MTN8: R43 507 460

Telkom Knockout: R57 287 446

Nedbank Cup: R80 000 001

MultiChoice Diski Challenge: R41 828 354

In announcing their departure, Absa made an interesting comment in potentially leaving the door open to a return as one of the league's three cup competition sponsors.

"We are exploring alternative options to continue our relationship with the PSL," said Daniel Mminele, Chief Executive of Absa Group.

Could this be a clue then that one of the current cup sponsors may step up and swap places with Absa as the league's headline sponsor?

Any one of the three current cup sponsors - MTN, Telkom or Nedbank - could be a possibility, with the latter perhaps the most likely as the highest funding cup sponsor (as above).

Other points worth highlighting in the financial report are the increase in administration costs from R159 million (2018) to R181 million for 2019 - an increase of R22 million.

Meanwhile, competition expenditure also increased from R157 million in 2018 to R201 million in 2019 - an increase of R44 million.

This can in part be attributed to the increase in prize money to a current total of just under R40 million for the 16 teams competing in the league.

What these financial statements also indicate just how precarious the PSL's finances are.

With a significant percentage coming from Absa - a full 14% - it's clear just how important of a role they have played financially in the success of the league.

Also with broadcaster money making up a massive 60% of revenue, it is now laid bare just why PSL chiefs are so desperate to resume the 2019/20 campaign as quickly as possible.

- Compiled by Baden Gillion

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