Do the numbers add up?

Financial reporting is best left to financial reporters, I’ll be the first to admit. It would be as unfair and unkind (but amusing) to expect them to explain reverse swing as it would be for a sports reporter to explain macro-economics. Or macro anything for that matter.

Many years ago one of the ‘real’ journalists arrived at a Sunshine Tour event clearly out of her comfort zone. But she had taken the trouble to do her research and, abiding by the unwritten rule amongst hacks that you ‘contribute’ at press conferences rather than piggy-back on the efforts of others, duly raised her hand to ask the tournament favourite, John Bland, a question after the first round.

“John, did you have any holes-in-one today?”

Without so much as a blink, never mind a pause, Bland replied: “No, not today, but I’m hoping for a couple tomorrow.”

So it is with caution that I trust my judgement in interpreting CSA’s financial report submitted at the AGM a fortnight ago. The CFO’s contribution includes this:

EXPENDITURE
“CSA’s expenditure increased by 34% to R1 219 million in the current financial period, with the main expense being professional cricket R707 million (2016/17: R463 million) and amateur cricket R341 million (2016/17: R301 million). Due to the nature of the business, expenditure is mainly fixed and not aligned with fluctuating revenues.

Most of these costs are committed to cricket development through our Members to ensure delivery of cricket to all South Africans. Whereas revenues are largely USD denominated, costs are largely rand-based.”

There is no mention anywhere of ‘legal costs’ but we know they were substantial following a variety of staff contract issues (notably former CEO Haroon Lorgat) and the costly collapse of the Global League. The ‘Central Costs’ (Head Office) increased from R92million to R113million – perhaps that is where ‘legal’ is accounted for.

So, expenses are on the rise. Substantially. What about revenue? You can’t blame the CFO for sugar-coating. (The bold highlights are mine.)

FINANCIAL OUTLOOK
“As CSA embarks on its next four-year financial planning cycle, the focus on revenue diversification and effective and efficient expenditure management will be critical. With broadcast revenue being a significant contributor to CSA’s profitability, a reduction in the FTP content and lucrative inbound tours going forward could put a strain on the company’s revenue generation. The loss of CLT20 income due to the joint venture termination between India, Australia and CSA results in CSA no longer earning approximately R70 million per annum going forward. Sponsorship growth is also not anticipated to be as high as the previous four-year cycle.

Considering the above, management will be reviewing CSA’s long-term strategy with the view to containing expenditure and growing revenues, including looking for lucrative investment opportunities to further boost CSA’s cash position. The Board considered CSA’s future commitments to continue all forms of cricket in South Africa and is confident that with the renewed organisational focus and drive, these resources ensure the sustainability of cricket in South Africa in spite of the fluctuating seasonal revenues in the foreseeable future.”

It’s hard to know where to start with the questions. Why and how did we end up with less international cricket than Bangladesh, the West Indies and even New Zealand for the next three years?

What are the “lucrative investment opportunities”? What are the plans for diversifying revenue? Is it true that, if the numbers don’t change massively, CSA will be in the red inside 24 months?

But here are the two questions I’d most like to ask: Why were two substantial, dollar-based offers to fund the Global League ignored?

Pretoria Mavericks owner, Hiren Bhatu, tabled an offer of $70million for the first 11 years of the tournament: “It was a build, operate and transfer offer which meant we would run it and take the risk for the first 11 years and then hand it back to CSA after that period,” Bhanu confirmed this week.

“I then agreed to take 49% of the ‘Newco’ (agreement between CSA and Supersport) and asked them to furnish feasibility, but they have none,” Bhanu said. “They could, and would have taken charge of an operating league of huge value, but they weren’t interested.”

A second offer, back in February, from a consortium in a Sports Trust based in Singapore, was even more substantial – I have many of the details but have been asked to keep the lid on, for now. It took eight weeks before they even received a reply despite the proposal even containing a title sponsor willing to pay $5million a year.

Let’s hope the Proteas continue to do us proud on the field where it really matters because there isn’t much to feel optimistic about further down the pyramid. And yes, the national team is the peak – no matter who thinks otherwise.

Continue Reading

Contact Me

Questions? Comments? Suggestions? Feel free to get in touch.

© 2010 - 2018, Manners on Cricket. All rights reserved.

Designed & Built by Silverback Dev Studios.