Gold Circle


Taking the gamble
Although gaming licences are often viewed as licences to print money, itÔÇÖs not always as simple a process as it might seem, as Alan Swaby learns.
A decade ago, horse racing in South Africa was still being run much as it had been for the previous 100 years. Individual racecourses were owned by their membersÔÇölargely a white, middle-class eliteÔÇöwho indulged their passion for the sport of kings along ÔÇÿclubÔÇÖ, albeit straight, lines but with the added side benefit of having exclusive monopoly over punters wanting to place a wager (at least legally).

Overnight, the advent of casino licences and the lotto created competition for horse racing. In the beginning, this was not completely fair competition. ÔÇ£At the time,ÔÇØ explains Graeme Hawkins, COO of horse racing promoter Gold Circle, ÔÇ£taxation for horse racing was higher than for other forms of gaming. When the turf clubs of Gauteng approached the state government about achieving parity, the local minister of finance agreed, but at a price.ÔÇØ
With one eye on the white colonial trappings of the sport, the Gauteng government agreed to a level playing field, provided the industry restructured to create more openness and wider public ownership. As a result, the four Highveld race tracks merged and metamorphosed into Phumelela Gaming and floated on the Johannesburg Stock Exchange.
ÔÇ£The rest of the country followed suit,ÔÇØ says Hawkins, ÔÇ£but split on political lines. While seven of the nine South African provinces chose to align with Phumelela, turf clubs in the Western Cape and Kwa Zulu Natal (provinces not governed by the ANC) amalgamated to form Gold Circle Racing.ÔÇØ
With less governmental pressure to go public, Gold Circle went corporate but with former clubs as its shareholders. This way, profits donÔÇÖt have to be distributed as dividends but rather are ploughed back into the sport and used to maintain and improve the five racecourses and various training facilities Gold Circle operates.
But it is not only government policy that has changed the face of horse racingÔÇöso too has technology. Punters no longer have any need to go to the track to have a bet. Gold Circle runs the tote through a network of 68 company-owned betting outlets plus another 119 independently owned outlets run by agents. In total, the tote generates around R5 billion in bets, of which R2.2 billion comes from Gold CircleÔÇÖs territory. For punters who prefer knowing where they stand, fixed odds bookies generate a further R3 billion in bets and Gold Circle has a slice of this through its subsidiary, Betting World.┬á
With only Christmas Day off, there are 364 days of racing in South Africa, thereby justifying a dedicated 24/7 TV channel, jointly hosted by Gold Circle and Phumelela. In fact Phumelela and Gold Circle operate quite closely on a daily basis, pooling their skills and resources for the overall benefit of the racing industry in its drive to gain a share of the gaming rand. Together they have formed Phumelela Gold Enterprises which recently contracted with DragonfishÔÇöthe B2B division of online gambling and software group 888.comÔÇöfor the supply of an online sportsbook which will be shortly followed by the debut of internet casino, poker, bingo and quickplay games.
ÔÇ£The one regret,ÔÇØ admits Hawkins, ÔÇ£is that punters no longer go to the track in the same numbers as before. Each year we host two of the countryÔÇÖs major horse racesÔÇöthe Vodacom Durban July at Greyville in Durban and the J&B Met, held in January in the Western Cape. At these events weÔÇÖll still get attendances of 50,000 but week in and week out, races are being run in front of empty stands.ÔÇØ
This is not a situation unique to South Africa. Some years ago, British racecourses experienced the same problem which for them was even more acute, as tracks in the UK are privately owned and gate proceeds are the major source of revenue. However, that trend has been arrested in the UK and Hawkins has high hopes that Gold Circle can pull off something similar. ÔÇ£We are committed to providing the highest quality facilities,ÔÇØ he says, ÔÇ£in order to attract owners and trainers to our courses. It follows that if we are investing funds in this way, we want to attract race goers to use and enjoy the facilities as well.ÔÇØ
Since 1997, when London News travelled to Hong Kong and won the invitational Queen Elizabeth II Cup, the world has taken note of South AfricaÔÇÖs racing achievements. It was the first time a South African-bred, owned, trained and ridden horse had raced overseas for years and it beat some serious international competition in the process. Similarly, the champion jockey in Hong Kong has been a South African many times running.
As such, the breeding and training side of the business has never been stronger, which fits in very nicely with Gold CircleÔÇÖs intention of ÔÇ£promoting the sport of horse racing through the development of thoroughbred horses.ÔÇØ However, it does mean that some of the best known names in the business have been lured eastwards.
ÔÇ£We canÔÇÖt blame them for capitalising on their skills,ÔÇØ says Hawkins, ÔÇ£but we do need to replace them. Fortunately, in Kwa Zulu Natal, there is a very strong Indian support base for horse racing and new owners and trainers are emerging all the time alongside more established names such as the Rupert family, the Oppenheimers and South AfricaÔÇÖs famous golfer Gary Player. In fact, quite a few international golfers own local horses. Similarly, the Western Cape attracts many owners from Europe who have a base in South Africa to enjoy the southern hemisphereÔÇÖs January summer.ÔÇØ
Although the Government has taken full advantage of gaming tax revenues by granting copious licences, there are indications that saturation point has been reached. Along with many others, Gold Circle will no doubt be pleased that cross-border internet gaming sites are being resisted and the planned rollout of limited payout machines put on hold.
With enormous competition already in existence, it doesnÔÇÖt make the job of promoting horse racing any easier; nonetheless, Gold Circle looks to be positioning itself at the front of the field.