The destructive power of this proposal was on full display when a similar one in Gauteng saw the racecourse operator in that province placed under business rescue within one year of its introduction, says the author.
By Bill Lambert
Preparations are well underway to host this year’s Hollywoodbets Durban July.
After a difficult year for KwaZulu-Natal (KZN) marked by successive tragedies and economic setbacks, the province looks forward to hosting the iconic annual race.
The event is a reliable revenue generator for the province, a much-needed reprieve from for the otherwise gloomy picture in the province.
But even as Gold Circle excitedly puts the pieces in place for an event to remember, a cloud hangs over the industry and calls its future into question.
A bill is under discussion that will determine the fate of the entire horse-racing industry in KZN.
The KZN provincial legislature is currently holding public hearings on the proposed Gaming and Betting Tax Amendment Bill.
The bill got off to a bad start, being published and republished a number of times between November 2021 and January 2022.
The immediate opposition to the bill was to be expected given its enormous potential to decimate an entire industry in the province.
A new schedule in the bill proposes reducing the betting proceeds that are paid to racecourse operators from 3 percent to 1.6 percent. The 1.4 percent of funds taken from racecourse operations are to be diverted to a so-called “Transformation Fund”.
What makes the proposal difficult to understand is that Gold Circle already reinvests all profits into the industry by design - its memorandum of incorporation prohibits the distribution of profits.
This investment is already aimed at accelerating transformation in the industry and supports hundreds of much-needed needed jobs KZN. The initiatives funded by Gold Circle include the training and career development initiatives, small business development, skills development for matriculants and job seekers, as well as operational support and skills transfers to black-owned bookmaking businesses.
The funding also provides financial and operational support to rural racing in KZN and various corporate social investment programmes - all initiatives that foster transformation in the industry. And there is no one better placed to do this work.
Rather than an acceleration of transformation, the proposed diversion of the funds poses an existential threat to the industry. Gold Circle is forecasting a loss of R106 million for the 2021/2022 financial year even after receiving the R66m betting tax contribution.
Direct racing and events only generated R50m in total revenue. Without the betting tax contribution, the losses that year would have been around R172m.
The fact is, the funding subsidies the proposal would take from Gold Circle keep the provincial industry alive. The destructive power of this proposal was on full display when a similar one in Gauteng saw the racecourse operator in that province placed under business rescue within one year of its introduction. There is no reason to expect a different outcome this time around.
The death of the industry will have foreseeable knock-on effects for employment in the province.
Workers at racecourse training facilities, racecourse breeders, the National Horseracing Authority, the Coastal Horse Care Unit, the South African Jockey Academy, the National Racing Bureau, horse feed manufacturers, veterinarians, farriers, grooms, jockeys, horse transporters, and downstream leisure horse grooms – all of these would lose their jobs. And with the KZN industry decimated, the bookmakers would start afresh – elsewhere.
As things stand, the province has endured successive crises that have left the provincial economy on its knees. The recent floods in the province have only exacerbated the challenges that began with the spread of the Covid-19 virus and were compounded by the unrest in July 2021. In this context, KZN cannot afford an industry-killing proposal that will cost hundreds of jobs.
In this exceptionally difficult climate, the province could also use every rand it can earn in tax revenue to help rebuild the province. Gold Circle is a tax-paying entity, but if the proposed reduction is effected, the province will lose an estimated R100m a year in taxes. This is a textbook lose-lose scenario and a self-inflicted wound for the province.
As the 2022 Hollywoodbets Durban July approaches, it’s worth remembering all that the event has meant to the city and the province - and not just the economic contribution. It is the premier racing event in the country and the largest horse-racing event in Africa. It brings visitors to the province, showcasing Natal’s natural beauty and our rich cultural tapestry.
And yes, it also supports workers’ incomes in the accommodation, transport, entertainment, and fashion industries. If the current bill is allowed to render Gold Circle insolvent, it would end an institution. We should all be invested in the withdrawal of the bill.
Bill Lambert is a former councillor and caucus leader for the Democratic Alliance in Msunduzi Municipality, KwaZulu-Natal.
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