New deal may finally take the edge off Cape Town Stadium

Article posted by Coliseum, February 17^th, 2020

Image: Cape Town Stadium

The Cape Town Stadium – a football and rugby union stadium in Cape Town, South Africa, was built for the 2010 FIFA World Cup™. Due to minimal post-event usage of the facility, it has earned the tag of ‘white elephant’.

The venue went on to prove skeptics correct who had a lot of reservations over the Cape Town Stadium vis-a-vis the pressures with hosting events as the facility was delivered in almost tearing hurry to host the FIFA showpiece.

But, the skeptics might finally be proved wrong thanks to a deal struck recently with the Western Province Rugby – the South African rugby union team based in Newlands, Cape Town. With this deal, the authorities are optimistic that the venue can shed its ‘white elephant’ label.

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The City announced that from February 1, 2021, Western Province Rugby would become the stadium’s anchor tenant, potentially for the next 99 years. Neilson informed that this would take the edge off as regards the operational costs for the City.

The maintenance of Cape Town Stadium cost a bomb last year – R79.6m (£4.1m/€4.9m/$5.4m) – with the City of Cape Town doubling its contribution. This means that the facility which cost R4.4 billion to build, last year cost almost R80 million to maintain and only managed to generate R22m in income.

The City of Cape Town took over the reins of managing the arena way back in 2018 under the banner of Cape Town Stadium.

The Cape Town Stadium’s annual report was presented to a council meeting held recently, with figures revealing that ratepayers forked out R55.1m for its subsistence in the 2018-19 financial years, up from R27m the previous year. The stadium reported an expenditure of R79.6m last year, which included the general upkeep of the stadium, security services, board members’ remuneration and contracted cleaning costs.

The City is reportedly paying through its nose over the past decade for the upkeep of the facility – spending an average of R39m per year on maintaining the venue, against an annual income of R9.5m. But, thanks to additional events and film shoots at the stadium, the revenue rose to R22.1m last year, against a targeted R18.7m.

Commenting on the stadium’s fiscal status, Ian Neilson, Cape Town’s Deputy Mayor and Mayoral Committee Member for Finance, had this to say, “There are some numbers that we can attribute to inflation, but the trouble is that because it is such a big venue, there are fixed costs associated with it.”

“There are also costs that are events-related; just opening the doors of the stadium already costs so much,” Neilson added.

Neilson stated that holding small events does not reap rewards – events that host just 5,000 people at the arena – “Although we allow, for example, small soccer matches because we are trying to keep it going, they are not really financially viable as the costs are so high. It would make more sense for them to play at a smaller venue.”

Media reports stated that the management believes that the stadium finances has passed the critical point, with new commercial deals on the cards which includes main stadium rights such as catering and pouring rights, along with an expected naming rights deal. These agreements may finally help the cash registers to jingle.

The entire development of the 55,000-capacity Cape Town Stadium was affected due to the deadlines looming over it for the 2010 FIFA World Cup™ . The City was forced to start construction work without rezoning the land it sits on. Due to this, the facility can be employed only for sports and leisure activities.

This whole restriction means that any commercial use of the venue – barring sports and leisure – entails special exemptions or permit applications which gets mired in red tapism. The light at the end of the tunnel is that the new Cape Town Stadium operating entity boast its own Board of Directors and can take operational decisions without the city authorities dragging their feet over it or poking their nose. The Board of Directors are also in a position to take their own decision as regards commercially-oriented deals.

In November last year, it was announced that Western Province Rugby will make Cape Town Stadium their home ground in 2021. The City of Cape Town’s Council green lighted a binding heads of agreement between the City, Cape Town Stadium and Western Province to enable the team to make the venue its residence from February 1, 2021.

An agreement has been reached on a “mutually beneficial” revenue share model as part of which Western Province will enjoy preferential access to play all of its matches at Cape Town Stadium. Under the pact reached, the City will be responsible for repairs, maintenance and operational costs of the stadium, which will retain its multifunctional status and will continue staging other sports and events.

As part of the pact, additional suites are being constructed at Cape Town Stadium through the conversion of former Press spaces.

Neilson asserted, “I think the big change will happen when Western Province Rugby comes in, and when we are finished building the additional suites at the stadium, completed in time for the rugby season. This will not only make it more profitable when rugby is played there, it will make it more profitable for any other event. One can charge a lot more for a seat in the box than for a normal seat. It will also increase the income streams of other events.”

The Congress of the People (COPE) caucus leader in Cape Town Farouk Cassim who seemed unpleasant over the way things were developing, stated, “This year we have heard that the City has given the stadium a grant of R50m, as well as an unquantifiable amount of indirect funding. The City is still contractually obliged to cover any expenditure shortfall. I am not particularly impressed with the way the entity is trying be financially viable.”

“The entity needs to do more – and quickly – to achieve wider income streams to reduce its dependence on the ratepayers of Cape Town.”

The African Christian Democratic Party (ACDP) caucus leader Grant Haskin summed up, “A more detailed and accurate assessment can be done on the stadium after a year of Western Province Rugby moving in.”

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