SA Rugby has noted plans to picket a forthcoming DHL Stormers match by elements of the Western Province Rugby Football Union (WPRFU) club structures and wishes to remind the rugby community of certain facts. It is felt necessary to do so at this time to remind the public of the calamitous sequence of actions and inactions by the former executive that led to the WPRFU being reluctantly taken into administration.
The remit of the administrator was to return the WPRFU to financial stability, while untangling the legal complications of the myriad of putative property deals that the former administration contemplated.
The claims now being made by individuals – some of whom were part of the executive which traded the entity to the brink of bankruptcy and now wish to reclaim control – are erroneous, misleading, and needlessly distracting.
Most important to note is that any property or equity deal that the Executive Council (Exco) of the South African Rugby Union believes has sufficient merit to be presented to the General Council of the WPRFU, cannot be completed without the approval of that General Council. The decision will be Western Province’s; no-one else’s.
Below is a timeline of events that led to the SARU Exco’s constitutionally appropriate application of the power to take a dysfunctional union into administration:
- 2019: WPRFU signed heads of agreement with Investec’s Property division for the redevelopment of the Newlands stadium. Investec advanced an R50-million loan to the WPRFU.
- 2020: WPRFU declined to sign the final documents to conclude the sale of Newlands development rights to Investec.
- 2020: WPRFU received R112m Flyt Property (secured on 11 properties owned by the Union), which was appointed as developers of the Newlands.
- Notwithstanding the value of the loan to repay the previous loans; it was secured by bonding the properties to the value of R250m, encumbering all the properties (worth almost R450m) without a performing a due diligence and exercising its duty of care;
- WPRFU’s auditors highlighted serious concerns regarding the arrangement.
- The WP executive failed to de-risk the organisation and did not act with the duty of care by not conducting a formal due diligence exercise.
- 2020: Flyt, via its parent company Dreamworld, paid R52.97-million to Investec Bank and R57.76-million to Remgro to clear WPRFU’s debts.
- 2020: Six WPR board directors resigned or were removed from the board in October.
- 2020: The players met the Union leadership in November to express their concerns
- 2020: Also, in December Flyt declared a dispute with the WPRFU over the valuation of Newlands.
- 2021: Dream World (Flyt) filed a suit against the WPRFU in the Western Cape High Court, claiming R388m in damages and the repayment of its R112-million loan plus interest.
- 2021: A term sheet was signed with Staytus by a member of the Exco, without performing a formal due diligence exercise and once again failed in its duty of care, furthermore breaching Clause 13 of the WP constitution and failing to get a mandate from the General Council.
- 2021: In June SARU, deeply concerned about the WPRFU’s operations – established a joint “Steering Committee” with WPRFU – comprised of representatives of both organisations to assist in managing the mounting legal and financial challenges
- 2021: In September SARU exited the Steering Committee because of a lack of transparency among WPRFU’s officials, making it impossible for SARU’s representatives to perform any useful function.
- 2021: Also in September the WPRFU President established what was described as a “war room” of ad hoc appointees of his choosing tasked with resolving WPRFU’s issues.
- 2021: Five members of the WPRFU executive committee – including the vice president – filed an urgent application at the Western Cape High Court to have the president removed.
- 2021: In October, SARU Executive Council of SARU determined that the WPRFU failed to meet the requirements of Clause 29 of its constitution. Western Province Professional Rugby was in a terrible financial position, the Union’s auditors, BDO Inc., had noted several reportable financial irregularities and Western Province Rugby was facing several legal battles, was unable to pay SARS or salaries and was in imminent danger of being liquidated. SARU was left with little choice other than to take the WPRFU into administration. Clause 29 requires that:
“All unions have to conduct their business affairs in such a way that, at all times, they are in a sound financial position, comply with the laws of the Republic and adhere to the requirements of good governance inter alia as expounded in the King Report on Governance for South Africa, 2009 (“the King Report”) and the King Code of Governance for South Africa, 2009 (“the King Code”) which came into effect on 1 March 2010, and to ensure that their commercial companies, if any, similarly conduct their business affairs in such a way that, at all times, they are in a sound financial position, comply with the laws of the Republic and be guided by the requirements of good governance inter alia as expounded in the King Report and the King Code.”
In conclusion, SA Rugby looks forward to ending Western Province’s unfortunate period of administration in the coming months with a solution approved by its clubs. The path taken has so far brought stability on and off the field while the process being followed to ensure the Union’s financial sustainability has been rigorously vetted from a legal and governance perspective.
We would urge all stakeholders that the greatest service they can do to WPRFU right now is to allow the proposed solutions to come to its General Council without sideshows and interference where the membership will be able to decide their own fate.
