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Thread: F Cachalia to brief media on cancellation of Motorsport contract, 8 Mar

  1. #1
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    F Cachalia to brief media on cancellation of Motorsport contract, 8 Mar

    Gauteng MEC for Economic Development to address the media on the cancellation of Motorsport contracts

    4 March 2010

    The MEC for Economic Development in Gauteng, Firoz Cachalia, will address the media on the decision to cancel Motorsport contracts in the province.

    During the briefing, MEC Cachalia will provide details on the A1 GP, BMW Sauber, SBK World Superbike Championship and SuperStars, as well as Nightsbridge contracts. He will also pronounce on the future of the Gauteng Motorsport Company.

    The details of the media briefing are as follows:
    Date: 8 March 2010
    Time: 09h00 to 11h30
    Venue: Gauteng Tourism Authority (GTA) Auditorium, 1 Central Place Cnr Jeppe and Henry Nxumalo, Newtown

    Please confirm attendance by Friday, 5 March 2010 at 12h00

    Last edited by Dave A; 05-Mar-10 at 05:04 PM.

  2. #2
    Site Caretaker Dave A's Avatar
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    Are we going to be losing a lot of international motorsport this year?

  3. #3
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    F Cachalia: Gauteng motorsport contracts

    Media statement by Gauteng MEC for Economic Development on the update on Gauteng motorsport contracts

    8 March 2010

    On 7 August 2009, I announced in the legislature that we will no longer proceed to acquire the rights to host Formula 1. At the time this did not affect other motorsport contracts, namely: A1 GP, SBK World Superbike Championship and Superstars.

    On 12 August 2009, I called a media briefing and issued a statement on the entire Gauteng Motorsport programme. During this briefing, I explained that a process of re-prioritising the budgets and programmes of the Gauteng Department of Economic Development and its various agencies was being undertaken in accordance with the new electoral mandate and the immediate priorities of the ruling party. This process was also a response to the adverse impact that the recession has had on government finances.

    Today I would like to announce the outcome of the review undertaken by Blue IQ of the entire Motorsport programme, and certain related developments.

    This review process began with an assessment of the legal issues involved to determine the rights and obligations of the various parties involved including those of the provincial government. Negotiations were then undertaken to achieve the best outcome possible in the circumstances. Mr Selwyn Nathan acted as an interlocutor and played an important role in securing a favourable outcome.

    Where it was clear that there was a legal basis to terminate, we made this clear in our discussions with our partners. Where there was uncertainty, we sought a settlement in order to mitigate risk and to secure the best possible terms. It was important in this process to preserve relationships with our partners, protect business reputations and preserve the reputation of the provincial government as a reliable party that acts in good faith and could be relied upon to fulfil its obligations.

    This was a considered and protracted process which I believe has secured the best possible outcomes in the circumstances. A multi-year program that the newly elected government considered was not in accordance with its priorities has been settled amicably without potentially resorting to costly litigation and in a way which preserves valued relationships. This leaves the way open for a future motorsport programme in South Africa and in particular for a private sector player

    Formula 1

    An ongoing commitment to Formula 1 at this time would have required an investment of R7 billion over a 10 year period to acquire hosting rights. This excludes infrastructure costs estimated at R2,4 billion and event management costs. Such costs could not be absorbed at provincial level without having an adverse impact on other priorities such as education and healthcare. Furthermore, to persist with this program in the face of the impact of the recession on revenue would have placed a permanent strain on the provincial fiscus.

    A1 GP

    This was a multi-year contract continuing through to 2011. This contract has been terminated amicably. We will save approximately R125 million in total by not continuing with these events, taking into account the savings on licensing fees, hosting costs and event management costs.

    BMW Sauber

    This contract, which was entered into by the Gauteng Motorsport Company (GMSC) has also been terminated amicably. Potential liabilities under this contract were approximately R105 million based on a three year period.

    SBK and Superstars

    These two contracts relate to the SBK World Superbike championship and the Superstars motorsport events. The SBK contract was for a period of five years (2009 to 2013) and the Superstars contract extended over three years (2009 to 2011). The legal advice we received is that these agreements were probably unenforceable under South African law but potentially enforceable in a foreign jurisdiction which would then expose the provincial government to costly litigation and reputational risk.

    We have therefore settled these two contracts with FGSport which requires that the provincial government pays an amount of R 115 million by the end of April 2010, an obligation which we will fulfil.

    In terms of the settlement agreement, the provincial government will carry out its obligations to host the two events already set down in the 2010 calendar. We will ensure that these events are a success.

    This means that our obligations for 2011 onwards are dispensed with and that on these two contracts we will have achieved a further saving of R 281 million over a three year period.


    Nightsbridge was contracted by Gauteng Department of Economic Development to provide consultancy services in relation to the motorsport events. Mr Selwyn Nathan will continue to provide project management services for the hosting of the two upcoming Superbike and Superstars events as part of the settlement of his contract. He will be paid an amount of R 2,5 million in full and final settlement which includes costs already incurred by him as well as his ongoing obligations.

    Gauteng Motorsport Company (GMSC)

    The shareholders of GMSC met in December 2009 and resolved to wind up the company by way of a voluntary creditor’s liquidation. The necessary steps to give effect to the resolution have been taken and a liquidator is expected to be appointed shortly.

    Accordingly, no further funding for GMSC has been requested or provided in the next financial and subsequent years. In the light of the winding up of GMSC, Blue IQ has been requested to manage the Gauteng Department of Economic Development’s remaining commitments regarding the motor sport program. A dedicated division of Blue IQ has been established for this purpose.

    Mr Stephen Watson, the Chief Executive Officer of GMSC will also continue to assist Blue IQ in the management of the two upcoming events since he has the necessary skills, experience and commitment.

    Costs and savings

    The total motorsport three years grant allocation was R167 million (2009/10), R334 million (2010/11) and R426 million (2011/12). This amounts to just over R928 million for the MTEF including

    Formula 1 rights and licence fees.

    Therefore, the total estimated savings of this decision on motorsport contracts, taken over the full period of the contracts concerned against the MTEF grant allocations, amounts to R796 million. This includes allocations which were originally made for deposits for Formula 1. This money has now been re-allocated by the provincial Treasury to new priorities which have been identified.

    In concluding, I wish to reiterate that the decisions taken on Motorsport are aimed at ensuring that we channel all the available resources to our immediate priorities adopted by Gauteng Provincial Government which flow from our electoral mandate. I believe that the cautious but principled approach that was adopted has resulted in an outcome that serves the public interest.

    Last edited by Dave A; 08-Mar-10 at 07:51 PM.

  4. #4
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    I see a bit of a calculation error here.

    The estimated profit to a province and country last time I checked 4 years ago, was just over $3,000 per visitor. This excludes advertising revenue, ticket pricing, travel and accommodation.

    I do not get this.

    Estimated visitors to a single Formula 1 = 100,000
    Estimated visitors to A1 GP in Durban = 100,000
    Estimated visitors to Superbike Championship = 40,000

    Just these 3 events would project a profit of at least 200% imho

    Also the costs as explained doesn't make any sense it is way higher than it is supposed to be, but lets leave it at that. The way government works in terms of tender awarding and salary payments has always been over expensive imo.

    All in all, this is an investment opportunity for any good business man and I am sure that some private funds will reap up this opportunity.
    Roelof Vermeulen (Entrepreneurship in large organizations)
    Roelof Vermeulen| Project Management Experts

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