Nelson Mandela Bay Stadium: The good news and the very bad news

The good news is that the South African government and Eastern Cape government, along with the Nelson Mandela Bay municipality, have collectively spent R2 billion in developing a magnificent and spectacular multipurpose sports facility in the Eastern Cape for soccer and rugby. This excludes the billions going into support infrastructures to ensure the stadium becomes an icon that enables the Eastern Cape to boast a contemporary world-class sports facility that will host international soccer and rugby events for the next ten years and beyond.

One has to credit Fifa for being absolutely meticulous and unrelenting in their planning and establishing high standards for construction, the environment and international media. This high level of standard and oversight will benefit the nine South African cities for the next 20 years.

Nelson Mandela Bay will be one of only nine South African cities hosting the largest sporting event in the world: the 2010 Fifa World Cup, from June 11 to July 11 2010. Eight games only, including a third and fourth place play-off and a quarter-final, will take place at the Nelson Mandela Bay Stadium.

The stadium has an eye-catching, unique roof structure and spectacular view overlooking the North End Lake. There aren’t many stadiums in the world that are designed and constructed overlooking a lake; this in itself is a very distinctive feature of the Nelson Mandela Bay multi-purpose stadium, in addition to its striking design. It is anticipated the stadium will be completed by next Sunday.

The roof consists of a combination of aluminium cladding, combined with a membrane material called PTFE (polytetrafluoroethylene) — a coated glass-fibre fabric and steel super structure — which has so far withstood the fierce winds of PE.

The stadium seats 45 000 in addition to 4 000 extra seats which will be temporarily installed from now till the World Cup next year. The stadium is approximately 40m high and consists of six levels on the western side, in addition to five on each of the north, south and east stands. Two giant video screens will be installed for the live viewing of events, as well as there being two conference rooms for hospitality.

That is the good news.

There has been an unprecedented development of “entertainment infrastructure” in South Africa over the last five years.

Clearly the Eastern Cape and in particular the Nelson Mandela Bay municipality understand that the development of stadiums, convention facilities and other “entertainment infrastructure” is a critical component of the ongoing maturation of the Eastern Cape region and more so given that SA Rugby announced and committed some four years ago that the Eastern Cape would get the 6th Super Rugby franchise.

The financial viability and feasibility model for the Nelson Mandela Bay Stadium was based on the stadium hosting at least 15 international Super Rugby matches a year starting in 2009.

This is the first time a world-class football and rugby stadium was built in the Eastern Cape Province. The importance and significance to the entire Eastern Cape region that the stadium succeeds, both as a catalyst for economic multiplier activities, in tourism, trade and hospitality, and with its positive knock-on effect for previously disadvantaged communities, throughout the entire Eastern Cape, cannot be underestimated.

The stadium has 100 suites embedded in its circumference, with two business-club rooms, 45 concession kiosks, and will be used for the first time with the inaugural launch of the Southern Kings Super Rugby franchise of the Eastern Cape to play the British & Irish Lions on June 16, which will be telecast to an audience of millions around the world.

This is the very bad news. The stadium will cost, as from June 7 onwards, R178 000 a day to run. That is R65 million a year and will escalate at about 10% a year. In five years time the stadium will have cost the Nelson Mandela Bay municipality R400 million.

Only 9 games are a certainty and here we are in June 2009 with but one rugby fixture on the calendar to be played over the next five years. One!

Nine soccer games and one rugby match hardly inspires confidence in corporates and advertisers asked to spend six figures for a hospitality suite. You can be sure they are keeping their powder dry until SA Rugby commits to a franchise in the Eastern Cape and by that I mean tournament fixture dates.

Take a look at what a Super Rugby franchise means to the area and perhaps you will begin to grasp how the stance taken by the SA Rugby presidents’ council in 2005 to award the Eastern Cape the sixth Super Rugby franchise needed to have been backed and implemented in 2006 and now more so in 2009.

For too long the Eastern Cape ratepayers, sports fans and spectators have been denied a Super Rugby franchise and it is time national government and regional government along with the Mandela Bay Metro intervene and demand SA Rugby quit the round-table discussions and meetings and commit a Super Rugby tournament structure for the Southern Kings starting this year.

Not with a single token exhibition match for a day but with real Super Rugby fixtures for the next five years, starting in 2010, with warm-up games this year.

This is why there has been much grinding and gnashing of teeth since 2005 to get the Southern Spears to play in 2006, 2007, 2008 and now a further effort is being made to get the Southern Kings to play this year and beyond after the much-trumpeted launch on June 16. Add the R30 million that SA Rugby has spent on keeping the Spears out, to the R15 million being spent for June 16. The R45 million spend has delivered nothing but anxiety and crippling financial circumstances for the rugby unions and its players in the Eastern Cape.

This then is the BIG picture and a 30 000-foot bird’s eye view on the financial impact of Super Rugby.

Super Rugby economics and the need for new “economically competitive facilities” like the Nelson Mandela Bay Stadium

Super Rugby franchise teams in South Africa and within Sanzar share revenues to a larger extent than in any other major sports.

In South Africa each of the 14 unions benefit from payments from the Sanzar broadcast deal. Teams share national television royalties from Sanzar via their broadcast sponsors. This is a R3.5 billion broadcast deal spanning five years.

Teams do not, however, share stadium revenues (eg concessions, parking, luxury suites, club seats, naming rights, advertising) and local television and radio revenues.

The practical implication is that the five Super Rugby teams in larger media markets effectively support and provide a subsidy to their subordinated junior partner unions in smaller media markets.

There is no question that the three South Eastern Cape unions of Border, Eastern Province and SWD have been excluded from this for more than 10 years and is this the reason why they are in such dire circumstances.

In South Africa, the five franchises have dominated with their own stadiums namely:

1. Loftus — Blue Bulls (51 762)
2. Ellis Park — The Lions (59 611)
3. Absa Stadium — The Sharks (55 000)
4. Vodacom Park — The Cheetahs (36 538)
5. Newlands — The Stormers (51 900)

A team’s stadium situation — not its market size — determines whether a team is a higher-than-average revenue team (a so-called “have”) or a lower-than-average revenue team (a so-called “have not”). A team’s stadium situation depends on:

(1) The building itself (ie is it new or old?);
(2) The stadium’s revenue potential (ie does it contain amenities fans will pay for?); and
(3) The lease.

“Haves” like the perennial Bulls, Lions, Sharks, Stormers and Cheetahs, play in stadiums that are:

(1) New;
(2) High revenue-generating as a result of numerous fan amenities and strong marketing possibilities; and
(3) Operated under competitive lease arrangements.

“Have nots” like the three South Eastern Cape unions of Border, Eastern Province and SWD, play in stadiums that are:

(1) Old;
(2) Economically obsolete; and
(3) Operated under onerous lease arrangements.

The economic multiplier effect of the Southern Kings Super Rugby franchise hosting 15 internationals in the host city, with each international team (Australia, New Zealand, UK, Argentina, US, Southern Africa and the Pacific Islands) visiting the city for 10 days, has an economic financial impact of R50 million a game derived from revenues generated from: sales of 50 000 tickets, 100 suites and their hospitality, accommodation, restaurants, ground transportation, hospitality, tourism, travel, medical, advertising, marketing, concessions, television, press and national and international exposure of a further R50 million, for a total economic multiplier effect of R100 million a game.

Ten games a year has an economic multiplier effect that pumps a billion rand value into the host city.

It is obvious that Super Rugby teams must have favourable stadium situations to survive in an international market, to be able to host international and high-profile national derby games.

It is reckless and negligent of SA Rugby that the Southern Kings Super Rugby franchise (one of six in South Africa) is denied participation at Super Rugby level. Participation does not mean rhetoric and promises but tournament fixtures with concrete dates.

That is why it is appropriate that the Nelson Mandela Bay municipality considers that the Super Rugby franchise be the anchor tenant and operator of the Nelson Mandela Bay Stadium and weighs in by lobbying national and regional government to ensure SA Rugby delivers on its promises that the Southern Kings play in 2009 and beyond.

This is for the Metro to ensure the Super Rugby Southern Kings franchise and its infrastructure and Rugby Academy are locked into the Nelson Mandela Bay area and that the stadium becomes the headquarters of professional rugby in the Eastern Cape in a mutually beneficial public-private partnership.

A successful public-private partnership must be viewed as a long-term community and regional investment consistent with the obligation of the Nelson Mandela Bay municipality to retool and modernise critical sports, arts, tourism and trade infrastructure in the region.

Without a Super Rugby franchise in the Eastern Cape, the Nelson Mandela Bay Stadium will die.