Stadium costs a fortune

Luke Stevens, Green Point

The story “Lease open for comment,” (Atlantic Sun, August 15) refers.

“ the stadium company becomes less reliant on the City subsidy…” said City spokesperson Luthando Tyhalibongo.

I snorted coffee out through my nose.

It has been exactly eight years since the City engaged the anonymously named “International Risk Mitigation Consultants” (IRM) at a cost of R3.9 million [i] to forge a plan to evict WP rugby from Newl… sorry I mean to make Cape Town Stadium (CTS) profitable.

Following some IRM recommendations – well not really “following” since it took six years – the City established a municipal entity called “Cape Town Stadium SOC(RF)Ltd” (CTSME) to manage the stadium. This finally happened on 1 February 2018 [ii].

It is very hard to determine precisely how much the stadium cost ratepayers between 2011 and now. In addition to operational budget expenses, a significant amount is spent each year from the City’s capital budgets.

Conservative estimates have stated that CTS costs ratepayers between R45 million and R60 million annually.

This is borne out in the annual reports: In the 2017/18 Integrated Annual Report, the stadium reports an operational deficit of R52 million for financial year ending 2017.

The budget for 2018 allowed for a balancing grant transfer of R47 million from the City to the CTSME with no revenue generated by stadium operations.

However, this grant increases substantially for the CTSME’s first full year of operation: in the 2018/19 budget year, the City allowed for a balancing grant payment of R70 million over and above stadium revenue of R19 million.

In the current budget year (2019/20) R75 million [iii] is budgeted for the construction of suites.

The projected cost of completing these suites for a “mystery” anchor tenant over the next few years is currently R282 million.

This is an example of the scale of capital budget allocation that has been repeating for the past eight years with no guarantee of any return.

In addition a balancing grant of R71 million will be made to the CTSME to cover their operational costs.

So, that makes R146 million in total for the current year on top of half to one billion rand frittered away since the World Cup.

Just outside the stadium on Granger Bay Boulevard, the exact same scenario has unfolded on a gravel car park. Consultant, business plan, rosy projection, public participation (ignored), fanciful rezoning and sub-division. Years go past and finally: no takers – it’s still just a gravel car park (but now, with a shoddy, temporary fence).

At the beginning of this month we learned that the stadium cannot even be used for its core purpose – playing football [iv]. The desperately inappropriate use of the venue for the Monster Jam in April this year destroyed the pitch for at least the past four months.

However, because nobody is ever held accountable and since the City can simply take whatever money it needs from its ratepayers (my rates went up 38% this July and similar extortion was widespread across the Atlantic seaboard), the CTSME will pay the City R100 rent each year and we will pay them R150 million each year; this relaxed arrangement will continue for at least another 49 years and rugby will continue to be played in Newlands.


[i] SCMB 19/08/11 419C/2010/11




Atlantic Sun comments:

When Atlantic Sun referred Mr Stevens’ letter to the City, they said: “Thank you for the opportunity to respond to the letter… However, the City’s stance remains as per the response to your initial media query dated 13 August 2019.”

The response referred to, had been credited to City spokesman Luthando Tyhalibongo, and read as follows:

The City subsidises the stadium. This means that if a commercial rental is charged, the municipal entity will use the subsidy to pay the commercial rental back to the City.

It therefore does not make sense to charge a commercial rental if it is just going to be paid back.

A nominal rental of R100 per annum was therefore used. The Municipal Asset Transfer Regulations requires that the rental be reassessed every three years.

This will be included in the lease agreement but was not included in the advertisement.

As the stadium company becomes less reliant on the City subsidy, there is scope for the rental to move closer to a commercial rental.

There are currently no permanent lessees in place at the Cape Town Stadium. The space can be utilised for retail, office and storage.