by Brian de Lore
Published 22 May 2020
Politics, self-interest, hidden agendas, lies, charlatans, nepotism, egotism, creative accounting, jealousies, incompetence, lack of vision, hatred, arrogance, foolishness, self-indulgence and ignorance – traits that have reared their head in various individuals that have played a part in the decline of racing over the last dozen years.
Plenty of good people who have done their best and contributed positively to racing have come and gone. But few of those have been the big decision-makers and administratively-speaking racing has a disastrous history under NZRB (New Zealand Racing Board) and now RITA (Racing Industry Transition Agency).
It’s the only conclusion you can reach when you look at the table below and see how far the decline has come in 12 years. The second line of the table shows that in 2008 the industry had net tangible equity of $104 million, which has declined to a deficit today of $40 million.
That was before last Tuesday week’s bail-out by Minister Peters who handed over $50 million to RITA so they could pay bills of $26 million and halt administration three days later. The balance of $24 million will, in part, need to be used by the clubs and codes just to ensure their survival while in idling-mode as racing comes back. How much will be left to reduce debt is unknown.
The TAB is fundamentally a good cash business that should be in good shape and servicing the racing industry well with maximum prizemoney levels while keeping its costs to a minimum
The TAB is fundamentally a good cash business that should be in good shape and servicing the racing industry well with maximum prizemoney levels while keeping its costs to a minimum, like any well-run business. But for a long time now, it has been servicing itself well on the pig’s back, and on a gradual basis, lessening the percentage returns to the codes for prizemoney distribution.
Why was it allowed to happen? Go back and read the first paragraph of this blog and you have your answer or answers. Politics played the most significant role followed by cronyism, and before long, we had racing run almost entirely by non-racing people. Having no skin in the racing game, these charlatans thought it was pretty cool, and it presented an excellent opportunity to bring some mates in and put them on big salaries.
The Racing Act of 2003 was supposed to protect the racing industry from these acts of human frailty, but nothing was ever policed, and the era of no accountability and no transparency commenced.
The Act said: 8. Objectives of Board The objectives of the Board are— (a) to promote the racing industry; and (b) to facilitate and promote racing betting and sports betting; and (c) to maximise its profits for the long-term benefit of New Zealand racing.
9. Functions of Board (1) The functions of the Board are— (a) to develop policies that are conducive to the overall economic development of the racing industry, and the economic well-being of people who, and organisations which, derive their livelihoods from racing.
No piece of legislation was ever ignored more than those clauses, but no one ever contested NZRB’s actions or demanded accountability. Why?
| Now | 2019 (4) | 2017 (3) | 2013 (2) | 2008 (1) | |
| Net Cash (DEBT) | ($45m) | ($25m) | $40m | $40m | $65 |
| Net tangible equity | ($40) | ($20m) | $56m | $62m | $104m |
| Profit | $135m | $148m | $140m | $130m | |
| Expenses | $211m | $200m | $173m | $141m | |
| Salaries/wages | $61m | $59m | $41m | $36m | |
| Employees on $100k plus | 136 | 136 | 93 | 38 |
Key: 1. Nathan Guy takes over as Minister of Racing – NZRB
2. Nathan Guy is Minister for Racing, Glenda Hughes (Chair) and John Allen CEO – NZRB
3. Winston Peters commences as Minister of Racing – NZRB and RITA
4. RITA is formed – Dean McKenzie appointed Chair and then Executive Chair
Have another look at that table and imagine an out-of-control gravy-train roaring down the tracks while the starving coal-face of racing look on in despair. Then, the new Minister Winston Peters arrived and engaged Messara to write the Messara Review and everyone thought Christmas had arrived early. Alas, it wasn’t Christmas, it was Armageddon Day and the nightmare was starting over again.
MAC was briefed to operationalise the Messara Review but decided it knew better and would fix things its own way. MAC became RITA (Racing Industry Transition Agency) and has since ignored the Minister’s Letter of Expectation and the needs of the racing industry as a whole.
Here’s what the first part of the legislation said, which became law last July: The objectives of the Agency are—(aa) to reform New Zealand racing in a manner that supports effective governance and improves industry sustainability; and (a) to promote the racing industry; and (b) to facilitate and promote racing betting and sports betting; and (c) to maximise its profits for the long-term benefit of New Zealand racing.
Please raise your hand if your think RITA has done its best to achieve the above. Please raise your hands if you think they have both carried out the terms of reference for MAC and Letter of Expectation from the Minister. I don’t see anyone raising their hand.
McKenzie was informed of the bail-out from going into administration only a day or two before it happened.
The second-hand hotline tells me that Executive Chair Dean McKenzie hardly ever gets to talk with Minister Peters, and that Minister Peters gave him a bollocking just before his announcement last Tuesday week. It also tells me that McKenzie was informed of the bail-out from going into administration only a day or two before it happened.
Whatever way you look at it, McKenzie and RITA have been a disaster. Sure, they received a hospital pass from NZRB, but the Agency knew what they were getting into well before that, and in horse parlance, have failed even to raise a remedial canter. RITA is the unqualified disaster for racing of 2020 but is using COVID-19 to stay afloat.
They cannot stay afloat for very long, however, because as already explained, the $50 million does not alter the long-term prognosis without any appetite for changing the structure, the people or the executive team that has already failed NZRB. Where is this industry heading in the next few months?
We know RITA is heading for a budget miss of $65 million or over
We know that the codes are all broke and the clubs mainly destitute, bar the Auckland Racing Club, and Riverton. We know RITA is heading for a budget miss of $65 million or over, and that the TAB won’t bring in very much profit even with the resumption of racing in July on a restricted calendar. And here we are on May 22nd and RITA is still holding back its Half-Year Report – albeit we don’t expect it to be riveting reading.
We know that COVID-19 has been a blow, but the TAB was trading as insolvent before the virus took effect. We know that available prizemoney on 2019/20 assessments will be down 40 to 50 percent for the 2020/21 season on the expected result.
But we also know that by August-September, the TAB turnover will be significantly down as we go into recession caused by Covid-19. No one knows how detrimental it could be, but estimates from educated sources suggest perhaps only half of the previous year.
Then, thinking bad news had run out of momentum, the piroplasmosis detected in a mare about to be exported to Australia has halted all thoroughbred exports across the Tasman and left the industry isolated with an equine equivalent of COVID-19. The borders are closed which has left the immediate future of horse exports in the balance.
Price Waterhouse Cooper’s stated that RITA ‘has a very weak equity position.’
When the Minister made his speech last Tuesday week he admitted that Price Waterhouse Cooper’s stated that RITA ‘has a very weak equity position.’ He also said that they advised that RITA should be recapitalised and this work will proceed over the next three months.
The Minister further said, “we are calling upon the industry to deliver serious reform, and that is necessary for the Government to be confident that any future investment is well directed.”
What? What is the Minister expecting when no structural change to governance has taken place, and he is dealing with the same team of failed executives that built the already redundant Fixed Odds Betting platform? Why do we keep coming back to Einstein’s definition of insanity: Doing the same thing over and over again and expecting a different result.
As well, don’t forget the contribution TAB makes to the NZ tax base which is $100 million annually -plus GST, betting, training fees, sale of horses, PAYE, Gaming duty, which more than offsets the $72.5 million donation made last week. Also, add the $10 million racing gets for sports annually which the government would need to front up with if racing wasn’t doing it for them.
That’s not to even mention compensation for the gross mismanagement of the TAB over the past 12 years by Government appointees who were nothing more than civil servants with zero qualifications.
Winston Peters: We have had enough of old men leaning against the rails scratching their derriere and blaming everyone else. Fortunately, common sense is prevailing.”
The Minister in his speech went on to say: “RITA and the codes have tightened their belts. Sadly, there has been some internal squabbling in racing circles. Some blame the transition agency for the problems it inherited. We have had enough of old men leaning against the rails scratching their derriere and blaming everyone else. Fortunately, common sense is prevailing.”
Well, sorry, Minister, but unfortunately, common sense is not prevailing because you have grossly missed all the points. The codes are now united but your RITA represents neither your brief nor the interests of the racing industry, and we can only presume they represent themselves.
Our current situation and future racing mode is a JOKE.
Keep the facts coming Brian, but the real dummies are our the trainers and owners who continue to support the status quo.
Any body interested in a new Entity yet.
Good luck then.
Does the piroplasmosis virus case have any connection with paragraph 1,
in your letter, always seems funny when no one wants to hang around and they place our product in home detention.
I have to agree, albeit reluctantly, with Steve Herlihy in casting as the ‘dummies’ the trainers (bar a few belatedly) and all the owners for their continued support of the status quo and for continuing inaction over many decades. Our industry was handed a ‘free pass’ with the lockdown, as we could have extended it ourselves without much further damage and at the same time indicating to the most sympathetic government in decades that we meant business. Is it too late ?
The eight worst words any business, any industry, any section of a nation can hear are: “I’m from the government; I’m here to help.”
Left to their own devices, the three racing codes could have either muddled along as they had since their inception or maybe even prospered by innovative thinking of their own or by plucking the best practices from overseas . . . maybe they’d have tried both. Who knows where we’d be now.
Along the way, on the betting side especially, they’d have needed to fight off the predations of our rulers, something they didn’t manage to do too well in the 20th century, and also compete with international operators.
But one thing is certain; allowing the government to call the shots leads in only one direction — downwards.
Many people, among them world-renowned economists, have wondered how the small British colony of Hong Kong became an economic powerhouse. The answer is simple.
When John Cowperthwaite took over as Financial Secretary in 1961 he instituted a process which he termed “positive non-interventionism”. His reasoning was that the combined efforts of citizens, all engaged in furthering their own aims, produced a better economic outcome, even with the mistakes that would be made, than anything directed by government authority, no matter how well-meaning.
Under Cowperthwaite, Hong Kong became, economically, the least-regulated, least-interferred-with place on the planet. It also became the most prosperous.
In New Zealand, racing’s doom was sealed when the reins were handed to the government appointees. Its first order of business must be to regain control of its own destiny. Even the bumblers of the previous 180 years wouldn’t be as administratively disastrous as the current bureaucrats.
Dead right !!
Gil Dymock’s comment from Friday on last week’s blog:
In reply to Steve Scott.
“Peters is right to say NZ should benefit from NZ gambling. It is not totalitarian, it is about collecting a dividend from NZ activities.”
++++
I have no beef with Peters, or any politician or administrator, saying that NZ should benefit from NZ gambling. It’s the methods used to ensure that NZ benefits that trouble me.
Two things are antithetical to sound commerce — protectionism and monopolies. Protectionism, usually dressed up as patriotism, pretty much ensures inefficiencies are never eradicated, featherbedding is rampant and innovation is curbed. Monopolies have the same effect and are pure poison and no economist outside of North Korea or Cuba would argue for them.
If Peters wants to NZ racing — and NZ society in general — to benefit from NZ betting, he should put all his energies into ensuring that the country has an efficient betting industry, not surround what we do have with legal threats against competitors.
My main concern, from a personal perspective, is that, in protecting racing, New Zealand will follow the US and Australia and ban its citizens from accessing overseas-based poker rooms.
And on the subject of Peters, the racing industry should forget about any long term assistance from his direction. The political history of New Zealand since proportional representation came in is that minor parties which enter into coalitions with major parties get hammered at the next election. This has already happened with NZ First, after Peters went with Bolger’s National instead of Clark’s Labour in 1996. In the 1999 election, their share of the vote dropped to 4.3 percent, compared with the 13 percent three years earlier.
With Labour’s stocks currently rising, at the expense of NZ First and the Greens, and National clinging by its fingernails to what they have, this year’s contest will be closer to a straight two-party fight than we’ve had since proportional representation was introduced. NZ First is toast.
A Toast to Winstone,lol “for what”,
He got $9 mill a few years ago and gave it to the big players to fight over.
Three $1,000,000 races for 3 seasons and it was all gone.
I recall one million dollar Auckland cup went to Aussie bank ANZ .
Perhaps our trainers need a wake up and smell the carrots.
They are paid a training fee, fair enough, but maybe to help the owner they could take a 5% stake fee instead of the 10%.
Just an idea, anyone from the public trainers like to respond with some constructive directive.
Supporting the status quo, lining up your clients horse for a bag of carrots,
is probably where I wouldn,t send a horse.
Excuse me for shaking your cage trainers, but you are conspicuous in your absence.
Any comments on stake levels after July 30th.
I,ve always felt like the trainers have not supported the owners like they could have.
To many or some, its a numbers game, don,t be shy.
Not “a toast” to Winston or NZ First. Come the election, they are toast; i.e., they are done. Gone. Finished. Scrapheaped. No longer a factor on the political landscape.
Yes!, a Toast to Winstone, thanks for coming and thanks for soon to be going. Gil ,what odds on Winstones departure can you get me?
Winstone, Your track record formline reads.
F- Failure to deliver the Law of the 2003 Racing Act, in regard to the welfare of its participants.
L-Lose of conifidence that we have in you as a Minister (leader)
O-Over paid ex Govt employees
P- Promises made pre election ,but never delivered.
Yes FLOP, fell,lost his way, 10th or worst, pulled up or out of contest.
Winstone made a comment about old men leaning over a rail etc.
Look in the mirror, buy yourself a cheap ex rental camper van,
and speak your apologies person to person to every stakeholder you meet on your retirement journey, which starts election night.
I say again lets start a new Entity, I believe we have the numbers.
Or can you tell me where Awapuni or Riccarton will find the $6 mill
each club needs to finish there all weather tracks.
Will it be to the detriment of stakes ,NOT LOL
Would common sence say ,lets build either one 1st.
I think Awapuni should make way for Riccartons all weather as we have Cambridge 2 hours up the road. Awapuni will have $4 mill for stakes.
Yes ,but its for the all weather, NO , its for spending recklessly, hey admin, give yourselves a pay rise, remind you of anyone
Rocket Science
When Labour rules solo post Sept with a leader who has NO interest in racing other than a vote , reminds me of our soon to be redundant Ministers plea vote.
We should be planng to leave RITA , the POSITIVE ,we have control back.
How , we raise shares.
Blogers , more letters and thoughts, we are fortunate to have Brian
make this available.
GET ON,
Food for thought – a five course meal actually !
I really like the idea of starting a new entity !!
Keep on spinning the ideas pls !!
Thanks Brian on a great report you could of added dumb as well to paragraph 1 .On promoting racing i have spoken to a racing board member three years ago and asked the same question about who’s role it was to promote racing and his thoughts were not the tab, i only wish now i could of read the 2003 act out to him because they were obviously oblivious to it. His thoughts were, here’s the codes funding you guys promote it. But my argument was your promoting sports betting what’s the difference and so on. The racing board were not up to it and were overridden by tab management. We definitely need a clean out at the top end of the tab. The codes need some assurance that expectations and promotions levels are met as in act. I thank you for your quality editorials on behalf of the racing public and can feel your anger in it. But be assured you have a lot of people on your side so keep it. We need more people like you to stand up and right now.
Its going to be a massive task ahead just to get back to the start point. Its interesting that whilst we all want change we have been consistently trying our hardest to not implement many of the recommendations in the “Messara Report’. I have just read where a petition has been organised with 2800 signatures to present to the government regarding the 72.5 Million bailout…… against horses really, rather than the use of TAB funding. Unfortunately, all the other businesses that the government has rightly assisted arn’t mentioned, so my point is whilst people in the industry are trying their hardest there is this bigger picture here that we are having to contend with. The axe will be too heavy for many people to grind.
Hi Brian,
The current model for racing hasn’t worked for the last 12 years at least,shown by your table. Profit has grown over this period by 0.3 % while costs have grown by a whopping 50% ! The number of suits employed paid in excess of $100K has risen from 38 in 2008 to an obscene 136 in 2019 an increase of 98 ! .Profits in the mean time a miserable $5m.
The current model has allowed a succession of Boards and Executives of the Codes, TAB and RITA to not be accountable to the key stakeholders who I consider to be ( the owners, the trainers , the punters the breeders, the jockeys/drivers/stable workers and government).
I suggest in a post covid environment NZ Racing needs a simple, low cost model with clear accountabilities . NZ need only look across the ditch at the Racing Western Australian Model and replicate that in NZ and take a leaf out of Irish Racing where the key stakeholders get to appoint the Directors of Racing in Ireland . The directors of Racing NZ which operates the TAB could be made up of Directors who represent each of the key stakeholders . (eg Owners (2) Trainers (1) Punters (1) Breeders (1) Government (1), Jockeys/Drivers/Stableworkers (1).
This would provide a simple ,low cost model with clear accountabilities of the Directors to their stakeholders.
Great idea Brian ……can I please nominate myself to be the punting director on the NZ racing board …..by god I would make some changes for the down trodden punter …..yes the punter ……without whom there can be no racing!
Reverting to the KISS theory would be a good start.
I read a very good article by Ken Rutherford stating that 95% of action on a race or sports fixture is invested on the top three options …….because thats what we want.
I recall back in the 60’s and 70’s the big go was the ‘Daily double’ …..everyone got on the daily double and the pools were HUGE…….. nowdays the daily double holds three and sixpence…….but it was the simplicity of it that was actually attractive.
I’m not suggesting the ‘daily double’ should be reinvented …..but the pick 6 could certainly be promoted WITHOUT easybets as they were (and could be again) an option of turning ‘nothing into somthing’ …..which is always attractive to the punter.
Its like fashion ….it goes in circles…..and turning the clock back sometimes creates excitement …….and dare I say it …..TURNOVER.
Graham B.
I think you’re on the money, Graham. If it was my choice I’d appoint you ‘punting director’ because you understand betting and the needs of the punter. In NSW when their TAB decided to make the minimum bet $5, Peter V’landys fought tooth and nail to keep it at 50 cents because he valued every grandmother 50 cents each-way bettor, and he won because he put the best argument forward and showed leadership.
When the NZ TAB decided to stop telephone betting its attitude was ‘f… the customer.’ They consulted no one and did what was best for them and have treated customers appalingly from then til now. The TAB’s zero goodwill is partly the reason turnover has been in decline – one bad decision after another by non-punting, non-racing people is another.
Thanks Brian as always bringing together some facts.
We need now as we are all in week four of May, to insist that we have the stakes for the race levels from August.
It is impossible to plan ahead without these.
Seems like a losing battle, but where do we now go to ensure a answer to this. They must be out this week with the schedules for planning, only two months to go.
Forward planning is rare. It costs $3 million a month to keep the codes and clubs going. The TAB is wounded and income from July’s 13 meetings will be meagre compared to last July. Borrowings can no longer be used to prop up stakes. Total stakes money for 20-21 may only be 50 to 60% of 19-20. Fewer races and small fields seem likely. It looks bleak for owners, okay for RITA executives though who apparently are still employed.
Good to see this comment from a successful business woman who is also a long time owner – she will well understand the importance of owners in the racing pyramid. So far, from the point of view of getting more stake money into the game (an absolute necessity if there are to be NZ domiciled race horses and dogs) the ‘urgent’ implementation of the Messara report has been a bit of a joke – snails travel more quickly! The main source of those additional monies was the future operation of our betting agency – yes, changes are afoot, but again at a snails pace and I have an underlying fear that necessary changes can’t be implemented because of earlier contracts entered into. I hope I am wrong on this point but am not filled with optimism.
Spoke to someone today who is on the inside, Mike, who says the Openbet 10-year contract will be an expensive one to buy out of, but going into administration might solve that issue