Golden Lions - Financial Turmoil

Financial Turmoil

In the 1980s the union ran into serious financial trouble, mostly as a result of redeveloping Ellis Park. Transvaal supporters nearly didn’t have a union to support anymore as at one stage the most likely outcome was that the union would disband. In 1984 the union had R37 million of debts to repay, which forced Volkskas Bank to carry the union for a period. This debt mainly came from the union redeveloping the old Ellis Park into a modern 80 000 seat stadium in 1980. The union started out with R1 million of its own money, and intended to raise another R12 million through the sales of suites and life memberships. However, due to the underperforming team, the union had a hard time to sell these ideas to businessmen and the intended revenue to fund the stadium never materialised.

In March 1984 Volkskas took over the management of Ellis Park. By August the union was told to repay debts of more than R40 million by 4 September. According to Louis Luyt in his autobiography, Walking Proud, the union was left with interest amounting to R20 000 per day. It was at this time that the then president Jannie le Roux was ousted by the clubs on 3 September 1984, and in his place came self-made millionaire Dr. Louis Luyt, a former provincial lock forward for the Orange Free State. Through the business acumen of Dr Luyt, the union was able to become financially stable once again. Dr Luyt saw an opportunity to use Ellis Park as a way for the union to cover its debt, and according to him in his autobiography, Walking Proud, used this asset as a means of renegotiating the unions’ debt with Volkskas Bank and the Johannesburg City Council. In order to refinance the debt the union would relinquish control of Ellis Park, and control of the stadium would be taken by a new company called Ellis Park Stadium Incorporated (EPSI) on which Volkskas would have 6 board members, the City Council 3 members and the Louis Luyt group 3 members. Thus the rugby union had no representation on the board. The rugby union would however be contractually obliged to play all future matches at the venue, and would have first right over the use of Ellis Park. However, 20% of all gate receipts generated would be paid over to EPSI. However, Volkskas was not fond of this idea, and eventually took complete control over the stadium as a new company called Ellis Park Stadium Pty Ltd. According to Luyt the union would now be allowed to keep 25% of its gate revenue plus R100 000 of the advertising revenue. Luyt also managed to negotiate a clause stipulating that the rugby union had first right of refusal should Volkskas decide to sell the stadium in the future.

In 1987 the bank decided to sell the stadium to a Mr Johan Claassen for R26.5 million, but with the union having first right of refusal, Luyt started working along with First National Bank (FNB) to buy the stadium back for the union. At the time FNB wanted to rename the stadium First National Stadium, although the City Council was against this as they wanted the stadium to retain the name of their former city councilman who provided the area for the stadium. This is in stark contrast when the stadium name was sold to Coca-Cola in 2008. Eventually FNB provided the union with the finance needed to take control of the stadium. Luyt reduced the capacity of the stadium from 80 000 to 60 000 by adding 88 suites behind the two goal posts. His rationale for this was that the general public preferred to sit on the sides of the field, thus these seats were deemed economically unviable. However, companies were satisfied to have any suite in the stadium. Thus even when losing 20 000 seats, the union was able to generate a bigger income from this “dead space” of the stadium. Even before construction on the suites started, they were fully subscribed. The cost of building the suites were R4 million, and the revenue of selling these were R25 million. Even though seating was reduced the union was able to show a constant revenue stream because of the suites. Eventually Luyt listed the stadium on the stock exchange, although this venture was unsuccessful. In spite of the unsuccessful stock exchange listing the union was able to repay all of its debt by 1993. Currently Ellis Park is known as Coca Cola Park, although as one of the FIFA World Cup 2010 venues, for the period of the world cup, it was known as Ellis Park again. The stadium, and surrounding swimming arena and indoor sports arena, is run by Ellis Park World of Sport Pty Ltd, in which the GLRU has a stake.