Johannesburg – If you look carefully at the well-heeled attendees of one of South Africa’s biggest horse racing auctions this weekend in Cape Town, you may see some deep worry lines grooved into their faces.
Few will speak about it publicly, but there are real fears within the horse racing community that the scandal surrounding Markus Jooste and Steinhoff could cause a sharp decline in horse sale prices.
And this decline could have a roll-over effect into the industry as a whole.
Many will be watching what happens at the Cape Premier Yearling Sale and the CTS Breeding Stock Sale at the Cape Town International Convention Centre between January 20 and 21 very carefully, as a sharp decline could expose the outsized role Jooste and a few of his business partners are said to have played in horse racing in South Africa.
Jooste was a man people said had helped create the local horse racing industry. Just last month the Financial Mail quoted the CEO of Thoroughbred Breeders Association as saying he has been a “massive contributor to the thoroughbred industry for many years”.
But now industry insiders are saying that Jooste’s approach “to own it all” – which was praised so highly when he was still at the helm of Steinhoff – could cause problems in the horse racing industry.
This in turn, say insiders, could have a negative impact on the farming communities horse breeding helps to prop up.
Sale of the year
An advert announcing the upcoming sale at the CTICC.
The yearling sale is an event hosted by Cape Thoroughbred Sales, a company which according to the Companies and Intellectual Property Commission still has Jooste as a director along with Hassen Adams, Craig Carey, Bernard Kantor, Michael Sharkey, Adrian Todd and Christian van Niekerk.
Jooste was also a director of the company which represented his horse racing interests, Mayfair Speculators. But he resigned as a director last month, leaving Stefan Potgieter, his son-in-law, as the sole director.
Cape Thoroughbred Sales and Mayfair Speculators are so entwined that they share an address in Quantum Street, Technopark outside Stellenbosch.
Jooste also partly owned the biggest horse breeding farm in the country, Klawervlei Stud.
Sources involved in the horseracing industry have told News24 that people have been whispering for years about Jooste’s monopoly over the industry.
The company behind the auction (Cape Thoroughbred Horses), the biggest seller (Klawervlei) and the biggest buyer (Mayfair Speculators) were all essentially owned by the same group of people.
They were too scared to ever really say out loud what they thought about this co-ownership. And while the fear of the power Jooste and the people around him hold has dissipated somewhat in the wake of the Steinhoff scandal, it is still there and sources do not want to be named.
Jooste liked to do business ‘mafia style’, said one source who knew him well.
“He wanted to own every single aspect of an empire, taking over segments until he owned it all. If it was furniture for instance, he owned transport, distribution, manufacturing, sale, all the links in the supply chain. It stopped being about money at some point and became about power. It’s the same thing he did with the horse industry.”
There was concern that this co-ownership could allow the manipulation of prices horses are sold at.
Last year the Cape Premier Yearling Sale had a “record revenue” where the average price per yearling was R699 212, up 16.9% from 2016. Klawervlei Stud topped the vendors’ list with R47m worth of horses sold at the event.
The Financial Mail reported that in January 2016 Mayfair Speculators, partnering with Coolmore stud in Australia, bought a colt called Silver Coin for R6m – R800 000 than the previous record for colts. There were 22 yearlings bought at the auction by Mayfair Speculators for a total of R24.5m, with Klawervlei as the top vendor, raking in R38m.
“If you essentially own the horse through the stud farm selling it, and you also buy the horse through a separate company you own, you are going to get the best price for that horse. So, the horse prices are marketed to be bigger and stronger than they might in reality be,” said an insider.
Another source said that prices were inflated to turn Cape Thoroughbred Horses into the biggest sales company in the country, which would in turn attract more overseas buyers.
It was an open secret and everyone “kind of knew” it was happening, the insiders said.
“You can’t deny that in an ailing industry, attracting overseas buyers could only benefit the sport. It’s not a lie that he (Jooste) did a lot to promote horse racing. But that is backfiring now,” said another horse racing insider.
With financiers breathing down its neck, it is doubtful whether Mayfair Speculators will be at this year’s yearling sale.
Cape Thoroughbred Sales 2017 March Yearling Sale at the Durbanville Racecourse. (CTS Facebook)
Towards the end of December, Jooste reached an agreement with Absa Bank to put on hold the bank’s application to the high court in Cape Town to put Mayfair Speculators into liquidation and freeze its assets.
Mayfair Speculators owe three banks more than R1.2bn. Absa claims R226m, Investec R250m and Sanlam R800m.
So this year’s yearling sale will likely be without the biggest buyer.
There is speculation that the sale will be down by as much as 30% to 40%, News24 was told by numerous sources. If that happens, speculation will grow that Jooste may have manipulated the price of previous sales.
This wouldn’t be good for the industry as a whole, which employs more than 15 000 people.
“The whole horse industry is quaking in their boots. The actions of one man could affect everyone,” another source said. “This could put the whole viability of the industry at stake.”
There is some hope though, as there will be overseas buyers at the auction. Buyers from Hong Kong in particular are expected to be present.
Insiders said that even though horse racing has the image of being solely for the rich and famous, in reality it isn’t like that.
The industry has numerous breeding farms and they are big employers in rural agriculture. A large percentage of gambling taxes come from horse racing, so a great deal rests on this auction, they pointed out.
Potgieter from Mayfair Speculators refused to speak to News24, putting the phone down immediately.
Jooste did not immediately reply to a WhatsApp request for comment. The former Steinhoff CEO has not spoken to the media since he resigned as a director of the global furniture retailer, amid a still-ongoing accounting scandal in early December.
Emailed queries to Kantor on the yearling sale were also not responded to.
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