24 July 2021
Dear NHA Member
Further to my letter of 7 July 2021, and on behalf of the National Board (“the Board”), I intend to
respond further to the written requisition of a Special General Meeting of the members of the
NHA to consider and vote on the two proposed resolutions to reconstitute the Board and vitiate
the position of the Racing Control Executive (“RCE”). In this regard I would like to share some
further thoughts with members on the role and function of the NHA, how the NHA interacts with
participants, the Board composition and the imperative of the Board’s independence.
1. THE FUNCTION OF THE NHA
I shall demonstrate that the Board, as it currently functions, has been exemplary in meeting
its obligations under the NHA Constitution.
1.1. Objects and responsibilities
The Constitution lists the objects of the NHA as follows:
1.1.1. To promote and maintain honourable practice and to eliminate malpractice in
horseracing;
1.1.2. To regulate the sport of horseracing;
1.1.3. To maintain and publish the General Stud Book;
1.1.4. To foster, through its regulatory function, the promotion of horseracing;
1.1.5. To encourage and improve, through its regulatory function, the breed of the
racehorse;
1.1.6. To promote and foster co-operation and goodwill with recognised horseracing
authorities, governments and provincial governments; and
1.1.7. To render services of whatever nature to racing or other sporting authorities.
The Constitution makes it absolutely clear that the NHA is the regulator of the racing
industry, guarding the integrity of racing from malpractice by individuals to keep racing
reputable for the benefit of everyone.
The National Horseracing Authority of Southern Africa
P O Box 74439, Turffontein 2140, South Africa -Turffontein Racecourse, Turf Club Street, Turffontein, Johannesburg 2190
Telephone: 683 9283 – Facsimile: 683 5548 - Dialling Codes: International +2711, Local 011 - E-mail: info@nhra.co.za
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NHA duties cover the full range of everything involved in racing and breeding. It deals
with government and gambling boards. It is the member of international bodies related
to horseracing authorities and laboratories. Its day-to-day duties include stud book
administration, general administration, licensing of individuals, registrations, taking
samples, running exhaustive checks in laboratory for prohibited substances,
handicapping, horse welfare checks, stable visits, starting stalls, running race days,
enforcement of rules, holding inquiries, prosecuting cases and various other important
functions.
1.2. Performance assessment
Looking back over the past five years:
1.2.1. Stud Book
Facing possible loss of “approved” stud book status in 2017, has been brought back
to alignment with the International Stud Book Committee (ISBC) and the International
Federation of Horseracing Authorities (IFHA) guidelines.
1.2.2. Laboratory
1.2.2.1. Annually scored 100% in Association of Official Racing Chemists (AORC)
proficiency test;
1.2.2.2. Scored 100% in the Asian Racing Federation AQAP negative specimen
confirmation program;
1.2.2.3. Over the past 5 years analysed over 27,000 specimens with approximately 73
confirmed positive findings; and
1.2.2.4. Acts as IFHA confirmatory analysis reference laboratory for other IFHA racing
laboratories (most prominently for France and England) – with over 150
confirmatory findings to date.
1.2.3. Racing Control
Integrity standards maintained to the highest level – as can be seen by:
1.2.3.1. Continued attraction for international sale of picture rights; and
1.2.3.2. Increased number of race days taken by Hong Kong Jockey Club.
1.2.4. International reputation
Enhanced as shown by:
1.2.4.1. Winning the bid and hosting ARC in Cape Town with 550 delegates;
1.2.4.2. Assistance given to HKJC to obtain 14 additional simulcast licences; and
1.2.4.3. HKJC partnering with NHA for assistance in its funding for export efforts.
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1.2.5. Government relations
Selected as partner alongside various government departments for the development
of the Traditional Equine Industry.
1.2.6. Developed COVID protocols for the industry, which achieved the expedited reopening and continuing racing.
1.3. Restructuring
Over the past five years, the NHA has undertaken significant restructuring programs to
achieve maximum efficiencies and lower cost structure, while maintaining integrity
standards. The process has involved dual roles for many senior positions, shifting direct
reports to different managers, reallocating resources, cost-cutting measures, process
improvements and job cuts.
Permanent staff declined from 90 in 2015 to current 68. The current complement of
Stipendiary Stewards is down to 14 from a peak of 24. There are six Senior Stipendiary
Stewards with the balance being Junior/trainee stewards and the RCE operating as a
“back up” Stipe. The Handicappers are down to two senior and one trainee, and all
Handicappers have to now fulfil Stipendiary duties as well. The number of full-time
veterinarians on the pay-roll is down to three, and outsourcing is used for the second
vet on duty in major centres. The complement of Part-Time (rostered/race day) staff is
about 130.
Race meetings are operated with minimum staff per race meeting – Clerks of Scales,
Judges, Specimen Collectors, Horse Identifiers, Farriers and Veterinary Surgeons are
at the minimum. Handlers are rostered per field sizes. The operators’ commitment to
racing 364 days a year, places huge pressures on a fully-stretched regulatory
staff. Laboratory restructuring has resulted in a reduction of staff and costs whilst
maintaining standards.
1.4. Racing Control Executive (RCE)
The proposed second resolution removes the Constitutional references to the RCE with
the intention of doing away with the position altogether. The only rationale given being
is to save costs, which is seemingly advocated purely from motives of self-interest in
lower regulatory capability and the hope that somehow the saving will increase stakes,
with no consideration given to the consequent damage to the integrity of racing.
The functions of RCE have been carried out separate from the role of Managing Director
for at least the past 35 years. The role of RCE, with both domestic and international
duties, is critical as integrity is the bedrock on which the horseracing industry is built.
The RCE oversees the whole integrity function, ensures consistency and coordination
of rules and regulations across racing district, and makes sure that international
standards are adhered to.
The Board, being responsible for the management of the NHA and fully informed on the
functions of the two positions, is satisfied that there is a need to retain both offices and
that the costs are fully justified in the interests of maintaining integrity and international
standards.
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1.5. Legal costs
By the very nature of the NHA being a regulatory body, it is reasonable and should be
expected that the NHA would incur legal fees in the pursuance and defence of its
objectives and its purpose of “eliminating malpractice”.
It is important to note that legal costs are “reactionary costs” in that they arise in pursuit
of enforcing rules – mostly from prohibited substance findings by the laboratory. All
inquiries, investigations and adjudications into breaches of the rules are conducted by
an Inquiry Board (IB). The IB consists mostly of Stipendiary Stewards, but depending
on the complexity or seriousness of the matter, a lawyer may also be appointed to the
IB. If a person facing charges engages legal representation, then the NHA is also legally
represented to ensure a parity of arms. The IB performs quasi-judicial functions and are
empowered to make findings and impose penalties. A person has a right of appeal to
an Appeal Board of 3 members of whom at least one is a lawyer as chairperson. As a
further check that processes have been followed, inquiries or appeals, which were
conducted without legal representation, are all reviewed by the Inquiry Review Board
(IRB). These boards are entitled to take legal advice and rely on such legal advice.
Legal costs are also incurred in legal actions brought against the NHA. The action by a
jockeys’ association to contest the NHA’s covid protocols is one example. Legal costs
have risen from about R2 million in 2016, to just over R4 million in the current year. The
average spend over those years is R2,856,000 and equates to 3.06% of the annual
costs. Legal fees are a natural consequence and a concomitant cost of a regulator
managing the enforcement of the rules. It is incumbent on the NHA to act to uphold the
integrity of the sport of horseracing.
Losing a case is not an indication of improper conduct by the Board. This is true
especially if the court bases its finding on an issue of procedural fairness, which
emphasis the need for the involvement of lawyers to keep procedural irregularities to a
minimum.
1.6. Overall costs
It is also interesting to note the operators’ opinion. The operators’ income depends on
betting turnover and international revenues from sale of picture and commingling, so
they know the importance of integrity to maintain income levels.
At a recent meeting with the operators as part of the NHA budget process, the operators
could not suggest any further restructuring cost cutting efforts. The operators were
agreed that the NHA, within its situation in the industry, is run efficiently and very close
to the bone and that for the NHA to maintain the integrity of the industry, then it cannot
cut costs further.
1.7. Levies and fees
The Board, through being vigilant with costs but without compromising standards, has
been able to keep operator levies and fees increases at under 5% over the five-year
period (2016-2021).
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Operator levies have on average increased by 4% over the five-year period (2016-
2021). During 2020, a total of R8.2m levy discount was granted to the operators due to
Covid-19 lockdown on racing. Although racing commenced 1 June 2020, the levy
discount applied from April to July 2020 inclusive. Registration and stud book fees have on average increased by 4% over the 5-year
period (2016-2021). 0% increases have been implemented since 2018 notwithstanding
annual inflation.
1.8. Conclusion
The primary objective of the NHA as regulator is to promote and maintain the integrity
of racing in South Africa to international standards. In this way, the public and
participants can be confident South African racing is run fairly and in accordance with
the rules, that crime and corruption is deterred, prevented or penalised, and that there
is a level playing field for all competitors. Integrity is essential for the sustainability of
the industry. Regulation and integrity cost money – administration, regulatory personnel
to monitor and maintain compliance in the industry, laboratory to detect prohibited
substances, and (where necessary) legal fees for hearings and to prosecute (if
necessary). The arguments that the RCE position should be eliminated and legal fees
slashed, would seriously damage the integrity of racing and therefore its future viability.
The dedicated and skilled position of RCE has been and continues to be key to
maintaining integrity standards in the NHA’s streamlined structure. Weakening the
regulatory team would mean lower compliance standards.
Legal costs are a necessary integral expense of a regulator. Limiting legal fees would
mean that there may be cases not pursued, that there may be cases the NHA loses,
notwithstanding the overwhelming evidence in its favour, because it has to forego legal
representation due to costs while the other side is legally represented, or that there may
be pressure to accept a plea bargain in cases where a harsher penalty if warranted to
maintain integrity of the industry.
These proposed changes would constrain the NHA in its duty to promote and maintain
honourable practice and to eliminate malpractice in racing. These proposed changes
would be contrary to the best interests of racing. Those licensees who are arguing for
the proposed change, are putting their own vested interests ahead of the integrity of
racing – a classic example of the conflict of interest and duty. This is a short-sighted
view to take which can have disastrous consequences.
It is disgraceful and unfortunate that certain people have embarked on an intimidatory
campaign of character assassination and insults targeted at management and Board
members, who are honourably discharging unenviable duties diligently and consistently
- without fear or favour.
By the very nature of its job, a regulator will not be popular with those it regulates. No
trainer would be happy with prohibited substance findings, no jockey would be happy
when fined or suspended for an unsatisfactory ride, no owner would be happy when his
horse is disqualified. A popular regulator is most likely one that overlooks positives for
prohibited substances or accepts plea bargains rather than prosecute. In such an event,
the industry will ultimately be doomed to fail. An unpopular regulator is more likely doing
its job thoroughly properly!
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2. HOW THE NHA INTERACTS WITH PARTICIPANTS AND BOARD COMPOSITION
2.1. Current situation
Throughout the year and on all subjects, there are frequent consultations by NHA with
industry stakeholders, including licensees. Representatives of stakeholders are
involved in the Rules Committee, the Stud Book Committee, liaison meetings in each
racing centre, and frequent informal consultations.
As with any regulatory body, the rule book is of paramount importance where the making
and changing of rules is a thorough and careful process. The Rules Committee meets
to consider and deliberate, and this committee includes input from trainers and jockeys.
NHA lawyers will carefully draft any new rules or changes so as to ensure that everything
is clear, workable, without conflicting other rules and not in conflict with any laws of the
country. The recommendation then goes to the Board for approval.
Representatives of jockeys and trainers are already part of the consultative process of
Rule-making, so these stakeholders definitely have input in to the Rules – including
prohibited substances, riding rules, whip use, handicapping guidelines etc.
The views of all stakeholders are currently considered through extensive liaison and
consultation, and these views are brought through to the Board. The Board, being made
up of “neutral” members and independents, can make the final decisions independently
for the best interests of racing overall.
2.2. Is it a good idea for participants to have representatives on the Board?
The first proposed resolution creates entrenched positions for representative directors
and also allows licensees and employees of operators to serve on the Board.
Directors have a fiduciary duty to act in the best interests of the organisation on whose
board they serve. Principles of good governance dictate that directors should be
appointed based on their level of knowledge, skill and expertise that they bring to the
board, and their ability to make the most appropriate decision with due care, skill and
diligence that are in the best interest of the organisation. Directors have a fiduciary duty
to the entity or company and not to its shareholders or members.
The difficulty faced by ‘representative’ directors is that they are expected to act in the
interests of the appointing party. This means that they have a conflict between these
interests and their duty as a director. The representatives of licensees could feel
pressurized by their short-term vested interests to effect changes lowering the regulatory
standards and thereby harm the integrity of South African racing – counter to their
fiduciary duty to the NHA. There are very real dangers that representatives would
prioritise protecting of advancing their own positions – and in any event the mere
perception that they would do so is just as damaging.
The presence of licensees on the Board creates the problem of regulation and the
perception that these licensees would get different rules applied or different treatment
in enforcement of the rules. Imagine the difficulties faced by NHA stewards holding a
riding inquiry when questioning a jockey who is a Board director. Imagine the
complications of an inquiry into a trainer for a prohibited substance finding when that
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trainer is a Board director. Imagine the scrutiny and comments on the fines and penalties
given to licensees who are directors.
2.3. Examples of conflicted boards
Prior to the changes made at the SGM in 2016, the NHA constitution afforded various
stakeholders the right to a seat on the Board – the racing operators, the TBA, and
owners’ bodies. Subsequent events showed that the conflict of interests was extremely
difficult to manage whilst actually and in perception maintaining integrity of the
organisation. These conflicts created tensions which severely compromised the ability
of the Board to conduct the affairs of the NHA and the Board itself became dysfunctional.
There were numerous occasions on which government, unhappy with the state of
affairs, sought to intercede in the regulation of racing. Government was insisting that,
for racing to remain as self-regulating, the NHA had to implement changes in order that
it conformed with the principles of good governance. It was required that the National
Board of the regulator be independent of those that it licenses, as is the case with other
regulators. The entire Board and the previously represented entities (the three
operators: RA, Gold Circle owners, TBA) all supported the change in 2016. The
members, by voting unanimously in favour of the change, clearly agreed with the view
of the entire Board that a director should not be compromised by having to speak on
behalf of any other organization.
Another pertinent example to consider is Cricket South Africa. Individuals, by attempting
to protect their own selfish interests, brought cricket to its knees inviting understandable
interference from government with the purpose of enforcing a credible level of
independence. Any such interference may have disastrous consequences for the
horseracing industry.
2.4. Conclusion
The wearing of two hats by some Board members created serious problems in the past,
and those problems would be exacerbated even further under the proposals which
would create a Board with a majority of conflicted directors. The proposal creates a
Board with a coterie of vested interests who, in effect, will police, prosecute and judge
themselves. It defies logic and fairness and will give rise to conflicts of interest and
duty.
It must be remembered that, as per the Constitution and gambling legislation, the NHA
is a regulator - it is not some sort of industry representative body. In its position as
regulator, the independence and autonomy of the NHA Board has to be
sacrosanct. There is a place for participants to have their views heard, but this is best
done with committees and consultation - and not at Board level.
3. BOARD APPOINTMENTS
3.1. Current situation
Alongside the changes made in 2016 to do away with representative directors, the
members also create a Nominations Committee to handle appointments to the Board.
The reasons for this change were that:
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(a) The election process of members was functioning unsatisfactorily. The general
apathy of members and an unwillingness to undergo an election process, made it
extremely difficult to secure the nomination and election of members to the board;
and
(b) The need to align with the principles of good governance regarding the inclusion
of independent directors and also executive directors.
Currently the Board comprises two executives (in line with King guidelines), three
independents, and seven members. These members on the Board are drawn from the
“neutral” members i.e., they are members who are not conflicted by being licensed
persons or employees of licensed operators. Owners’ interests are absolutely aligned
with the best interests of the industry as a whole – they want fair, well-regulated racing
with high integrity and thus the sport appeals to the betting industry (local and
international) thereby earning income for operators and securing race stakes benefiting
trainers, jockeys, owners etc.
Under the current system, the Nominations Committee, comprising past Chairmen of
the Board under the age of eighty, has ensured that the Board has the necessary blend
of skills and knowledge. As per the Constitution, the Nominations Committee can seek
suggestions from anywhere, and any person or entity is at liberty to make suggestions
to the Nominations Committee.
3.2. Assessment of proposed resolution for Board appointments
3.2.1. There are areas of concern related to the proposed procedures for Board
composition, which can be summarised as follows:
3.2.1.1. Majority are representative directors with vested interests giving rise to problems
of conflict of interests;
3.2.1.2. Licensees and employees of operators on board compromises the independence
of board;
3.2.1.3. Election process can cause difficulties;
3.2.1.4. Proposed Nominations Committee applies only to appointment of the three
member/independent seats. It is a sub-committee of the board, and its role seems
to be more to conduct a screening process; and
3.2.1.5. Owner and independents only have a minority of the seats - 3 out of the 12.
3.2.2. The proposed resolution would result in a board more captured, more conflicted, and
with fewer neutral and independent directors.
3.3. Conclusion
The Board is of the opinion that the current provision for a Nominations Committee,
being truly independent of the Board, is the best way to appoint the Board. It is
concerning that there is the perception of a closed shop, so perhaps members should
give consideration to a change to the Constitution to expand the composition of the
Nominations Committee rather than seeking to do away with it.
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4. WHY A NEUTRAL/INDEPENDENT NHA BOARD IS IMPORTANT TO EXTERNAL
RELATIONS OF RACING INDUSTRY
4.1. Governance
Governance is the manner in which an organization is controlled and directed, such that
the outcomes of ethical culture, good performance, effective control and legitimacy are
achieved. Governance starts and end in the board room. The board composition sets
the tone for the overall regulator. A neutral/independent board ensures that the NHA is
seen as independent regulator of racing. A board composition that complies with the
principles of good governance means that the NHA is respected and trusted.
4.2. Government bodies
In the last five years, the independent NHA has forged good relations with government
bodies. Previously the government had a poor opinion of a regulator with a board
dominated by representative directors and viewed it as captured by operators, so good
relations had been noticeably lacking. It is a sign of the respect with which the NHA is
regarded by government currently that this year the NHA signed Memorandums as a
trusted partner of government programs to develop the Traditional Equine Industry.
Gambling Boards license the operators and it is a condition of that licence that the
operator is licensed by the NHA. It is believed that the independence of the NHA from
any influence by the operators is an important consideration by the Provincial Licensing
Authorities.
There could be serious consequences following on from the proposed installation of
representative directors and licensees. This would result in a board even more captured
by representatives and less independent than prior to 2016 – in effect the policed being
the police. Members will recall that government previously sought to intercede in the
regulation of racing because of their dissatisfaction with a non-independent regulator.
This proposed change would be likely to attract attention from Gambling Boards,
Minister of Trade and Industry, and Minister of Sport seeking to exercise direct control
over the regulation of horseracing with a view to ensure that the regulator is
appropriately independent.
4.3. International standing
The NHA is a full member of the International Federation of Horseracing Authorities
(IFHA) and is a signatory to the International Agreement on Breeding, Racing and
Wagering of the IFHA (“the agreement”). The main objectives of the IFHA include
harmonization of rules and fairness of racing. The agreement obligates all members to
commit themselves to furthering the objectives of the IFHA. The Asian Racing
Federation (ARF) is formally linked to the IFHA and membership of ARF is generally
contingent upon the legitimacy of the horseracing industry in that country. South Africa
is part of the respected higher tier of the global racing industry. In order to remain there,
it needs to retain the standards commensurate with those jurisdictions. It is clear that
various authorities internationally view the independence and expertise on a board as
being of paramount importance. It is also evident, that the view taken by the majority of
international jurisdictions is that jockey / trainer representation on the Board would be
an unacceptable conflict of interest.
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With the operators earning significant income from the sale of picture and commingling,
there would be serious financial implications to jeopardizing international opinion of the
integrity of the South African horseracing industry.
4.4. Conclusion
Given the NHA’s objective to “promote and foster co-operation and goodwill with
recognized thoroughbred horseracing authorities, Governments and Provincial
Governments” it is incumbent on the NHA to conform with the principles that are valued
by these bodies.
5. FINAL REMARKS
Integrity must remain the bedrock that the horseracing industry is built on. The proposed
changes to the Constitution go against the very essence of the NHA’s standing as an
independent regulatory body and its integrity standards. Those who are policed cannot be
the police, as this would have severe consequences relating to the confidence that existing
and potential investors may have in the product. There would also be negative implications
for the safety of riders in races and the welfare of horses, both crucial to the sustenance of
the industry.
The independence of the NHA is sacrosanct for the health of the industry. The Board urges
members to consider the proposed changes very thoroughly, from both domestic and
international perspectives, because of the impact on the racing industry as a whole.
The Board will be sending out full documentation to members shortly. With the benefit of
“hearing both sides”, members will thus be able to make an informed decision and to vote
against both resolutions and in so doing ensure that the actual and perceived integrity of
the regulator remains in place for the best interests of the whole racing industry.
Best regards
Susan Rowett
Chairperson
Topic Author
