The history tells a story but nothing changes

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?

Summary of the financial results of years of mismanagement of the TAB.
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.

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