Three perspectives on SA Tourism’s pending R1bn Spurs sponsorship deal

Acting SA Tourism CEO Themba Khumalo, Jaco Beukes of Sail and Theo Vorster of Galileo Capital consider the value of the R1 billion sponsorship of English Premier League football team Tottenham Hotspur.

RYK VAN NIEKERK: SA Tourism [on Thursday] reacted to media reports that it had entered into a sponsorship agreement with the English football club Tottenham Hotspur to a value of almost R1 billion. The news elicited tremendous criticism, and various organisations said it made no sense and would be a waste of money. In response SA Tourism held a press conference.

On the line we have Themba Khumalo, acting CEO of SA Tourism. Themba, thank you so much for joining me. You hosted a press conference in which you confirmed the sponsorship was on the table, but that no deal has been signed. So what is the status now of the negotiations?

THEMBA KHUMALO: The status of the deal right now is that the board had approved the project, on condition that we engage with the various stakeholders – the ministry, the department, National Treasury, the provinces, and [the] private sector, etc. We are in the process of doing so.

Should all stakeholders come on board, we would then proceed with engaging in the deal. But if they don’t, we would seek alternative projects.

RYK VAN NIEKERK: What would the benefit for South Africa be if you signed a deal after engaging with those stakeholders?

THEMBA KHUMALO: Here’s the thing. This is not about football. It’s not about Tottenham Hotspur. This is about the audiences that follow the English Premier League, who follow the team. So if you do marketing around the world, you’ve got to go where people are already focusing their attention. So you either go onto media platforms such as this one where you’ve got listeners – and the target of this conversation is your listeners – or you go to the buying engine, the big buying engines, Expedia, Travelstart, those kinds of engines, or you go to sports and entertainment platforms where you’ve got aggregated audiences.

So what we are after here is not Tottenham Hotspur. We target the audiences that follow them, and we know that there are 616 million of them around the world. They are in all of our target markets.

Imagine if we converted just 1% of those into arrivals, that would mean an additional 6.2 million arrivals into our country, which would translate into billions of rands coming into the country. If you look at our investment over the last three years in terms of the media spend we have engaged in, right up to 2019 just before we went into the Covid break, the equivalent of the arrivals from the UK and the US alone is a ratio of 1:88.

So, if you invested R1 billion you’d get R88 billion in terms of return. That is the kind of power of being able to target your marketing, rather than it being random.

RYK VAN NIEKERK: Rwanda is one of the big examples of a similar sponsorship. Rwanda sponsors Arsenal and has been doing so since 2018. Have you analysed how successful that campaign was?

THEMBA KHUMALO: Yes, we have. The Rwanda deal was much narrower than ours. It is a straight media buy. It doesn’t have all the other components of the deal that we are looking into. But even though it’s only media, they’ve been able to achieve an incremental 8% above their growth trajectory. So can you imagine if we were able to get an additional 8% growth over our current drive path? We’d be able to get a lot more foreign investment and spend coming into South Africa.

If you look at Rwanda for example, it’s a small country. All they have is Hotel Rwanda and a couple of tourist attractions in terms of the forest and the gorillas, etc. We are South Africa. We’ve got a massive offering, a diverse offering. We’ve more hotels, more beds, more attractions. If we are able to get that kind of growth, it would result in money coming in, jobs being created, SMMEs supported – and all of those good things that our economy requires.

RYK VAN NIEKERK: I must say I’ve been around the world and South Africa is by far the most beautiful country in the world.

THEMBA KHUMALO: I agree.

RYK VAN NIEKERK: We just need to get tourists here. But why do you think there was such a negative reaction when the story first broke?

THEMBA KHUMALO: The reason is the document was leaked, and the story was leaked outside the context of the economic impact. So when it was leaked, it was leaked as ‘South Africa Tourism wants to spend X amount on a soccer team’. This is not about football; this is about audiences. This is about aggregated audiences. So the story was leaked outside the context of the economic impact.

I’m following Twitter, I’m talking to different stakeholders. Now that we’ve been able to present the context of the economic impact, many people are beginning to change their minds because they see that it’s not about football, it’s about tourists. It’s about getting people into this country, getting them spending in our economy. And now, by and large, people are beginning to change their attitudes. It was unfortunately a malicious act by the person who leaked the document, and sadly they kind of misread our intentions.

RYK VAN NIEKERK: How will we benefit if a deal is signed; what would the sponsorship entail?

THEMBA KHUMALO: I can’t go into all the detail of the deal because I’m under confidentiality. But what I can tell you is that we will be able to get extensive media exposure, on a global scale. We’ll be able to get that coverage throughout the year because we have to reach people continuously for them to see our message and be persuaded.

The other thing is that it’s a whole marketing ecosystem. It’s not just TV, it is digital, it is active engagement, it is one-on-one with corporates. It’s very comprehensive, a full 360-degree marketing ecosystem.

That’s the first point.

The second one – and I can’t go into the details of this – there will be an impact in terms of activity on the South African side as well. It will inspire a lot of young people. It’ll make them see themselves as part of a global community. And when it happens I think it’ll be very inspirational for all South Africans.

One of the things that we haven’t even factored into this is in terms of the merchandise. A big part of this agreement is that people buy the t-shirts, they buy merchandise. So you are going to have hundreds of thousands of people, hopefully millions around the world, wearing a t-shirt with South Africa on the sleeve. That exposure itself is inspirational for those seeing it. The team members also have their own Twitter followers, and some have extensive Twitter followings which they’ll be able to influence when they tweet about South Africa. So we believe that this is a very great deal, and that it will inspire South Africans, and inspire people to visit South Africa.

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RYK VAN NIEKERK: How significant is this potential deal for SA Tourism? How big is your marketing budget and how much of it will go to this deal if it is signed?

THEMBA KHUMALO: Look, if this is the issue in the public domain, the total of the South African tourism budget in any given year is R1.4 billion, and this deal is across three years. So the number that is in the public domain – which I can neither confirm nor deny – is estimated to be around the billion mark. That is not the amount that we’re going to spend in one year. It is over three years. So this is only about 30% of the total investment we’ll be making in marketing [South Africa].

Let me just go on to say the following. Whether we do this deal or not, that amount still gets spent on marketing in those countries. It’s been spent year on year for the last 20 years. All that we’re doing is taking all the small initiatives from all over the place and aggregating them to have impact, so that we become recognised around the world. That is what we’re doing.

RYK VAN NIEKERK: We’ll have to leave it there. Thank you very much, Themba. That was Themba Khumalo, the acting chief executive of SA Tourism.

‘The amount is not excessive’

On the line we now have Jaco Beukes, chief executive of Sail. Jaco, welcome to the programme. You are very, very actively involved in sponsorships and marketing through sport. What do you think of this proposed sponsorship?

JACO BEUKES: Ryk, good afternoon and good afternoon to the listeners. Yes, I think it’s a difficult one. I wouldn’t want to use the expression ‘fact or fallacy’ here, but I think the circumstances in our country make it a somewhat complex situation.

I think there are three factors important to note from a negative point of view. For one, I think the amounts mentioned have unfortunately been converted from British pounds to rands, which I think most people will understand makes the amounts appear rather large, for a start. Furthermore I think it’s a multi-year agreement being put together, which of course makes the figure seem so large.

What’s more, I think our socioeconomic situation in this country makes this a conversation that in first-world countries would not necessarily even end up on your programme.

So I think that makes it a pretty complex situation. From our experience of sponsorships in sport, and with specific reference to football – or soccer, as we refer to it – in an environment that one shares with British sport involving unbelievably high commercial amounts, I don’t think that specific amount is excessive in itself.

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RYK VAN NIEKERK: The amount is £42.4 million, and with the weak rand of course it sounds huge in rands.

But you say it’s a reasonable amount, given the standing of Tottenham Hotspur and the prestige of the English Premier League?

JACO BEUKES: I think it’s very market related. Again, I’ve not done all my research into the amount, but I think it’s a reasonable market-related figure for such sponsorships. The team specifically use independent companies to research how the value compares with other platforms on which people advertise, whether TV or a billboard beside a highway, using models they consider will give a good return on the investment made. The companies they use are pretty well accredited.

I do however think from a South African government perspective it is a well-considered decision, and what’s more I think from my experience everyone is referring to the Rwanda example, which is reported to have received very good returns in terms of tourism growth.

For my part I looked at the sponsorship on [Arsenal FC’s] backs, and I thought it a pretty unique or creative way to market one’s country.

Again, I think there are various examples of non-traditional entities that sometimes look at such sponsorships, and here I refer specifically to rugby, where I know certain universities in Australia market themselves on jerseys, etc.

I don’t think this is specifically that unique. I just believe our unique circumstances in South Africa can give rise to questioning whether it was wise, and whether there are other holes that need plugging.

RYK VAN NIEKERK: I think the mandate of SA Tourism is to market South Africa especially overseas to attract tourism. That is its mandate. I think the only question is whether this is the best application of the funds. According to sports sponsorships, is this a very effective way to do things?

JACO BEUKES: Ryk, I may be somewhat biased, but from previous experience I see sport as an incredibly huge platform. I think sport as a platform comes with something, where other platforms like TV don’t inspire such passion.

Whether positive or negative, I think the passion accompanying sport elevates the platform in many examples to a level that provides excellent returns on the investment made.

I think there are hundreds of examples worldwide, as well as in South Africa, where sports sponsorships are a really good platform to market specific entities, or specific projects that companies are targeting.

So yes, without a doubt sport is an incredible platform.

In that context one needs to mention that football, specifically in terms of people and spectatorship, is the top sport worldwide.

And hence the value of sponsorships, payments made to players and the associated commercial aspects, is phenomenal.

RYK VAN NIEKERK: Jaco, thank you very much for your time tonight. That was Jaco Beukes, the chief executive of Sail.

[Aside] Theo, that’s a tricky situation. What are your thoughts?

THEO VORSTER: It’s very complex. What’s that old saying? Only 50% of all marketing activities succeed, and 50% fail. You never know which 50% succeeds and which does not. I think it’s complicated and should be left to the experts who try to quantify it. There is no simple yes or no answer. There is more to it.

This transcript is a translation from the original interview conducted in Afrikaans, which aired on RSG Geldsake, here.

This article first appeared on Moneyweb and was republished with permission. Read the original article here.