THE Msunduzi Municipality might still be owing R18 million to the Royal AM FC as the three-year sponsorship contract still stands despite recent recommendations that the club should be sucked from the Premier Soccer League (PSL).
The PSL recommended terminating the team, which the taxman attached from supposedly worthy tenderpreneur Shauwn Mkhize due to her failure to comply with tax laws.
On Wednesday, PSL sent a letter to all chairpersons, chief executive officers of all clubs that are affiliated with it informing them about the recommendations to expel Royal AM.
It said due to the team being placed under curatorship, it was unable to fulfill its obligation to the league, misrepresented information to the league in its application for renewal of its membership, which it submitted on July 1, 2024, and it transferred shares contrary to the provisions of Article 14.6 of the National Soccer League (NSL) Constitution.
Msunduzi spokesperson Ntobeko Ngcobo, Royal AM general manager Richard Makhoba and PSL spokesperson Fhatuwani Mpfuni did not respond to questions sent to them on Thursday.
The NSL constitution reads: “Should any sale, transfer or disposition take place in contravention of this Article, the Executive Committee will immediately upon the matter coming to its attention recommend to the Board of Governors that the Membership concerned or the registration of any person or entity directly or indirectly involved in the transaction be cancelled or terminated, and that appropriate disciplinary action be taken where necessary.”
Therefore, the PSL recommended the cancelation of the Royal AM membership to the Board of Governors of the league “in accordance with Article 10.16 and or 14.6 of the NSL Constitution.”
“Royal AM and all Member Clubs of the league will be given notice of the Board of the Governors meeting in accordance with the NSL Handbook.”
DA councillor at the Msunduzi council Ross Strachan told this reporter that the city only paid R9 million of the three-year R27 million sponsorship deal, which started towards the end of 2023.
However, he said, looking at the troubles that the team has with the South African Revenue Service and PSL, the city had no obligation to honour the sponsorship contract.
“We only paid one tranche, which I think was an amount of approximately R9 million, but a report still has not come to confirm the exact amount, but we know that one tranche has been paid,” he said.
He said the city held back the second payment because in a sponsorship contract, there was a small print stating “depending on revenue and flow”.
“The municipality has not had the cash flow; therefore, they have not paid the amount that is owed as well as the third amount that needs to be paid in the upcoming year (which started on March 1),” said Strachan.
The DA was waiting to hear the verdict in case it lodged with the Pietermaritzburg High, seeking an order to cancel the sponsorship. The matter was heard last month.
“The Royal AM did not even arrive at that court case,” said Strachan.
The team, which used the city’s Harry Gwala Stadium as its homeground, last played a PSL game towards the end of January under a difficult situation as it was struggling to pay the salaries of the players.
This was due to SARS putting it under curatorship because it owed a tax of R40 million.
The team’s clubhouse outside Pietermaritzburg and Mkhize’s properties in Durban and Johannesburg were raided late last year and expensive movable assets, including luxury cars, were confiscated.
Strachan said there were no compelling reasons for the council to continue sponsoring the team that was in trouble with SARS and PSL.
“Right now it (the sponsorship) is in the air, the municipality still has it on the budget, which we are obviously challenging.
“It is around R18 million that is outstanding because it should have been paid on an annual basis and in terms of the contract, the municipality is owing the team.
“Legally, in terms of the processes, there is no legal obligation for the municipality to pay and there is no legal obligation for the Royal AM to claim that money,” he said.
The city adopted Royal AM after ditching local Maritzburg United FC, which had been relegated to the Motsepe Foundation Championship.
Upon Maritzburg United’s relegation, Royal AM abandoned a R15 million sponsor from eThekwini Municipality before the deal came to an end and swiftly moved to Pietermaritzburg.
When he was defending the sponsorship, Msunduzi Mayor Mzimkhulu Thebolla previously said the municipality decided to bring Royal AM to the city as it was looking for a PSL team to partner with in promoting Pietermaritzburg.
The aim was that the team would promote tourism in the city by filling up the Harry Gwala Stadium whenever it has home games.
But Strachan said the team failed to fulfil its obligation as there was no documented evidence to prove that the city’s financial gain from the Royal AM.
“The city benefited nothing; we only wasted money,” he said.
He said if the municipality was looking for another PSL team to replace the Royal AM, that team should come to the city voluntarily without expecting financial gains.
“The team should only come in kind to use our stadium as we are not in a position to help anyone financially, but it is more than welcome to come and contribute to the economy and development without any sponsorship ties,” said Strachan.