EXPLAINER | What is Financial Fair Play and how could it work in SA?

27 January 2023 - 08:25 By Marc Strydom
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Mamelodi Sundowns celebrate with the DStv Premiership trophy after their match against Royal AM at Chatsworth Stadium on May 23 2022. Downs are cruising to their sixth title in succession in 2022-23, raising questions over the competitiveness of the league.
Mamelodi Sundowns celebrate with the DStv Premiership trophy after their match against Royal AM at Chatsworth Stadium on May 23 2022. Downs are cruising to their sixth title in succession in 2022-23, raising questions over the competitiveness of the league.
Image: Darren Stewart/Gallo Images

The introduction of Financial Fair Play (FFP) by the Premier Soccer League (PSL), adapted to South African conditions, could benefit small clubs’ progression to better structures as much as it might limit bigger teams’ acquisition of players in an unfair manner.

Jabu Mahlangu’s Twitter rant this week that Mamelodi Sundowns are “destroying South African football” reignited the debate over whether FFP is needed in the PSL. The Brazilians are cruising to a sixth consecutive DStv Premiership title with a 16-point lead just past the halfway mark, raising legitimate questions over the competitiveness of the PSL.

The accusation against Downs is they don’t just buy the top players they need, but sometimes those they don’t just to keep them from rivals. The Brazilians respond that they need to keep strengthening their squad in their quest to add to their 2016 Caf Champions League title.

Critics of their opponents say FFP would not be necessary if big three rivals Kaizer Chiefs and Orlando Pirates simply spent more of their large budgets and all clubs in SA were run better.

 

What is FFP and how is it applied in Europe by Uefa?

FFP was implemented in Europe in 2011 in response to more than 50% of the continent’s clubs being in debt, some alarmingly, to reel in spending and the salary and signing-on fee explosion and prevent instability caused by clubs imploding. Aimed at regulating clubs to operate within their means it was mostly welcomed by club owners, who were having to part with increasing sums of their own money to keep teams competitive.

Contrary to the belief of many, squad sizes are not limited, but reducing squad size in European competitions the Uefa Champions League and Europa League can be a sanction against transgressors, along with monetary fines or complete expulsion.

In 2022 Uefa introduced an overhaul of FFP, and some rules aimed to address how much can be spent on a squad. Limits were relaxed on how much debt clubs can accumulate, allowing losses of 60m from 30m, and 90m if a club is in good financial health. At the same time it limited spending on players and staff (aimed at coaching staff) to 70% of total revenue.

Many clubs in Europe — such as Paris St Germain, owned by Tamim bin Hamad Al Thani, the Emir of Qatar; Manchester City (Sheik Mansour), Inter (Steven Zhang) and AC Milan (Silvio Berlusconi) have mega-wealthy owners who pump in money far beyond the club’s income.

In addition to the losses allowed, there is quite some latitude for owners to pump in money — 50m annually. In terms of sanctions, that latitude grows.

Clubs who go over the limits are not automatically sanctioned. In fact, they don't necessarily ever have to break even. Even if they have run up huge debt so long as they can show a downward trend and solid business strategy, clubs can argue they are on the path to sustainability.

Frankly, without such latitude football's economic model might collapse.

Expenses such as building stadiums and youth structures are not taken into account because Uefa wants to encourage such expenditure.

Yet clubs do transgress to the extent Uefa imposes sanctions — last season eight were fined including PSG (€65m), Roma (€35m), Inter (€26m) and Juventus (€23m).

 

How could FFP be applied in an SA context, and could a form of it be beneficial in resolving SA football’s unique problems?

SA football clubs operate on a radically different model to those in Europe.

Attendances have been in decline since the heyday of crowds in the 1970s and 1980s and now are mostly poor. So gate takings are small.

Only six of the 16 Premiership clubs have a shirt sponsorship. So clubs rely heavily on the R2m monthly grant from the PSL.

The rest of clubs’ budgets come from more lesser kit sponsorships, shareholders and the pockets of club owners. No club owns a stadium, so they rent from municipalities. Some migrate, affecting their support base.

Chiefs, thanks to huge merchandising income, might be the only self-sustaining club and own the most in property in their world-class facility at Naturena. Perhaps to a lesser extent Pirates also are. Both have big sponsorship income. Sundowns have the smallest attendances of the big three and no sponsor, so fall firmly into the wealthy owner (Patrice Motsepe) category.

So to implement regulations that ask for clubs to only spend what they earn would be impossible in the current structure.

But moving towards it is surely SA domestic football's next revolution, the earlier ones being the first national league, the NPSL, in 1970; the richer NSL in 1985; and the professionalised PSL in 1996 that grew in wealth through the 2000s.

Yes, FFP-type rules might limit any club's use of financial muscle in an anticompetitive manner and a squad size limitation could be an SA aspect. It could do so much more though.

FFP that requires teams to have sponsorships, the PSL facilitating introductions to big corporations and skilling clubs in attracting deals — a huge deficiency at most sides — could be a game-changer in restructuring smaller clubs. In SA, FFP could also regulate far better screening of new owners’ finances.

By solidifying regulation and transparency, more of SA’s more reputed, stable wealthy businesspeople might be drawn to club ownership, rather than tenderpreneurs, whose wealth can be transient and business models unstable. Development programmes could be mandatory.

But it would take a huge mindset shift in the PSL to even come close to formulating, let alone implementing, such a plan.

Remember, this is a league that has at best spuriously policed its existing club licensing policy, has conflicts of interest in its leadership structure being team owners and has mind-bogglingly blocked club sponsorships in recent years on flimsy technicalities.

But it could also be a game-changer. Who knows, one day it might happen.


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