The Cheetahs face an uncertain future after having to enter negotiations with the South African Revenue Service (Sars) for the repayment of outstanding fees.
“We are currently in discussions with Sars,” the Cheetahs replied to a question posed by the Sunday Times after CEO Ross van Reenen refused to be interviewed on the matter.
One well-placed source revealed the Cheetahs owe R25m but could not provide more details on how such a significant amount had accrued.
The timing of the Cheetahs’ fallout with Sars is far from ideal, as they’re currently in negotiations with a proposed equity partner. However, the significant tax bill and the handbrake it will place on their future profits, have already made their negotiations trickier than they ought to be. “Yes, they are,” the Cheetahs replied when asked if the proposed equity partners were in the loop on the Sars matter.
Asked whether it has complicated negotiations, the Cheetahs said: “Everything [income and liabilities] has been declared as part of the due diligence.”
The Cheetahs were coy about the details around a potential equity partner. “We are in negotiation but cannot divulge more at this time due to the sensitive nature of the negotiation.”
They would not reveal what percentage they are putting up for stake. “This is equally sensitive and cannot be discussed yet.”
They conceded that the debt has negatively affected their operations. “Like with all companies operating under difficult economic conditions, all liabilities negatively impact operations.”
There will be many questions about how the company ran up such a significant tax liability, especially with Van Reenen — a self-described “expert of more than 30 years’ experience on financial planning, insurance and management programmes for managers as well as people in leadership positions” — at the helm.
The Cheetahs described him as having “an impressive track record as financial growth, transformation and turnaround leader, CEO, board chair and developer of businesses and people”.
Van Reenen, who represented Free State in more than 60 matches, took the job in November 2021 amid much change on the South African rugby landscape.
The Cheetahs did not form part of the United Rugby Championship and have been struggling to make ends meet.
SA Rugby are in no position to alleviate their plight given the sheer weight of the outstanding fees. The game’s governing body continues to help affiliates in financial distress, but the scope of this matter is beyond their reach.
The Cheetahs may owe Sars a significant amount, but they are some way off liquidation. Should they secure an equity deal, Sars will likely look favourably on their prospects of repaying what is owed. Ultimately, all Sars wants is to recoup moneys owed.
As long as the Cheetahs comply with the conditions of their repayment plan, they should be in the clear. However, noncompliance or failure to meet deadlines could see the full weight of tax law applied. They would have a capital amount outstanding, as well as likely interest and penalties.
As an entity with a turnover exceeding R1m, they would have registered for VAT. If they under-declare or fail to declare income, they would also fall foul of tax law. Sars would declare a dispute that could see it freezing banking accounts, recouping funds directly and eventually liquidating the organisation.
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