Peter Pietermaritzburg High Court Declares Royal AM’s R27 Million Sponsorship Deal Unlawful

Peter Pietermaritzburg High Court Declares Royal AM’s R27 Million Sponsorship Deal Unlawful

The Peter Pietermaritzburg High Court has struck down Royal AM’s R27 million sponsorship agreement with Msunduzi Municipality, ruling it unlawful and ordering repayment. The deal, signed in 2021, provided R9 million annually but was paid upfront, which the court found violated proper financial oversight.

The Democratic Alliance had challenged the sponsorship, citing the Municipal Finance Management Act and alleging wasteful expenditure. Speaking on the matter, sponsorship expert Stuart Masela explained the distinction between sponsorship and donations. “If it was a donation, it could be retained, but a sponsorship implies that the funder expects returns. Without proper contractual terms, this deal functioned more like a donation,” Masela said.

The Royal AM sponsorship, according to Masela, failed to provide measurable returns to the club or benefit the municipality. Most of the team’s matches were held outside the municipality, raising questions about the sponsorship’s impact on the local community.

Masela also highlighted that proper sponsorship contracts require careful planning, legal review, and alignment with corporate governance. “Sponsorship is a partnership. Both parties should know their objectives, how value is measured, and the penalties if expectations aren’t met. Without this, the money cannot be considered a proper sponsorship,” he added.

The Royal AM-Msunduzi deal serves as a cautionary tale for both brands and rights owners. Brands must clearly define the benefits they expect, while rights owners must ensure they can deliver on the contract. Masela concluded that well-structured sponsorships, like SASSO’s long-term support of women’s football, deliver measurable returns over time, benefiting both the sponsor and the sponsored entity.

The court ruling underscores the importance of transparency, contractual diligence, and adherence to financial regulations in sponsorship agreements.