Formula One F1 - Abu Dhabi Grand Prix - Yas Marina Circuit, Abu Dhabi, United Arab Emirates - December 8, 2024 Mercedes' Lewis Hamilton in his car after finishing fourth in his last race for Mercedes.
In his capacity as Governor of Machakos County, Alfred Mutua launched a mini Formula One race circuit in Machakos on April 27, 2022. Although dismissed by sceptics as an unsustainable venture not backed by solid financial and infrastructural plans, it is the closest Kenya has come to having a Formula One race track.
But Rwandan President Paul Kagame is on his way to actualising what has remained a pipe dream for Kenya – building an international Formula One circuit.
On December 13, Kagame announced his country’s bid for a Formula One race when the country hosted the 2025 FIA awards ceremony in Kigali, where Red Bull driver Max Verstappen was handed a fourth title in a row.
Formula One has not raced in Africa since the last South African Grand Prix was held at Kyalami, north of Johannesburg, in 1993.
“I am happy to formally announce that Rwanda is bidding to bring the thrill of racing back to Africa by hosting a Formula One Grand Prix,” Kagame said in an opening address to the governing FIA’s General Assembly.
Rwanda plans to host a race at a permanent circuit, to be designed by a company run by Austrian former F1 racer Alexander Wurz. The circuit will be built near a new international airport under construction at Bugesera, some 40km from Kigali.
South Africa has also announced that it will bid to host a Formula One race.
But what does it take to host a Formula One race? Across the globe, a Formula One circuit is the work of the central government, or extremely rich investors because it is very expensive to build and maintain it. The huge investment does not guarantee any return on investment but in some countries, such circuits are used for testing cars and hosting other forms of formula racing.
F1 is big business and attracts extremely rich individuals. They do this to serve the rich, royalty and famous people who spend millions of dollars on entertainment and can fork out as much as Sh200,000 for a ticket to Las Vegas, or Sh20,000 for a race ticket at the Chinese Grand Prix.
Independent F1 industrial sources claim that a grade one F1 circuit will cost US$270 million (Sh34.8 billion) to build, in addition to an annual maintenance fee averaging $18.5 (Sh2.38 billion).
Throw in $14 million plus (Sh1.8 billion( for the grandstands, $14 million Sh1.8 billion) on safety barriers, and $8 million (Sh1 billion) for fencing, race pits, offices, parking lots and finally you have an F1 circuit worth Sh40 billion, according to the Journal of Economics at the University of Michigan.
Things start getting interesting from here. A company known as Liberty Media, the owner of the Formula One franchise, will travel to Kigali to inspect and certify the track, then demand its promotional fee of Sh1.9 billion to Sh6.4 billion, depending on the slot of the year.
Prime time races like the Qatar Grand Prix, and Abu Dhabi Prix held towards the end of the year cost Sh6.4 billion in promotional fees. Unlike the WRC Promoter in the case of the WRC Safari Rally who ask for millions of shillings, Liberty Media continues to ask for more.
All revenue from track sponsors and broadcasting rights for races goes to Liberty Media. And, for the 2023 season, sponsorship revenue came out to $445 million (Sh57.4 billion). Liberty also takes home all the broadcast revenue in 2022 totalling $936 million (Sh120.7 billion), according to the journal.
Now, will Rwanda be smiling all the way to the bank?
The country’s sole revenue will emanate from ticket sales, which is not enough to make an F1 venture profitable.
“The Indian and Korean Grand Prix are two of many historic examples which show how hard it is for track owners to gain profits when tickets are their sole revenue source,” said the Journal.
The two countries hosted only a few Grand Prix races and cancelled future ones for multiple reasons, but large financial losses appeared as one of the main ones.
The Indian Grand Prix in 2013, its last year of operation, lost $24 million while the Korean Grand Prix lost $37 million in 2012, as Reuters international news agency reported.
So why should governments and private track owners take this risk of burning money? Owners of Kyalami in South Africa, the last circuit to host an F1 race in Africa in 1993 had approached the tourism ministry to underwrite its expenditure to enable it to bid for hosting rights for a round of the 2025 championship last year but the deal did not go through.
Well, Rwanda has found F1 and hosting major international events as an avenue to increase its tourism arrivals.
Evidence shows that money brought in by tourism and travel due to the Grand Prix actually stimulates local economies with positive returns.
It is estimated that Las Vegas raked in an estimated $1.2 billion (Sh154 billion) from expenditures on hospitality, accommodation and local businesses from an initial investment of around $500 million (Sh64.5 billion) last year in the Las Vegas Grand Prix. Britain is expected to account for a generous amount of foreign exchange inflow and spend from the 490,000 spectators who attended this year’s British Grand Prix at Silverstone, the highest in the 24-race calendar.
The Qatar Grand Prix held at the Lusail International Circuit was attended by 194,000, some of them Kenyans with disposable income, according to Tuta Mionki who attended the event as an observer steward.
From 2008 to 2018, the Singapore Grand Prix benefited local economies by bringing in 450,000 additional visitors who spent around $1.4 billion in the local economy.
And finally, the Mexican Grand Prix hosted in Mexico City continues to bring in a 12 percent annual increase in stays at luxury hotels on race day weekend. Mexico City also continues to see visitor spending averaging about $1,730 per person for the Grand Prix weekend on goods and services unrelated to Formula One.
So what gains for Rwanda? The country raked in $620 million from 1.4 million visitors last year, according to the Visit Rwanda website.
But Kagame knows if his race can add several hundreds of thousands to the 1.4 million visitors, then in the long run the country will benefit from its huge investment in sports.
