There are claims that key South African sponsors have withdrawn their funding.

Eastern Province, Western Province, Free State and the Blue Bulls were due in Wales in early November to challenge Llanelli, Cardiff, Pontypridd and Bridgend

It was hoped that the competition would keep Welsh players who were not on international duty active, plugging a gap in the club rugby season.

Llanelli chief executive Stuart Gallacher said: "The original deal was that we would share the net gate receipts between the teams.

"But we had to cover the costs of the hotel accommodation and transport of the four South African sides out of that money.

"They had a sponsor for their incoming and outgoing flights. But I was then informed in an e-mail that was no longer the case and that the sponsor had been withdrawn.

"They were looking for us not only to cover the cost of the accommodation but the flights as well. That was a massive change to the original deal and I believe is too much of a financial risk.

"It is my view that the tournament will now be cancelled."

Proposed fixture list for the Challenge Cup

Four points for a win, two for a draw.
Bonus points: One for losing within seven points, one for every four tries scored

Friday 8 November
Bridgend v Eastern Province
Cardiff v Free State
Llanelli v Western Province
Pontypridd v Blue Bulls

Tuesday 12 November
Bridgend v Western Province
Cardiff v Blue Bulls
Llanelli v Eastern Province
Pontypridd v Free State

Friday 15 November

Final (the best Welsh and best South African teams will meet at the Welsh club's ground)