World Cup: Our saviour or peril?

2010-02-11 00:00

FEW post-apartheid events have borne such a heavy burden as this tournament, which carries the immense aspirations of an entire nation.

Indeed, few topics in South Africa elicit such polarised viewpoints.

Some optimists proclaim the tournament as South Africa’s “saviour”, while naysayers are adamant that the event will do little for the country.

It appears that even economists, analysts and researchers are divided on what will be the ultimate impact of the tournament on the South African economy.

First, a reality check from a professor of economics at the Cass Business School in London, Stefan Szymanski.

Szymanski, who co-authored a book ­titled Soccernomics, told The Witness that the overall impact of the tournament on the economy is likely to be small.

“From an economic perspective hosting a tournament like this is likely to be at best neutral. However, this does not mean that the tournament is a bad thing — it is a big African party and it should be a joyous occasion. I think it is very sad that a sports spectacle which brings pleasure to billions should be expected to justify itself on whether it makes the host richer,” Szymanski stressed.

Vanessa Tang, lecturer in economics at the University of KwaZulu-Natal (UKZN) Pietermaritzburg campus said that although overall confidence surrounding the event is high, the country’s growth rate will remain unimpressive. She also cited concerns over inflation and possible interest-rates hikes in the near future.

Although Jessica Schroenn Goebel, also an economics lecturer at UKZN, does not believe the hype, she is more optimistic about the potential impact of the event.

Goebel said that the impact should come from two sources, namely massive infrastructure spending pumped into the economy in preparation for the event, as well as expenditure by visitors during the tournament.

“The kickstart to nonsports infrastructure in preparation for the tournament is another big plus for the economy — for example, fast-tracking of the new Durban airport is thanks to 2010, and that has been very good news for the regional economy. General infrastructure improvements, roads, transport and security are also positive spinoffs. All of this spending would be expected to have multiplier effects which will resonate into the medium term, boosting GDP [gross domestic product], incomes and employment,” she said.

SZYMANSKI warned that foreign visitor numbers will not be as high as some people expect.

“From all I have heard, South Africans have scarily high expectations. Most of the evidence shows that visitors to these events want to see the football, they want cheap accommodation and they want to keep the cost of food and beverage to a minimum. I think South Africa has overestimated how affluent most of the fans will be. Under normal circumstances I would not be optimistic – it’s very expensive to get to South Africa for most fans. With the world economy in such poor shape and unemployment rising, most people are tightening their belts.”

He also believes that there will be many “displaced” visitors — particularly people who would otherwise have come to South Africa during the period but will avoid travelling due to the World Cup.

Cadiz Securities research analysts Shamil Ismail and Jasmine Lin recently expressed similar sentiments.

Noting that visitors from Africa comprise the bulk of off-shore tourists to South Africa, they predict a decline in intra-continent tourism during the World Cup, as many African visitors may choose to avoid the expected crowds.

Ismail and Lin added that a strong rand could make travel and accommodation more expensive for foreigners, reducing rand purchases made by foreigners.

AS anticipated, tourism-related businesses such as hotels, restaurants and bars are expected to perform well — as are several other sectors.

Goebel said construction and related upstream sectors have already benefited.

“We’ve been cushioned from a worse recession by the stimulatory effects of the increased infrastructure spending,” she said.

But Szymanski is adamant that every other sector except hotels, restaurants and bars will be left out in the cold.

THERE is a general sense of agreement that geographical areas outside host cities and host towns will struggle to make the most out of the event.

Tang agrees that the areas located on the outskirts of the “gaming area” might not benefit a great deal.

Goebel said that the eight matches hosted by Durban will be of critical importance for KZN. Durban is where “most of the local spending will happen. But there will be wider effects as fans take in more of the country, and as the ripple effects of increased spending spread economy-wide. Fans will stay for several days to three or four weeks and many will want to see the surrounding areas,” Goebel said.

For Szymanski, proximity to consumers remains the key: “To benefit you have to be near to the consumers who will buy things,” he said.

Goebel stressed that — judging by the experiences of previous host countries such as Germany in 2006 and Korea and Japan in 2002 — the tournament will leave other positive legacies.

“The biggest potential benefits to the country are likely to be less tangible, longer-term impacts. Assuming we pull off a successful tournament, we’ll enhance our international image, which could give a sustained boost to international tourism, trade and foreign investment. In addition, the domestic ‘feel-good’ factor is significant — increased national pride and unity is valuable even though it doesn’t easily translate into rands. It’s also likely to lift business confidence.”

Whether the tournament delivers significant economic benefits or not, perhaps this comment from Tang sums up the true spirit of the tournament: “Reportedly hosting the soccer did not make the Germans rich but it appeared to make them happy. Let’s hope that after the game South Africans will be richer and happier.”

“FIFA is entitled to protect its intellectual property, and if there were no controls then rip-off products would undermine the economic value of the tournament, but Fifa also wants to keep most of the economic returns to itself, meaning that South African businesses are unlikely to gain much of a benefit. Even if Fifa wanted to help the SA economy, the relative insignificance of the World Cup in economic terms [rather than social or political] means there is not much that the event can do to boost the economy.” — Professor of Economics at the Cass Business School in London, Stefan Szymanski.

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