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Will the South African economy get a kick from the World Cup?

Sandeep Mahajan's picture

As the month-long FIFA 2010 World Cup tournament kicks-off on June 11, all eyes will be on South Africa. Quite literally, since the 2006 tournament in Germany had a global viewership of around 30 billion.
 
The event is an opportunity for South Africa to showcase itself not just as an attractive destination for tourism and investment but also as the Rainbow Nation, home to people of every race, color, and creed.
 
The economic dividends will be plenty. As President Zuma explained: “the country’s transport, energy, telecommunications, and social infrastructure are being upgraded and expanded. This is contributing to economic development in the midst of a global recession, while improving conditions for investment.” 
 

Some economists are skeptical, seeing white elephants in large stadium constructions and citing analyses that show little net economic benefit to the hosts of previous such events.

 But close to 300,000 tourists are expected to come watch the World Cup. Assuming average per-person spending of $5,000 (excluding tickets), that translates into a cool gross gain of $1.5 billion for the South African economy.  Oddly enough, this would still be dwarfed by FIFA's profit from the World Cup, but that's a topic for another blog post.
 
Recent analysis by Grant Thornton, a firm of accountants, found that the World Cup may boost GDP by an additional 0.5%, confirming the estimate put out earlier by the National Treasury in February. The timing could not have been better since it coincided with the general economic downturn. Moreover, the country will be left with brand new, ultra-modern international airports in Durban and Cape Town, expanded and refurbished highways, and modern public transportation systems (think Gautrain!), overcoming many of the previously known infrastructural bottlenecks.

Even if none of this materializes, it doesn’t matter, because as Simon Kuper and Stefan Szymanski say in their book Soccernomics, “hosting doesn’t make you rich, but it does make you happy.”

Comments

World Bank should now channel alot of its money that it grants orloans to African Governments to Private Organistions mostly SMEsand Civl Soviety of the Southern because the SMEs are it touch with and are operated by the poor whom we want to get out poverty. Also African Govrnments have perpectualy misused the funds infornt of the eyes of the ever aware officials of the World Bank. Yet payments of the loans are shoulded by the poor who do not make away with a single cent. Finally W/K has always very secretly granted or loaned African Governments funds even payments from taxes are done very secretly. So actually W/Bk is the one that taught these guys non- transperancy and impunity for nobody can question the W/Bk if not the Almighty GOD

Submitted by ismail abuu on
yes mwololo you are absolutely right, to put it a nutshell the giant world bank is in essence a tool to enhence colonialism and exploitation of of africans in a new style.however, on thing is certain and clear;should the african sme's and civil society united to form one powerfull block then they are sure to beat the self-styled,greedy,dictatorial governments of africa. its the only way to ripe the benefits arising out of wb.and be it known that we have a share of whatever come out of thhis institutions. afterall the funds building and operating it partly the result of alongtime global imbalanced economic order. sme's and civil societies unite! long live africa and africans

Submitted by Salima Kane on
Both economists and poli Sci specialists should have mixed feelings. I will comment it as a Political scientist, first i was trained like one and secondly having been several times to South Africa. My answer to it is yes: World Cup will boost the South African economy but, truly through a smaller percentage. Tourists are not only coming to watch all soccers, but, will also visit other attractions. You see it is important to bear in mind that South Africa is politically stable, that is a great advantage and thanks to the hard work of Nelson Mandela and other people, the country does not have political unrest. I am a little bit skeptical though and truly concerned about security, though it has been beefed up in the preparation of the world cup, but, certain areas though attractive to tourists like Soweto where Mandiba himself has lived could be a little insecure sometimes. Let me back up to a little bit to the real question: Would the world Cup boost the economy? yes it will ; South Africans are smart and very eager to chance the image of their own country, by changing this image, it will also reflect on the entire continent. Remember vast amount of money has been injected into this world cup to beautify South Africa: constructions, infrastructure etc. Yes it will indeed boost the economy mostly from tourism: Hotels, attending games, and other attractions; but, only to a certain level . But, my question to the audience is WHO WILL TRULY BENEFIT FROM THE ECONOMIC BOOST? REGULAR SOUTH AFRICANS OR THE SHAKERS OR THE MAKERS OF MODERN SOUTH AFRICA? Salima Kane,

Submitted by mosca on
The event it’s already a large recompense for this country. I’m sure many problems will be still there and could not be solve by the world cup, but in many ways the south Africans will be more confident in their ability, in their competence and also they will have the clear perception that they have definitely enter in a new era. Give them this chance and good luck to the rainbow nation!

By all means South Africa is very fortunate as always, we must at this moment pay homage to that Great force of stability, the Great Mandela who still remains alive to see this great event in his life time as a unifying factor of a great African country. South Africa is richer in terms of improved infrastructures, which has always been there with the best of maintenance culture in Africa. South Africans must be happy for hosting the whole world. They have always been hosting the world round the year on tourism scale. Their efforts have now been further blessed. Kudos to the builders of that great African country where almost everything works! While I am not in position to contest the indicators proposed by the financial analysts, I have no doubt in my mind that South Africa being a serious developing nation, will make do with every opportunity this time offered it. All it need do is to further strengthen the country’s rule of law. Best wishes to South Africa!

Submitted by Ramata on
SA is already the first economic power in Africa and among the G20. If SA succeeds in organizing the WC that will be a great deal to improve the image of the continent and at this stage, the continent might attract more invetors. Ra

Submitted by Ahmed Ali on
I believe that it will boost the country's economy significantly in the longterm depending on how well the whole event ends. Nevertheless. there will be also a slight bosst in the short term as well.

Whether or not the World Cup will boost the South African economy, it is definitely a step forward. Although FIFA will have to get their profit from the estimated 0.5% additional to SA's GDP, there will still be a fraction of that left. No matter how small that is, it's still a plus. Even if there was no additions to the GDP, the infrastructure development due to hosting the world soccer tournament is an investment that will spare the country resources to commit to other parts of its economy, at least in the next couple of years. In addition, many people visiting SA for the first time on account of the World Cup tournament this year, may find lots of amusement which will cause them to go back there and add value to the country's tourism industry.

The South African economic is comparatively in a better shape than many other countries in Africa. Proir to the World Cup SA is a country that receive an enormous inflow of tourists that help builds the economy. Unfortunately, the high level of corruption continues to hinder development. I do not expect that the world cup will help kick the South African economy any different from what already exist. However, it is fair to say that the World Cup will help add to an economy that has a great potential for growth.

Submitted by Ola Onikoyi on
Although economists may rationalise their proposition that the world cup woudn't bring enormous benefits to South Africa using various theories. I do think that sometimes there is awide disconnect between theories and reality. The fact is South Africa has already began to enjoy the micro economic dividends of the world cup hosting. We've seen in Soweto how Nike for example have established a football academy that will engage youths and help towards talent development including HIV mitigation. This laudable project is apart from the very fact that transportation and infrastructure has been improved markedly by the government. While I agree that a lot of small businesses have been hit, there is no doubt that a lot of small businesses have also been given the opportunity to cash in. I don't want to talk about FDI simply because, it may run negative through capital flight, but the short term injection of FDI will really play a tremedous role. Lets not forget that the roads have bene improved, more hotels have been built and more local amenities have been improved. I don't think this developments will dissapear anytime soon, even years after the world cup have been played...

Submitted by Raj Raina on
It would also be interesting the discuss if we will see a sizeable increase in tourism revenue not only in South Africa but also other tourist hot spots in Africa such as Kenya's Mount Kenya national park, Maasai Mara, Amboseli national park and Tanzania's Serengeti and Kilimanjaro national park? Also what a good Soccer World Cup delivery can do for the branding of South Africa?

Submitted by Emmanuel on
Certainly, the South African economy will get a kick from the World Cup. However, one important question is whether the kick will "score a goal" or "miss the post." No matter how it goes, we cannot take it away the fact that South Africa is going to reap in other various dimensions including "status" and "re-announcing" its presence in the world as a major player in international affairs. At a micro-level, the unemployed bricklayer who suddenly got employed, the vendors and hawkers who sees an increase in business activity because of the World Cup in South Africa will defintely get a kick from the World Cup.

Submitted by Zé Alves-Pereira on
I do not think there is a model able to predict exact conclusions before 5 years time. By then it will not be a model... that goes for nowadays modelling. What I can say is that the Olympic Games did not really help the Greeks and the Euro 2004 did help the Portuguese. Nowadays, they are both PIIGS but the overall investment on this mega events reveals different realities. In Lisbon and Porto the new stadiums built for the Euro keep filling up whereas the Olympic city in Greece became a ghost town. One issue is that the budget was not respected and that creates additional problems. We will have to wait till the Final so see how many people come. It is also important that the new facilities created have a further purpose. There is another major issue for ZA – to prevent any disaster during the championship, particularly man made disasters. And that is an exogenous factor that is highly vulnerable. If it goes well –and I sincerely hope so- I'd say it will be very positive. If not for ZA in particular, it will be for Africa in general because football is not all about money and revenues. If Africa shows the World that they can organize –and I know they can- another fantastic World event – in the mid, long run that will be always positive; firstly, politically, afterwards economically. Long life to the Bafana Bafana and I hope the final will be against Portugal.

Submitted by GS RADJOU on
I am happy South Africa won the world cup. I hope we all share this idea. Hopefully, willing to make goods is not all the time fulfillefd. Hope their are less crimes and a peacefull civilian society an a better one also. I think it is the puposedly goal of the 2010 world cup in South Africa with all organizations that hva build that game.

Submitted by Rodney Atuhaire on
The fact that there has been new infrastructure put in place and existing facilities probably rehabilitated is already in itself a huge benefit. But the question is will the local South Africans be able to sustain it? Do they have the resources to sustain this infrastructure. We already know that football is not such a big thing in SA like the way Rugby is. With the level of corruption, skilled man power, security concerns and not to mention other economic variables like aspects like disparities in income levels that result in social unrest. Then there is still a long way to go to assess how benefical this has been to South Africa. But lets not forget South Africa is an economic powerhouse in Africa. There is alot to learn by other nations and in the scheme of things South Africa has created that embodiment of success in the region by hosting the World Cup. R

Yes...South Africa has good economy comparatively than the other African countries. However, only this wold cup will not make a huge change. In reality, It will take a lot more than this FIFA event to give South Africa's need of change.

Submitted by Stanley Ndawula on
I believe it will build south africa's economy and build it, thus boosting the tourism industry in south africa. This will encourage youth in south africa and across the africa region to like football and develop their talents through sports. Perhaps it will help reduce poverty across africa and also encourage young people work as a team for a better africa

Submitted by Tafadzwa Muropa on
the World Cup will definitely boosts the South African economy, especially in the tourism sector, with the hope that it will also trickle down to the rest of the Southern African region..that is yet to be realised , the key question is whether the ordinary South Africans benefited economically and the answer is obvious- not many will benefit, so really at the end of the day, capital wins and the poor suffers!

Hi there every one! Congratulations for the debate, I just think that South Africa will profit if the other countries near will grow to, I even think is the only way. Have you ever went to that region? When you enter South Africa from another country you think that your are entering in another Dimension, I mean there you have an industrialized country in the middle of nothing, there are no higways untill you get in there. It will be impossible to grow thowsands of kilometers from the civilization

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