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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.”