||Do you remember where you were when it was announced that South Africa had won the bid to host the 2010 FIFA Soccer World Cup? Throughout the country, a unified chorus of approval was sounded as history was finally made for both South Africa and the continent.
The awarding of the Soccer World Cup tournament inevitably generates a great deal of emotion – tears of joy for the successful host nation and tears of sorrow for those who miss out. South Africa knows this emotion all too well, having experienced both the highs and lows of tournament announcements in recent years.
Inevitably though, once the emotions have died down, the focus turns to the important matters of money and finances and there is a need to understand the wider economic realities of the tournament. So, just what are the economic impacts that 2010 will have on South Africa and what will the likely lasting economic legacy be for the country?
To begin with, the economic impact of the World Cup tournament can be seen in both direct and indirect benefits. It will directly impact the country’s infrastructure, tax base, tourism and hospitality revenue generation. Publicly financed capital improvement projects are being undertaken to prepare the country for the tournament, such as new or improved stadiums and road and transport infrastructure construction. Private companies are also working to expand capacity in advance of the World Cup, such as increasing the number of hotel rooms for the influx of visitors, who travel to watch the tournament— and these soccer tourists mean potentially millions in additional sales for local businesses. Indirect impacts include country marketing value, secondary and tertiary follow-on spending, and the increase in national pride that naturally accompanies the tournament. Commentators remind us that, whilst South Africa will receive a massive direct boost from hosting the World Cup, the likely spin-offs of an improved image abroad will have an even greater and long-lasting impact.
While there are many differing studies into the economic effect that the World Cup delivers, the majority agree that the tournament brings an economic prosperity along with it. Consider that over 36 billion consumers watched the last World Cup on television and that the final between France and Italy had over 2 billion television viewers watching live. The economic reality of the tournament is obvious. But what can South Africa learn from past tournaments?
Nelson Mandela, seated next to bid chairman Irvin Khoza in Switzerland, could not hold back the tears as one of his dreams for South Africa was finally realised. “This is for Africa and its people”, said a remarkably calm Khoza. “For 44 million South Africans, this is for you. We have the jewel in the crown of sporting events.”
The 2006 World Cup in Germany was the largest ever tournament. The country took advantage of the tournament to build new stadiums as well as rail stations, rail tracks and modernizing highways in an effort to fast-track the upgrading of their infrastructure. The World Cup had a very positive effect on the country’s economy and helped improve its image inter-nationally. The four-week tournament earned Germany’s tourism industry an extra $399 million in revenue, added 2 billion euros to retail sales and yielded 50,000 new jobs, according to the country’s final report on sports’ biggest event. Ticket sales funneled a further 40 million euros into the treasury, while the World Cup Organizing Committee earned a net profit of 56.5 million euros, which will go to the German Soccer Federation (DFB) and German Soccer League (DFL). While the cost of holding the World Cup in terms of infrastructure racked up a bill of 3.7 billion euros, Germany welcomed 15 million more visitors, and their euros, to the tournament than original estimates suggested.
While South Africa’s hosting of the World Cup is not expected to draw as many foreign visitors as the 2006 German World Cups, the economic benefit will be great, due in part to the historical nature of the location and the already emerging economy of South Africa. According to consulting firm Grant Thornton, which drew up the financial impact report for SA’s World Cup Bid Committee, the event will lead to direct expenditure of R12,7 billion and will contribute R21,3 billion to GDP. It will also generate the equivalent of 159,000 annual jobs and an additional R7,2 billion will be paid to the Government in taxes. On a more intangible note, there will be an increase in tourism and foreign direct investment and the profile of the country will be raised generally. It will also foster confidence and national pride on the part of the local population.
Judging from the economic history of the World Cup Soccer tournament, South Africa stands to gain tremendously both in public and private economic terms. If the country’s GDP follows the historical trend, it will experience substantial gains in 2010. It is also likely to show gains in the years that follow due to the continued pay-off of public and private investment in facilities and in infrastructure. In addition, South Africa’s opportunity to bask in the sole world-wide spotlight for the duration of the event provides an unquantifiable advantage in the promotion of tourism in the country. Furthermore, the country’s surge in nationalistic pride will no doubt carry over into other non-sport related areas.
Let’s hope Sepp Blatter was on the mark when speaking at the ‘2010 FIFA World Cup Business Opportunities’ conference held in South Africa in June this year when he stated, “Apart from the Soccer World Cup, there is no other sporting event that has such huge economic and financial benefits.”With such an optimistic economic outlook ahead it can only be a case of roll-on 2010!