South African media question benefits of the World Cup

There is no doubt that the FIFA World Cup is one of the biggest sporting events in the world, having the largest worldwide audience. It is an event that brings the world together, and in 2010 the eyes of the world will rest on South Africa. However, is this enough to justify the expenses of staging the event, asks Sports Illustrated writer Tim Vickery. “Should South Africa really be spending over $6 billion on the event while many of its population survive on little more than $120 a month?”.

South Africa’s economic gain
Last month, The Economist cited a report from the accountant firm of Grant Thornton saying that the World Cup is estimated to give South Africa an extra 0.5% growth. Around 373,000 foreigners are expected to visit South Africa during the tournament (down from 485,000 visitors expected in 2007) each spending $4000 on average. In all, about $12.4 billion is estimated to be injected into South Africa, most of the profits generated before this year. Tourists are expected to account for 16% of the final total and the rest is to come from the South African government’s spending on infrastructure.

Economists are cautious
However, many economists are cautious in predicting a large economic boost for South Africa. Germany, who hosted the tournament in 2006, saw a jump in retail spending and services activity before and during the tournament, but also a sharp slowdown afterwards, writes the Canadian newspaper The Star.

“Although there will be a lasting positive effect on the South African economy via further infrastructure development, investment and tourism related to the World Cup, it is likely to disappoint from initial expectations” says Noelani King Conradie, managing director of NKC Independent Economists in Cape Town.

“The lasting effects of the global financial crisis and South Africa’s image abroad as a dangerous and crime-ridden country will be the biggest negative factors”

“The World Cup will probably have an impact on the economy, but by less than what was initially expected as the number of foreign arrivals (and estimated amount spent per traveler) looks set to fall short of expectations” said Jean-Francois Mercier, an economist at Citi.

In all, analyst Udesh Pillay of the Human Sciences Research Council predicts that in a best case scenario, South Africa will be able to break even on the expenditure of the World Cup.

Short term benefits?
In order to protect its sponsors, FIFA has set up a list of very strict copyright regulations that makes it even less likely that the average South African will profit from the event.

Many informal traders have for years been selling home-made food and drinks to the crowds around the stadia, in order to make a living. Some sell home-made souvenirs, such as armbands with the South African flag and 2010 on them in order to make a small profit from the World Cup. However, what they are doing is now illegal.

Unlicensed traders are not allowed to sell foods and drinks within 1 km from the stadia. Shop owners around the stadia will also lose out as they are not allowed to operate during the tournament unless they pay a large fee.

This infringement in the livelihoods of some of the poorest South Africans seems completely ridiculous to many South Africans:

“All these restrictions, we are told, are meant to protect FIFA and its overzealous protection of sponsors against ambush marketing, but since when is pap and shisha nyama (local South African food) going to infringe on anybody’s trademark and copyright” asks the columnist Pinky Khobane in the South African newspaper The Sunday Times.

Columnist Shipho Hilongwe even goes so far as to say that “The World Cup is FIFA’s event. They just rented the country from the government”

Long term benefits?
The construction and improvement of stadiums for the World Cup and the improvement of the infrastructure in South Africa has created thousands of short-term jobs. However, economists say that the tournament is not expected to have a lasting impact on employment.

In a poll, slightly more than half of the economists asked, 12 of 22, expected the World Cup to have a lasting impact on foreign direct investment, writes The Star.

However, more intangible benefits can also be expected, as the World Cup in South Africa is also a very expensive branding operation. Historian Peter Alegi says in Sports Illustrated that “The world cup is an opportunity to show that South Africa is a modern democracy, technologically advanced, business friendly and also an attractive tourist destination”

The final legacy and economic benefit for South Africa might therefore take many years to measure.

FIFA takes the cake
Many South Africans are beginning to realize that, while South Africa is bearing most of cost, FIFA stands to lose very little and gain very much from this mega-event. FIFA is responsible only for the prize money paid to the participating teams and their travel and preparation costs, writes the Economist.

According to a report from Institute for Security Studies, it is estimated that FIFA will generate an income of between $3,2 and $4 billion from the event. Also, all revenues from television ($2 billion), marketing ($1 billion), hospitality ($120 million) and licensing ($80 million) go to FIFA and its local organising committee.

FIFA’s huge profits from the World Cup already is in The Mercury even compared to “a dinner-party invitation from a friend where you end up picking up the bill, and are expected to be eternally grateful for the honour of being chosen to pay”

In 2005 one in three South African hoped to personally benefit from the 2010 World Cup. That number fell to one in five in 2009 and today, just ahead of the tournament, only about 1% of South Africans believe that they will experience any benefits from the World Cup, says Udesh Pillay.

While the bookmakers are talking about Spain and Brazil as potential winners, a lot of South African voices seem to agree: the big winner will, again, be FIFA.

 See also Andrew Jennings' article on the disillusioned South African media