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article imageWhat are the benefits of World Cup 2010? Special

By Sharon Davis     Jun 9, 2010 in Business
Durban - Not long after the jubilant day in May 2004, when South Africa won the right to host the games on African soil for the very first time in 2010, pundits began been extolling the benefits of the games to 2010 and beyond.
This sort of rhetoric and PR speak has continued in the run-up to the games. As recently as June 7 South Africa's president Jacob Zuma has been quoted in the media saying that South Africa would benefit from the investment in infrastructure and would also benefit from the unifying force for years after the tournament.
In the initial run-up to the games foreign tourist arrivals were forecast at around 483,000 and the expectations were high that the South African, and her neighbouring countries, would see a tangible economic benefit.
More recently global audit and advisory firm, Grant Thornton, maintains that there are a number of reasons for South Africa to remain optimistic, it does appear that the benefits to South Africa and the region will be lower than initially forecast.
Factoring in the recent world-wide recession recent projections from Grant Thornton released on April 21 saw foreign tourist numbers drop to 373,000, but they say that these visitors are expected to stay longer and spend more.
Their conclusion was that the forecast net economic impact for South Africa remained unchanged at 0.5% of Gross Domestic Product (GDP), and add that the economic impact is significantly higher if one factors in higher government spending and the number of jobs sustained.
According to the advisory firm’s report South Africa government has spent ZAR 30.3bn, up from a budgeted ZAR 17.4bn (USD 3.87bn) in addition to ZAR 9bn spent by local government, while the gross economic impact of the Soccer World Cup is estimated at ZAR 93bn (USD 11.87bn) with 62% of the generated before 2010 and 38% during the course of the year.
While other forecasts have put expected foreign tourist arrivals as low as 250,000 the National Department of Tourism has confirmed that they expect “100,000 less” visitors.
The department’s Chief Director Communications, Trevor Bloem, said: “Even though we will receive fewer visitors than originally anticipated, the event will be a success.”
Bloem said that the take-up of accommodation packages in South Africa’s neighbouring countries was not very high, and that it was unclear how many visitors would actually visit SADC member countries during and after the event.
“From a generic point of view the games will certainly contribute to a positive image of Africa and therefore the neighbouring countries should benefit in the long-term,” said Bloem.
In contrast, German journalist Jens Weinreiche has been warning us for a couple of years not to expect too much from hosting the 2010 event. He has reported on mega-sporting events for many years and says they simply do not have the significant impact that everyone expects.
He also said that the 2006 Cup had no effect on Germany’s GDP, but said that maybe the 2010 event might be different and could have a small effect on South Africa’s GDP.
The Regional Tourism Orangisation of Southern Africa (RETOSA) was mandated by SADC in 2004 to draft a 2010 FIFA World Cup Regional Tourism Organising Plan in the hopes of promoting tourism business within the SADC region and encouraging business and investment.
In a recent newsletter, Kwakye Donkor, Marketing and Communications Director of RETOSA appealed to locals not to heed the pessimistic suggestions that Southern Africa would not benefit from the mega event.
“Thousands of people will be crossing our borders to and from South Africa. The World Cup is a five-week event in which many visitors may choose to travel across the borders between games. Countries must pursue opportunities to market their tourism attractions aggressively in South Africa during that time – not only to lure tourists during the World Cup but also to entice them to return for further exploration,” said Donkor.
RETOSA anticipates that the region will benefit from both the media focus on South Africa and the increased tourist arrivals, and notes that there sill also be non-football lovers who would choose another African destination over South Africa over this period.
Whythawk’s development economist, Gavin Chait, said we should stop and look at things in context. According to statistics, South Africa received 10 million tourists in 2009, of which 2.2 million were from overseas. This translates to an average of about 180,000 foreign visitors a month.
With foreign tourist arrivals projected at slightly over double the annual average of the five-week tournament, if the event was purely about the visitors during the World Cup there would be no real measureable gain, said Chait.
He points a finger at badly prepared tourism plans by government as well as dishonest politicking and said that hot-zones for tourist movement should have been derived from carefully prepared analysis. Instead: “we’ve seen widespread construction in areas so remote from general tourism interest as to be comic if it wasn’t costing the investors so much”.
To derive a long-term tourism benefit from the World Cup people will need to remember the impression for long enough, said Chait. “Maybe by the end of 2011 when economies start to potentially return to normal, then maybe they will start to visit. I’m not sure that the hoteliers and B&B owners can last that long, though,” he said.
“The other long-term benefit is in direct business investment, but South Africa is hardly open for business,” said Chait who quickly listed the chaos surrounding Eskom and its lack of investment in infrastructure, followed by the ineffectual reaction to the debate around nationalization, and prolonged strikes.
“We have a very powerful union movement threatening to disrupt the very sporting event that is designed to showcase South Africa,” said Chait.
“There are far easier places than South Africa to invest,” said Chait, listing China, South East Asia and Brazil. “South Africa is remote, disconnected from global trade patterns and Africa itself is not a sufficiently interconnected market for SA to be considered as an entrepôt to the continent.”
In addition Black Economic Empowerment rules are inconsistent and increase costs for those who would invest. Companies like Microsoft, with existing client base and investment, often find that they have no choice but to “buy” continued access to their customers through BEE payments. Outsiders not yet in the market are unlikely to see the same returns, according to Chait.
This is the post-credit crisis world. There is less money to invest and investments need to be more secure than before, he explained.
In contrast, Bloem is confident that, “During the World Cup, visitors will be afforded an opportunity to experience the tourism products on offer so that can become brand advocates and proud South African ambassadors.’ He expects this to boost income for tourism product owners in the longer term.
Post-2010 South Africa will be able to enjoy the major investments in infrastructure like hotels, transport links, airports and stadia, said Bloem.
While Chait cautions that when the games are over South Africa will be left with happy, but chaotic memories, a big bill that ratepayers will have to pay, and “a bunch of massive stadia that nobody will know what to do with."
More about Fifa, Soccer 2010, South Africa, Gavin chait
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