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World Cup's main beneficiary is Fifa, and SA's slice slims  Comments
March 10, 2010

By Ethel Hazelhurst


Early estimates of the economic benefits to South Africa from the World Cup seem to have been too optimistic.

Gillian Saunders, the Grant Thornton supervisory director of research in 2008, said she had revised downwards her forecast that the event would draw 480 000 visitors. Saunders said yesterday she now estimated between 330 000 and 450 000 visitors.

The tournament is set to start in three months' time.

Forecasts of the impact of the major sporting event on the domestic economy vary but what emerges in a report released this week by Citibank's research arm, Citi, is that Fifa, the monopoly organiser, is the major beneficiary while South Africa, the host nation "carries a disproportionate share of the cost burden".

Jean Francois Mercier, Citi's Johannesburg-based economist, said: "Fifa is only responsible for prize money awarded to the participating teams, and compensation for their travel and preparation costs, which in Germany in 2006 only accounted for €222 million (R2.24bn).

"By contrast, the main direct benefits of the event - television and marketing rights - accrue to Fifa, which also cashes in the proceeds from sales of VIP tickets. In the case of the 2006 World Cup in Germany, Fifa's profit amounted to about €1.4 billion, or 0.7 percent of South Africa's gross domestic (GDP) product that year."

Citi said assessments of economic benefits made after major sporting events are generally more downbeat than those made prior to the events.

Saunders said the 2008 Grant Thornton research was conducted before the collapse of US investment bank Lehman Brothers, which triggered a crisis in financial markets and a global recession.

The original Grant Thornton report assumed visitors would stay for an average of about 15 days and concluded overall spending by these visitors could amount to about R14bn to R15bn, including R6bn on ticket sales and the remainder on accommodation, catering and entertainment. Were these expectations to be realised, the direct impact on South Africa's growth in gross domestic product (GDP) could have been as much as 0.5 percentage points this year.


This is in line with projections by economists. Elna Moolman, the group economist at Barnard Jacobs Mellet, said the tournament could lift GDP growth an extra 0.5 percentage points, while Dawie Roodt, chief economist at the Efficient Group, estimated between 0.2 and 0.5 percentage points.

Citi said most of the benefits this year would come ahead of and during the event as people made travel arrangements and spent money during their stay.

This could potentially boost GDP growth to 5 percent in the second quarter, followed by a dip the next quarter. The figure is a quarterly change adjusted for inflation and seasonal factors and annualised (multiplied by four). The most tangible benefit would be to the tourism industry, which "has expanded fast in the past 15 years but has yet to reach its full potential". It contributes 8 percent of GDP.

Citi said risks of a drop in construction activity after the event were limited.

Following a recession-related fall in private sector investment in capital projects, growth in the construction sector has already dropped sharply from 10.7 percent in the first quarter of last year to 3.6 percent in the fourth. And there have been fears that the end to World Cup preparations would see a further fall in construction activity.

Mercier said the size of investment in World Cup-related events "pales in comparison with the overall infrastructure build programme implemented in the public sector since 2006".
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Showing page 1 of 1 comment pages, 8 total comments
26 Weeks ago Ponkie wrote :
Who ever believed that SA will make a profit with Fifa from the SWC surely also still believe in the Tooth-fairy. The same goes for the Olympic games. But South Africa wants to be seen playing in the big league because it believes it deserves to be seen and acknowledged by the real world, but do has still not realized it cost big money to play with the big guns. Now the Taxpayer is stuck with the burden. The world will surely take notice of SA, but for entirely different reasons, they have seen your "president" and his circus for what they are and they will shortly also see and experience the "nonexistent" crime in SA. Afterwards the begging from the "colonialists" will start because the nation will not have any bread to eat.
26 Weeks ago Jane wrote :
it does not take a rocket scientist (or an economist for that matter) to come to that conclusion! It's not called FIFA World Cup for nothing! they stand to benefit 99% from us hosting this tournament. If anything, SA is reaping the monetary loss of hosting the FIFA World Cup. to us lay persons, there is absolutely nothing life changing that has happened or is going to happen. However, on the flipside, the tournament is bridging the social gap between black and white. it has driven optimism and some level of patriotism (even if it's just going to last for 6 weeks!) the stereotypes we had about each other which always divided us, are slowly diminishing (or minimising, for the lack of a better word!) Social cohesion is the positive that we are getting out of hosting the world cup.
26 Weeks ago Geyser wrote :
Why am I not shocked? Even grade 6 student could figure out that we were being taken for a ride by FIFA and their local robber barons. They have really taken us the taxpayers for a big time ride. I propose that we hold Pravin Gordhan then head of SARS, Trevor Manuel, Mbeki, Mandela, and the entire LOC responsible and charge them with mis-management and fraud. Nothing less will do because we are in for a massive inflation and higher taxes from 2011 to fund this grand theft.
26 Weeks ago Lorraine wrote :
It surprises me that it has taken apparently intelligent people so long to realise this. That Fifa has been able to pull the wool over so many people's eyes for so long is nothing short of astounding.
26 Weeks ago Eyes wide open wrote :
No surprises here. The only winner out of the World Cup is FIFA. It is a major money making scheme on FIFA's part and if SA reaps any benefits it will only be seen in the distant future. In the meantime the tax payers are going to carry this load. We should be questioning where do FIFA profits go? Are they going to invest in the development of Africa football with some of their loot and if so how much are they going to invest?
26 Weeks ago Not a fan, not surprised wrote :
Hands up everyone who is not surprised by this... Apart from apparently carrying most of the costs and seeing less of the benefits than were expected, there are the future costs of the upkeep and maintenance of the stadiums. That is going to cost taxpayers and ratepayers a bomb. Personally, I am counting the days to when this whole circus is over and done with
26 Weeks ago Anonymous wrote :
grant thornton reiterated its so-called 2008 numbers up till about a month ago. they apparently also prepared a report in favour of cape town's greenpoint stadium which was substantially contradicted by another cpa (the latter apparently ignored by the politicians). the latest overseas ticket sales (approximately 300 000 confirmed) indicate about 75 000 visitors (4 games average). the absence of true sales figures is making it almost impossible for business to plan.
26 Weeks ago Mark wrote :
Of course the main beneficiary is FIFA, thats what the event is about, the soccer and FIFA getting enough money to carry them through the next couple of years and to fund their projects. Te country hosting the event uses the tournament as a way to promote the country through worldwide exposure.
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