gE Blog Series: World Cup South Africa Part 5 - Footing the Bill

So we've heard about a lot of the positives about what a World Cup can bring a country, but is it really all gravy for South Africa?

There is one thing for certain when a budget is planned for a major event such as a World Cup, the organizers of sporting mega-events always overestimate the economic benefits and underestimate the costs. Let's look at one of the causes for the recent troubles in Greece. The Athens olympic games were going to be put on for $1.5 billion, and ended up costing 10 times as much. In 2004, when Fifa awarded the tournament to South Africa, consultants Grant Thornton predicted costs of just $300 million on stadiums and infrastructure and a boost to gross domestic product of $2.9 billion. But now those costs have ballooned to $4 billion, $3 billion of which will come directly from South Africa. FIFA will pay $1 billion, but make around $2.1 billion when all is said and done.

Now it's projected that South Africa may struggle to even make that $3 billion, though the influx of tourism should definitely help and it already has even before the World Cup started. The projected figures on visitor numbers and their anticipated spending look very optimistic. Fifa's ruthless defence of its brand means that there are restricted opportunities for traders and small businesses to get a slice of this tourism influx however. Fifa will pocket the vast majority of the money raised by the sale of media rights and global sponsorship deals as well as some of the income from ticket sales. This leaves South Africa with a tough task of just breaking even. So where is the ultimate benefit?

You may think of the jobs that were created, but there will hardly be any long-term employment benefits from the World Cup. How about all of the stadiums that were built and the advanced infrastructure? While the stadiums are now finished and impressive, many are destined to turn into white elephants, their costs and capacity massively exceeding the means and needs of the local football economy.

That leaves most of the benefit from the intangibles, economic benefits that you cannot necessarily see. These include a new global perception of South Africa and Africa in general. Economic research says that the hosts of major football tournaments experience a real rise in public contentment. It is very likely that hosting Africa's first World Cup will provoke a wave of national and continental joy that will be spread to all of the country and continent. The challenge will be to capitalize on this and turn it into tangible development. In the end we can only hope the World Cup leaves South Africa happy and with the desire to improve upon its already growing infrastructure and developments.