June 28, 2010 / 3:11 PM / 10 years ago

World Cup costs S.Africa dear but longterm boost seen: analysts

JOHANNESBURG (Reuters) - South Africa will only directly recoup a fraction of the billions of rand spent on staging the World Cup but should reap long-term economic benefits through the rebranding of a nation noted for violent crime.

Workers cut wood during the modernisation work at the Royal Bafokeng Stadium in Rustenberg November 25, 2008. The venue will be used for the 2009 Confederation Cup and for 2010 FIFA World Cup. REUTERS/Radu Sigheti

Businesses in Africa’s biggest economy have reported booming trade, including increased hotel bookings, car rentals and sales of World Cup memorabilia since the start of the soccer spectacular on June 11.

Visa Inc says spending by foreigners using its credit cards has topped $128 million, up 54 percent compared to the same period last year.

But analysts estimate foreign spending will only inject 13 billion rand into the local economy, far short of the roughly 40 billion rand the government has ploughed into new stadia and upgrading roads and airports.

“In the short-term, the economic benefits will be to a very minor extent, if there is a benefit at all,” said Econometrix analyst Tony Twine, adding more costs would come from lost production while workers watch soccer matches.

“But I think in the longer term we will see definite assistance to economic growth simply because of the global market exposure that the South African economy is enjoying at the moment,” he told Reuters.

Office rental firm Regus says a recent survey of 15,000 contacts on its database showed South African companies were optimistic the country would gain from the World Cup.

Overall, 86.5 percent of respondents said hosting the soccer extravaganza would be good for business, while 83.5 percent believed it would improve global opinions about South Africa as a place to do business.

“The strongly positive view about a change in outside perceptions is especially relevant as South Africa moves into the post-World Cup phase,” said Joanne Bushell, Regus vice-president for Middle East and Africa.

“Some believe the big win is yet to come as business builds on South Africa’s new image as a reliable organiser with modern infrastructure and a can-do attitude.”


At the G20 summit in Toronto, President Jacob Zuma said preparations for the World Cup over the last few years had already boosted South Africa’s economy.

“Additional spending by World Cup visitors and residents should boost economic growth this year alone by at least 0.3 percentage points,” he said.

“The marketing benefits, including tourism spin offs, will no doubt be felt for many years to come.”

The Treasury has previously predicted the World Cup would add 0.5 percentage points to GDP this year, with a lasting positive effect seen on the South African economy through infrastructure development, investment and tourism.

It is however too early to definitely say how much in total will flow from the tournament for the country of 50 million, the majority of whose people are still mired in poverty 16 years after the advent of democracy.

While some tourists have been robbed, the world’s biggest sporting event has gone smoothly, dousing initial fears of attacks on foreigners in a country with one of the world’s highest rates of violent crime outside a war zone.

“Most important is the global profiling of South Africa more positively. We were very misunderstood as a destination, both for tourism and even for FDI (foreign direct investment),” said Gillian Saunders, director at Grant Thornton Advisory Services.

“The stories that are going out now are largely that the event is going well, the fans are having a great time. It’s a welcoming and friendly country and there’s nothing major going wrong except little incidents which are being handled as they happen.”

This, among other “non-tangible” benefits, would make up for the monetary shortfall in recovering the government and private sector’s World Cup expenditure, Saunders added.

“Is it money worth spent? I’d say yes, it’s money well spent. I think we got a bargain,” she said.

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