Figuring the value of 2010

Nation states often compete fiercely for mega-event tournaments. They invest billions on luxury goods such as sports and entertainment facilities in the belief that it will enhance the image of the country and stimulate the economy. Impact assessments generally provide guestimates which provide positive assessment for economic growth and job creation as if it is in the interest of the nation. They exclude the social implications and the social value of these projects in a context of pressing social needs. They are after all, private sector interest guestimates.

But there are concerns about guessing the outcomes of the 2010 World Cup. Increase in spending attributable to the games may be "gross" as apposed to "net" measure. Direct spending is simply the summing of all receipts associated with the event. This approach fails to take into account displaced spending that would have occurred as residents spend to buy tickets and spend their money on activities that otherwise would have been spent on the local economy. Further, guestimates fail to analyse how local residents who are not attending the event spend their money.

Evidence f rom the Sydney Summer Olympics in 2000 indicate a "substitution effect". While Sydney had an increase of 49% for hotels, other cities indicated a general decline of a round 19% for the same period.

Event tourists may also, "crowd out" as tourists may simply supplant other travelers who normally visit the host venues. In South Korea 2002 world cup, while the number of visitors was far higher than normal it was offset by a similar decrease in the usual visitors from Japan. While there were 460,000 visitors during the World Cup, it was an identical figure to that of the previous year. According to Grant Thornton a consulting firm, South Africa should expect around 362 000 foreign visitors for the World Cup. This is well below the figure of 506, 790 foreign visitors to South Africa for the period of June 2005!

The final reason why impact is exaggerated relates to what economists refer to as the multiplier effect. Grant Thornton guestimates that between 2006 and 2010, the gross contribution to GDP will amount to R51,1bn which is the R30,4 bn public funds and the multiplier effect thereof. A further, R15,6 billion will be generated from foreign tourism. The information excluded from the multiplier effect is what amount of funds is to be repatriated depending on whether the companies are national or international companies. In other words, what percentage of profits remains in the country? The repatriation of funds can also be extended to the importation of some 35000 scarce and critical and highly paid skilled labour as South Africa is experiencing a skills shortage. It has been estimated that the informal sector may account for more than 40% of construction employment. The larger portion of South African and migrant labour is in a semi and unskilled category. Here too Zimbabwe is experiences a severe shortage of skills as people from the sector flow downwards to take advantage of 2010. The multiplier effect must therefore reflect this leakage of income and subsequent spending.

The implications for developing countries hosting mega-events differ largely from that of developed nations as the costs of investing in infrastructure are much higher. In 1994 the USA spent less than $30m and in 1998 France spent less than $500m. In contrast South Korea in 2002 spent some $2bn and South Africa tab is currently $4,1bn.

From an economic point of view the cost of the stadiums is not about the amount of investment but the value to society in relation to other pressing needs. It should be not ed that the amount of public money being spent in preparation for the world cup is equivalent to the amount that the state spent on housing delivery over a ten year period. The multiplier effect of concentrated civil engineering projects is lower than that of residential and non-residential construction. After all, the stadia are only home for 90 minutes! The multiplier effect of expenditure would have been greater if the public funds had been invested in socially viable construction whereby the funds invested and skills development could have been measured .

There was no popular consultation about these projects nor their long-term implication for local soccer clubs and ordinary citizens who are driven out of the cities, criminalized and crowded out due to gentrification and thereby reinforcing and exacerbating the racial and spatial landscape of South Africa . This is contrary to nation-building effort that such projects were intended to achieve.

Because of this guestimate of combined "sustained jobs" for both construction and tourism is guestimated at 564,650 annual jobs. The report does not consider the specialized and short-term nature of the 2010 world cup and that over 200,000 formal jobs were shed in the 1990's. The guestimates do not also say what the quality of these jobs will be and whether labour will share the fruits of increased skills development and revenue. On all accounts, it appears that the private sector has been awarded a mega public subsidy and the winners will be the construction and tourism shareholders.

In the main as most commentators agree, the significance of the 2010 World Cup is more about the prestige and power of the nation state and its leadership than the exaggerated developmental outcomes of unaccountable public investment.

Eddie Cottle

Coordinator

Campaign for Decent Work and Beyond 2010

Led by Building Workers International, International Trade Union Confederation, Solidar, Swiss Amalgamated Trade Union (UNIA), Swiss Labour Assistance and Labour Research Service)

8 August 2007

(the author writes in his personal capacity)