But as any sports economist will tell you, economic benefits from building new stadia or hosting sports events in the long term are usually marginal to say the least. Montreal’s massive debt due to the construction of the Olympic Village in the east end in order to host the 1976 Olympics, plus the demolition of 6 of the 10 stadia that were constructed by Japan and South Korea to host the 2002 World Cup are regularly trotted out as examples to demonstrate that hosting an international sporting tournament doesn’t necessarily having lasting effects in terms of productive new infrastructure.
But here I think the cynics are wrong. South Africa these days is a dynamic place – developing rapidly despite the high unemployment and wrenching poverty in parts – and has always had large numbers of sports fanatics in proportion to the total population, perhaps not on a par with Australia but still well up there. So I believe that the capital investment will pay off down the road, and especially as South Africa is a developing country with need for new infrastructure that other developed countries who have hosted these contests really didn’t need.
Here in South Africa though, all the attention is on the short-term benefits of hosting the event. I think these will be minimal and for several reasons. First, South Africa is not exactly next door to any other regular World Cup participating countries, and most other African countries tend to be poorer than South Africa. This is not the case in Europe, was not the case in Asia, and was not the case in South America either. Airline ticket prices will be high for most avid soccer fans in terms of getting to South Africa, and as any economist knows, price and quantity demanded are inversely related, so less foreigners should be expected than would otherwise be the case. This is already in evidence with the ticket sales made so far – over ¾ are to South Africans, the US has the second highest ticket sales, followed by the UK.
Second, most of the world is still not in a mood to spend large amounts of money on international travel – what might seem like fun and would result in minimal cause for dismissal in good times might not seem like such a good idea in a down economy with lots of unemployed workers eager to replace existing workers.
Third, it is the winter in South Africa – one of the nicest things about coming out here is to escape the northern hemisphere’s winter chill – winter in South Africa is not quite snow and ice, but it is hardly hot and humid in July in South Africa, so this will tend to lead to shorter visits by those “in the know” and perhaps even shorter visits by those “not in the know”. Of course I could well be wrong here, and those "not in the know" might end up boosting clothing sales in July!!
OK, I don’t wish to sound like a killjoy, and really I hope the economic boost from hosting the World Cup is significant, but what with prices being quite high in South Africa because of the strong Rand, plus the above reasons, I wouldn’t want to oversell the short term stimulus from the event.
Of course the long run is a different matter. If South Africa mounts a successful event, and people around the world get to see what a great place this is, I think it could really put the country on the map as far as international tourism goes, and mark a turning point in the views of international investors in the stability and maturity of the country. Here the knock-on effects ( - or externalities as economists call them) could be significant.
Go Bafana Bafana ( - the name of South Africa’s national soccer team)!!
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