Gordhan counts World Cup benefits

Friday, July 2, 2010

Johannesburg - As the FIFA World Cup draws to an end next weekend, the economic and social benefits created by the event will continue to benefit South African long after the visitors have left the country, Finance Minister Pravin Gordhan said on Friday.

"I think as South Africans, we need to remember that we are a teenager in the world of nations and for us this has been a proud moment since 1994 and from the economic point of view all the investment was money well spent," Gordhan said at a FIFA press conference.

He is adamant that for South Africa, the tournament's benefits will not only be seen in terms of economic legacy but could help the country increase its delivery capacity while demonstrating to the world its ability to host major events.

The national government spent more than R33 billion over a period of four years on infrastructure and preparation for the World Cup. Close to R12 billion was spent on stadia infrastructure with another R11 billion spent on transport and R1.5 billion spent on event broadcast and telecommunications.

FIFA has made revenue of 3.2 billion US Dollars from hosting the tournament in South Africa. But FIFA spokesperson Nicola Maingot was quick to point out that World Cup revenue accounts for more than 90 percent of the governing body's budget for a period of four years. "So what this means is that the money has to sustain FIFA's development programmes for the next four years," he said.

Gordhan said current projections are that the tournament will add 0.4 percent to the country's real GDP. "What this actually means is that about R38 billion will be added to the GDP as a result of the World Cup."

He said while some benefits from hosting the event were not clear cut for now, South Africa has prospects of fast growth as a result of the infrastructure that has been built for the World Cup. An estimated 130 000 jobs, most of them leading up to the World Cup, were created in the construction, roads and transport and hospitality industry.

"I know there are questions that are being asked but I'm sure you will all realise long after the World Cup, the social and economic benefits that this tournament has been able to provide for our country.

"Today, we have earned the reputation of a country that can actually deliver and that is good for future growth. This infrastructure we have built is not a short term infrastructure that you build today and destroy tomorrow. We have increased the productivity of the people of South Africa and all of that is part of our development and long term planning for our country," said Gordhan.

The money invested in the event could also be justified with the argument that the event has helped to bring an end to the Afro-pessimism that has dominated foreign media for years, he said.

While some businesses, especially those in the hospitality industry, will struggle to sustain the high profits generated by the World Cup, one economist believes future benefits for business are enormous. "Yes, it's true that business will hate to see the World Cup go - especially the hospitality industry where production is expected to drop again. But, I believe with little creativity and coordination we can actually turn this into future opportunities," said Iraj Abedian

"For instance the success of this event will ensure that most of the people who have visited our country will surely come back so the infrastructure we have spent on hotels is not a waste at all...history has taught us that hosting events of this magnitude can boost the country's credibility," he said.

Initial research shows that restaurants, hotels, informal traders and shopping malls are experiencing better than usual business over the World Cup period as fans flock to the country for the tournament. Overall business activity has picked up since the arrival of the first team and fans in the country a few weeks ago.

Abedian said when South Africa was awarded the right to host the event with all the accompanying deadlines, business was "worried" about the ability to meet all of the deadlines.

"We were worried that what if we don't meet all of them...what would that mean for the country but now we are all smiling. All the Afro-pessimism we are accustomed to is now being replaced by a high level of trust and confidence which is good for attracting foreign investors and visitors to our country." he said.