With World Cup finally here and the celebrations beginning, some will feel that every cent of the R33-billion the government spent is worth it. Others believe the money should have been spent on more pressing issues like education and housing.
The reality is that there will never be agreement on how money should be allocated, and any government has to balance long-term investment spending with short-term needs.
Standard Bank economist Goolam Ballim says the World Cup was an investment decision in the long-term growth of South Africa. If this investment pays off, it has the potential to elevate South Africa’s longer-term growth rate, which will mean more jobs over time.
But whether the R33-billion pays the dividends to justify the expenditure is actually up to each and every one of us. Ballim believes that the heart of the success of the World Cup investment will be on how graceful a host South Africa is, and that we leave our foreign visitors and the media with a positive image of the country so that we see growth, not only in our tourism, but also in trade and investment flows.
“If you see already the visibility of South Africa on the global stage, you realise that this is a marketing opportunity without precedent,” says Ballim.
But the World Cup is not just about marketing — possibly the biggest benefit from the World Cup is the investment in networking infrastructure, namely telecommunications, roads, rail and power.
In 2002 South Africa’s ratio of investment to GDP was only 14%. The global norm is 25%. What we were spending was not enough even to maintain existing infrastructure, let alone develop new projects for a rapidly growing economy — as we all know too well.
By 2009, that ratio had increased to 22,4%, thanks largely to the World Cup and a need to put our best foot forward.
In a country where demands for short-term survival often crowd out longer-term needs (the urgent vs the important), the World Cup commitment forced the government to prioritise infrastructure. According to Treasury figures, money spent directly on the World Cup included R12,95-billion on transport, R3,5-billion on ports of entry and R1,5-billion on telecoms. In other words, network infrastructure made up more than half the World Cup spend.
But it also galvanised other transport projects, including the Gautrain and airport upgrades. Transport spending in the last three years clocked in at R82-billion, according to Sanlam Private Investments.
Ballim says the multiplier effect of the government spending on network infrastructure is between two to three times. That means for every rand you spend, your long-term return in terms of economic growth is double to triple what you spent as a result of improved productivity. So the total R87-billion spent on network infrastructure is actually worth more than R200-billion.
Because of the World Cup, we have the Gautrain, wider highways, improved broadband, a bus transport system and world-class airports.
Hopefully by the end we will have developed a world-class tourism industry and put South Africa on the map for investment and trade. But what we will definitely have is one hell of a party.
Some World Cup facts:
- Preparation only started in 2007 — all this in three years.
- OR Tambo International Airport is processing nearly 4 000 passengers per hour.
- R33-billion spent on the World Cup is 1,5% of total government spend over the three years.
- Jobs created: 130 000 building stadiums, 3 370 in telecoms, 116 000 hospitality, 100 000 safety and security.
- 210 new sommeliers have been trained.
- 373 000 visitors are expected to stay eight days and spend R30 200 each. Total tourist spend R8,8-billion.
Read more news, blogs, tips and Q&As in our Smart Money section. Post questions on the site for independent and researched information.