Wednesday, 8 June 2011

A Year on from WC2010, Has the Rainbow Nation Lost It's Pot of Gold?

We’re nearly a year on from the World Cup in South Africa. Africa’s finest. Africa’s first. On Saturday it will be the first anniversary of Spain’s first ever global conquest at Soccer City over the Dutch cloggers.

Widely recognised as a success on footballing fronts, the only question left to be asked is this: Just how much did it benefit South Africans financially?

This week we have heard Johannesburg’s metro council claiming they made R7 from every rand spent on the World Cup, then the luxury hotels built for the tournament complained they were lying empty.

The FNB Stadium, formerly known as the 90,000-capacity Soccer City, claim they are going from strength to strength, while those other white elephant stadia in Port Elizabeth, Nelspruit and Polokwane lie largely idle.

A man who runs bike tours in Soweto says he’s been fully booked ever since launching his concept during WC2010 but I’ve just heard a mother claim her talented young lad can’t find a junior football club to play for in the Pretoria area.

For every South Africa claiming it was the best thing to happen to the Rainbow Nation, we hear another on the radio phone-ins claiming the nation has been ripped off. Who’s right? Can we ever be sure?

The single dominant fact, as far as one can glean from the limited information available, is that FIFA made a record $4.3billion from the event, though as we shall see, that figure varies and may just be for public consumption.

Let’s switch to pounds sterling for a simple profit-loss analysis. And it makes uncomfortable reading. According to London’s Daily Telegraph, South Africa recouped just £323m on the £3bn it spent on the event. FIFA may be laughing. South Africans should be sobbing. Bitterly.

While the World Cup unquestionably helped to boost the image of South Africa and the so-called Dark Continent in general, the Telegraph insists: “Financially it turned out to be a major disappointment”. Construction costs for venues and infrastructure amounted to £3 billion (€3.6 billion), and the government expected increased tourism would help to offset these costs to the amount of £570 million (€680 million). However, only £323 million (€385 million) were actually taken in as just over 309,000 foreign fans came to South Africa, well below the expected 450,000.

Even the little men, the local vendors around the stadium, had to disappear for six weeks – or cough up a registration fee of R60,000 (approximately to $7,888).

Michael Defteros, managing director of Headline Leisure Management who ran stadium concessions for FIFA, admits: "We didn’t make what we’d budgeted for, or hoped for. But it was a once-in-a-lifetime experience. And thankfully, we didn’t lose any money."

Optimists (particularly a report in the respected Economist magazine) suggest South Africa recouped a projected total in “direct economic value for GDP” of approximately $21.3 billion.

But given the Telegraph’s figures, published last December, unless FIFA make a monumental u-turn (perhaps the opera singer and new FIFA monitor Placido Domingo can recommend this to his president Sepptic Blatter) and offer President Jacob Zuma a share of the revenue, South Africa will make a huge loss on the deal. Can that be right?

A tournament which ran with barely a glitch, which avoided comfortably the expected pitfalls of crime, poisonous snakes, earthquakes, traffic jams and politics trumpeted by the European (and largely British) press, began and finished with glorious ceremony and gave Spain their first ever World Cup.

Okay, not everyone liked the plastic vuvuzela trumpets unique to South Africa football, but hey, nobody’s perfect. And they sold like hot-cakes.

Some might say a positive judgement was confirmed by the events of March 3, 2011, when FIFA announced they had earned $4,189 billion dollars in the financial period from 2007 to 2010.

President Blatter, re-elected for a fourth successive term without opposition last week, told "I am the happiest man to announce that the World Cup in South Africa was a huge, huge financial success for everybody, for Africa for South Africa, for FIFA.

"For the first time in FIFA's four-year accounts we are over four billion dollars."

When Blatter took over the running of the global football body in 1998, they were in less secure financial straits. But FIFA, a non-profit association under Swiss law, has blossomed since Blatter, now 75 and set to preside until 2015, took over the reins from Brazilian Joao Havelange in 1998.

According to their deputy secretary general and financial director Markus Kattner, they now have a surplus of $631 million.

And he says 87 percent of FIFA’s revenue, that’s $3.655 billion dollars, were earned from the 2010 World Cup in South Africa.

The World Cup doesn’t just earn from ticket sales and franchise rights around the stadia. The bulk of the money comes from global broadcasting rights and and marketing or sponsorship contracts. Adidas, Visa, Emirates Airlines and Coca-Cola, all critical of the current state of FIFA before Blatter’s one-man election last week, are among the major players.

Kattner added: "The sale of television and marketing rights was more successful than expected.”

Four months after awarding the 2018 World Cup to Russia and, controversially, the 2022 event to tiny Qatar – but two months before suspending Qatar’s Mohamed Bin Hammam for corruption – Blatter told us: "We are very proud we delivered the World Cup to Africa. For the first time our turnover in one year has been more than one billion dollars.

"The market trusted South Africa.”

But should South Africa have trusted FIFA? Jerome Valcke, the FIFA secretary general who forged a strong personal relationship with South Africa’s Danny Jordaan from what I saw of the pair of them last year, admits FIFA did even better in 2010 than they did in highly-developed Germany four years before.

He said: "Commercially it has been a success, we have increased our income by 50 percent since 2006 in Germany to 2010 in South Africa."

But Valcke insists the profits would be invested in African football. He said 80 percent of countries in Africa "would not have football" were it not for Fifa's funding. "If we don't have money, it means football will collapse."

He said, with more justification, FIFA received a lot of criticism for "taking over South Africa", including allegations that the World Cup was "just about money". Valcke’s verdict: "It is to protect football."

Yes, that smooth Frenchman Valcke. The man who said in that infamous “private” email last month: “Qatar cannot buy the FIFA presidency like they bought the World Cup.”

The Economist magazine offers this perspective. They reckon the World Cup alone grew the South African economy by an “astonishing” extra 0.5%, quoting Grant Thornton, a firm of accountants, who predicted overall 2010 growth of 3 percent.

Those slightly less than expected thousands of World Cup fans came, saw and enjoyed, staying on average for 18 days, attending five matches and spending R30,200 (around $4,000) each.

They say the total effect on South Africa’s economy was around R93 billion ($12.4 billion).

But hold on, FIFA is responsible only for the prize money paid to the teams along with the cost of their travel and preparation, which amounted to just $279m in Germany, where the tournament last took place, in 2006. Four years on, while raising the prize money 60 percent to $420 million, FIFA said it would contribute an extra $100m to ensure that all the facilities are ready in time.

And that’s it. Cash from television and marketing rights all go to FIFA, so does the money from ticket sales and franchise profits. South Africa had no way of checking exactly how much was leaving the country.

Potential World Cup hosts have to agree, when bidding for a World Cup, to give FIFA the right to ship foreign currency around the country untouched, untaxed, uncounted. Great when FIFA is based in Switzerland and the president is a Swiss national with access to those desperately confidential Swiss bankers.

Citi, the research arm of Citibank, said FIFA’s profit in Germany came to a far lower $1.8 billion, equivalent to 0.7 percent of South Africa’s GDP. FIFA say they will recycle much of that money into football development worldwide. But nothing goes to South Africa, despite spending an estimated at $5.29bn on stadiums, airports, motorways, accommodation, infrastructure and security.

Those profit and loss guys at Grant Thornton say South Africa spent R33.6bn, plus another R20bn on the Gautrain. They add: “Has it put us in insurmountable debt? No. Should we do it again? It’s clever to go for the Commonwealth Games next. They are a bit smaller than the Olympics, and a good test and preparation for a possible Olympics at less cost.”

More than 3.1 million people attended the 64 games, the third highest figure behind the United States in 1994 and Germany in 2006.

Some six million people watched the games in public viewing areas around the world.

FIFA said the average television audience in Spain for the final was a record 15.6 million.

Jordaan, the local force behind the World Cup, said the tournament "was an incredible moment, a dream has come true...we are very, very happy and very proud to be Africans and South Africans."

Jordaan did a great job. He deserves a crack at the CAF presidency, perhaps even the FIFA job once Blatter eventually fades in 2015, if UEFA’s Michel Platini opts out.

But how proud should South Africans be of a tournament which may have cost the Rainbow Nation their fabled pot of gold?

In a fascinating paper called World Cup Economics: What Americans Need to Know about a US World Cup Bid, Dennis Coates, PhD, Professor of Economics at the University of Maryland Baltimore Count reckons: “A study of the 1994 World Cup hosted by the United States found substantial lost output, with the final result showing that the pre-World Cup predictions were up to $13 billion off-target. Hopefully, this report will get politicians, economists, sports fans and all Americans demanding answers.

“The existing evidence of negative economic impact from other World Cups, combined with the self-interested motivation of the Bid Committee members and the lack of disclosure of the economic impact study all point to the conclusion that the US taxpayers are better off saying no to an expensive and secretive World Cup bid.”

There it is, neatly summed up in a couple of paragraphs. The only people who profit from a World Cup? FIFA and their “self interested” executives.

We may have to wait ages for a real profit and loss account of the 2010 World Cup. We may never really know how much it really helped the country, FIFA’s Swiss bank accounts are hardly open to public scrutiny.

But a year on from Soccer City’s finale, we have to ask: Apart from Bafana Bafana rising from No90 to No38 in the world and leading their African Nations qualifying group with Egypt a continent adrift, has the 2010 World Cup really profited the Rainbow Nation?

And will Russia 2018 and Qatar 2022 benefit the world game... or just FIFA? I guess you know what I think.

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