South African economy feels 2010 pressure

Although official reports praise the economic benefit following the SA World Cup, reality is a potentially negative effect on local businesses and industries.

Government ministers, FIFA officials and other stakeholders are expecting the 2010 World Cup to benefit the South African economy in a number of ways: through increased employment, a rise in tourism, generation of a good reputation for the country, investment in green energy and improved city infrastructure – to mention a few.

However, many participants in the local economy have had to adapt to new demands, FIFA regulations or government legislation, and these may have a potentially negative effect on many local businesses and industries.

For example, while increased costs of flights may allow cash-strapped airlines to make a quick buck, many businesspeople who commute via plane to various cities within South Africa will no longer afford to conduct their business for a 6-week period before, during and immediately after the 2010 World Cup.

Short-sighted thinking
Barrie Jarrett, CEO of TEAMtalk Media, a British-owned sports digital media company based in Cape Town, believes that short-term inflated pricing of flights, hotels, and even beer will also drive potential tourists to look for cheaper holiday destinations in future.

He says, “Why would a British tourist come all the way back to South Africa [following the World Cup] expecting to pay the same price for everything as he does in the UK, when he can get everything much cheaper in, say, a country like Bulgaria?”

Besides this short-sighted thinking, Jarrett also mentions that the South African Rand is too strong at the moment against the British Pound, Euro and US Dollar, and that this exchange rate will seem less attractive to foreign tourists, “Where it should R15 to the British Pound, it's R11.”

‘2010 Soccer World Cup Liquor Policy’
Meanwhile the service industry might also have to accommodate ’draconian’ government legislation. A local newspaper, Cape Times, recently published a report stating that any public establishment screening World Cup matches, such as bars, pubs and restaurants, might have to pay approximately €500 for a special liquor licence.

The ‘2010 Soccer World Cup Liquor Policy’, published on January 18 by the Minister of Trade and Industry, is being called into question by a legal expert on liquor regulation, Marius Blom, on the grounds that “the proposed bill was contrary to the provisions of the constitution and that the department had gone beyond the boundaries of its powers”.

Relocation of informal traders
Informal traders have not escaped the effects of the World Cup either. While local governments have invested in informal trading infrastructure, traders at the Sunday market next to the Green Point Stadium in Cape Town – who have been operating on the site for years - were forced to relocate during the renovation of the stadium and for the duration of the tournament, often to the detriment of their livelihood.

Similarly, in Durban, street traders have to accommodate FIFA host city by-laws regarding ambush marketing (marketing by association and marketing by intrusion), illegal advertising, and prohibited trading areas.

Many traders have not been granted permits to trade near the stadium, and they will have to carefully ensure that none of their products are in any way different from ‘objects that they are not known to trade’.

Local industries feel neglected
There has also been a large amount of publicity around the fact that World Cup memorabilia, including merchandise emblazoned with the World Cup mascot Zakumi, is being imported from other countries such as China.

Represented by trade union Cosatu, workers are angry at the fact that overseas manufacture of clothing, flags, and even buses and beer, will not benefit local industries.

In response, a representative of the Global Brands group – FIFA’s exclusive international licensee – told Cape Times that the company was “committed to ensuring South Africans benefited from the World Cup” and was utilising the services of 38 licensed local companies that employed over 13,000 South Africans.