Yesterday, I talked about some economic problems associated with two of the top soccer leagues in Europe. With the impending World Cup games in South Africa, one might think that this would be bonanza time for the people in that country. Given a few of the numbers that are beginning to surface, that may not be the case.
According to various reports, South Africa budgeted £3.2B ($4.7B) to do things like build stadiums, training facilities, transportation infrastructure and the like to host the games. I will assume here that all of those works were completed with no overruns anywhere; if you really think that was the case, you also probably think that the Tooth Fairy was going to pay for any overruns had they happened.
The estimated GDP for South Africa in 2009 was $281B; therefore, the country was spending 1.7% of its GDP last year on “improvements” for a one-month soccer tournament. According to the CIA World Factbook, the unemployment rate in South Africa is 24%, the GDP fell by 2% in 2009, the country ran a $12B deficit in 2009 and the public debt of South Africa is 35.7% of the GDP. I am not an economist by any stretch of the imagination, but that is not a pretty picture taken in aggregate.
The only way this tournament turns out to be a long-term benefit for South Africa is if people from countries other than South Africa come to the country to see the games and to see other things in South Africa and spend money in South Africa that would not have come to the country without the World Cup Games. Selling tickets to local people is nice, but it does not “pay the freight” here. And that is why some numbers that hit the papers today are frightening:
160,000 tickets remain unsold for events.
75,000 of the “Tier One Tickets” (the expensive ones that local South Africans are unlikely to afford) are unsold.
90,000 tickets had been distributed to sponsors/partners and were returned to FIFA because the sponsors did not want them and/or could not dispose of them.
Of the 64 games in the tournament, zero games are sold out.
Let me do a little math here. There are ten stadiums that will house the games and the seating capacity averages about 54,000. So, if they sold out all of the 64 games and averaged $150 per ticket (that is a very high estimate even if all of the Tier One Tickets get sold at face value which they will not), the ticket revenue will be in the range of $520M. Assume that 80% of that comes from foreign sources (again a high estimate) and the ticket revenue that can logically offset expenses for the tournament comes to $416M. Remember, the budget for expenditures was $4.7B.
Therefore, the only way that South Africa comes out of this “with a profit” is if those foreigners spend more than $10 in South Africa for other stuff than they did for tickets and that the government collects taxes efficiently to recoup its share of the “profit”. Neither of those conditions is likely to obtain.
In 2004, Greece hosted the Olympic Games and the Greek Government spent loads of money it did not have to become the “beneficiary” of all the money that people would spend there while attending the Olympic Games. Their losses were monumental; those losses surely did not cause the current economic crisis in Greece but those losses contributed to the current economic crisis in Greece in a meaningful way. The economies of Greece and South Africa are of similar size; South Africa cannot lose as much money on the World Cup as Greece did on the Olympics because the Greek expenditures were far higher to prepare for the Olympic Games. Nevertheless, the legacy of the World Cup games for the economy of South Africa looks to be an increase in debt for the country that the country does not need.
FIFA says that the 2010 World Cup will “leave a lasting legacy on the country and the African continent.” They are probably right; that debt will be hanging around for a while…
In case you are interested, the favorite to win it all in the World Cup at the moment (according to BetUS.com) is Spain at 4-1 odds with Brazil the second choice at 9-2 and England third at 5-1. The longest shot on the board is New Zealand at 1,000-1.
One of the local yakkers on sports radio here in the DC area went into a faux rage the day before yesterday about the World Cup and how it was going try to make him interested in soccer and how it was never going to succeed. He did a full three minutes on how boring soccer is with most of the standard complaints. Then he went to commercial…
Since I listen to him when I am driving somewhere, I know that he is a huge golf fan and that he goes into raptures over the Ryder Cup every other year. I am making a note to call him this Fall and point out to him how boring the Ryder Cup is and how he is trying to make me interested in golf and will not succeed. No one can pretend to have a low boredom threshold and still think televised golf is something worthy of attention.
Let me clear up something I said yesterday. I suggested that some folks in the US might watch some of the World Cup games this year to begin to acquire a taste for soccer. I did not say – nor did I mean to imply – that enough people in the US would become real fans of soccer that the game would take on an important status in the sporting firmament here. It will not. Nevertheless, if some folks begin to appreciate soccer the sport can grow here in the US and these impending World Cup games could be the catalyst for a smidgen of growth.
Changing gears for a moment here, I notice that while I was away the good citizens of Connecticut decided that Linda McMahon would be one of the candidates for the US Senate from Connecticut. Linda McMahon is the former CEO of World Wrestling Entertainment. Consider the esteem in which you hold World Wrestling Entertainment – and pro ‘rassling itself. Now consider the esteem in which you hold the US Senate. Question:
If elected, would Linda McMahon be taking a step up or down in terms of the organization with which she is affiliated?
Finally, here are two comments from Greg Cote in the Miami Herald regarding two of football’s ne’er-do-wells and their recent appearances in the public eye:
“Nutrisystem dropped [Lawrence] Taylor as a spokesman. Apparently, this latest arrest was the last straw, whereas all those previous arrests were tolerable.”
“Adam ‘Pacman’ Jones has signed with the Bengals. His next arrest and suspension have tentatively been scheduled for late July.”
But don’t get me wrong, I love sports…