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December 7, 2010
 

Gotta Spend Money to Make [Less] Money

When I Grow Up, I Want to Be Converted to a Shopping Mall

The 2010 World Cup was a smashing success, except when it was a failure, which it also was.

Results of a survey conducted by South African Tourism and the National Department of Tourism, as well as the Office of Redundancy, were released yesterday. And it’s all good news.

At least that’s according to the headline from something called “Conference & Incentive Travel” that reads “FIFA World Cup 2010 Boosts South African Economy, Survey Reveals.” And really, why wouldn’t a publication dedicated to conference and business-related travel dig deep behind the numbers to see what they actually mean?

We can excuse them for their laziness, but shouldn’t the bar be a little higher for CNN?

Answer: no. From Turner’s newschild: “South Africa’s tourist industry happily blew its own vuvuzuela Monday, reporting a half-billion dollars in receipts from hosting this year’s FIFA World Cup matches.”

Never mind that the half-billion figure (specifically $529.6M or 3.6B rand) was well under the original projections for revenue. Almost nowhere in any of the media reports about the survey results does anyone bother to mention that the World Cup cost South Africa about $5.8B (roughly 40B rand) in infrastructure and other related spending.

Now, I’m not a high-rolling Wall Street wiz, but I’d venture to say that a -91% return isn’t really that great.

On the plus side, September tourism numbers from well after the Cup was over, are up almost 13% year-over-year.

And this is the tact that South African ministers started taking almost the moment that it became obvious that the country wasn’t going to come near it’s original projection for visitors and revenue during the Cup—that this was a long term project and the benefits would come over time.

This was a theme echoed by Tourism Minister Marthinus van Schalkwyk, the man presenting the report yesterday: “The tournament has positioned South Africa as a viable investment market and the spin-offs of improved perceptions abroad could have a long-lasting impact… The World Cup is not an end objective, it is just one building block in building the value of this industry in ensuring that it becomes an even more important subsector of our economy… This is an extremely positive vote of confidence in our destination, our capabilities, our facilities and our people,”

And to some extent, that’s a legit argument. Personally, when I now think of South Africa, I think, “Hey, they pulled it off without much problem.”

So eventually everything will work out. The end.

Okay, not really because the next thing I think is, “But it’s still pretty crime ridden.”

Despite the fact that September’s tourism numbers were up year-over year, overall they are still down from 2008. Compared to that year South Africa is still off 28% of international arrivals.

And compared to the previous “long haul destination” World Cup—2002 in Korea/Japan (Germany was easily accessible for many Europeans)—the numbers were also a bit of a disappointment, with South Africa only attracting 309,000 tourists to Korea/Japan’s 403,000.

Of course, some of the infrastructure spending (airports, roads, telecom, etc.) has long term benefits to the people of South Africa that don’t show up in a survey of hotel operators. Then again, they’ve also got massive modern stadia they paid a hefty price for that they don’t seem to have much use for and are already looking like they are too expensive to maintain.

None of this is to say that, maybe long term, the World Cup for South Africa does somehow net out positive. But spinning the numbers in the short term to make it seem an unqualified success mightn’t accurately reflect the immediate impact of the World Cup on South Africa. And, on the surface, spending almost $6B to get 300,000 visitors to show up for a month doesn’t seem like a good investment.

With that it mind, it becomes hard not to cringe when van Schalkwyk claims, “Looking back at the World Cup, as South Africans we can now say with a clear conscience, it has been worth every cent, it has been worth with every ounce of energy and it has been worth every minute of our time, undoubtedly.”

Undoubtedly? He does know that “every cent” totals up to $5.8B and that the numbers he released yesterday are a small fraction of that, doesn’t he?

Maybe the World Cup should go to kleptocracies and petrol-monarchies. If they’ve got billions to blow for a negative return, what should debtor or underdeveloped nations care?

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Precious Roy