The Impact of Hosting a Major Sport Event on the South African Economy

THE IMPACT OF HOSTING A MAJOR SPORT EVENT ON THE
SOUTH AFRICAN ECONOMY

H R Bohlmann & J H van Heerden

Department of Economics, University of Pretoria, South Africa

Abstract

The impact of the sporting industry on economic decision making has increased dramatically
since the global media explosion in the 1980s. Tourism and advertising revenues generated
by these mega-events have become a major boost to the economies of hosting nations. In
addition, globalisation has placed great emphasis on the importance of foreign direct
investment (FDI), especially to developing countries.

This paper seeks to examine the impact of the pre-event phase expenditure attributed to the
hosting of the 2010 FIFA World Cup on the South African economy. In this phase, expenditure
is mainly geared towards the construction and improvement of infrastructure required to
successfully host the event. Using a Computable General Equilibrium (CGE) model
developed specifically for the South African economy, the impact of the pre-event phase on
the local economy is measured. It is found that there is a positive impact on most
macroeconomic variables, including GDP and employment. With the potential economic
benefits of the event and post-event phases of the World Cup also taken into account, it can
be concluded with relative certainty that the impact of hosting a mega-event on the South
African economy is beneficial towards achieving higher economic growth and development. In
addition to analysing the impact of the 2010 FIFA World Cup, the outcomes are also used to
briefly examine the feasibility of South Africa’s bid to host the 2011 IRB World Cup and the
2016 Olympic Games.

JEL classification code C68, O10

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