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



1.


Introduction


Games are central to the human experience. Outlets for aggression, universal forms of entertainment,
metaphors for the struggle to survive. The cathartic experience of participating in a hard-fought contest
takes us one step closer to an understanding of our mysterious, questing nature.

Mark Frost, author of The Greatest Game Ever Played

1.1 Motivation

Sport has always been an integral part of the South African culture, but now it is also
becoming an increasingly important part of the economy. The hosting of mega-events such as
the Olympic Games is generally reserved for developed countries with an already advanced
infrastructure. The FIFA World Cup tournament has been held in developing countries more
often, mostly due to the football rich tradition that exists in Latin America. Motivated by a
desire to promote football and capitalise on its growing popularity elsewhere in the world,
FIFA has begun designating host countries outside of Europe and Latin America. This
strategy by FIFA has led to the first ever World Cup being hosted in Africa since the
competition began in 1930. South Africa’s successful bid to host the 2010 FIFA World Cup
poses a unique opportunity to assess the impact of such a large scale event on a developing
economy.

1.2 Study Approach

The 2010 FIFA World Cup will be the largest sporting event ever to have been staged on the
continent of Africa. The objective of this study is to measure the impact of hosting the 2010
FIFA World Cup on the South African economy. A Computable General Equilibrium (CGE)
model, designed specifically for the South African economy, is used for the simulations. The
CGE modelling methodology overcomes many of the limitations associated with the long-
established input-output method of estimating the impact of mega-events (CREA, 1999).

An important consideration of the study is to decide the time period over which the effects of
the World Cup should be modelled. Madden (2002) identified three distinct phases when
modelling the total effects of the 2000 Sydney Olympics, based on the classification of
expenditures that are immediate consequences of the event. The pre-event phase consists of
all the operation expenditures, construction and upgrading of venues and accommodation,
and the necessary upgrading of transport infrastructure in the five years preceding the event.
The second phase is the year of the event, in this case 2010, during which the major
expenditures would be on the operations of the World Cup, and by the visitors to the
tournament. The final phase would be the post-event period during which expenditure by



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