Abstract:
From an examination of the ways that the 2010 Soccer World Cup affected the South Africa GDP, it was concluded the GDP of South Africa increased as a direct result of hosting the tournament. Not only did the GDP increase, but also thousands of jobs were created as a result.
The 2010 Soccer World Cup is likely to significantly stimulate South Africa’s economy. One need only look at the various expenditure categories that make up economic growth to see a positive relationship between hosting the tournament and overall economic growth. Hosting the tournament not only stimulated the economy financially, but also created thousands of jobs for locals that would have otherwise been unemployed.
To measure economic growth, one needs to calculate the gross domestic product of a country. GDP is the market value of all the final goods and services produced within a countries economy within a given time period. (Parkin et. al, 2008: 470). These are good and services in their final stage. GDP can be calculated using the following formula:
GDP = C + I + G + (X-M)
(Parkin et. al, 2008: 475).
This formula means that GDP is calculated as the sum of the market value of consumption expenditure, government expenditure on goods and services, investments and net exports of goods and services with a country.
Grant Thornton, a global auditing firm, has said that the GDP growth rate of South Africa is estimated to be between 2 and 2.5 percent of which 0.5 percent is directly attributed to the hosting of the tournament (Business Report, 2010:1). This is a huge amount of expenditure attribute to a single event. To understand the enormity of this expenditure in its entire scope, one needs to look into the various expenditure categories in more depth.
Consumption expenditure is the monies paid by households on goods and services. (Parkin et. al. 2008: 475). This also includes households that may be located in a foreign country; in this case it includes tourists that came to South Africa for the 2010 Soccer World Cup. Expenditure that falls under this category includes expenditure at restaurants and at shops.
It is too soon to see the increases in consumption expenditure in the SARB bulletin, as this data has not yet been compiled. It is, however, possible to look at other indicators to get an idea of the possible changes within it. For example, spending by tourists in South Africa on Visa brander cards between the period of June 1 to June 20 increases by 54% from the same time last year (Daily News, 2010: 8). This expenditure would have been on consumption activities and shows an increase in this category used to measure economic growth.
Government expenditure is another category used to measure economic growth. Government expenditure is the expenditure on goods and services by government, municipal, provincial and national. (Parkin et. al. , 2010: 475). It is important to remember that government expenditure does not included monies paid by government to social grants such as states pensions.
The South African government spent R33 billion on World Cup preparations (Mail and Guardian, 2010:1). This included the building of new stadiums, the restorations of old stadiums, the building of infrastructure such as the bus rapid transit system and the Gautrain high-speed train link between Johannesburg and Pretoria. This is R33 billion above normal government expenditure.
Investment is the expenditure on capital and property by businesses and expenditure on residential properties by households (Parkin et. al, 2010: 475). Investment also included inventories. Inventories are good and materials that are held in stock and have not yet been sold.
Unfortunately, the 2010 Soccer World Cup was held at a time where South Africa had just begun to recover from a recession. It is hard to see growth in investment because of two opposing factors; the recession’s downward pull on the economy and the positive stimulation of the economy catalyzed by the mass spending of tourists in South Africa to view the tournament.
Mike Schussler, an economist for economists.co.za, believes that investors are showing confidence in the economy with growing investments in machinery, equipment and transport equipment such as planes and ships (Sunday Independent, 2010:1). Schussler believes that this is a direct result of the tournament.
Net exports are the market value of South Africa’s exports less the market value of South Africa’s imports (Parkin et. al, 2010: 475). The reason that net exports are added to the GDP equation is because it is impossible to tell what parts of gross domestic expenditure is spent on imported goods. To get an accurate GDP figure, net exports must be added to gross domestic expenditure.
The increase in growth domestic expenditure during the preparations to 2010 Soccer World Cup caused imports to increase while at the same time exports decreased (SARB, 2010: 2). This means that net exports decreased which would have a diminishing effect on the GDP.
The 2010 Soccer World Cup has a positive affect on employment. Many jobs created were temporary such as the construction workers that build and refurbished the stadiums. Between 20 000 and 50 000 jobs will be sustained after the event which is good news for the South African economy. (Enslin-Payne, 2010:1).
In conclusion, the 2010 Soccer World Cup was definitely worthwhile for South Africa to host. Consumption expenditure increased, government expenditure increased and investment increased. The net exports of South Africa on the other hand diminished as a direct result of increases in gross domestic expenditure, but the overall effect was economic growth. Not only did the event stimulate the economy, but also as a result of the increase in gross domestic expenditure, thousands of jobs were created for people that would have otherwise been unemployed.
List of References:
· BUSINESS REPORT, 2010. Grant Thornton expects WC economic impact of R93 billion. [Online]. Available: http://www.busrep.co.za/index.php?fArticleId=5438637. [Accessed 1 August 2010].
· DAILY NEWS, 2010. Tourism brings in big bucks: World Cup has seen economic benefits. DAILY NEWS. 24 June. pg 8.
· ENSLIN-PAYNE, S, 2010. Cup tally may top 50 000 permanent jobs. Business Report. [Online]. Available: http://www.busresp.co.za/index.php?fArticleId=5531521. [Accessed: 2 August 2010].
· HAZELHURST, E, 2010. Appetite for investment slackens. SUNDAY INDEPENDANT. 27 June. pg 1.
· MAIL AND GUARDIAN, 2010. Thousands protest against World Cup Spending. [Online]. Available: http://www.mg.co.za/article/2010-06-16-thousands-protest-against-world-cup-spending. [Accessed 1 August 2010].
· PARKIN, M, POWELL, M, MATTHEW, K, 2008. Economics (7e). Essex, England: Pearson.
· SARB, 2010. Quarterly Bulletin: June 2010. [Online]. Available: http://www.reservebank.co.za/internet/Publication.nsf/LADV/E4BC43CC225669174225774B00567861/$File/QBJune2010.pdf. [Accessed 2 August 2010].
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