Sports events have always been about power projection. When China hosted the Olympics, the world acknowledged its growing power on the international stage. To host such events requires huge infrastructure and capacity. These events speed up the development of the country and create many jobs. But the global profile of a country would be as short-lived as the sports event it hosts if its development strategy is not sustained.
The world’s second largest sporting event, the FIFA World Cup, is in full swing in South Africa. However, after one month, when it will pass the baton to Rio de Janeiro, the state will have to face many unsolved problems overshadowed by the mega event.
Impact of the World Cup:
South Africa, the top economy in the continent, is the first African nation to host such a large-scale event. The slogan then for the South African bid was, "Africa's time has come, and South Africa is ready,” recalling the euphoria of the successful transition to non-racial democracy. At the end of the event, it is estimated that around USD 2 billion will flow into South Africa's tourism industry. An additional USD 1.1 billion is expected through the retailers in and around the various match venues and city centres.
FIFA is known to assist the host country and South Africa is estimated to attract USD 21.3 billion as total direct economic value for GDP for hosting the tournament. In addition, the event created 59,000 new jobs- full and part- time, permanent and temporary.
The darker side
Within twenty years, South Africa has grown tremendously. But there is still disparities and hostilities between the rich and the poor, the whites and the blacks. The white-led corporations continue to be the dominant force in the economy and enjoy a level of income well above most blacks partly because of market-oriented policies followed by the new government.
Major issues that have infected the country’s political system and can affect its growth are:
- The level of corruption is very high with cases filed even against its president, Jecob Zuma.
- Secondly, despite relative economic stability and steady growth, South Africa has not addressed the fundamental sources of poverty. Unemployment has reached 25%, being much higher among the black population. Income inequality has increased since the end of apartheid. It has the largest inequality quotient in the world after Brazil. Only one third of the population has government assistance in the form of pensions, child support and other grants.
- Thirdly, the lack of educational skills in population has affected the economy. The success rate for middle school students, which rose to 74 % by 2000, has fallen to 60.5 %. Less than 20 % of students pass the university entrance examination. In addition, half of all students drop out before finishing the twelfth grade.
- Protective labour laws enacted by the African National Congress (ANC) government have kept formal wages high with many employment regulations. This leaves South Africa with a high-cost, low-productivity economy, which neither attracts investment nor allows it to invest outside a few sectors.
- Land reforms have not been undertaken. Blacks are confined to only 13% of the land, and marginal land at that. This led to a decline in agricultural experience and a focus on urban and industrial employment. Efforts to buy back this land, which was possessed by the whites before 1994 for black farmers have largely failed because of the cost constraints and the land not been having put to agricultural use.
Zuma has not come out forcefully to resolve these matters or to provide clear direction. The future of South Africa's economy depends on how efficiently he handles them. The government, which reportedly spent about USD 4.6 billion on infrastructure including the renovation and construction of 10 stadiums, must confront these issues.
However, it cannot be denied that South Africa has enough to have hosted the rugby World Cup in 1995, world cup cricket in 2003 and the Indian Premier League last year. One benefit of a successful hosting of the tournament by South Africa will be the feeling of a sense of accomplishment that despite the negative criticisms from the western media, Africans are able to pull off the organisation of a tournament of such magnitude the not too distant future.
-BE Bureau
World: Business Economics July 1-15, 2010 ( Page 8-9)
Copyright@Business Economics
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