THE IMPACT OF A MEGA-EVENT ON COUNTRY IMAGE: THE CASE OF THE 2010 FOOTBALL WORLD CHAMPIONSHIP IN SOUTH AFRICA

THE IMPACT OF A MEGA-EVENT ON

COUNTRY IMAGE:

THE CASE OF THE 2010 FOOTBALL

WORLD CHAMPIONSHIP

IN SOUTH AFRICA

Master Thesis

Msc International Business and Management July 2011

Supervisor: Igor Kalinic Faculty of Economics and Business

ABSTRACT

The purpose of this thesis is to examine people’s views regarding the country image of the emerging country South Africa comparing before and after perceptions since the World Championship in 2010 was organized. This is done within the context of marketing theory on country of origin, country image effects including soft and hard associations, consumer ethnocentrism and literature about emerging countries (Hollensen, 2008). This is achieved by making pre-post comparisons and interaction effects, based on other similar studies. Significant results are found concerning soft and hard associations of country image being valued higher after the World Championship is organized. The World Championship has been successfully organized in South Africa, hence the post-event assessments are overwhelmingly higher. This thesis has important implications for the effects of mega-events on country images. These issues have relevance for countries seeking to host mega-events and those who manage these events and make decision about where they will be held.

INDEX OF CONTENTS

2.1.3 International country images including country of origin ... 8

2.1.4 Developing country ... 9

2.1.5 Consumer ethnocentrism ... 10

2.1.6 Animosity ... 11

2.1.7 Country images and mega-events ... 11

2.1.8 South Africa ... 12 2.2 Research framework ... 14 2.3 Hypotheses ... 16 3 RESEARCH DESIGN ... 23 3.1 Data collection ... 24 3.2 Sample ... 24 3.3 Control variables ... 25 4 RESULTS ... 26

4.1 Demographic profile respondents ... 26

4.2 Country image impact ... 26

4.3 Economic impact ... 34 5 DISCUSSION ... 41 6 CONCLUSION ... 46 6.1 Limitations ... 48 6.2 Further research ... 49 7 REFERENCES ... 52 8 APPENDIXES ... 59 Appendix 1 ... 59 Questionnaire ... 59 Appendix 2 ... 70

Value added to GDP by sector, 1988-2008 ... 70

Appendix 3 ... 71

SPSS results: Paired Samples Statistics ... 71

Appendix 4 ... 77

SPSS Crosstabulation ... 77

Appendix 5 ... 78

SPSS results: respondent characteristics ... 78

Appendix 6 ... 84

1 INTRODUCTION

Talking in general, most persons express a preference for German cars, French vacations or Italian opera, most people impulsively have confidence in the policies of the Swedish government, observe the ambition of the Japanese, the bluntness of the Americans or the good manners of the British (Anholt, 2005). Especially concerning today’s globalisation, nations compete with each other for the awareness, admiration and faith of investors, tourists, customers, immigrants, the media, and the governments of other countries. Consequently, a strong and positive country image presents a vital competitive advantage. It is necessary for nations to recognize how they are observed by publics around the globe; how their successes and failures, their assets and their liabilities, their inhabitants and their goods are mirrored in their country image.

The central objective of this thesis is to investigate what influence a mega-event has on a country image. In this case concerning the emerging country South Africa, after it organized the WC in 2010. This research objective is answered by means of a quantitative study including 159 answered questionnaires regarding the country image of South Africa and is supported by desk research investigating the economic impact of such a mega-event. There has been done some research about the positive economic impact of mega-events, though research explicitly connected to the impact of mega-events on country image is minimal. Consequently, my contribution to the existing theory is to find this impact on a country image. In addition, this country image is, especially for the emerging countries, vital in enhancing international views of the country as a growing industrialized country and a source of attractive goods for importation. Furthermore tests show that people who have already traveled to South Africa are more positive about the country which corresponds to previous theories. As a result this thesis investigates the change of perception after the WC has been organized, with reference to the effects on primarily country image in the context of relevant research and theory for the WC in South Africa 2010. The practical aspect of this thesis are the important implications for the effects of mega-events on country images. These issues have relevance for countries seeking to host mega-events and those who manage these events and make decision about where they will be held. Especially concerning the organization of the WC in 2018, which will be organized by the emerging country Russia.

2 THEORETICAL BACKGROUND

2.1 Literature

This literature begins by means of clarifying the mega-event, the Football World Championship, and its potential impact on place and country images. Furthermore, a general investigation on the academic foundations of country of origin effects, consumer ethnocentrism, animosity and the representation of the emerging country South Africa is given. In addition South Africa’s motives and goals for hosting the WC are explained.

2.1.1 World Championship

The WC is a mega-event that draws the attention of the world to the host country. Besides the football competition, the host country holds parallel cultural events to showcase the culture and accomplishments of the country. Most countries compete enthusiastically for the rights to hold the Figure 1: South Africa event for the tourism revenues and the enhancement of national and international prestige that are expected to flow from successfully hosting the event (Heslop, John & O’Reilly, 2010). The 2010 WC was hosted by South Africa, most frequently they are held in developed countries because of the infrastructural requirements (locations and accommodations) for hosting such a large-scale event. Although the WC has rarely been hosted by emerging countries, some examples of emerging country hosts include Chile in 1962, Mexico in 1970 and Argentina in 1978. South Africa still receives development aid, yet it is considered one of the emerging economies in the world and with the status of upper-middle-income country. South Africa is also a growing political, economic and social player in Africa.1 South Africa’s country image regarding the international perceptions of the host country are vital in terms of international relations, tourism, product purchasing, and investing decisions (see Chapter 2.1.3).

2.1.2 Place image

Image is usually described as a mental construct grown on the foundation of a small number of certain impressions from among the flood of the entire impressions throughout a creative procedure wherein those chosen are explained and ordered (Reynolds, 1965, p. 840). According to Kothler, et al. (2006) image symbolizes the simplification of a lot of associations and information related to a place or country. Consequently, image is a relative concept in which objective information and facts are replaced by subjective beliefs, opinions and judgments. Accordingly images summarize, standardize, and generalize information from lots of sources and concerning numerous features of the image object, which in the case of this research is the country South Africa.

The subjective nature of the image results in the fact that individuals hold images regarding countries / places even if they have never been there. Additionally, this perception may differ among people depending, eg. on their knowledge about a place, their experience with the place (often based on a single event), their experience with other places, attitudes, expectations, motivations, stereotypes they hold or their individual goals. Prebensen (2007) concludes that personal images of a particular place are therefore unique, constructed from someone’s own memories, associations and imagination of that place. In the decision-making procedure, image simplifies the procedure by reducing risk and allowing choice. Consequently the image concept presumes, that if someone has sufficient knowledge about a place / country accompanied by positive feelings and valuated judgments towards it, the person is prepared to prefer it among others. This tendency might result in repeatability of visits, rising demand on country products, or the willingness for more enduring ties with a country.

Country image Country profile - industriousness - education level - wealth - technology level - stability of economy - individual rights & freedoms - export products(brands) - politics / governance Infrastructure - convenient local transportation - language

Hard associations of place images

Soft associations of place images

Safe at mosphere trustworthine ss - safety / security - peacefulness - friendly & hospitable people Culture & Heritage - natural attractions - interesting historical / cultural / art attractions - appealing local food & beverage Environment - refreshing / relaxing atmosphere - good climate - exotic atmosphere - unpolluted and unspoiled environment - landscape Willingness to travel - value for money - travel costs / prices - recommend to family or friends -already have experience in travelling to SA

and private industry is inspired by welcoming an extraordinary and worldwide recognised event. The pride of hosting such an event creates local identification, visions and motivation. For example, the Chinese were keen to demonstrate their place as one of the world’s leading economies through the hosting of the Olympics in Beijing in 2008 (Lin, 2004 & Preuss, 2007).

Figure 2: Conceptual model regarding determinants of country image. Adopted from: Preuss, 2007

2.1.3 International country images including country of origin

aspect except for their country of origin are perceived differently by consumers. I will clarify this by means of the following example about Chinese piano manufacturers experiencing the country of origin effect. (Hollensen, 2008). The Chinese piano business is a helpful illustration to demonstrate the opportunities and challenges facing Chinese brands. One of the brand manufacturers, Pearl River, has become the world’s main piano producer with yearly sales of about 100,000 components. As a piano is still a labor-intensive industry, Chinese companies benefit from a large cost and price advantage. In addition this stimulates global traders to stock Chinese pianos, because of a larger profit margin. Though, the main branding problem facing Chinese piano producers is negative perception of ‘made in China’ as a label. It is complex for individual firms to transform this perception and requires the country to adjust its image from inexpensive product to a leading worldwide brand. To overcome their association with ‘cheap products’ Chinese manufactures could emphasize for example that a certain model is designed by the worldwide known designer to conquer their cheap image or to connect their brands to Western-oriented values and names. (Drozdenko & Jensen, 2009) Concluding, country of origin has an impact on consumers' quality perceptions of a product, as well as ultimately preference for and willingness to buy that product.

2.1.4 Developing country

2.1.5 Consumer ethnocentrism

just to keep the name of Switserland high. Of course the case of the country image of South Africa is exactly the other way around, starting with a low country image and improving it, but it underpins the importance of the country image itself.

2.1.6 Animosity

A relatively new stream of research in country images has involved animosity between countries. Political, military, or economic interactions between countries from time to time are of a negative character and can lead to correspondingly negative responses of the inhabitants of one country directed towards offending a country, its people, and its goods. (Klein et al., 1998) Some researchers (Klein et al., 1998; Shin, 2001; Nijsen, Douglas, 2004; Amine et al., 2005; Ettenson, Klein, 2005; Riefler, Diamanteopoulos, 2007; Heslop et al. 2008) have studied the consequences of animosity towards quite a few countries by customers in various countries and the impact of animosity on ideas about and awareness of cooperating with the country. For instance, Woodside and Chebat (2001) talk about the aversion of a Jewish couple to purchase a Volkswagen because of ongoing animosity towards the German treatment of Jews in the Second World War. Another example, Chinese consumers in Nanjing, an enduring symbol of Japanese occupation, might not acquire Japanese products because of lack of sympathy towards Japan. (Maheswaran, 2006). Thus, the degree of country of origin may also be a result of historical events and may consequently influence the use of country of origin in product evaluations. Animosity has been conceptualized as being temporary or continuing and happening from a variety of reasons, particularly wars, economic supremacy, religious and political dissimilarities. Animosity is visible by constant negative biases which are mostly seen in negative approaches to inhabitants and countries and also to goods connected with the country. Such negative biases can have an effect on the understanding of whichever actions of the unpopular country. This thesis has relevance in this study since it can support in understanding responses of people towards South-Africa and their hosting of the WC.

2.1.7 Country images and mega-events

world about the country, eg. building and / or enhancing a country brand image (Dolles & Söderman, 2008). Various emerging countries have embraced the hosting of mega-events as a potential road to world appreciation and reputation development. This is also the case for South Africa, the authorities of South Africa have defended their actions regarding the WC by saying that they are capitalising on the ‘once in a lifetime’ possibility to push through a great deal essential clean-up and regeneration. Surely, the WC has been a extraordinary chance for the authorities to improve abroad perceptions of South Africa and they have certainly been successful in this regard. Going forward, they will be looking for the ability to maintain the momentum and to additional bring together the so-called ‘rainbow nation’. As Deputy President (and former president) Kgalema Motlanthe mentioned in May 2010, the WC presented ‘an opportunity to consolidate the national cohesion to strengthen the sense of belonging, the sense of being one nation’ (Business Monitor International’s monthly regional report SA, 2010). IS

2.1.8 South Africa

This thesis looks at the WC host country image within the perspective of an emerging country host. South Africa’s position as an emerging country proposes that its image would be comparable to other emerging countries where sometimes a poor image is connected to the country, its inhabitants, and its goods, as noted above. Explicit to South Africa’s image, some studies have confirmed this general trend indicating that customers do hold a poor image of goods from South Africa (Brunner et al., 1993). Additional, there has been a great deal of current negative publicity for South Africa regarding its product quality and safety. (Rennie, 2008) There are several structural weaknesses in South Africa’s political environment. The key challenges consist of: the legacy of apartheid; widespread poverty and unemployment (unemployment stood at 25.2% in Q110 according to Statistics South Africa, 2010); and a high prevalence of HIV/AIDS. However, the South African economy is enjoying its longest post-War upswing, and poverty indices show a decline in poverty. For example, the Headcount poverty rate declined from 51.4 percent in 2001 to 43.2 percent in 2006, while mean incomes of the poorest 20 percent of society increased on average about 7.2 percent per annum during this period. Furthermore, there is evidence for a reduction in the depth and severity of poverty.3 The government is actively looking for ways to lessen these challenges, for instance through the ‘Black Economic Empowerment’ plan, plus a campaign to enhance

HIV consciousness. It will, nevertheless, take numerous years for these problems to be dealt with.

South Africa’s economy, which in 2009 contracted by 1.8 % Gross Domestic Product (its first decline since 1992), because of the global recession, is recovered reasonably in 2010, with an increase of 2.8%, helped by the global recovery4 (see Table 1). Growth quickened in 2010, supported by an increase in worldwide demand (particularly for minerals) and an improvement in domestic orders following a sharp decrease in interest rates in 2009. The recovery was quite fragile, though, since the jobs lost in 2009 (about 870,000) were not be completely restored in 2010 and private investment stayed subdued in anticipation of concrete proof of a more continued global recovery.3Nevertheless, public investment and consumption remained quite strong as the government continued with its fiscal stimulus. In addition, growth in 2010 has benefited from the WC in mid-year, which gave a major boost to tourism and associated services, and added a complete percentage point to GDP growth. The GDP growth is expected to accelerate to 3.7% in 2011, facilitated by a more positive global environment, spin-offs from the WC, ongoing public investment and a recovery in private investment. Household consumption is expected to benefit from more rapidly jobs growth, improved credit accessibility and an increasing black middle class (strengthened by the roll-out of black economic empowerment programmes). The GDP is even expected to increase towards 3,9% in 2012 (Country Report April 2010).

GDP GDP (millions of US$) Real annual percentage change

compared with year before

2007 (before WC) 283,381 5.5 % 2008 (before WC) 293,866 3.7 % 2009 (before WC) 288,577 -1.8 % 2010 (during WC) 306,657 2.8 % 2011 (after WC, prospect) 2012 (after WC, prospect) 317,633 329,631 3.7 % 3.9 %

Table 1: GDP(Gross Domestic Product) percentage South Africa

approach to economic development, building on the economic strengths of each locality and supporting the basis for economic growth, for example productive investment and enterprise improvement. (Pike et al., 2006; Valler & Wood, 2010). Virtually all business sectors are open to foreign investors. No government approval is required, and there are almost no restrictions on the form or extent of foreign investment. To summarize, the South Africa government is open to foreign investment, which it views as a means to drive growth, improve international competitiveness, and obtain access to foreign markets.

To conclude, mega-events, including WCs, are generally known as being important vehicles for constructing national pride within the country and for the country’s self-promotion to viewers outside the country. And this self-self-promotion is very important concerning today’s globalisation. Countries compete with each other for the awareness, respect and confidence of investors, tourists, clients, immigrants, the media, and the governments of other nations. As a result, a strong and positive country image presents a fundamental competitive advantage. This research examines the impact of a mega-event on country image, by studying the case of the 2010 Football World Championship in South Africa. This country image is measured via the perception of people of soft and hard associations of place images. These are shortly related to country of origin effects which are based on diverse experience with the nation and its products, historical ties or conflicts, economic ties, cultural associations, geographical distance, familiarity, consumer ethnocentrism, animosity and being an emerging or developed country.

2.2 Research framework

Country image Country profile - industriousness - education level - wealth - technology level - stability of economy - individual rights & freedoms - export products(brands) - politics / governance Infrastructure - convenient local transportation - language

Hard associations of place images

Soft associations of place images

Safe at mosphere trustworthine ss - safety / security - peacefulness - friendly & hospitable people Culture & Heritage - natural attractions - interesting historical / cultural / art attractions - appealing local food & beverage Environment - refreshing / relaxing atmosphere - good climate - exotic atmosphere - unpolluted and unspoiled environment - landscape Willingness to travel - value for money - travel costs / prices - recommend to family or friends -already have experience in travelling to SA

Figure 2: Conceptual model regarding determinants of country image. Adopted from: Preuss, 2007

People’s associations that comprise a country image are classified into two types (see Figure 2). Hard associations, which are rational, objective and performance related, referring to either tangible brand features or functional benefits. This includes the country profile (economics, export, politics, industriousness, education, wealth, technology and the individual rights and freedoms of the inhabitants) and infrastructure (transportation, language). In contrast, soft associations are subjective and emotionally based. Such as a feeling of safety (friendliness, people, trustworthiness, safety), culture (attractions, food & beverage), environment (landscape, atmosphere, climate) and the willingness to travel to the country (costs, recommendations, experience) (Biel, 1993; Preuss, 2007).

technological expertise (Heslop, Nadeau & O’Reilly, 2010). Therefore it is expected that the majority of the respondents will show a significant positive change when comparing the image-related opinions before and after the WC.Nevertheless the most positive and strongest influence is expected to be foremost related to the soft associations, they are related to feelings of safety, friendly and hospitable people, and multi-cultural atmosphere, etc.. Since these feelings of a place image are more subjective and emotionally based (Florek, Breitbarth & Conejo, 2008). By means of these associations several hypotheses have been developed which will be further discussed in the next chapter.

2.3 Hypotheses

To answer the research objective first of all the country image impact is looked at, beginning with the soft associations of place images (H1) followed by the hard associations of place images (H2). However to support this research also the economic impact of a mega-event is examined. For example, respondents can answer that they are more willing to travel to South Africa after it organized the WC, and when this is proven by real numbers it upgrades the reliability of this report. Firstly, the population variances are tested. This in order to determine whether the variances are equal or unequal and subsequently, whether to use the equal-variances or unequal-variances test statistic. The following hypothesis is used:

H0: The population variances of the first and the second population are equal

H1: The population variances of the first and the second population differ from each other

The hypotheses are divided into hypotheses related to the hard associations of place images versus hypotheses related to the soft associations of place images. It is expected to see a positive change in perception of the host country after it organized the WC for both associations.

Soft associations of place images Safe at -mosphere trustworthiness - safety / security - peacefulness - friendly & hospitable people Culture & Heritage - natural attractions - interesting historical / cultural / art attractions - appealing local food & beverage

Environment - refreshing / relaxing atmosphere - good climate - exotic atmosphere - unpolluted and unspoiled environment - landscape Willingness to travel

- value for money - travel costs / prices - recommend to family or friends -already have experience in travelling to SA

normal since the sample size is large enough to overcome any ordinary or not normal attributes of the distribution.

Hypothesis 1a:

H1a: The perception of the soft associations regarding the country image of South Africa changed after the WC was organized

To investigate this hypothesis further, it is subdivided in smaller hypotheses. (figure 3) Hypothesis 1b concerns the importance of travelling to South Africa and two populations from which one is the respondents opinion before the WC and the other one after the WC. The objective is to gain more insight whether there is an actual difference between the importance of travelling to South Africa, ranked from 1 = very negative to 7 = very positive. Both populations are distributed normal. This hypothesis is followed by a hypothesis testing whether the opinion before (µ1) and the opinion after the WC (µ2) differs.

H1b: The willingness towards traveling to South Africa changed after South Africa organized the WC

Figure 3:The determinants of soft associations of place images. Adopted from: Preuss, 2007

negative to 7 = very positive. Both populations are distributed normal. The hypothesis is as follows:

H1c: The perception of the safety in South Africa changed after the WC was organized

Crime is a main concern in South Africa and incurs high social costs to South Africans and to tourists (Maennig and Maennig 2002). Crime may be a significant reason for many people not to travel to South Africa. The WC organizers and the South African government acknowledged the vital role of crime in advance and on the occasion of the WC 2010 (Bob, Swart, Turco, 2006). A broad international communication of new policies of crime prevention and its successes are necessary to fully profit from the opportunity to stimulate tourism. Despite early scepticism, the stadiums in South Africa were built on time and fans were kept safe from crime. Approximately 1.3 billion Rand (0.2 billion Dollar) has been spent on safety and security included the permanent addition of 40,000 new policemen and women..5 Consequently, South Africa proved that it can host a world-class event tourists, this should increase the country’s international image immediately. Therefore a positive outcome is to be expected. The WC might even extent the way people are culturally interested in South Africa. Hypothesis 1d examines the likeliness of people being culturally more interested in South Africa after it organized the WC. The same two populations are used, population 1 (µ1) consists of the respondents’ opinion before the WC was organized and population 2 (µ2) embodies the respondents’ opinion after the WC was organized. Both populations are distributed normal.

H1d: The cultural interest in South Africa changed after the WC was organized

And the final soft association of place images, the environment of South Africa. Since people might get more familiar with the country after the WC was organized and might become more positive about the landscape, atmosphere, climate etc. Hypothesis 1e examines the perception the environment of South Africa before (µ1) and after (µ2) the WC was organized. Both populations are distributed normal.

H1e: The perception of the environment in South Africa changed after the WC was organized

Country profile - industriousness - education level - wealth - technology level - stability of economy - individual rights & freedoms - export products(brands) - politics / governance Infrastructure - convenient local transportation - language

Hard associations of place images

Hard associations of place images are more rational, objective and performance related, referring to either tangible brand features or functional benefits, such as economics, production and politics. (figure 4) South Africa enjoys a relatively advanced and entrenched democracy, however there are many structural weaknesses in its political backdrop. And these weaknesses are mostly remembered (eg. Apartheid, poverty, joblessness and HIV/AIDS). According to the literature review (see Chapter 2.1.3) Many studies have investigated the negative bias among customers towards emerging countries and their goods (Gaedeke, 1973; Wang & Lamb, 1983; Crawford & Lumpkin, 1993; Kaynak et al., 2000; Jaffe & Nebenzahl, 2001; Papadopoulos & Heslop, 2002; Wang & Chen, 2004; Heslop et al. 2004; Hamzaoui & Merunka, 2006) (Statistics South Africa, 2011). Johansson (1989) posited the motive why people have biases against emerging countries and hold negative stereotypes, customer awareness of the progress lags recent progress of emerging countries. There surely are examples to demonstrate the stereotypes that surround countries can change eventually (Papadopoulos et al. 1987; Jaffe & Nebenzahl, 2001). Of course, this finding has particular relevance for this research concerning the perception before and after a mega-event. To increase the awareness of people regarding the progress of South Africa.

Figure 4:The determinants of hard associations of place images. Adopted from Preuss, 2007

Hypothesis 2a:

The second hypothesis concerns the possible change in perception of hard associations of the country image of South Africa.

To investigate this hypothesis further, the hypothesis is subdivided in smaller hypotheses. Hypothesis 2b investigates the perception of the infrastructure of South Africa before (µ1) and after (µ2) the WC was organized. Both populations are distributed normal. H2b: The perception of the infrastructure of South Africa changed after the WC was organized

Hypothesis 2c tests whether people are more willing to buy products from South Africa after (µ2) it organized the WC, compared to their perceptions before (µ1) the WC was organized. Both populations are distributed normal.

H2c: The willingness towards buying products from South Africa changed the WC was organized

Hypothesis 2d concerns the perception of the economy level of South Africa before (µ1) and after (µ2) the WC was organized. Both populations are distributed normal.

H2d: The perception of the economy level of South Africa changed after the WC was organized

Hypothesis 3:

This hypothesis examines the perception of soft associations (µ1) versus hard associations (µ2). When examining both hard and soft associations of place images it is expected to see a positive change in perception of South Africa after it organized the WC. However the strongest influence is expected to be foremost related to the soft associations, as explained before. Since these feelings of a place image are more subjective and emotionally based. (Florek, Breitbarth, Conejo, 2008) Compared to hard associations of place images which are more rational, objective and performance related, such as economics, production and politics. H3: The perception of the soft associations of place images of South Africa are valued higher than hard associations of place images of South Africa after South Africa organized the WC

Hypothesis 4:

This last hypothesis is used to support the prior hypotheses. It investigates the economic situation in South Africa before and after the WC was organized.

Hypotheses Soft associations: H1a. H1b. H1c. H1d. H1e. Hard associations: H2a. H2b. H2c. H2d.

Soft versus hard associations H3.

Economic impact H4.

The perception of the soft associations concerning the country image of South Africa changed after the WC was organized The willingness towards traveling to South Africa changed after South Africa organized the WC

The perception of the safety in South Africa changed after the WC was organized

The perception of the cultural of South Africa changed after the WC was organized

The perception of the environment in South Africa changed after the WC was organized

The perception of the hard associations concerning the country image of South Africa changed after the WC was organized

The willingness towards buying products from South Africa changed after South Africa organized the WC

The perception of the economy level in South Africa changed after the WC was organized

The perception of the infrastructure of South Africa changed after the WC was organized

People value soft associations of place images higher than hard associations of place images after South Africa organized the WC

The economic situation of South Africa increased after South Africa organized the WC

3 RESEARCH DESIGN

A structured research progress is of essential importance for the efficiency and success of this thesis. I collected data to test the study’s hypotheses using questionnaires based on previous studies of country images and with measures from the literature review. These similar research projects are ‘China and the Olympics’ (Heslop, Nadeau & O’Reilly, 2009) and ‘The Conceptualisation and Measurement of Mega Sport Event Legacies’ (Preuss, 2007). The questionnaire is checked by an academic and tested on a test-panel before the final questionnaire was send out. To assess perceptions of South Africa’s image the respondents are asked to indicate their level of agreement on each item on a seven-point scale anchored by strongly disagree (1) and strongly agree (7) (Harzing, et al., 2009). Consequently primary and secondary data are used to answer all research questions. The secondary data is derived from books, articles, newspapers and the Internet. In order to provide a representative research, careful attention is paid to the respectability and correctness of the sources.

A deductive research approach is utilized. A deductive model necessitates building up the theoretical framework prior to investigating it. Therefore, this research begins with conceptualization and after that, the relevance of the model is examined (Gill & Johnson, 2002). The deductive research procedure can be segregated into diverse phases as demonstrated in table 3.

Action Explanation

Concepts Choice of relevant theories for the resulting theory which will be assessed afterwards.

Rules Understandable description of regulations for the examination – this is vital for the operationalization as it declares what should be determined.

Operationalization Empirically recognizable indicators are developed. Consequently, an abstract theory is connected to visible measures. The produced rules describe what is actually measured.

Instructions Connected to the operationalization, precise instructions on how to examine are essential as this facilitates hypotheses-testing. If a standardized procedure results, this make additional studies by other scholar s simpler.

Testing corroboration

The outcomes of the tests are connected to the hypotheses and the theory to draw conclusions. Quality criteria such as validity should be considered too.

Testing The outcom es of the tests are connected to the hy potheses and the

3.1 Data collection

A questionnaire is a good method to achieve reliable responses, as it provides respondents the opportunity to read, interpret and answer questions in their own time (Kozak, 2001). A set of questions is asked to respondents about their opinions related to the image of South Africa. Demographic questions are included to gather information about the respondent’s gender, age, home country and education level. The results of the questionnaires are coded for data analysis in SPSS. By using among others a paired t-test, which compares means on the same or related subject in the before-after situation. It tests if the differences between the two observations is 0. (Keller, 2009) For example (H1a) ‘The perception of the soft associations concerning the country image of South Africa changed after the WC was organized’. Furthermore a Pearson correlation is utilized, to reflect the degree to which all these variables are related. It ranges from +1 to -1, meaning a positive or negative relationship. And cross tabulations which is an SPSS procedure that cross-tabulates two variables, thus displaying their relationship in tabular form. A significance level of 0.05 is used, the practical bottom-line meaning of the 0.05 level is that this experimental has about 95% confidence that the observed result reflects something more than mere random variability result. All hypothesis consist of interval data and the descriptive measurement concerns the central location. To make inferences about the difference between two means, independent samples are used from the two populations (perceptions before and after the WC was organized). The samples are independent of each other because they are separate samples containing different sets of individual subjects. The individual measures in population 1 are in no way linked with or related to any of the individual measures in population 2, and vice versa. (Keller, 2009)

3.2 Sample

to complete questionnaires. Additional I sent the questionnaires to two social networks: Facebook and Hyves to increase the diversity of respondents. The amount of returned questionnaires is 159 which is, according to Thomas (2004, p.108) and Hoinville et al. (1978, p.61), a sufficient amount that gives scope for analysis of survey data. The questionnaire can be found in appendix 1.

3.3 Control variables

To ensure that the results are not biased control variables are used. (Blumberg, Cooper & Schindler, 2005) The control variables used in this study are the same control variables used in a similar research procedure (Heslop, Nadeau & O’Reilly, 2010). I controlled for the possible effect of the world wide financial crisis, this is mostly related to the economic impact of a mega-event and can be found in chapter 5.3. Because South Africa is recovering form the world wide financial crisis as much as other nations. On the other hand, South Africa can on the long-term obtain benefits from the WC, both financial and in terms of international goodwill, for the reason that the WC presented South Africa as a potential secure, peaceful, modernized and a viable objective of foreign investment.

4 RESULTS

In this section the results are given and these results are further discussed in the following chapter 6.

4.1 Demographic profile respondents

This study contains data from 159 respondents mostly from the Netherlands, but also from Germany, the US, China, Bolivia and Estonia, on two distinct objects measured with multiple items to assess different components of soft and hard associations of country image. All associations were significant at α = 0.000. The characteristics of the respondents are presented in appendix 5. The proportion of female respondents (50.9 %) was slightly higher than male (49.1 %) respondents. The respondents were primarily aged between 20 and 29 years (62.3 %). University and higher graduates were predominant (62.9 %), representing nearly two-thirds of respondents.

4.2 Country image impact

General pre-post perceptions of South Africa *

Pre-event Post-event Percentage change Soft associations • Safety / security • Peacefulness • Friendliness / hospitability • Natural attractions

• South African major cities • Climate

• Food and beverages • Landscape

• Willingness to travel

Average perception of soft associations

3.15 3.63 4.99 5.40 3.56 4.24 5.21 5.55 3.72 4.38 4.42 4.45 5.49 5.65 4.28 4.58 5.58 5.81 4.43 4.97 40.32 % 22.59 % 10.02 % 4.63 % 20.22 % 8.02 % 7.10 % 4.68 % 19.09 % 13.47 % Table 4: Comparison of the perception of the soft associations regarding the WC, pre- and post-event.

Notes: Significant at: *p < 0.05, all associations were pre-event lower than post-event. All associations were significant at α = 0.000 for individual and summary measures. Explanation of the numbers: 1= very negative; 2 = negative; 3 = slightly negative; 4 = average; 5 = slightly positive; 6 = positive; 7 = very positive. For the whole test see appendix 3

Other previous research (Biel, 1993; Lin, 2004 and Preuss, 2007b) confirmed that soft associations are, clear and consistent, valued higher than hard associations. (table 6) This is also observed in this study in that the hard associations are valued very low, which confirms the third hypothesis ‘People value soft associations of place images higher than hard associations of place images after South Africa organized the WC’. The hard associations scored on average (before the WC) a 3.27 (table 5) with the lowest value given to the perception of the individual freedom and rights in South Africa of 2.92 (between 2: negative; and 3: slightly negative). All associations concerning country policies including political orientations, freedoms and rights of the people, environment laws, role in the world politics are measured very low.

General pre-post perceptions of South Africa *

Pre-event Post-event Percentage change

Hard associations

• Economy • Technology • Politics

• Individual rights and freedoms • Export products

• Infrastructure

Average perception of hard association

3.09 3.33 2.96 2.92 4.23 3.09 3.27 3.96 4.08 3.65 3.53 4.45 4.29 4.01 28.16 % 22.52 % 23.31 % 20.89 % 5.20 % 38.83 % 22.63 % Table 5: Comparison of the hard associations regarding the perception of the WC, pre- and post-event.

When looking at both the soft associations versus hard associations a clear higher value is observed after the WC was organized (see Table 6 ). Even most for the perception of the hard associations, which increased with 22.63 %, and confirms the second hypotheses ‘People’s perception of the hard associations changed after the WC was organized’.

General pre-post perceptions of South Africa *

Pre-event Post-event Percentage change Average perception of soft and hard

associations

3.83 4.49 17.23 %

Table 6: Comparison of both the soft and hard associations regarding the perception of the WC, pre- and post-event. Explanation of the numbers: 1= very negative; 2 = negative; 3 = slightly negative; 4 = average; 5 =

slightly positive; 6 = positive; 7 = very positive. For the whole test see appendix 3

Subsequently, I compared the perceptions of people before and after the WC was organized, plus the personal experience when travelled to South Africa or not. (table 7) When looking at the average perception of the soft and hard associations they are higher for the persons who travelled to South Africa than the ones who did not. This supports the theory of Johansson and demonstrate that the stereotypes that surround countries can change eventually. (Papadopoulos et al. 1987; Jaffe, Nebenzahl, 2001) Therefore this finding has particular relevance in the case of the country image of the quickly emerging countries, like South Africa. Concerning the soft associations there is one item that is valued lower by the persons who have travelled to South Africa, this one is the peacefulness. However the rating of the peacefulness pre-event differs 0.02 and after the event has taken place the persons who did travel to South Africa are more positive. (see Table 7)

Differences in perceptions of South Not travelled Yes travelled Africa when travelled (yes or no) to Pre-event Post-event Pre-event Post- South Africa * event

Soft associations

• Safety / security • Peacefulness

• Friendliness / hospitability • Natural attractions

• South African major cities • Climate

• Food and beverages • Landscape

• Willingness to travel

Average perception of soft associations

3.25 3.62 4.93 5.37 3.43 5.02 3.91 5.55 3.60 4.30 4.00 4.21 5.43 5.58 3.95 5.51 4.40 5.75 4.32 4.79 3.30 3.60 5.80 5.89 4.33 6.36 5.90 5.60 5.00 5.09 4.49 4.73 6.27 6.50 4.73 6.45 6.70 6.45 5.82 5.79 Table 7: Comparison of the soft associations regarding the perception of the WC, pre- and post-event between people who actually travelled to South Africa and people who did not. Notes: Significant at: *p < 0.05, all

Concerning the difference in the hard associations of the perceptions of South Africa when travelled or not. There is also one items that are valued lower by the persons who have travelled to South Africa, these are peacefulness and technology. However the rating of the peacefulness pre-event differs 0.02 and after the event has taken place the persons who did travel to South Africa are more positive. When looking at the technology level it even stays lower after the event has taken place (see Table 8).

Differences in perceptions of South Not travelled Yes travelled Africa when travelled (yes or no) to Pre-event Post-event Pre-event Post- South Africa * event

Hard associations

• Economy • Technology • Politics

• Individual rights and freedoms • Export products

• Infrastructure

Average perception of hard association

3.07 3.31 2.50 2.82 4.19 2.98 3.15 3.64 4.10 3.60 3.45 4.40 4.19 3.90 3.40 3.55 2.96 4.00 5.88 4.18 4.00 3.98 3.64 3.63 4.81 5.88 4.55 4,42 Table 8: Comparison of the hard associations regarding the perception of the WC, pre- and post-event

between people who actually travelled to South Africa and people who did not.

Notes: Significant at: *p < 0.05, all associations were pre-event lower than post-event and lower for people who have not travelled to South Africa, except for the item: technology. All associations were significant at α = 0.000 for individual and summary measures. Explanation of the numbers: 1= very negative; 2 = negative; 3 = slightly negative; 4 = average; 5 = slightly positive; 6 = positive; 7 = very positive. For the whole test see appendix 3, 4

Differences in perceptions of South Not followed Yes followed Africa between persons who intensively Pre-event Post-event Pre-event Post- followed the WC and who did not* event

Soft associations

• Safety / security • Peacefulness

• Friendliness / hospitability • Natural attractions

• South African major cities • Climate

• Food and beverages • Landscape

• Willingness to travel

Average perception of soft associations

3.09 2.60 4.40 4.40 4.14 5.66 3.60 6.14 2.71 4.08 3.83 3.73 5.40 4.40 4.30 6.14 3.60 6.71 2.71 4.54 3.24 3.88 5.16 5.60 3.54 5.56 4.36 5.68 3.95 4.55 4.48 4.56 5.67 5.77 4.43 6.14 4.71 5.87 4.74 5.15 Table 9: Comparison of the soft associations concerning the perceptions of the WC, pre- and post-event

between people who intensively followed the WC in South Africa and people who did not.

Notes: Significant at: *p < 0.05, all associations were pre-event lower than post-event and lower for people who have not intensively followed the WC in South Africa, except for the item: landscape. All associations were significant at α = 0.000 for individual and summary measures. Explanation of the numbers: 1= very negative; 2 = negative; 3 = slightly negative; 4 = average; 5 = slightly positive; 6 = positive; 7 = very positive. For the whole test see appendix 3, 4

All hard associations were pre-event lower than post-event and lower for people who have not intensively followed the WC in South Africa, except for the item: export products (see Table 10).

Differences in perceptions of South Not followed Yes followed Africa between persons who intensively Pre-event Post-event Pre-event Post- followed the WC and who did not* event

Hard associations

• Economy • Technology • Politics

• Individual rights and freedoms • Export products

• Infrastructure

Average perception of hard association

3.29 3.29 2.29 2.43 4.83 3.20 3.22 3.86 4.00 3.71 2.71 4.83 3.80 3.82 3.00 3.40 3.03 2.88 4.03 3.09 3.24 3.95 4.14 4.00 3.70 4.34 4.35 4.08 Table 10: Comparison of the hard associations regarding the perceptions of the WC, pre- and post-event

between people who intensively followed the WC in South Africa and people who did not.

Notes: Significant at: *p < 0.05, all associations were pre-event lower than post-event and lower for people who have not intensively followed the WC in South Africa, except for the item: landscape. All associations were significant at α = 0.000 for individual and summary measures. Explanation of the numbers: 1= very negative; 2 = negative; 3 = slightly negative; 4 = average; 5 = slightly positive; 6 = positive; 7 = very positive. For the whole test see appendix 3, 4

Soft associations: Correlation Safet y Peacefu l Inhabitant s Attraction s Citie s F & B Clim ate Landscap e Willingnes s travel Soft associations: Safety Pearson cor. Sig. 1 ,580** ,000 ,232** ,007 -,175* ,046 ,347** ,000 ,192 ,039 -,058 ,502 -,053 ,532 ,162 ,057 Peaceful Pearson cor. Sig. ,580** ,000 1 ,314** ,000 ,057 ,506 ,421** ,000 ,257** ,005 ,069 ,409 ,000 ,999 ,288** ,000 Inhabitants Pearson cor. Sig. ,232** ,007 ,314** ,000 1 ,380** ,000 ,248** ,004 ,309** ,001 ,149 ,081 ,174* ,039 ,341** ,000 Attractio ns Pearson. Sig. -,175* ,046 ,057 ,506 ,380** ,000 1 ,110 ,210 ,185* ,049 ,050 ,567 ,331** ,000 ,321** ,000 Cities Pearson cor. Sig. ,347** ,000 ,421** ,000 ,248** ,004 ,110 ,210 1 ,129 ,164 -,055 ,521 -,023 ,780 ,288** ,001 F & B Pearson cor. Sig. ,192* ,039 ,257** ,005 ,309** ,001 ,185* ,049 ,129 ,164 1 ,392** ,000 ,116 ,206 ,304** ,001 Climate Pearson cor. Sig. -,058 ,502 ,069 ,409 ,149 ,081 ,050 ,567 -,055 ,521 ,392** ,000 1 ,430** ,000 ,176* ,035 Landscape Pearson cor. Sig. -,053 ,532 ,000 ,999 ,174* ,039 ,331** ,000 -,023 ,780 ,116 ,206 ,430** ,000 1 ,352** ,000 Willingsness travel Pea. Sig. ,162 ,057 ,288** ,000 ,341** ,000 ,321** ,000 ,288** ,001 ,304** ,001 ,176* ,035 ,352** ,000 1 Hard associations: Economy Pearson cor. Sig. ,236** ,007 ,221** ,010 ,090 ,305 -,184* ,036 ,190* ,027 ,270** ,004 ,021 ,812 ,046 ,589 ,178* ,036 Technology Pearson cor. Sig. ,343** ,000 ,252** ,003 ,062 ,488 -,044 ,625 ,073 ,414 ,255** ,007 ,015 ,860 ,041 ,637 ,206* ,017 Politics Pearson cor. Sig. ,273** ,002 ,500** ,000 ,163 ,064 ,032 ,725 ,326** ,000 ,218* ,020 ,046 ,596 ,096 ,261 ,263** ,002 Rights & Freedoms P. Sig. ,105 ,237 ,412** ,000 ,206* ,019 ,204* ,022 ,280** ,001 ,297** ,001 ,010 ,910 -,021 ,806 ,333** ,000 Export Pearson Cor. Sig. -,116 ,208 ,048 ,600 ,046 ,626 ,249** ,007 ,305** ,001 ,407** ,000 ,182* ,042 ,050 ,581 ,065 ,474 Infrastructur e Pearson C. Sig. ,194* ,027 ,343** ,000 ,192* ,031 ,136 ,129 ,087 ,326 ,382** ,000 ,243** ,005 ,092 ,289 ,402** ,000 Table 11: Pearson correlation. **Correlation is significant at the 0.01 level. * Correlation is significant at the

0.05 level. For the whole test see appendix 6

Hard associations

Correlation Economy Technology Politics Right &

Freedoms Export Infrastructure Soft associations Safety Pearson cor. Sig. ,236** ,007 ,343** ,000 ,273** ,002 ,105 ,237 -,116 ,208 ,194* ,027 Peaceful Pearson cor. Sig. ,221** ,010 ,252** ,003 ,500** ,000 ,412** ,000 ,048 ,600 ,343** ,000 Inhabitants Pearson cor. Sig. ,090 ,305 ,062 ,488 ,163 ,064 ,206* ,019 ,046 ,626 ,192* ,031 Attractio ns Pearson. Sig. -,184* ,036 -,044 ,625 ,032 ,725 ,204* ,022 ,249** ,007 ,136 ,129 Cities Pearson cor. Sig. ,190* ,027 ,073 ,414 ,326** ,000 ,280** ,001 ,305** ,001 ,087 ,326 F & B Pearson cor. Sig. ,270** ,004 ,255** ,007 ,218* ,020 ,297** ,001 ,407** ,000 ,382** ,000 Climate Pearson cor. Sig. ,021 ,812 ,015 ,860 ,046 ,596 ,010 ,910 ,182* ,042 ,243** ,005 Landscape Pearson cor. Sig. ,046 ,589 ,041 ,637 ,096 ,261 -,021 ,806 ,050 ,581 ,092 ,289 Willingsness travel Pea. Sig. ,178* ,036 ,206* ,017 ,263** ,002 ,333** ,000 ,065 ,474 ,402** ,000 Hard associations: Economy Pearson cor. Sig. 1 ,531** ,000 ,454** ,000 ,467** ,000 ,273** ,003 ,494** ,000 Technology Pearson cor. Sig. ,531** ,000 1 ,464** ,000 ,290** ,001 ,279** ,002 ,446** ,000 Politics Pearson cor. Sig. ,454** ,000 ,464** ,000 1 ,611** ,000 ,231* ,011 ,474** ,000 Rights & Freedoms P. Sig. ,467** ,000 ,290** ,001 ,611** ,000 1 ,211* ,022 ,618** ,000 Export Pearson Cor. Sig. ,273** ,003 ,279** ,002 ,231* ,011 ,211* ,022 1 ,112 ,225 Infrastructure Pearson C. Sig. ,494** ,000 ,446** ,000 ,474** ,000 ,618** ,000 ,112 ,225 1

Table 12: Pearson correlation. **Correlation is significant at the 0.01 level. * Correlation is significant at the

0.05 level. For the whole test see appendix 6

85,9% 47,8% 32,6% 25% 7,6% N a tu re C u lt u re T ru s tw o rt h in e s s o f th e c o u n tr y C o n v e n ie n t lo c a l tr a n s p o rt a ti o n s O th e r re a s o n

(table 4) being valued highest. The culture of South Africa was mentioned 47.83 percent of the times, convenient local transportation 25 percent and the trustworthiness of the country 32.61 percent.

Figure 5: Reasons for travelling to South Africa

Other reasons (7.6 percent) mentioned by the respondents were: • Costs

• Having friends in South Africa, therefore convenient local transportation is important. • Business

• Family • Internship

The nature of South Africa scored highest of all associations of place images and is valued here again in a direct question best. The country image concerning the nature is high and the awareness for this association is observable for investors, tourist, customers, immigrants, the media, and the governments of other countries etc. Therefore South, Africa should focus, if possible, more on the associations that scored lower in perception. For example, the willingness to travel (see Table 4) increased with 19,09 percent, this can even increase if other, especially hard associations of the country image, will be valued higher. The results are further discussed in the next chapter.

4.3 Economic impact

and agriculture sectors have been fairly well developed. The infrastructure is even excellent, nowadays.6 The same applies to banks that endured the credit crisis of 2008 better than banks in Europe and America.7 Besides the financial sector, a key sector of the South African industry is the mining sector. South Africa is one of the largest gold, platinum and coal producers in the world.8 On the other hand, South Africa still exhibits some characteristics of third world country. The country still faces a huge gap between the rich and the poor, high crime rates and a high unemployment rate (officially 25 percent) (Statistics South Africa, 2010). The government has recently proposed to reduce the unemployment rate to 15 percent in 2012.

Let us take a closer look to the investment costs and benefits of the WC in itself. South Africa started construction the first stadium in September 2006 and since than economic costs and benefits began. South Africa invested heavily to host the WC 2010. The games were played in 10 stadiums in nine host cities, all of which possess the minimum capacity of 40,000 spectators as required by the FIFA. Five stadiums (Soccer City and Ellis Park in Johannesburg, Royal Bafokeng in Rustenberg, Loftus Versfeld in Pretoria, and Free State in Bloemfontein) were adapted to FIFA’s quality requirements via modernization measures. Another five stadiums (Cape Town, Durban, Nelspruit, Polokwane, and Port Elizabeth) were newly built. Total investment in stadiums added up to US$ 1.23 billion (R9.6 billion), for which the government was almost exclusively accountable. For infrastructure, US$0.62 billion (R4.8 billion) was needed, excluding the US$1.54 billion (R11.98 billion) earmarked for the Gautrain rapid rail link over the same period (National Treasury 2008).

Generally speaking, the WC will not immediately provide a significant boost to the nation's economy (aside from an increase in tourism-related businesses and construction jobs). However, a surplus value of the WC is that the government has spent a lot of money to build and improve the infrastructure (roads, rails, stadiums, etc.). Consequently, lasting benefits may accrue, in the form of increased foreign investment and more permanent jobs. As seen already in the literature review (see Chapter 2.1.6) the GDP of South Africa increased with 2,8% in 2010 and is even expected to grow with 3,7 % in 20119 (see Table 13). When looking

6

at the long-term tendency since 2005 growth gradually narrowed, but recovery is expected after 2010.

GDP GDP (millions of US$) Real annual percentage change

compared with year before

2007 (before WC) 283,381 5.5 % 2008 (before WC) 293,866 3.7 % 2009 (before WC) 288,577 -1.8 % 2010 (during WC) 2011 (after WC, prospect) 2012 (after WC, prospect) 306,657 317,633 329,631 2.8 % 3.7 % 3.9 % …

Table 13: GDP(Gross Domestic Product) percentage South Africa

Let us take a closer look towards the development of the top - five key sectors of the South African economy. They are ordered according to their economic importance and the way they are impacted by the WC. First of all the tourism industry.

- Tourism industry

The South African tourism industry contributes an average of 8.3 percent to the gross domestic product (GDP)10. The tourism industry is the main sector that will directly benefit from a mega – event. This industry is expected to draw most long-term gain from the WC (Cornelissen, 2007) South Africa's charming beauty, wonderful outdoors, sunny weather, cultural variety and reputation for delivering value for money have created one of the world's fastest rising leisure - and business - travel destinations. To give an idea of the development in tourist arrivals the arrivals, the tourist arrivals of 2009 are compared to the tourist arrivals in 2010, which increased with 15.14 percent11. To benchmark, the figures from the UN World Tourism Organisation showed that global tourism arrivals were estimated to have grown by 6.7 percent in 2010. This meant that South Africa outperformed the global market by 8 percent12. When looking to the long-term tendency a steady growth is spotted. When comparing the total amount of tourist arrivals in 1997 (around 5,200,000 tourist arrivals), the total amount increased with 35.59 percent.

Tourism in South Africa

Tourist arrivals Total income in millions US$

Real annual % change compared with year before

2008 (before WC) 6,875,849 24,664.9 3.11 %

2009 (before WC) 7,011,865 25,163.1 1.98 %

2010 (during WC) 8,073,552 29,652.5 15.14 %

2010 (during WC) 8,073,552 15.14 %

Table 14: Tourism in South Africa

- Mining and minerals in South Africa

The South African mining sector added approximately 19 percent of GDP in 2009 (8.8 percent directly, over 50 percent of merchandise exports, more or less 18 percent of gross investment and around 30 percent of capital inflows into the economy by means of the financial account of the balance of payments)13. South Africa is a world leader in mining. It is well-known for its large quantity of mineral resources, accounting for an important amount of world production and reserves. South African mining corporations are key players in the worldwide industry. These multinationals are eg. De Beers, BHP Biliton and AngloAmerican. The commodities (minerals) include (a) diamonds, (b) asbestos, (c) fluorspar, (d) iron, (e) lead, (f) manganese, (g) antimony, (h) nickel, (i) uranium, (j) vermiculite, (k) coal and (l) platinum. In general the South African economy benefited greatly from the mining industry supported by the rising raw material prices. This wealth earned from mining is also used to build stadia for the WC.14 When looking at the tendency (see Appendix 2) the mining industry is quite stable since 1998. However, the South African mining industry was not spared the impact of the global economic crisis. The total South African mining production felt by 8,81 percent in 2009, given the response of mining companies to the global financial crisis which included cutting back supply and closing loss-making production15.

Table 15: Mining industry in South Africa

The turnaround began in about May 2009. Firstly, the US dollar weakness which convinced many central banks across the world to diversify their foreign assets out of US

13

Mining industry in South Africa

Total income in millions US$

Real annual % change compared with year before

dollar and into commodities. Secondly, the fragility of the US and European economies made investors (Japanes, Chinese and other emerging countries) seek opportunities in ‘commodity-intensive’ countries. Therefore, the commodity prices are on the rebound but there is still a way to go. Consequently, the outlook for 2011 does look brighter, when the damage of price volatility is reduced, then the mining sector will continue a steady rise out of the recession16.

- South Africa’s financial sector

The South African financial industry contributes an average of 21 percent to the gross domestic product (GDP) in 201017. South Africa has a well developed financial system. The Johannesburg Stock Exchange is amongst the ten biggest in the world. Banks like Standard Bank, ABSA and Investec are widely operational in the rest of Africa. Actually, Trevor Manuel (Minister in the Presidency, in charge of the National Planning Commission. Previously he was the Minister of Finance from 1996 to 2009) even before the credit crisis called for a halt to the uncontrolled credit18. In contrast to the American and European banks the South African banks endured the crisis well. Therefore, the South Africa's banking sector is preferred compared to those of developed countries. In South Africa foreign banks are well represented and electronic banking facilities are widespread, with a countrywide system of automatic teller machines (ATMs) and internet banking facilities available. Consequently, the World Bank and International Monetary Fund have given South Africa’s financial sector the thumbs-up following an assessment of the country’s adherence to international banking, insurance and securities markets regulatory standards19. This is very positive for South Africa’s country image. When looking at the tendency of the financial sector of South Africa (see Appendix 2) from 1998 to 2008 we see a steady increasing line20. And when examining the annual percentage change (see Table 16), the growth of the South African financial sector got stuck a bit in 2009 because of the worldwide financial crisis but still developed a percentage and is expected to continue growing coming years21.

Financial sector in South Africa

Total income in millions US$ Real annual percentage change compared with year before

2008 (before WC) 69,463.4 7.8 % 2009 (before WC) 2010 (during WC) 70,094.2 71,451.8 0.9 % 1.9 %

Table 16: Financial sector in South Africa

- South African agriculture

The South African agricultural sector contributes an average of 3 to 4 percent to the gross domestic product (GDP) and together with the agro-industry even 14 to 20 percent20.

The strong, varied environment and rich soil make South Africa capable of almost any imaginable agricultural production. The government’s intended redistribution of land towards the black inhabitants still develops slowly. By far, most land is still owned by a relatively small amount of white farmers. The agricultural sector offers approximately all local needs for food and beverages. Additionally, large-scale wine (fifth in the world), fruit (avocados, grapefruit, tangerines, plums, pears, table grapes), corn and ostrich products are exported. To give a small example per segment, the wine industry export grew 12,5 percent after the WC was organized. Especially since the European supermarkets were willing to participate all together for the promotion of South African wines during the WC22.

When looking at the tendency of the South African agriculture, the sector is quite stable since 1998 (see Appendix 2). When examining the annual results of the South African agriculture (see Table 17) we see a decrease in demand in 2009 which main cause is the worldwide financial crisis. However slight recovery is observed since 201023. This recovery can expand further since the South African agriculture has several competitive advantages, making the country both an important trading partner and a feasible investment destination. First of all the world-class infrastructure containing tree deep-water ports, three international airports, a network of roads and railways, well-developed cold chain facilities, and a sophisticated financial sector (see previous Chapter). Furthermore, South Africa has a counter-seasonality towards many countries for its horticultural and floricultural products and