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The economic impact of major sport events on countries in
different stages of macroeconomic development
Tom Kamphuis University of Groningen Supervisor: Drs. A. Visscher Co-assessor: Dr. R.W. de Vries March, 2017 Abstract
Up until today there are no concrete theories about how the economies of certain countries might be boosted by hosting a major sport event, while the development of other economies is slowed down. Despite this gap in the literature, studies have found evidence that deeper insights concerning the economic impact of major sport events might be found in the economic conditions of the hosting country. The main purpose of this thesis was to gather insights in how countries could benefit from hosting a major sport event through the investigation of the conditions and economic characteristics of hosting countries based on data from 2003-2014. Not only does our case study find a difference in economic impact between major soccer tournaments and the Olympic Games. It does also indicate that countries with different conditions and economic characteristics respond differently in different economic area’s on hosting a major sport event. Furthermore, zooming in on the World Cups in South Africa and Germany, we made several propositions concerning the long-term benefits for the population coming from investments done by public funds, and the impact of participating countries on tourists visiting the hosting country.
Keywords: mega events; economic impact; macroeconomic development; JEL-code: Z20
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Introduction
“The Cup doesn’t just represent spending,
but also brings with it benefits for the country.
It injects billions of reais into the economy. It creates jobs.”
Dilma Rousseff, President of Brazil2011-2016, TV Senado, June 10, 2014
Dilma Rousseff, a trained economist and president of Brazil at the time, expected that the large investments, which were necessary for hosting the World Cup of 2014, would be absolutely rewarding. She assumed that hosting a major sport event like the World Cup would turn the spotlights of the world towards Brazil, and undoubtedly generate long-term economic benefits for the country (Bloomberg, 2014).
The so-called “holy trinity of mega events benefits” described by Matos supports this positive view of Rousseff, by stating that major sport events act as drivers of economic growth. Moreover, according to Matos, sport events foster improvements in infrastructure, and promotes the country on a worldwide scale (Matos, 2006). Honor, prestige, and the promotion of the country on a worldwide scale has always been a motive for countries and cities to host a major sport event. But since the Olympic Games of 1984, where the city of Los Angeles boosted their local community with a profit of USD 200 million, the opportunity for economic growth has become an argument as well.
Although policy-makers and the population are typically quite enthusiastic and prone to believe in the opportunities major sport events might offer to hosting countries, the (long-term) economic benefits are at the same time widely discussed among politicians and in academia. Proponents argue, in accordance with Dilma Rousseff, that the necessary
3 are purely based on the best interests of the national population, and these higher interests cannot be subordinated to the momentary vagaries of a single sport event (Barclay, 2009).
Despite the uncertainty whether a major sport event does boost or indeed hurt the economic development of the hosting country, more and more countries are requesting to host a major sport event in the near future (Bisseker, 2010). Previously, most of the global sport events were assigned to rich and developed countries, which can boast on a long and honorary history in sports. Recently, due to the increasing number of candidate countries to host these sport events, and the more or less accepted view that it might boost the economic development of the concerning nation, the policy of major sport organizations such as the International Olympics Committee (IOC) and UEFA has changed. In order to boost the development of sport, and to offer the economic opportunities major sport events might generate for the hosting country, more and more developing and transition countries have been assigned to host a major sport event. (E.g. European Football Cup, Poland and Ukraine 2008; World cup, Africa 2010, Brazil 2014; Winter Olympics, Russia 2014). The different academic views regarding the actual benefits for the hosting country are reflected in their opinions about this new trend of assigning major sport events to developing countries. Some researchers assume that developing countries might benefit more, while others expect their economic development will be slowed down by the event. Although conflicting views whether or not a developing country might gain or lose more from hosting a major sport event, the majority of researchers expects that hosting a major sport event will have, a different economic impact for developing countries as their initial conditions and economic circumstances differ on many aspects from developed countries (Baade et al. 2004a; Blake 2005; Barclay, 2009; Watts,2002;).
Up until today there are no concrete theories about how the economies of certain countries might be boosted by hosting a major sport event, while the development of other economies is slowed down. Despite this gap in the literature, studies have found evidence that deeper insights concerning the economic impact of major sport events might be found in the economic conditions of the hosting country (Matheson, 2004; Lee, 2005). Considering this evidence and the wide shared forecast that developing countries will react differently on hosting a major sport event than developed countries, this research comes up with the following research question: ‘How do economies of countries in different stages of
4 This research question will be investigated by means of a multiple case study based on ex-post evidence, which will be guided around the different macroeconomic conditions of developed and developing countries. The selection of developing countries as host for major sport events is a relative new and unresearched phenomenon, and it offers therefore large opportunities to get more insights in the economic impact of major sport events. Analyzing multiple cases with a very different macroeconomic context (e.g. developed versus
developing countries), might gain clearer insights in what factors and characteristics influence the chances for a country to successfully host a major sport event and to what extent the macroeconomic conditions play an role in it. Previous studies investigating the economic impact of major sport events can be grouped in several major categories. These studies mainly focused on one specific economic indicator in determining whether or not there was an economic impact. This gave very contradicting results as just one facet was highlighted (Solberg and Preuss, 2006; Lee, 2005). In this multiple case study there is chosen for a comprehensive approach, focused on a small group of suitable countries, where the economic effect in multiple categories is investigated simultaneously through six economic indicators. The remainder of the paper will proceed as follows: The literature review will provide further insights in the conflicting views and theories about the economic impact of major sport events, support the assumption that countries in different stages of
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Literature Review
Whether or not it is wise for a city or a country to host mega sport events is without exception reason for an extensive debate in the media, among politicians and in academia (Maennig et al. 2012a). On one side of the table proponents of major sport events have found that the investments made based upon the hosting of a major sport event have generated positive net benefits and boosted the development of the economy (e.g. Haynes 2001, Blake 2005, Matos, 2006, Rose and Spiegel 2011). Maennig and du Plessis (2007) emphasize in their paper the so-called multidimensional benefits of hosting tournaments, which
incorporates direct, sustainable non-financial benefits which existence and importance can no longer be neglected. For instance an increasing political voice, and the development of a public image and goodwill on an international level. According to them, it can therefore be presumed that hosting a global sport event may have long-term positive economic benefits for the concerning country.
This view is challenged by other researchers and academics who doubt that there is any direct economic advantage for the hosting country. On the contrary, they expect that hosting a major sport event might rather hurt the economic development of the hosting
country. This is especially the case for developing of transition countries, which need to make much larger investments to be able to organize such an event (Grant Thornton, 2010).
Researchers found that, in the vast majority of cases, the parties investigating and estimating the economic influence of the event were in favor of hosting the sport event (E.g.
6 developed countries increases the reliability, they are still unable to generate clear insights into this topic as they show conflicting results for major sport events in the same countries. Assigning developing countries for hosting a major sport event is a new trend, therefore ex-post studies of these events are becoming more and more available and might be able to contribute to generating insights about the economic impact of major sport events (Jakobsen et al, 2012).
Structure literature review
The present literature review is structured as follows: first of all motives and theories behind the assumption that major sport events will have different economic impacts on countries in different stages of macroeconomic development will be described. Secondly, to complement the insights in the existing literature about the economic impact of major sport events, the different categories in which the existing literature of both ex-ante and ex-post studies investigating the economic impact of major sport events can be divided will be described. Based on the theoretical insights in these categories hypotheses will be developed to explore how the impact of major sport events for countries with different levels of macroeconomic development differs. This section will be concluded with an conceptual model.
Overview of different theories within the literature
Macroeconomics studies examine the behavior of whole economic systems, instead of focusing on individual firms or markets, and can be used to distinguish developed from developing countries.. The economic situation and development within countries is measured through the analysis of important economic parameters (e.g. level of unemployment, gross national product (GNP), balance of payments position, and inflation). The assumption that major sport events will have a different impact on countries with different levels of
macroeconomic development (e.g. developed versus developing countries) is widely shared within the academic world. Although this apparent consensus about a different impact, academic theories do differ in whether this impact benefits or hurts the developing country.
7 or even higher (Watts, 2002). Another argument involves the increasing threat of terrorism around the globe. For countries with less developed security standards the cost to guarantee the safety of the athletes, tourists and other people involved are much higher. And in case something might occur, the image damage will be much higher for less known developing countries than for developed countries (Abadie and Gardeazabal, 2003). The opportunity costs of these countries might be higher as well. As stated before, it does not make much sense for a government to spend scarce public money based on the interests of a single sport event, while it might be more needed in more important areas such as the health or education system, social security, or important economic investments. Spending this scarce public money on a single sport event will most likely slow down the overall development of the country (Watts, 2002).
On the contrary, others argue that the opportunities country encounters from hosting a major sport event may be larger for developing countries than they are for developed
countries. This is based on the fact that developing countries are obliged to invest more in their infrastructure, communication channels, public transportation, and similar sectors which might still benefit them when the event has passed (Matos, 2006). Investments which might not be made otherwise. Developed countries already have higher quality facilities and therefore organizing a major sport event does not involve an additional economic boost in that area (Baade et al. 2004a). Moreover, organizing a major event does create much
employment for the local community. It’s logical that this provision of employment makes a larger difference in developing countries where employment levels are low, than it does in developed countries were employment levels are much higher (Blake 2005). Another strong argument is that the investments that are involved in hosting a major sport event does attract a lot of new foreign investors to the developing country, which might result in trade agreement long after the event has been. Developed countries are likely to use their existing network of foreign investors for these investments, so therefore they have less to gain (Allmers and Maennig, 2009).
A final argument in assuming whether major sport events have a different impact on countries with a different level of macroeconomic development is brought forward in
8 might contribute to the development of theories about the impact of major sport events on countries in general.
Different economic impacts of major sport events and hypothesis development
Nowadays the existing literature of both ex-ante and ex-post studies investigating the economic impact of major sport events can be grouped in six major categories where different indicators of economic development have been researched (Solberg and Preuss, 2006). Researchers have been focusing on: (1) the impact of major sport events on national exports; (2) the impact on foreign direct investment (FDI); (3) the impact on the stock performance index following the announcement of the event; (4) the impact on the tourism sector; (5) Impact of major sport events on the host country image; and (6) the influence on the unemployment ratings within a country.
National Exports
In the literature several researchers have tried to examine the impact of hosting a major sport event on national export. Yet, studies have achieved conflicting results and the economic benefits measured by some are doubted by others (Owen, 2005). An example of these controversial results can been found in South Korea. Initially researchers measured no
9 infrastructure will also facilitate the attractiveness of trading opportunities in developing countries, which will lead to higher national exports (Matos, 2006).
Hypothesis 1: The positive impact of a major sport event on national exports will be larger for developing countries.
Foreign Direct Investment
The focus on the impact of major sport events on FDI is a relatively new phenomenon in the literature as it has been examined for the first time in 2012 by Jakobsen et all. Their findings drew initially a quite pessimistic view. Foreign investors were particularly interested in their own benefits, and did not invest in long-term relations. Although they found a significant increase of foreign investment in the hosting country in the years before the event, these numbers generally decreased rather shortly after the event took place (Jakobsen et al, 2012). On the other hand they noted that their research took place in industrialized developed countries, and that the effects of an event in a developing country is probably much higher. This theory is supported by Allmers and Maennig (2009) who state that developing countries willing to host a major sport event have to attract new foreign investors for the large and necessary investments. This might result in a larger network of foreign investors and the establishment of relations which will increase FDI in the long term. Developed countries have not only less investments to make, they are also able to fall back on their extensive network of foreign relations which does not give them an additional economic boost of acquiring new investors.
Hypothesis 2: The positive impact of a major sport event on FDI will be larger for developing countries
Stock Performance
The impact on the stock performance index following the announcement of a major sport event has been studied by several researchers. Similar to the impact on national exports, the results of these studies are conflicting. On the one hand Veraros found, regarding the
announcement of the Olympic Games of Athene in 2004, a significant increase on the Athens Stock Exchange index (Veraros, 2004) On the other hand there was no significant effect on the overall stock market in Australia regarding the Olympic Games of Sidney in 2000
10 developed or developing countries we have taken into account the efficiency of the stock markets. Efficiency reflects whether information is available for all participants at a given moment in time, and is therefore of major importance after the announcement of a major event. Due to common characteristics like loose disclosure requirements, discontinuity in trading and less developed institutional factors the efficiency of stock markets in developing countries is significant lower than in developed countries (Poshakwale, 1996; Ojah and Karemera 1999). The nature of different stock markets may also react differently because of the maturity or market capitalisation of that specific stock market. According to Ramdas et al (2015), the difference in maturity between stock markets of developing and developed countries in this instance could influence different stock market reactions to hosting a major sport event like the FIFA World Cup. He expects that, having less developed institutions, developing countries won’t react as quickly on major economic events as well-developed countries. For this reason he suggests that for further research in the near future a comparison should be made between well-developed and developing countries (Ramdas et al, 2015). Hypothesis 3: The positive impact on the stock performance index caused by a major sport event will be smaller for developing countries.
Tourism Sector
There has been a lot of research done regarding the impact of major sport events on the tourism sector in the hosting country, as these events attract enormous amounts of visitors. The outcomes of the studies are in these category are contradicting as well. Some researchers are skeptical about the actual effects of major sport events (Matheson 2002; Solberg and Preuss 2006). They argue that the market conditions will change as a result of the event. Prices will increase and logistics like accommodations and transport facilities will be
11 countries is the most important and sustainable economic development option. Moreover, in certain developing countries the main source of foreign exchange earnings.
Hypothesis 4: The positive impact of a major sport event on the tourism sector will be larger in developing countries.
Corruption Perception
Another important research area within the literature about the impact of major sport events is involving the image improvement of the hosting country. Although ‘soft’ benefits like being in the spotlights and receiving the honor of hosting a major sport event was previously considered one of the main reasons for countries, assessments about actual long-term effects within this category are conflicting as well. Researchers argue that the long-term perception of the hosting country will be definitely improved for sport fans from around the world. This is especially the case for sport fans visiting the country during the event. Moreover, hosting a major sport event is likely to increase the country’s self-consciousness which may contribute to an economic boost (Gethard, 2006). This is supported by Dauncey and Hare (2000), which state that the effects of both external and internal audiences is likely to create a synergy effect that will influence the image of the hosting country. On the other hand researchers have found a small statistical significance of the actual impact on the image of Australia when they hosted the Olympic Games in Sidney, which might also be the case for other countries
(Rivenburgh et all, 2002). Regarding the difference in levels of macroeconomic development literature has found evidence that developed countries generally have a well-known and reliable identity and will therefore not benefit extremely from hosting successfully a major sport event. Developing countries entrenched in poverty will benefit more from successfully hosting a major sport event as they are more unknown and therefore more sensitive for country branding initiatives (Akotia, 2005; Gethard, 2006). As the total image improvement perception is seen a vague indicator, biased by personal opinions and therefore difficult to measure, we have chosen to focus on once critical element within this country image perception, the corruption perception.
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Unemployment Ratings
Within the last major category researchers are measuring the impact of major sport events on unemployment ratings within the hosting country. Researchers have found conflicting results and have different opinions on the long-term effects on unemployment ratings. In their examination of the pre-event phase expenditures attributed to organizing the World Cup of 2010, Bohlmann and van Heerden (2005) found an positive, long-term impact on the
unemployment ratings in the South African economy. Contrary to this view other researchers argue that although in the build-up to the event unemployment ratings may drop, but will increase shortly after the event has taken place. This is based on the fact that most of the jobs are created for one-time investments necessary in the preparation period, while jobs creating during the event are mainly based on temporary services (Matheson, 2002). As in developing countries the unemployment levels are relatively high, we expect that the provision of
employment will have a bigger impact in these countries than it will have in developed countries, where the unemployment levels are much lower (Blake, 2005). Another reason why the impact of major events on tourism might be bigger in developing countries is because most jobs are generated to offer services for fans and tourists. As described before the tourisms sector is generally bigger in developing country, so the impact of more available jobs in this sector will be bigger as well (Bramwell and Lane, 2010).
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Conceptual Model
When we relate the hypotheses, which estimate whether an economic indicator is more impacted in developing or developed countries, to the fundamental research question under investigation, ‘‘How do economies of countries in initially different stages of macroeconomic development react on hosting a major sport event?’’, we can create the following conceptual model:
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Methodology
The conflicting opinions and theories in the literature, the various economic indicators influenced, and the unique characteristics of the hosting country in a specific period of time make it very complex to investigate the economic impact on countries hosting a major sport event. To facilitate this investigation we have made a conscious choice to approach this subject by means of a case study. This provides us with the opportunity to explore this phenomenon within its context using a variety of data sources. This guarantees that the economic impact on hosting countries is not explored through one lens, but rather a variety of lenses which makes it possible to lay bare and understand multiple facets of the phenomenon. According to Yin (2003) you should consider a case study approach if the goal of the study is to answer ‘how’ and ‘why’ questions, if it’s impossible to control the behavior of those involved in your research, if you want to take the contextual conditions into account because you consider them relevant, and if it’s difficult to distinguish the context and the
phenomenon. As these aspects all apply to this investigation, a case study seems the perfect approach. In order to find similar effects on specific economic indicators for countries in the same stage of macroeconomic development we have to investigate several cases, which makes our research a multiple-case study.
Decision mega sport events
According to Horne (2010) mega sport events can be described as “exceptional public events, which can be categorised based on spectator capacity, length and location. Mega sport events usually include Olympic Games, the FIFA football World Cup and the UEFA football
Championship. Based on this theory we have chosen to focus our research on these tournaments. As described before Ex-post studies, based on surveys and statistical data collected after the event, are on average more modest about the economic impact of major sport events than Ex-ante studies (Porter, 1999). Therefore there is chosen to focus on tournaments that already have taken place. To increase the credibility of the outcomes of the research we will only make use of data gathered a while after the event, because data
collected shortly after the event might be, according to Matos (2006) be biased. Taking this into account we came up with the following tournaments.
15 workforces and well-developed financial sectors, while Poland and Ukraine are considered developing countries based on the definition of the International Monetary Fund (IMF) (IMF,2014). This difference in development is also showed in their GDP per capita, which is one of the main indicators of macroeconomic development. In 2008 the amounts of
Switzerland ($50,438.763) and Austria ($41,151.585) were twice as big as that of Poland ($18,046.152), not to mention Ukraine ($8,417.004) (World Bank, 2016a). These proportions were about the same in 2012, which makes these countries most suitable cases for our
research.
Considering the FIFA World Cup we first chose the tournaments of 2006 in Germany and 2010 in South Africa. While Germany, having the fourth largest economy in the world, is considered a rich and powerful country, South Africa is according to the definition of the IMF clearly a developing country. This is shown in their GDP per capita, which was in 2006 much higher for Germany ($34,690.333) than it was for South Africa ($10,658.788). We also considered the World Cup of 2014 in Brazil as a case, but on the time of this investigation the clear economic impacts might not be clearly measurable yet. Moreover, the economic
impacts of this World Cup might be obscured by the impacts of the Olympic Games of 2016, which were hosted by Brazil as well.
Talking about the Olympic Games, we have chosen the 2008 summer edition in Beijing (China) and the 2012 summer edition in London (United Kingdom) as the last two cases for our research. Although China is one of the most powerful countries in the world and their economy is based on nominal GDP the third-largest economy in the world, they are still considered a developing country due to its incomplete market reforms, high income
inequality and it’s million poor in rural areas (World Bank, 2016b). The United Kingdom is having the fifth-largest economy in the world based on nominal GDP and London being the financial capital in the world, clearly considered a developed country. Moreover their GDP per capita is with $41,294.515 in 2012 one of the highest within the world. This contrasts sharply with China that in 2012 showed a GDP per capita of $6,246.644.
Data and Analysis methods
16 being biased by generalization. The quantitative data necessary for investigating the six economic indicators described before will be collected through databases like the OECD and the World Bank. There are lots of types of case studies and therefore many ways to process and analyse data. As our case study can be grouped into multiple-case studies, it’s important to use the data in a way that we can explore differences within and between cases. To do this Miles and Huberman (1994) describes six methods: (1) putting information into different arrays; (2) making a matrix of categories and placing the evidence within such categories; (3) creating data displays – flowcharts and other graphics – for examining the data; (4) Tabulating the frequency of different events; (5) Examining the complexity of such tabulations and their relationships by calculating second-order numbers such as means and variances; (6) Putting information in chronological order or using some other temporal scheme. Considering the complexity of the cases and the different timeframe in which they occurred we have chosen for option three: creating data displays – flowcharts and other graphics – for examining the data. In this way we were able to, through the use of a reference group, create a relatively manageable overview of the data, which we could easily analyse.
Reference group
In order to distinguish the countries hosting a major sport event from regular countries we have will use a group of countries of which the averages outcomes can be compared to the outcomes of the countries under investigation. This will increase the reliability of the
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Explanation of processed data and links between tables
As the thesis investigates six different economic indicators, we have used a lot of different data to measure the impact of an major sport event in these different economic areas. In the measurement of the data it goes through different processes, which are shown in the different tables. In order for the reader to clearly understand the different processes and links between tables, and to show how they are compared to previous and the following years, we will explain them briefly in this area.
Table 1 (Trade in goods and services). In this table we first show the annual growth in percentage of the countries under investigation, and the average annual growth in percentage of all the members of the OECD for the period 2003-2014.
Table 2 (Trade in goods and services). In this table the average annual growth rate of all the OECD members in a specific year is abstracted from the annual growth rates of the countries under investigation in the same year. In this way major worldwide economic events will be taken into account. The new figures are shown in table 2, and based on comparison with previous and following years conclusions can be drawn.
Table 3 (Foreign direct investment). This table shows the inward flows in million US dollars for the period 2005-2015 for the countries under investigation and the average inward flow for the members of the OECD. The last column also gives the average inward flow per year for this period.
Table 4 (Foreign direct investment). This table shows the inward flows in percentage, based on the average inflow per year shown in table 3. The penultimate column of table 4 shows the average inward flow of the two years prior to a major sport event of the specific country, and compare it with the average inflow of the OECD members for the same years. In the last column the difference between these two averages is indicated.
Table 5 (Share prices). This table shows the monthly share prices of the investigated countries in the year they host a major sport event and the average share prices in the Euro Area for the same year.
Table 6 (Share prices). Based on the data in table 5 this table shows the monthly growth rates of the countries under investigation, in the year they host a major sport event and the average monthly growth rates in the Euro Area for the same year.
18 the share prices will be taken into account, and the specific month of the tournament can easily be compared with the previous and following months.
Table 8 (International Tourism). This table shows the number of arrivals, in thousands, for each year between 2003 and 2014 for the countries under investigation. The last column shows the average amount of arrivals for the specific country between 2003 and 2014. Table 9 (International Tourism). Based on the figures of table 8 we have calculated the annual growth rate per year for the period 2003-2014, and this is shown in this table. In the last row the average annual growth rate of the OECD members is calculated.
Table 10 (International Tourism). In this table we have abstracted the average annual growth rate of the members of the OECD from the annual growth rates of the countries under
investigation. In his manner major worldwide economic events which influence international tourism will be taken into account, and the specific year of the tournament can easily be compared with the previous and following years. The last column provides the average annual growth rate for every individual country.
Table 11 (Corruption Perception Index) In this table the corruption index for the period 2003-2014 is given for the countries under investigation. In the last row the average index of the members of the OECD is given as well.
Table 12 (Corruption Perception Index) In this table are the average growth rates of the corruption perception index shown, but the average growth rate of the OECD members is already abstracted. In this way major worldwide economic events which influence the overall corruption perception index will be taken into account, and the specific year of the
tournament can easily be compared with the previous and following years.
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Analyses
In this part of the thesis we will explain the method used to investigate the stated hypotheses, we will discuss the hypotheses based on the outcomes of these investigation and draw
conclusions per subject. In the final section of the thesis these outcomes and insights will be used to answer our research question, ‘‘How do economies of countries in different stages of macroeconomic development react on hosting a major sport event?’’, as comprehensive as possible.
National Exports
To investigate the national exports of the selected countries we have been using data of the OECD, and also make use of their members as a reference group. As our indicator of national exports we have chosen outgoing ‘trade in goods and services’. This because it’s considered a defined change in ownership of material resources and services between one economy and another, and it’s therefore the perfect indicator of national export. To map the impact of a major sport event on the export of these goods and services we have created an table of the annual growth rate of the countries investigated and the members of the OECD between 2003 and 2014 (Appendix; Table 1). We have chosen for this period because it’s taking into
account the years before the first major sport event investigated in 2006 (World Cup in Germany) and it might show the impact on the years after the last major sport event investigated in 2012 (Olympic Games of London and the UEFA football championship in Poland and Ukraine).Unfortunately data from the year 2015 was not available yet. Based on this first table we compared the annual growth rate of countries with the average annual growth rate of the members of the OECD. These comparisons are processed into a second table (Appendix; Table 2), in order to have a clear overview of the export annual growth rate of a certain country in a certain year between 2003 and 2014 based on the average export annual growth rate of the members of the OECD (As noted before the reference group of members of the OECD serves as a way to eliminate the annual macroeconomic fluctuations which have nothing to do with the major sport event).
20 seems that well-developed countries capitalize on hosting a major sport event by increasing their annual export growth rates.
When we compare this with the developing countries we see that contrary to well-developed countries the average annual export growth rates of developing countries are a lot higher than the average annual growth rate of the OECD members. China (7.4%), Poland (3.4%), and Ukraine (2.6%) are all growing faster than the average OECD member. Only South Africa’s export growing rates are below average (-2%). When we view the annual growth rates of the developing countries in the specific year that the major sport event was held, another remarkable insight appears. Poland (1.5%), Ukraine (1.2%), and South Africa (-3.9%) were all performing below-average in the year they hosted a major sport event. China (7.4%) just managed to achieve their average growth rate. Regarding the years before and the years after the major sport event we did not indicate any patterns or remarkable insights between well-developed and developing countries.
Based on these insights we indicate that the national export of both well-developed and developing countries are impacted in the year they hosted major sport events. While the national export of well-developed countries are performing better, developing countries seem to be hurt by hosting a major sport event. Explanations might be found in the fact that the organization of such a major event asks so much from a developing country, that they don’t have the financials, skills or resources to further develop and invest in their export activities. That might also explain why the national export of well-developed countries are able to do better in the year they host a major sport event. Based on the arguments described above we fail to reject the null hypothesis, and we reject the alternative hypothesis. We conclude based on our research that the positive impact of a major sport event on national exports won’t be larger for developing countries.
Foreign Direct Investment
21 investments recovered by investors is higher than the amount invested. As indicator of foreign direct investment we have chosen to only focus on the inward flows of FDI, as we are only interested in the investments made in an specific country hosting a major sport event. We have created an table where the inward flows of FDI from the investigated countries and the chosen reference group are visible for the period 2005-2015 (Appendix; Table 3). In the last row we have calculated the average amount of inward FDI per country. Unfortunately these data was not available for the years before 2005, so in case of Germany we only have one year prior to the major event. Based on this data we have created another table
(Appendix; Table 4), where the average FDI inward flows for the eight countries and the reference group are calculated in percentages. In order to do this we took the average per year over the whole period 2005-2015 as a 100 percent. This gives us the opportunity to check the relative amount of FDI inward flows in a specific country and compare it with the relative amount of the reference group.
When we only take a look at the actual year of the major sport event, it’s difficult to discover similarities or patterns between the countries as the relative amounts are actually contradictory. But this changes if we look at the two years prior to a major sport event. As you can see in the last column, the average of the two years prior to an event exceeds the average of the reference group in the same two years for Austria (51.6), Germany (57.8), Poland (16.5) South Africa (66.4) Switzerland (14.1) and Ukraine (21.6). These countries all hosted a major soccer tournament. (e.g. European Football Cup; World Cup) Only in China (-68.5) and the United Kingdom (-44.2), the countries that hosted the Olympic Games, the inward FDI flows in the two years prior to an event were below average of the reference group. This might indicate that the Olympics, which are only organized within one city, attract far less foreign investment than the nationwide organized soccer tournaments. When we take a look at the difference between well-developed and developing nations hosting a major soccer tournament we see that the three well-developed nations attract slightly more FDI than the three developing nations (41.2 over 34.9) but that developing country South Africa (66.4) leads the list while well-developed nation Switzerland (14.1) is at the bottom of this list. So these averages might be misleading and as there is no clear difference between the impact from a major soccer event on well-developed or developing countries.
22 of previous investments withdrawn from the country in a certain period of time. If we look at the average inward FDI flows of the two years after a soccer tournament we see that the well-developed countries Austria (125.3), Germany (123.5) and Switzerland (114.2) are
maintaining their inward FDI flows above their own average. When we compare this with the developing countries, we see that the inward FDI flows into Poland (83.2), South Africa (76.9) and Ukraine (47.5) drop significantly below average in the two years after hosting a major soccer tournament. This might indicate that investors are more eager to recover money from investments in developing countries after the soccer tournament has taken place than they are in well-developed countries. This indication could be explained and supported by the fact that well-developed countries are more notorious for their reliability and high trust levels than developing countries, which might lack the confidence of foreign investors. Based on the arguments described above we fail to reject the null hypothesis, and we reject the
alternative hypothesis. We conclude based on our research that the positive impact of a major sport event on foreign direct investment won’t be larger for developing countries.
Stock Performance Index
To investigate the impact or major sport events on the stock performance index we used the data provided by the OECD. This time we made use of the ‘Euro Area’ as a reference group, because the data of the OECD members was not available. The countries within this group are a good mix of developing and well-developed countries. The fact that there are only European countries in this reference group might seem problematic, but as the information at the different stock market worldwide nowadays is very transparent and accessible we don’t estimate big differences with countries from other parts in the world. Moreover, 75% of the countries under investigation are from Europe. A stock performance index is a way to measure the value of stock market or a specific part from it. It is mainly used by investors to measure a market's or sector's performance and attractiveness. Unfortunately detailed information of the recent history of important stock markets within the countries under investigation is very valuable for many people, and therefore impossible to collect without spending a lot of money. In order to still measure the impact of major sport events on the attractiveness of a country we have chosen to investigate the impact on share price indices. These indices are compiled by central banks and are based on the prices of common shares of companies traded on stock exchanges. Share price indices show investors what their return is, and also show the attractiveness and the performance of markets in certain countries.
23 think it’s the best possible way to measure the attractiveness of countries for investors on the stock market. Unfortunately we could not find any daily share prices, so we had to
investigate the impact based on monthly figures, which might be to imprecise and therefore biased.
Based on data of the OECD we have created an overview of the monthly share prices within the different countries for the specific year they hosted a major sport event and the average share prices within the Euro Area for the same period (Appendix; Table 5). Aided by this overview we created an table with the monthly grow rates of the share prices (Appendix; Table 6). In this way it’s more simple to compare the growth of the share prices in a certain country with the average growth rate of the Euro Area in the same year. In the next table we have accumulated these growth rates, to lay bare the relative monthly growth rate of a certain country in the year they hosted a major sport event (Appendix; Table 7).
As anticipated we could not find clear patterns of valuable insights based on these monthly figures. However we did find some remarkable facts, but as we do not have a remarkable explanation for them these facts can also be based on other events or just an coincidence. (1) Share prices of China (-12.3) and the United Kingdom (-3.4) hosting the Olympics decreased significantly below average in the month they hosted the sport event. (2) The growth rates of the share prices of Austria (3.1), Poland (4.9), Switzerland (3.0), and Ukraine (1.7) all increased above average in the month they hosted the European Football Cup. These growth rates all decline in the following month. (3) Share prices of Germany (-1.2) and South Africa (-0.5) decreased as well below average in the month they hosted the World Cup. Considering our hypothesis we did not find any indication whether the impact of major events on the stock performance index differs between developing and well-developed countries. Indeed, as described above, we did not find any significant impact at all. Based on the arguments described above we fail to reject the null hypothesis, and we reject the
alternative hypothesis. We conclude based on our research that the positive impact of a major sport event on the stock performance index won’t be smaller for developing countries.
Tourism Sector
24 as our reference group again. The indicator ‘number of arrivals’ is described by the World Bank as the number of tourists who travel to a country other than that in which they normally live, but outside their regular environment, for a period no longer than twelve months and whose main reason in visiting is other than an activity paid and supported from within the country visited.
25 experienced an relative annual growth rate of 5.6%. Therefore we expect that the difference between hosting a major soccer event or hosting the Olympics is at least to some extent responsible for the negative results of China and the United Kingdom.
If we compare the results of well-developed and developing countries we notice no remarkable difference in impact, the size of the country and the amount of average visitors seems to be responsible for determining the impact. Based on the arguments described above we fail to reject the null hypothesis, and we reject the alternative hypothesis. We conclude based on our research that the positive impact of a major sport event on the tourism sector won’t be larger for developing countries.
Corruption Perception
Soft benefits like image improvement, self-promotion, and showing what you’re capable of as a country, are belonging to the set of favorable arguments proponents use to convince their compatriots for hosting a major sport event. However, these soft benefits are difficult to measure, and it’s even more difficult to estimate to what extent this drives economic growth within a country. Nevertheless image improvement is considered one of the six major categories in the existing literature about the impact of major sport events. To investigate a critical element within these category we have chosen to use the corruption perception index. This is a yearly appearing list, created by transparency international, that ranks countries based on the extent to which corruption is believed to exist. Although image improvement is about more than only the perception of corruption, it is certainly a major part, and an
exponent of it. Moreover, a decrease of corruption can be strongly linked to an increase in in trust and therefore investment and economic growth. For our reference group we will, although the data is not collected from the OECD, make use of the OECD members. This because we consider this group as the best representation of the countries under investigation, and because all their data was available within the database of the corruption perception index.
26 countries like Austria, Switzerland, and the United Kingdom are slowly decreasing, only Germany experiences growth. On the other hand are developing countries like China, Poland, and Ukraine experiencing growth, only South Africa did not growth, but they managed to stay the same. If we focus on table 12, we see that this is not the only difference between well-developed and developing countries. Developing countries China (5.9), Poland (5.5), South Africa (4.4), and Ukraine (13.0), all manage to decrease corruption in the year they host a major sport event based on figures of the year before. On the other hand well-developed countries Austria (0.0), Switzerland (0.0), did not experience a decrease of corruption based on the previous year. Germany (-4.1), and the United Kingdom (-5.1) were even becoming more corrupt in the year they hosted a major sport event than they were in the year before. A logical explanation seems that the developing countries, which have a lot more corruption than the well-developed countries, have to adjust and strengthen their control mechanisms as the whole world is looking over their shoulder. This decreases corruption. For the well-developed countries this control from the rest of the world is much smaller, because they are more trustworthy, so their incentive to decrease corruption is much lower. Moreover, it’s common knowledge that these events attracts fraudsters and tricksters, not only on the streets but also in the top levels of organizations (e.g. FIFA). Therefore hosting a major sport event in a well-developed country might increase corruption. Based on the arguments
described above we reject the null hypothesis, and we accept the alternative hypothesis. We conclude based on our research that the positive impact of a major sport event on image improvement will be larger for developing countries.
Unemployment Ratings
For our last economic indicator, measure the impact on unemployment, we used data of the World Bank. Unemployment refers to people within the labor force who are without work but available and seeking a job. The members of the OECD were again chosen as our reference group. As an indicator we used the impact on the total unemployment within a country, related to the total labor force.
27 decline. For the well-developed countries it is just the other way around. Although the United Kingdom (0.2) experiences a growth in unemployment in the year they host the Olympics, Austria (-0.9), Germany (-0.3) and Switzerland (-0.6) al have decreasing unemployment figures. We could suggest that this doesn’t say anything, as well-developed countries might be just better at decreasing unemployment than developing countries, regardless of there is a tournament or not. But this opinion can be refuted by table 13. We see that related to 2003 three countries have growing unemployment figures. China, Switzerland and the United Kingdom. So as there are two well-developed and just on developing country in this group of three countries, developing countries are clearly declining their unemployment figures as well over the period 2003-2014 based on this data. Therefore this data might indicate that well-developed countries are better able to use major sport events in their advantage when it comes to decreasing unemployment figures. This could be partly explained by the fact that well-developed countries have the knowledge and the resources to hold their own, while developing countries might need foreign companies. Another, more likely, explanation could be that the unemployed workforces in developing countries do profit from the tournament, but are moonlighting because of the low wages and the lower ethical standards within these countries. Moreover one could expect that it is easier for people in developing countries (e.g. in the tourism sector) to work illegal than it is for people in well-developed countries. These aspects should be monitored in the future while measuring the impact of major sport events on unemployment ratings.
28
Comparing the World Cup of Germany (2006) and South Africa (2010)
In order to go deeper than the big picture outlined before, there is chosen to study two of the investigated cases more carefully. This might bring up new information or details that are of great influence, but have been overlooked before. The chosen cases are the World Cup of 2006, in well-developed country Germany, and the World Cup of 2010, in developing country South Africa. The World Cup is chosen twice for two reasons. First, in order to compare, it’s of major importance that the same tournament is picked twice, as the specific differences in impact between different tournaments are still unclear. Choosing the same tournament twice makes it able to compare their effects with less bias. Secondly, literature indicates that regarding major sport events, the World Cup might have the greatest economic impact on a country or region (Barclay, 2009).
Germany and South Africa are both leading political and economic powers on their continents Europe and Africa, respectively. Despite this fact, they are very different
countries, in very different economic circumstances. The South African economy comprises mainly primary industries like agriculture and mining, as well as a relatively well-developed manufacturing division. Germany’s most important economic sectors is the highly developed industry and the service sector. South Africa is considered an upper middle income country, while Germany is considered a high-income economy, by the World Bank. With a gross domestic product (GDP) of USD 3,363.45 billion in 2015, which is USD 41,313.3 per capita, Germany outflanks South Africa, which gained in the same year a GDP of USD 314.57 billion which is USD 5,724.0 per capita, completely (World Bank, 2017). In this study the US dollar will be used as the monetary unit. To decrease the bias of fluctuating exchange rates over time and keep the comparisons in cost as reliable as possible, there is chosen to convert the cost based on the exchange rates of the time in which they were endured. This implies that the Euro will be converted based on the exchange rate of 1/6/2006 and the South African Rand will be converted based on the exchange rate of 1/6/2010. An exception will be made for the maintenance cost of the stadiums, as these costs are currently endured and therefore converted at the current exchange rates.
29 population after the tournament. After that the study concentrates on the stadiums. Central question within this subject will be who financed the necessary investments, and to what extent do they benefit the greater good after the World cup. Ultimately the study concentrates on the effect of tourism in both countries, which is considered one of the main drivers of economic growth when hosting a major tournament. Furthermore it describes to what extent the expectations met the actual reality for both countries, while the influences which caused this reality are explored. Throughout this study propositions for further research will be stated.
Economic Impact
Germany
According to the final report of the World Cup of 2006 the German Federal Government did several investments in transport, stadiums, security, artistic and cultural programmes, and other campaigns which together summed up to USD 374.96 million (Appendix, table 15). The German Federal Government did no further direct investments in the World Cup 2006, nor did it issue an indemnity bond or give any other kind of financial guarantee. The World Cup Organising Committee Germany achieved a positive result of USD 72.3 million (German Federal Government, 2006).
According to reports of the German Federal government the World Cup earned Germany's tourism industry an extra USD 399 million in revenue, added USD 2500 million to retail sales and yielded 50,000 new jobs. Moreover over USD 51 million was added to the treasury through the tax on ticket sales while USD 56.3 million was paid in taxes over the total profit. These calculations by the German Government seem reasonable as Kurscheid, Preuβ and Schuütte (2007) also found a World Cup-induced consumer spending of USD 3900 million using poll data.
30 a short-term increase of 3.2% in employment around the World Cup, they were not able to find any significant economic impact at the country level.
Despite the fact that the 2006 World Cup did not significantly impact the enormous German economy on a national level, the tournament can be considered an economic success (Brenke and Wagner 2007; Feddersen and Maennig, 2010). Especially when you consider the low investments done by the German Federal Government.
South Africa
The South African government calculated in their final report their own investments on R28 Billion, which was worth USD 3.64 billion in June 2006 (Republic of South Africa, 2010). Most expenses occurred in stadiums and precinct development, USD 1.28 billion, and transportation, USD 1.53 billion (Appendix, table 16). According to subsequent
investigations these investments were lower, the Sport and Recreation department of South Africa calculated that the South African government spent in anticipation of the 2010 World Cup a total of USD 3.12 billon on infrastructure, transportation, telecommunication, stadiums and other cost (Sport and Recreation South Africa (SRSA), 2012). The World Cup
Organising Committee South Africa achieved a positive result of USD 10 million (Republic of South Africa, 2010).
Although the national government of South Africa realizes that the investments for the World Cup were high, they believe that they paid off. And considering the high expectations for economic gain, the high investments could be justifiable, especially when you take in mind the improvements in infrastructure and transportation facilities which will benefit the South African population after the World Cup as well. Studies done by Thornton (2003) and the Inspection Group Report for the 2010 FIFA World Cup (2004) expected significant direct and indirect gains for South Africa’s economy. According to these studies the World Cup would contribute USD 2.73 billion to the economy and create 150.000 permanent new jobs.
31 African government also stated that the World Cup had a major impulse on labour. The investments in stadiums, infrastructure and hospitality created over 130,000 jobs (SRSA, 2012).
Although the direct impact of the World Cup calculated by the South African government seems impressive, the numbers are doubtful. Their calculations are mainly based on the direct impact of investments in stadiums and commercial activity during the event. However, the method of estimating this ‘direct impact’, which is used by the South African government, has been criticised by many scholars as fundamentally flawed. One explanation for this is that the attributable increase in direct spending may be deduced using a ‘gross’ measure instead of a ‘net’ one. This means that the money foreign tourist spent on tickets for the World Cup cannot be spent on other activities in the local community such as theatres, amusement parks or concert halls. This makes it plausible that the calculations for the direct impact might be overstated (Barclay, 2009). Especially when you consider the disappointing number of foreign tourists visiting the World Cup (SRSA, 2012). Another aspect which was not
mentioned in the final report of the South African government, is the fact that 80 % of the 2.7 million tickets sold for the World Cup were bought by South Africans. This money,
approximately USD 168.9 million, leaves South Africa as the FIFA reaps these benefits (Buch, Maennig and Schulke, 2010). Also the impact on employment is largely overstated. Although 40,000 permanent jobs were created within the police corps, the largest section of the jobs were temporary construction gigs (Brehm and Saunders, 2010).
The disappointing economic results are confirmed by macro-economic studies done by Du Plessis and Maennig (2011), and Anton, Alonso and Rodriguez (2011) who assess that the direct economic impact of the 2010 World Cup is neglectable in both, the short and long term.
Comparing economic impact of the World Cup between Germany and South Africa
32 government invested up to USD 3.64 billion, mainly in infrastructure and stadiums, to host the World Cup. One might conclude that even the most positive calculations of the economic profits, gained by South Africa through the World Cup, shrink into insignificance compared to the enormous investments made.
While criticists argue that this tax money could have been spend on more important and urgent matters, proponents plead that the money at least is invested in projects which benefit the South African population, instead of disappearing the back pockets of corrupt civil servants and officials. In the continuation this study explains how the difference in public investments between Germany and South Africa became so large, and it describes to what extent the major public investments in South Africa benefit the overall population after the tournament.
Infrastructure
Germany
Being one of the most successful and rich countries in the world, Germany already had a well-developed and extensive infrastructure. Nevertheless, the final report states that the German Federal Government did spent USD 3.93 billion on upgrading and expansion
projects for the federal highway network since 2000, the year FIFA announced that Germany would host the World Cup of 2006. But these investments were not specifically for the World Cup, and were therefore not budgeted as such. According to the official report, the German Federal Government did no investments regarding infrastructure which it would not have done otherwise (German Federal Government, 2006; Maennig, 2007).
South Africa
Unlike wealthy countries like Germany, which already have a well-developed infrastructure, South Africa has much to gain in this area. Hence, hosting a World Cup is considered a huge opportunity for developing countries, as s it accelerates the speed with which infrastructure projects are approved. For the 2010 World Cup South Africa invested over USD 364 million in ports of entry, 1.35 billion in train stations, airports and roads, and USD 156 million in broadcast technology. The government also spent USD 135 million on safety and security, which resulted in 40.000 permanent jobs within the police corps (SRSA, 2012).
33 they benefit the whole South African Population. But do they? According to research of Matsuoka de Aragao (2015) this suggestion is questionable. She states that the investments in train stations and roads mainly occurred in areas that were already well developed before the tournament, but needed to be expanded to handle the great numbers of visitors (e.g. areas around airport and stadiums). Moreover, the government tried to allocate the tourists mainly in the safer, low-crime areas of the cities. Although this decision makes sense, it ensured again that investments were made in these already developed areas, while the poor and disadvantaged areas remained the same.
According to Patrick Bond, director of the University of KwaZulu-Natal centre for civil society, the investments done in these well-developed areas have lost their value, since the crowds departed. "A World Cup could be held at much less expense if FIFA looked at a society's needs and did not fetishize luxury," Bond argues. Carlos Amato, a football writer for the Mail & Guardian and the Times in South Africa, who was a proponent of hosting the World Cup in South Africa, states that he now realizes that he would have preferred the money to be spent on schools, hospitals and roads. "We have deep social stresses here related to inequality, we need a more inclusive society. The World Cup did show us what South Africa could become, but we are a long way from that." (Conn, 2013).
Comparing investments in infrastructure between Germany and South Africa
The different investments in infrastructure explain largely how it’s possible that the South African Government contributed so much more to the World Cup than the German Federal Government. Despite investing almost USD 1.9 billion in infrastructure, the actual benefits for the South African population are considered minimal. Indeed, investments in
infrastructure were done, but only led to overcapacity as they were mainly focussed on expanding the areas that were already well-developed. Hence, the benefits for the South African population are neglectable. Based on this case of South Africa one might conclude that hosting the World Cup might accelerate investments, but that investing in infrastructure based on the needs and requirements of the World Cup does not necessarily lead to benefits for the population, and might just be a waste of tax money.
34 underdeveloped and unsafe areas were ignored. We suggest for further research to look into the long-term economic effects of investing in underdeveloped and unsafe areas. Upgrading these areas makes the organisation able to allocate tourists there as well, and reduces pressure on the areas which are already well-developed. This solves the problem of investments in well-developed areas which are creating an overcapacity after the tournament. Although this different approach seems better, one should realize that the investments in disadvantaged areas may be higher, and the risk that these upgraded areas might fall back into their former state after the tournament, cannot be ruled be out. Nevertheless, an investigation towards the economic impact of this approach seems justifiable.
Proposition 1:
We expect that the positive long-term economic impact on developing countries will be higher if investments are not only concentrated on the safe and relatively well-developed areas, but also on the underdeveloped areas.
Stadiums
Germany
35 World Cup, and private investors and lenders, who were also responsible for maintaining the stadiums. Hence, the total amount contributed by the German Federal Government towards the investments in stadiums necessary for the 2006 World Cup is USD 315.4 million (German Federal Government, 2006).
If we take a look at the current use of the stadiums, we notice that eight out of twelve stadiums are used by clubs in the Bundesliga 1, the other four stadiums are used by clubs playing in the Bundesliga 2. Based on spectator data of the current year we have found that the twelve stadiums have an average amount of 48,225 visitors per game (Appendix, table 17). This is higher than the average in the Bundesliga 1 from last year, which was the best viewed soccer competition in the world, with 43,456 spectators per game on average. To compare, the English Premier League holds the second place with 36,458 spectators on average, while the Spanish La Liga comes in third with only 28,719 spectators on average (Goullet, 2015). Based on these numbers one might conclude that the utilization rate of the modernized stadiums in Germany is amply sufficient.
South Africa
For the 2010 World Cup the FIFA required that South Africa established ten modern stadiums, which were all able to meet their high standards. Five of the ten stadiums already existed, although they underwent dramatic renovations, the other five needed to be built from scratch. In their bid in 2003 the South African Organisational Committee expected the total cost to be around USD 204 million. This amount increased with 965% to USD 2.178 billion in their final estimation in 2009 (Molloy and Chetty, 2015). As described before, the South African Government calculated that it contributed USD 1.28 billion into the development of these stadiums. A report by Alm for the Danish Institute for Sports Studies states that these calculations are inadequate, and that that the South African Government contributed almost USD 1.8 billion (Alm, 2012).
36 playing in the National Soccer League and is using the stadium, only attracted an average of 4,000 prospectors in the season 2015-2016. Having this small amount of prospectors in a stadium with a capacity of 55,000, and it makes sense why the club is not able to cover the full rent necessary to maintain the stadium. Hence, the Cape Town stadium is losing an estimated USD 8 million annually, which is covered by public funds (Dube, 2016). Prior to the World Cup, local authorities wanted to renovate the existing Athlone stadium, but the FIFA insisted on building the new one on Cape Town’s spectacular waterfront to make the matches more attractive to its global television audience. The irony is that the existing Athlone stadium is still popular and attracts much more visitors nowadays (Young, 2015). Cape Town is not the only case where FIFA insisted on putting their own benefits above the local preferences. In Durban another brand new waterfront stadium had to be built, costing South Africa USD 380 million. This while local governments advised to use an already existing 55.000-seat rugby stadium, which could have been expanded and modernised for the World Cup. After the tournament, the local rugby team did not want to move to the new stadium, as it stated that it could not afford the rent. The brand new stadium is now standing empty, and on the decline (Young, 2015).
The stadiums in Cape Town and Durban are not exceptions, with an average attendance between 2.000 and 10.000, the other soccer clubs playing in the NSL are not profitable enough to afford the rent and justify the costs of playing in the expensive 2010 World Cup stadiums. Only the Soccer City Stadium in Johannesburg and Moses Mabhida in KwaZulu-Natal are managing to make a profit from various events they host each year (Dube, 2016). This places an unnecessary yearly burden on the South African population, as the stadiums still are publicly owned. Just the Cape Town stadium costed the South African population already USD 32 million since 2010 (Molefe, 2014).
Comparing investments in stadium capacity between Germany and South Africa
It has become apparent how the investments in stadiums between the German and the South African Government could differ that much. While in Germany the cities, soccer clubs, and private investors were able to finance the investments needed, in South Africa the largest part was financed with public funds. Furthermore were the soccer clubs in the Bundesliga able to fully utilize and maintain the new stadiums. This is in sharp contrast with South Africa, where the empty stadiums place a financial burden on the South African population.
