South Africa's World Cup Woes

South Africa projected that the world’s most-watched sporting event would attract 450,000 international spectators from around the world. The World Cup was supposed to create jobs for one in four unemployed workers, and increase economic growth and development. The government has invested over 34 billion rand ($4.6 billion) to host the World Cup, constructing 10 world-class stadiums and other infrastructure. Now it just needs fans.

Three months before the June 11th start date, only 100,000 international airline tickets have been sold. The visitor estimate has been cut to 350,000 and the expected contribution to economic growth has been halved. When the World Cup was awarded to South Africa in 2004, the global economy was in a much different place. Sales of corporate hospitality packages have fallen 50% short of the target, with tournament sponsors and partners returning thousands of tickets for premium-price seats in luxury boxes. Big banks that paid millions to attend the 2006 tournament in Germany are passing on the event.

Where European World Cups have the advantage of half of the participating teams and fans within driving distance from the host venue, the cost of long-haul flights and accommodation has priced out many international fans. Furthermore, the portrayal of the South Africa as a crime-ridden, aids infested nation by the media may also be scaring off fans that would normally attend the event. And accusations of collusion between airlines to jack up prices have certainly not helped the situation.

As for economic benefits, about 130,000 jobs have been created since 2007 from the construction and refurbishment of stadiums. But as many as 30,000 workers who constructed the stadiums and related infrastructure are back on the streets already. South Africa’s unemployment rate reached 24.3% in the fourth quarter of last year, nearly the highest in half a decade. The Treasury projects the rate to remain above 21% through 2014.  Udesh Pillay, co-author of “Development and Dreams: The Urban Legacy of the 2010 FIFA World Cup says that “The event will not help to significantly mitigate poverty” even thought it will leave behind “many positives.” The Ministry of Finance recently said that the tournament would boost GDP by about .5% this year, half of what was projected before the recession.

More than 600,000 of the 2.9 million South Africa tickets remain. Low attendance would be a huge blow to the government’s efforts to expand the tourism industry and revive consumer spending. It would also be extremely embarrassing for President Zuma and Sepp Blatter, president of FIFA, as both repeatedly assured investors and fans that the South Africa location would be successful. As tour operators slash prices the government is hopeful for a last-minute ticket rush. They better get their marketing cleats on and dig into sponsors to make sure the 32 nation tournament scores big at home and abroad.