I had discussions with a number of friends before the soccer world spectacle and asserted that the event will come and go, but the majority of small business would not see anything. Some might say that I was a prophet of Doom? The writing was all across the economic landscape, SMME’s would be relegated to the boundary. When Fifa announced that SA would host the 2010 World Cup tournament, many placed their hopes on starting business ventures to capitalise from the trade to be made from tourists that attended the prestigious tournament. South Africa spent more than $3 billion on the 2010 World Cup, and in return gained an “intangible legacy” from the first world soccer show-piece in Africa. In the “2010 FIFA World Cup Country Report,” now over three years ago, we know that South Africa actually spent $1.1 billion on building and upgrading stadiums alone.
A report put together by UBS Investment Research in February estimated that the preparation for the World Cup, which started four years ago, contributed between 0, 5% and 2, 2% to the South AfricanGDP and created an excess of 300,000 jobs since 2006 – a 2, 7% contribution to employment figures.
The tournament earned Germany’s tourism industry US$399 million in revenue and an additional 2 billion Euros to retail sales.But more worth mentioning was the fact that the majority of beneficiaries of the 2006 World Cup were small and medium enterprises (SMEs). What went wrong in SA, why was small business sacrificed?
Research by academics Du Plessis and Maennig conducted shortly after the World Cup in Germany revealed that the major beneficiaries of the tournament were beer breweries, tabletop football producers, money exchangers, small plane aviation services and producers of soccer merchandise. While other industries and firms of bigger economic significance also benefited, research showed that emergent businesses and SMEs were the engines to economic.
The SA government as a precautionary measure also negotiated that 30% of the budget of the Organising Committee had to be allocated to Black Economic Empowerment (BEE) and SMEs (and SMMEs) in terms of procurement policy. Who benefited from this 30%?
Sadly, many small, medium and micro enterprises (SMMEs) not directly affiliated to the tournament and its organisers were turned away by the harsh regulations and restrictions enforced by Fifa (such as the demarcations around stadia for vendors).
Apart from the sudden spike in tourism-related businesses and temporary upsurge in construction and service related jobs (and the sub-contracting spill-overs created for some privileged SMMEs) business confidence remains benign.
“The successful soccer World Cup has contributed to a better business mood in SA, as well as a strong desire to capitalize on the opportunities to re-brand SA here and abroad. While the BUSA view is that the overall effect of the Soccer World Cup on the economy has been positive,” deputy CEO of Business Unity South Africa (BUSA), Raymond Parsons said.
At the time Parsons said that they did not have sufficient official statistics available to quantify the actual economic impact of the World Cup on business, especially small business, I’m still eager to find out what their official view is.
A report released by the Africagrowth Institute – an independent SA company that focuses on growth opportunities in Africa, not much has happened to SMME’s in the build-up and during the period and business confidence in the sector is quite lower that one would expect.
The notion that sporting events have a tendency boost business is not always true for all sectors. They can also do to harm the economies that support them, often for the long term. The ‘beautiful game’ has cost the hosting government over R40bn – money that could go into business support and employment programs. Also, local businesses (mostly SMMEs) often lose loyal customers when crowds take over
The retail industry for instance enjoyed a significant spike in business activity especially the buying splurge reported by American tourists during the tournament. Naturally the few SMMEs affiliated with such retailers (fruit and vegetable suppliers, branding and packaging firms) stood to gain from this but not the majority of them evidently were that fortunate.
The SMME Business Confidence Index (BCI) report conducted by Africagrowth Institute is based on a quarterly survey of the responses of SMME owners or managers in relation to factors that impact on their businesses.
The technological infrastructure needed to run the stadiums and provide world class coverage of the tournament created jobs via the multiplier effects (to other sectors) from the spending of money on the infrastructure.
A lot was mentioned about the macroeconomic spill-over effects of having cheaper broadband available for especially for smaller businesses (SMMEs).“Well, there’s a lot of new infrastructure in place, including new fibre rings around the stadiums, which will come in handy,” Duncan McLeod of leading online IT media website, Techcentral said.But the key question to how SMME’s will benefit (as the tourism and retail sectors did) is whether foreign companies and businesses regard SA as a tourist destination or a country in which to do business in over the forthcoming quarters.
SA and business in general, however, can debatably reap tremendous benefits – both financially and in terms of international goodwill. Successfully hosting the World Cup presented the country as safe, peaceful, modernized and a viable destination for foreign investment. We stand in great stead to gain on this ‘investment’ in the future.
Africagrowth Institute however attributes the marginal decline in the confidence index to the internal challenges faced by SMMEs which seem to constrain their activities and their performance. Among the constraining factors mentioned by the interviewed SMME managers and owners in their survey were the high operating costs, high government taxes and regulations, limited access to bank credit, insufficient demand and high employee costs.
Such challenges predictably prevented many SMMEs from benefiting from any of the spoils from the 2010 World Cup tournament. “There is empirical evidence now that ‘Red Tape’ can be reviewed to reduce the costs of doing business without necessarily having negative consequences. It strengthens the case of small and emerging business in SA for a lighter regulatory framework in future to enable them to thrive and create jobs,” Parsons says. Who will rescue Small Business from this irrational regulatory yoke? What was economic impact of the Fifa World Cup tournament on SA’s SMMEs?
Anthony Phillip Williams
Editor: SMME XCLUSIVE MAGAZINE
0726272080
1st October 2013
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