Show me the money!

The economic implications of South Africa hosting the Rugby World Cup in 2023

Sarah Boomgaard

Last month SA Rugby Union delivered their bid to host the 2023 Rugby World Cup. Jurie Roux, CEO of SARU, was extremely proud of the 827 page, 8.2kg document outlining why South Africa is the ideal country to host the tournament.

Roux highlighted the fact that South Africa would be able to use the existing infrastructure left over from the 2010 Soccer World Cup which would allow for a maximisation of profits. Roux made further predictions regarding the economy and he believes that South Africa could see “a R27.3 billion direct, indirect and induced economic impact on South Africa; R5.7 billion [of which flowing] to low-income households [and] an estimated R1.4 billion tax benefit to government.” Similar fantastical predictions were made when South Africa bid for and eventually hosted the Soccer World Cup in 2010. Yet seven years later, South Africa’s economy doesn’t seem significantly different.

During the Soccer World Cup, there was a sense of euphoria. The statistics were certainly hopeful. Tourism was expected to skyrocket, alcohol, food and beverage sales were also expected to increase. The opportunity for job creation was frequently highlighted. The tourism sector indeed saw a significant increase of 20%, while alcohol and food and beverage sales also enjoyed a slight increase. However South Africa’s unemployment rate remains at 27%. During the build up to the Soccer World Cup unemployment rates decreased from 2008-2009. However many of the jobs created by the tournament were temporary and following the World Cup, unemployment rates continued to rise in South Africa.

Given the unsustainable economic momentum of the 2010 Soccer World Cup, one has to wonder whether Roux’s promises of a better tomorrow are justified. Speaking to Dr Djiby Thiam, a Senior Economics Lecturer at the University of Cape Town, it is clear that those in need will not be the recipients of the wealth which the 2023 Rugby World Cup is predicted to generate. Dr Thiam stresses that South Africa’s financial woes cannot be solved by hosting the tournament. Should South Africa win the bid, the tourism sector will most likely flourish.  However the impoverished will not be the direct recipients of the surge in the tourism sector as the “the implications will be very much narrowed” says Dr Thiam. The profits “will be going towards those who already have the capital to invest in guest houses or hotels.”

While the rich will be main benefactors of the income generated by the Rugby World Cup, this does not mean that we will not see any ramifications for the poor. In terms of poverty reductions, Dr Thiam thinks that we would see “some implications for the poor, when it comes to investing in infrastructure.” Additionally beyond improvements in infrastructure, the State will be able to collect income and value added taxes from the wealthier segments of the population who would be earning and spending more during and in the build up to the Rugby World Cup. The increased income for the State in the form of taxes can then be reallocated to the poor.

The reallocation of these profits will be complicated. Dr Thiam explains that “reallocation does not only mean money” arguing that this is only one part of the solution. “It means [creating] drivers for change. Drivers for change are education, service delivery and from there not only will we have a higher GDP, but we can expect a GDP that is much more inclusive of the country.”

The government can indeed use the increase in taxes to supplement education, health care, etc. However let us not forget that SARU would also earn a tidy sum of money from the International Rugby Board. I propose that most, if not all, of the money which SARU receives from the IRB should be placed in an independently run sovereign fund. This fund would be used to finance rugby clinics in underprivileged communities, providing financial support for schools with budding rugby programs in impoverished areas and establishing better financial and tactical support for women’s rugby in South Africa. Should SARU restrain themselves and be cautious with the allocation of their own bonuses, transformation would not be a hope for the distant future, but 2023 could be the start of a realistic and necessary change in SA Rugby.

So what do you say, SARU? Don’t boost your bonuses, boost our teams.

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