So, the “last outpost of the British Empire” is hosting the Commonwealth Games in 2022. It’s the first time the Games will be hosted on African soil despite the fact that Africa (and South Africa in particular) has a not-so-proud history of British occupation and our politicians have been vocal about the evils of colonial rule.
Chances are that they’ve been tempted away from their anti-colonialist stance by a potential treasure chest that would have made Vasco da Gama blink as he sailed past the Bay of Plenty.
As mayor James Nxumalo and MEC for Economic Development and Tourism, Mike Mabuyakulu, begin talking up the prospects of the Games at almost every significant event in the province for the next seven years and especially during the run up to next year’s local government elections, the question has to be asked: How much is hype and what is realistic?
With a sound track record of delivering other international sporting events, Durban can certainly deliver. But can they do this in the same “smart” fashion as outlined in the original bid?
It seems that everything comes down to sensibly managing both expectations and costs.
As South Africans watch the rand weaken, commodity prices dip and labour and energy issues pull economic growth downwards, good news is in short supply. It’s not surprising that, even when the Canadian city of Edmonton withdrew its bid citing the worldwide oil crisis and a pending recession as reasons, Durban persevered.
Durban needs good news and expectations are high. A public opinion poll in January / February this year saw 90 percent of respondents vote in favour of Durban hosting the Commonwealth Games.
But then comes that proverbial hot ‘spud’ – the R6,4 billion budget that, according to the bid document, is to be sourced from both the public and private sectors and supported by government. As yet, no details are available.
The city is apparently prepared to spend R2 billion on the Games.
The initial budget was R3.4 billion but was soon pumped up to the present figure.
In 2010, New Delhi spent over R55 billion (in today’s prices) to host the Commonwealth Games – more than ten times more than the initial R5 billion budgeted. In contrast, in 2014, Glasgow invested about R8.5 billion, bringing in around R5.6 billion.
Earnings guesses for Durban have swung from R5.8 billion to R20 billion.
Speaking at a Durban Chamber of Commerce Tourism Forum event just prior to the announcement that the city would host the Games, chairman of the 2022 Commonwealth Games Durban bid, Mark Alexander, pegged the expected “positive economic effect” at R25 billion.
“There will be 220,000 tourists coming to this region spending pounds. And it won’t just be for the games. It will be a seven-year process because there will be various teams coming to prepare for the event during the build-up. The economic impact of the All Blacks playing one test in Johannesburg is R400m in one week. So, imagine what a seven-year process will bring in,” he said.
No more white elephants
What was most memorable about his presentation was that he declared that there would be no fancy stuff. “When we leave after the games, there will be no white elephants. We are not building monuments.”
And that’s probably the biggest difference between the 2022 Commonwealth Games and the 2010 FIFA Soccer World Cup. No splurging on white elephant stadiums is needed. All sports facilities are already in place and within a 2,5 kilometre radius of the Moses Mabhida Stadium. This vindicates the city’s – and, ironically, controversial past city manager, Mike Sutcliffe’s – vision of creating a sports precinct that would host international events and position the city as a sports tourism destination.
The improvements and upgrades to cater for the Games’ special requirements will primarily be served by temporary structures to fulfil capacity needs.
There’s also a lot to be said for locating the athlete’s village within the Cornubia housing development to ultimately provide much needed gap housing. Government is reigning back on infrastructure spending despite its declarations via the President’s National Development Plan. Housing projects in particular, seem to have stalled.
The Commonwealth Games will undoubtedly create a greater urgently to deliver both this and Durban’s rapid public transport network within stipulated timeframes.
Although that will be a definite plus for Durban, there will always be a fine line and balancing the books for the next seven years remains the key challenge.
Just in case those holding the purse strings need their memories jogged, the 2010 FIFA World Cup Country Report, published by the department of sport and recreation and released in 2013, said R8.4 billion had initially been set aside for stadium construction. This was “readjusted” to R13.5 billion.
At the final whistle, FIFA has spent R13-billion on the 2010 World Cup while South Africa picked up a R30-billion bill. The spend on infrastructure and operations started out at R2,3 billion in 2003, grew to R17,4 billion within four years and reached R30,3 billion by 2010.
Another obstacle to be avoided is inflating the possible benefits. The contribution to the GDP from the World Cup was probably over stated. Finance minister of the time, Pravin Gordhan, put the direct benefit at R38-billion or 0.4 percent. Subsequently, the Human Sciences Research Council, calculated that the World Cup’s contribution to be between 0.2 and 0.3 percent of GDP.
But the most damaging fallout from 2010 is the corruption that continues to stalk what would otherwise have been a spectacular achievement for South Africa. This started with collusion and bid rigging for the building of the stadiums and culminated in the on-going investigations into FIFA itself.
What the Commonwealth Games could do is to reverse any negative perceptions from the 2010 scandal.
Ruwayda Redfearn, the incoming managing partner for professional services firm, Deloitte in KwaZulu-Natal and head of Risk Advisory, caution that it is imperative for the city to lay a strong foundation before this mega event is even out of the starting blocks.
“The world has seen the far reaching negative impact of the FIFA World Cup scandal on sport in general. It is imperative that the Federation, in conjunction with South Africa, delivers games that are free from any corruption, bribery or unlawful acts. This requires strong governance frameworks underpinned by sound financial processes in every phase of the games, to ensure seamless execution.”
Based on experience from Deloitte’s strategic role in the 2012 London Olympic and Paralympic Games and, more recently, the organising committees of the 2015 South East Asia Games and the Youth Olympics, she adds: “With a project of this magnitude, enterprise risk management of the games will be critical. The logistics behind securely moving 220 000 people will have to be well planned, tested and executed.”
Heeding the warning signs
Again, there are many lessons to be learnt from FIFA and 2010. Very many businesses – especially in the hospitality sector – spent large amounts on expanding for the event but never realized the expected windfall. Expectations were too high, arrivals were overestimated and disappointment was inevitable.
Most disturbing of all was that the small businesses and rural crafters that were supposed to get a share of the tourist spend were left high and dry. Informal traders were removed and banned from trading close to stadiums during the event. Smaller businesses failed to benefit.
Perhaps the problem was that many expected this prestigious event to change their worlds in much the same way as many retailers expect a festive season boom to compensate for a year’s poor trading. International sporting events are one hit wonders. They deliver bonuses for those who spot opportunities rather make teetering businesses sustainable businesses.
Even promises of job creation are misleading. Most are temporary at best.
The following declaration by the 2022 bid Committee in the Bid Document is probably best viewed against this background: “Internship programmes aimed at providing access to job opportunities and skills empowerment will form a cornerstone of our procurement and
Delivery of infrastructure. In fact, our intent is to ensure that at least 30 percent of the entire workforce directly related to the Games comprises young people.”
Dumi Cele, also sees the bigger picture. Observing that hosting the Commonwealth Games will increase inbound tourism, she nevertheless notes that the true benefit will come from triggering business activity – but she says plans need to include small and medium enterprises.
“Previous Commonwealth Games hosts have established procurement networks to assist local businesses compete for service contracts. The Durban Chamber of Commerce looks forward to implementing a business engagement strategy that offers support services for third sector organisations and SMEs,” she said just prior to the announcement that Durban would host the Games, providing some reassurance that there would be a private sector watch dog.
She hasn’t deviated from her belief that, both before and after the event, development of tourism related businesses will take centre stage. Already, hotels are upgrading and adding extra rooms. New airlines are about to touch down in Durban with their eyes firmly on the Commonwealth Games pot. Mayor James Nxumalo told a press conference in the run up to the 2015 World Routes Summit that Durban intends to grow the number of international arrivals by two million within the next seven years.
Again, is this sustainable?
Cele believes the benefits of the Games can be more on-the-ground with urban renewal that leaves a legacy similar to the beachfront promenade upgrade ahead of the 2010 Soccer World Cup.
“Consider how the 1992 Olympic Games transformed Barcelona into one of Europe’s most vibrant and popular tourist destinations. The impact of those Games to Barcelona was evident six years before the event. Unemployment fell dramatically as construction and related opportunities opened up locally, regionally and nationally. Housing benefited with the Games generating demand… This allowed Barcelona to build on the Games’ positive global media attention, to fulfill its potential as a vibrant destination. A European Tour Operator Association study showed tourism now accounts for 12% of the city’s gross domestic product (GDP) against one to two percent before the Olympics,” she says.
But most importantly of all, there’s that feel good factor that lasts long after the Games are over. South Africa weathered the 2008 global recession a lot more positively than others during the lead up to the Soccer World Cup. Perhaps the Commonwealth Games can inspire a more robust approach to gathering economic storm clouds – and this time taking a middle road could just make this last.