World Cup counters should score but not necessarily the economy
May 17, 2004
By Patrick Lawlor
This week is a remarkably quiet one when it comes to economic indicators, with no data releases due until the final rush week of the month.
This is just as well, since the data watchers will have plenty to digest from other sources, notably high oil prices and the awarding at the weekend of the 2010 football World Cup to South Africa.
Let us deal with the second of these first. Apart from the immediate beneficiaries - car repair shops, tow truck firms, panel beaters and others who scored from an even more drunken weekend of revelry than usual - there will be particular attention paid to those counters on the JSE Securities Exchange set to benefit from the bid.
These include, firstly, the construction, engineering and fixed investment sectors, which will be charged with building and refurbishing the stadiums, hotels and other infrastructure required to host the event.
So look out for share price gains for the likes of Murray & Roberts, Aveng and Pretoria Portland Cement. Also watch the performance of hotel and leisure stocks like Kersaf, City Lodge, Cullinan (which released its interims last Thursday), The Don, Sun International and Tourvest - though you will need to take a six-year view on these.
It is still debatable whether the World Cup will have a lasting benefit for the economy as a whole. This writer saw figures of over R20 billion in new spending being mentioned in the weekend papers, which is well and good and sorely needed but will be less beneficial to all if there is no sustained follow through. Infrastructure that is created will need to be used. New businesses must continue to flourish after being kick-started by the World Cup.
It is hard to see fancy, new and big stadiums in Kimberley, Nelspruit and Port Elizabeth continuing to draw huge crowds for games in the years and decades that follow the World Cup.
Local club football has become somewhat notorious for its small crowds in games not involving Kaizer Chiefs and Orlando Pirates, and even where these teams are involved, the turnouts have been erratic.
Sadly, no new stadium for the World Cup is set to be built in the heart of Soweto, the spiritual home of the Chiefs and Pirates, where such an investment could realise a return.
Of course, the authorities will have everyone know that the World Cup will spark a new wave of tourism. This may be presumptuous.
The last World Cup does not seem to have changed the popularity of South Korea as a tourist destination.
Value, service and safety are the perceptions that drive tourism. Tourism here will succeed only to the extent that the World Cup enhances these perceptions.
Lest anyone think I believe Morocco or Egypt should have won the bid, let me add that the award is a wonderful feather in this country's cap.
No other country in Africa could realistically host such an event in six years' time. But we should remember that the award of an event such as this is just that: a reward for achieving certain standards, not a licence to print money.
(Fifa, the world governing body, keeps that particular licence for itself.)
The World Cup aside, the oil price will be closely watched this week. In the past, sustained higher prices have generally heralded a later slowdown in the world economy. High oil prices in 2000 did just that, as a slump in global equities followed rises in the price of crude.
This time is a little different. Oil is priced in dollars, and since most other currencies have gained against the dollar, a lot of the oil price rise has been cushioned by the currency effect.
A sustained high oil price has all sorts of nasty consequences, notably high inflation and a weakening balance of payments.
These are the things that get trigger-happy central bankers edgy about rates. Alas, it doesn't take much for our lot to put up interest rates.
So we should all be nervous about interest rates, even as we look forward to one spectacular festival of football in 2010.
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