Economics - Holiday Homework !

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    BY

    EKUS SINGH

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    INTRODUCTION

    South Africas airports and borders have been busy over the last few weeks as hundreds-and-thousands

    of visitors stream into the country for the 2010 FIFA World Cup.

    According to the South African Department of Home Affairs, 682,317 foreigners entered into the

    country between 1 June and 21 June 2010 compared to the arrival of 541,065 during the same period

    last year. Over and above visitors from neighbouring countries, the largest number of foreign arrivals are

    from the United Kingdom, USA, Germany, Australia, Mexico, Brazil, France, Netherlands and Argentina.

    As the action heats up on the pitch, with the next round soon to start, this influx is only set to rise, with

    major benefits for the future of South Africas tourism industry.

    From a tourism perspective the World Cup has been fantastic exposure for South Africa, said

    Thandiwe January-Mclean, CEO of SA Tourism. The World Cup has afforded South Africa the

    opportunity to do away with stereotypes. Overall, the response from visitors has been one of surprise.Surprise at our infrastructure development, at the excitement of match audiences. All our feedback has

    been positive, people are extremely excited.

    SA Tourism is confident that the World Cup will open up the country to a whole new spectrum of

    visitors.

    The 2010 FIFA World Cup has seen an increase in visitors from new countries, namely the Latin

    American nations such as Mexico and Brazil. This has been coupled with the implementation of the

    international FIFA Fan Fests, at which over 900,000 people have been in attendance since the start of

    the tournament. The highest television audience and international fan-fest attendance has been in

    Mexico. We are promoting South Africa in those Fan Fests, said Roshene Singh, the chief marketing

    officer of SA Tourism.

    There will be new market opportunities after this tournament. With our track record of hosting major

    events, sports tourism is important to South Africa. We are not relaxing, we are continuing with our

    campaigns to convert awareness into visitors, continued Singh.

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    One of the biggest talking points around large sporting events is the revenue generated from visiting

    fans, and SA Tourism is confident that the tournament will be a success from a tourism revenue

    perspective. We only have estimates at this point, but we are looking at around R27 billion, almost a

    thousand percent of what we spent on marketing, said Singh.

    Last year the South African economy benefitted from R100 billion in tourism spend. Globally tourismnumbers took a dive in 2009 - internationally there was a 4% decrease in tourism but South Africa

    managed a 3.7 per cent increase. Although we have no official figures yet, we are confident we have

    met the numbers we projected for the World Cup, said January-Mclean.

    South African accommodation figures are also looking promising, with 65 to 70 per cent occupancy rates

    in Johannesburg, while Cape Town and Durban are looking closer to 85 per cent. We will see an

    increase in movement as we reach the knock-out stages, said January-Mclean.

    South Africa is home to 6% of Africa's population, and produces 18% of the continent's gross

    domestic product. It also boasts 45% of Africa's mineral production and 50% of the continent'spurchasing power.

    The country's economic growth averaged 3% from 1994 to 2004, an improvement on the

    average of 1% in the decade before 1994. Since 2004, growth has exceeded 4% per year,

    reaching about 5% in 2005.

    With the faster growth rate has come rapidly improving employment creation. In the last year

    measured (to September 2005), around 540 000 net new jobs were created. Inflows of foreign

    capital have been exceptionally high since 2003 - R80 billion (about US$13 billion) came into

    the JSE share market between the beginning of 2005 and the first quarter of 2006.

    Macroeconomic strategy

    Since democracy, South Africa's economy has been subject to a process of structural

    transformation. Policies seeking to promote domestic competitiveness, growth and employment

    and increase the outward orientation of the economy have been implemented.

    Government has also embarked on a programme of fiscal reform to restructure government

    expenditure towards social services that will contribute to a better quality of life for all South

    Africans.

    In South Africa, the central bank maintains its independence from government. The bank has

    embarked on a programme of inflation targeting, which has had positive outcomes; the realinterest rate has stabilised and the currency is able to fluctuate at competitive levels.

    Business confidence now stands at a 13-year high, having followed a cyclical upswing since the

    political reforms of 1994. All key macroeconomic indicators have improved over the past decade

    and, since 1994, South Africa has experienced a surge in the registration of new businesses.

    A sound environment

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    The cost of doing business in South Africa.

    South Africa's energy costs are among the lowest in the world. Eskom supplies most of Africa

    with electricity, and is known for its superior supply quality. South Africa also compares

    favourably in terms of petroleum prices. Private sector and multinational oil companies refine

    and market nearly all imported petroleum products in southern Africa.

    Telecommunications are becoming increasingly competitive, with the partial privatisation of the

    telecommunications service-provider, Telkom, driving down the cost of international phone calls.

    South Africa's unit labour cost is significantly lower than those of other key emerging markets,

    including Mexico, Hungary, Malaysia and Singapore. In terms of the corporate tax rate, South

    Africa ranks favourably against a number of developing countries who have tax rates higher

    than 30%.

    Three new stadiums were built for the mega eventand five older stadiums underwent major renovations.

    Various operations as transportation, accommodation,

    health services, logistics, technology & telecom.

    Sales and promotions such as ceremonies and

    cultural events, marketing etc.

    Administration costs.

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    Operations

    35%

    Sale and

    promotions

    16%

    Adminstrati

    on

    15%

    New

    stadiums

    34%

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    Quick Hits-Revenue

    FIFA, a non profit-making organization, said it

    had made a $196 million surplus in 2009, as

    revenues soared to $1.06 billion.

    This is the highest revenue recorded ever in one

    year in the history of FIFA.

    Ticketin

    g

    56%

    Sponsor

    ship

    14%

    Broadc

    asting

    rights

    30%

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    Positive World Cup Implications for

    AfricaFor a country that tends to be associated with images that embody the negative aspects of

    humanity such as death, poverty, disease, and hopelessness, the 2010 World Cup brings an

    overwhelming abundance of pride to, what may seem like, an otherwise desperate nation. Its

    ability to host an event of this grandeur, puts South Africa and the entire African continent on the

    global map in a positive context. Every person with a patch of land and a ball can play this

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    internationally renowned sport. With that said, an otherwise meaningless game between two

    children, becomes just as important as the World Cup Soccer final.

    Negative Effects of the FIFA Cup in Africa

    This world soccer tournament is currently estimated at costing $4.6 billion. In a country wherethe unemployment rate is twenty-five percent, this high expense may cause considerable

    upheaval throughout the nation. While millions lack basic life necessities such as electricity and

    clean water, FIFA and its corporate sponsors will reap the benefits of this multi-billion dollar

    initiative.

    Two reports of al-Qaeda threats have come to light; one against the Danish and Dutch teams

    and the other during the game between England and Unites States. While the threats have

    been made out to be rather insignificant by authorities, upwards of 55,000 officers are set to be

    on the streets of South Africa. Each of the thirty-one participating nations will also have their

    own special protection squads during the tournament.

    The long-standing high levels of crime, including an estimated fifty murders a day, is suggested

    to be deterring fans from attending the event. Fears such as this loom beneath the excitement

    of the World Cup.

    World Cup Hope for Africa

    Throughout the city of Johannesburg, the continent of Africa, and, ultimately, the world, there is

    a growing ambition that the 2010 World Cup will not only be momentous sporting event, but also

    an image makeover for the host nation. FIFA President, Sepp Blatter is quoted as stating, "We

    can all applaud. The victor is football. The victor is Africa."

    hy is it that governments

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