In The Black article: Holy Grail or Tainted Chalice

I've only just received my copy of In The Black, the CPA's very own monthly magazine.

This month it has a lengthy article analysing the pros and cons of hosting a large sports event like the World Cup, mostly from a financial/economic perspective.

One thing about both Chartered Accountants and CPAs, they pride themselves on their independence, and that's a good starting point for this sort of article.

Although I must give a word of caution, whenever we have a situation with Government wanting to throw around billions of dollars of taxpayer money, inevitably even the most independent of operators will find the lure of filthy lucre far too enticing to put their professional principles to one side.

This article appears to do a reasonable job at showing both sides of the argument, so it's instructive to have a bit of a look at it.

It refers to a consultant's report sought directly by South Africa's World Cup bid committee which estimated that the equivalent of $3.1 billion would be pumped into the nation's economy.

However, FIFA's inspection report noted that the underlying prediction of revenue from ticket sales may be hard to achieve.

The article talks up the intangible benefits. The CEO of the International Marketing Council of South Africa, Miller Matola, refers to the World Cup being a "confidence booster".

Even Craig Foster is quoted: "Football globally recognises it can change regions of the world. It changed the German's perception of themselves."

Then we get to the nub of the matter, and I quote the article: "Despite all this ebullience, there are plenty of reasons not to play host to big sporting events, according to an outline for the Global Sport Industry Summit to be held in Paris at the end of September."

We are then told about the massive cost runs that occur routinely across the board with these sorts of events:
• Athens estimated a cost of US$1.6 billion to host the Olympics and it ended up costing a staggering US$16 billion (which has contributed directly to Greece's current economic plight).
• Beijing also estimated a cost of US$1.6 billion, but current estimates of the final cost are a bewildering US$30 to US$40 billion (and counting).
• London was originally budgeting on a cost of less than US$5 billion, but that's already blown out to US$19 billion (and counting).

In relation to hosting World Cups, the economic record is patchy, at best.

The US economist, Dr John Irons, says: "The historic experiences of past hosts show that countries are about as likely to see lower economic growth in the World Cup year as they are to see higher growth."

In 7 of the last 13 World Cups, economic growth in the year of the World cup has been slower than in the two years leading up to it. On average, economic growth is slower in the year of the World Cup than in both the two years before and after the event.