Thursday, June 24, 2010

2011 World Cup Fever

With an impending game against Paraguay tomorrow morning, the New Zealand All-Whites are about to face one of the toughest games they have had in the 2010 World Cup. If they lose we will all pat them on the back but if they win they will be the nation's heroes and we will lavish them with praise and all the accolades they rightly deserve.

A great deal of those accolades will be over-hyped and far short of the mark - it is only a game (please don't hurt me)after all but I cant help compare the exploits and hype that has gone along with the All-Whites over their last two games and the expectations from some over the economic spin-offs from the Rugby World Cup in 2011 when it is held in New Zealand.

It has been suggested by Government (since when has any Govt been accurate with facts and figures) that the economic benefits to New Zealand of the 2011 Cup will be around $NZ 1.25 billion. Without a calculation as to how this figure is arrived at it is best to take this estimate with a large grain of something (salt is bad for you now apparently) because it is likely to be over-hyped.

The returns for New Zealand are likely to be negligible at best and loss making at its worst.

When one looks at just how much taxpayer and ratepayer money has gone into building stadiums and associated infrastructure you don't really have to grab a calculator to see that the Government's own estimate of a $1.25 billion gain is quickly gobbled up.

Ahh but your answer to my apparent negativity (I would say I am a realist though) would be that all this spending stimulates the economy. Well, it does if you own shares in Fletcher Building [FBU.NZ] or Steel & Tube [STU.NZ] or have a financial interest in Fulton Hogan but this money has been taken off you to simply circulate around the economy. No foreign exchange was earned and nothing productive sold - very incestuous stuff.

There are other direct beneficiaries too. The bars and eateries around the game towns will get more patronage, the hotels and motels will be booked out, Sky City Entertainment Group [SKC.NZ] are planning for an influx of rugby heads and companies like Tourism Holdings [THL.NZ] should get a shot in the arm.

Indirect benefits are difficult to quantify and a merely guess work without the facts and figures to support them. Government are saying that there will be exposure to new tourists from the 4 billion that will watch (another dubious figure) but how do you calculate that if there are benefits and how do you know any increase in tourist numbers might be from having staged the World Cup?

You simply don't.

Taxpayers and ratepayers are going to be saddled with paying off the giant stadiums that have been built for years and the drain from the ongoing running costs will only be eclipsed by the fact that these large holes with many seats in them will rarely be used to capacity.

South African taxpayers will find this out in the years to come and as with the 2010 World Cup the big winners will be the officials who oversee the world game. FIFA for Football and the IRB for Rugby.

They will make big quantifiable profits that are black and white on the balance sheet.

The proletariat are subsidising them.

Good luck to the All-Whites !

Disclosure : I own FBU, STU & SKC shares in the Share Investor Portfolio

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