Big sporting events ‘good for investment’

2 August 2012

As the London Olympic Games continue to mesmerize the world, new research from consultancy Grant Thornton shows that businesses in South Africa and other emerging markets recognise the ability of big sporting events to attract investment to their economies.

According to Grant Thornton’s International Business Report, 78% of South African business leaders believe that big sporting events are key to attracting investment.

This is even higher than the positive sentiment following South Africa’s hosting of the 2010 Fifa World Cup, when 73% of local businesses felt that the event’s overall economic impact was a positive one.

South Africans, Brazilians bullish

“These new figures really indicate how important a major sporting event can be for an economy,” Gillian Saunders, head of advisory services at Grant Thornton South Africa, said in a statement ahead of last week’s Olympic opening ceremony. “For South African businesses to still recognise this economic knock-on from 2010 is testament to this fact.”

In Latin America, according to the report, almost three-quarters (74%) of business leaders believe major sporting events are important in attracting investment to their economy, with 83% of Brazilian businesses expecting a positive impact on their economy from the 2014 Fifa World Cup and 2016 Olympic Games.

Across the BRICS nations – Brazil, Russia, India, China and South Africa – taken together, over half (54%) of business leaders hold this view, according to Grant Thornton.

By contrast, far fewer businesses in the European Union (42%) and North America (44%) believe in the ability of big sporting events to attract investment, dropping to just over one in three (36%) in the G7 countries (Canada, France, Germany, Italy, Japan, the UK and the US).

‘Global shop window’ for emerging countries

“Holding a major sporting event gives an emerging country – often a less well known market with perceived challenges – a global shop window, allowing it to market what it has to offer to a massive worldwide audience,” Saunders said.

“For more established economies, international sporting competitions are still a great opportunity, but are just one element of a much bigger ongoing offensive to attract investment.

“The message is clear: if international sporting bodies want to make a positive impact on host countries’ economies, they should choose developing nations as hosts more often.”

It’s also more often the case that developed economies will have the venues, transport and technology infrastructure already in place for any major event, Saunders argued. Capital investment to build new infrastructure was therefore much more limited in these economies, compared with the level of investment required in emerging markets, as was seen in South Africa in the build-up to the 2010 Fifa World Cup.

London in the spotlight

With London currently in the spotlight, two-thirds (61%) of UK business leaders believe that big sporting events will have a positive impact on the economy. In a similar vein, the UK government anticipates that the London Olympics will bring £13-billion of economic benefits over the next four years – £6-billion in the form of foreign direct investment.

“A big part of winning the race to host big international sporting events is convincing the public and businesses that the benefits will outweigh the obvious costs,” Saunders said. “Our research suggests that developed economies have to work a lot harder than emerging economies to make a convincing case.”

The research also indicates that business leaders in those economies that have recently held, or are soon to hold, major sporting events are more bullish about the investment they bring.

The exception to this is China, where the legacy of the 2008 Olympic Games in Beijing remains unclear, probably because it occurred during a massive economic boom in a large economy, so that its impact was less in relative terms.

SAinfo reporter