The true legacy of building stadiums for the FIFA World Cup

25 June 2018 Authored by Consultancy.eu

A comprehensive study of the World Cup ‘legacy’ in South Africa – conducted by Said Business School and South African real estate consultancy K40 – has revealed how most of the tournament-related assets remained “underutilised.” Recent analysis forecasts a similar lack of returns on the $11 billion investment made by Russia for the 2018 FIFA tournament.

The World Cup (WC) is well underway in Russia, and nearly half of the world’s population is tuning in from various corners, contributing to the overall hype of the event. Nevertheless, while the WC is often a major source of joy for football fans across the world, the lasting effects that such an event has on the host country have historically sparked controversy.

When including the cost of building stadiums, and the outlay required in establishing the supporting infrastructure, hosting the WC is an expensive affair. The 2014 WC in Brazil was termed by some as the “biggest theft in history,” in reference to claims that the actual costs of hosting the event – including indirect ones – amounted to as much as $46 billion, as opposed to the $15 billion figure released to the public.

Bid Book Estimates for the SA World Cup

In essence, those opposed to hosting the event – particularly in developing countries – argue that the cost-benefit analysis of being the host nation almost always tips heavily in favour of the former. In Brazil, for instance, the most tangible return was the $100 million World Cup Legacy Fund offered by FIFA, which pales in comparison not only to the costs, but also to the $2.6 billion of profit earned by FIFA from the event.

According to research compiled by Eamonn Molloy, an Associate Fellow at the Said Business School (SBS), the world cup before last in South Africa resulted in a similarly imbalanced scenario, further accentuated by a severe lack of planning leading up to the event. SBS is a part of the University of Oxford, and offers some degree of strategy consulting services in addition to its wide array of programmes.

The shortcomings of the South African WC in terms of planning, as per the report, were caused by overoptimistic estimations, lack of national direction on funding, poor political decision making, lack of clarity from FIFA on the requirements, an extra emphasis on technical overdesigning, corruption, and an overall failure to engage stakeholders.

Budget history for the SA World Cup

Most of these issues manifested themselves in the budgeting estimates for the tournament. The ‘bid book estimate,’ for instance, which is the approximate expected cost when bidding for the WC, initiated at just over R1 billion as per government estimates. The final costs eventually amounted to just short of R17 billion.

The stadium costs reflected a similar disparity. Overall, the WC infrastructure consisted of the development of six new stadiums, and the upgrade of four existing ones. The maintenance costs alone of these stadiums has pushed the country’s budget way over its estimate, as the annual costs for maintenance are estimated at between R30 million and R70 million, which already represents a substantial loss for South Africa’s public coffers.

New analysis has now revealed that a similar scenario might emerge in Russia, primarily due to the relative lack of popularity of their domestic football league. This situation is exemplified by the club Rotor Volgograd, which is set to inherit a new 45,000-capacity stadium after the WC, while the average attendance for the team’s games this year stood at 3,800.

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