Economic Research Southern Africa Infrastructure Workshop

May 2006

2010 World Cup: Infrastructure Challenges

National Treasury

Dimensions… International showcase event. Demanding clients (FIFA, SAFA, Players,

Supporters & Spectators, Visitors). Tight timescale, delivery capability constraints with

multiple participants. Three tiers of government involved. Quality infrastructure and services required. Political (all South Africans to be involved).

What is this event about…Pre-event 32 teams arrive 2/3 weeks in advance. 128 warm up matches.

Event 64 matches and 32 teams. Duration 35 days. 10 Stadia in various locations in the country. Approximately 500,000 spectators. Approximately 40 billion TV audience (over entire

event). 200 viewing hours.

2010 World Cup Infrastructure… Management infrastructure

– Office and communication infrastructure to support the management and co-ordination of the 2010 World Cup – international officials and local officials.

Sporting infrastructure– Stadia.– Team practice facilities and accommodation.

Transport Infrastructure– Rail transport.– Urban transport.– Gateway airport infrastructure modifications.– Road transport.– Inter-modal transfer facilities.

2010 World Cup Infrastructure… Communication infrastructure. Telecommunications infrastructure (latest technology). Broadcasting infrastructure (latest technology). Media centres. Tourism infrastructure (although the total number of

international visitors is likely to be well within the figure for annual international visitors, the concentration and particular requirements of football tourists create specific needs).

Safety and security facilities. Emergency health facilities. “Fan” parks.

Host Cities… Johannesburg (Gauteng Province). Tshwane (Gauteng Province). Rustenberg (North West Province). Polokwane (Limpopo Province). Mbombela/Nelspruit (Mpumulanga Province). Ethekweni (Kwa Zulu Natal Province). Nelson Mandela (Eastern Cape Province). Mangaung (Free State Province). Cape Town (Western Cape Province).

Stadia…

Five new stadia are required: – Polokwane. – Mbombela. – Nelson Mandela. – Ethekweni (old Kings Park Soccer Stadium).– Cape Town (Green Point).

• Five upgrades are required:– Johannesburg (Soccer City upgrade to 98 000 seat capacity). – Johannesburg (Ellis Park). – Tshwane (Loftus). – Mangaung.– Rustenburg.

Stadium Capital Spend % of Total

0

5

10

15

20

25

30

35

1

Stadium

% o

f C

ap

ital

Sp

en

d Johannesburg

Johannesburg

Ethekwini

Cape Town

Tshwane

N Mandela

Rustenburg

Manguang

Polokwane

Mbombela

Host City Supporting Infrastructure % Of Total Spend

05

1015202530

Host City

% o

f T

ota

l S

pen

d

Series2

Training Centres % of Total Spend Jhb

Ethekwini

Cape Town

Tshwane

N Mandela

Rustenburg

Manguang

Polokwane

Mbombela

Key Challenges

Our challenge is not just to provide the additional sporting infrastructure demanded by FIFA for the World Cup, but to ensure that the provision of this infrastructure supports:– Development of human resources for service delivery excellence.

– Development of planning and financial estimating, prioritisation, budgeting for both capital investment and life-cycle operation.

– Strengthening decision making and implementation capability.

– Development of the skills of managers, the professions and artisans to deliver and operate infrastructure.

– A commitment to long-term sustainability.

Development…

Competing Demands for Resources…

Unlike Australia (2000 Sydney Olympics) or Germany (2006 FIFA World Cup), South Africa is a developing country with significant gaps in our social and economic infrastructure.

Specifically, there are significant needs for: – Housing. – Water and sanitation. – Municipal utilities. – Roads and transport. – Schools. – Clinics and hospitals and

– Associated community facilities.

Key Challenges

Delivery Systems…

• Our delivery systems – from planning, capital cost estimation, procurement through implementation to long-term operation and maintenance of infrastructure – are at varying levels of excellence.

Key Challenges

Supply Chain Management and Procurement…

For large construction/works projects Municipal Supply Chain Management Regulations require a committee system for competitive bids:– A bid specification committee.– A bid evaluation committee.– A bid adjudication committee (considers the recommendations of

the bid evaluation committee). Due to tight timelines for delivery of infrastructure the procurement

function has to: – Perform effectively and efficiently. – Ensure no errors in scopes of work etc. – Reduce the risk of litigation due to disaffected “companies bidding for

work”.

Key Challenges

Contract Disbursement Rates…

Key Challenges

Value of Contract Duration of Contract Disbursement Rate(Rand) (Month) (Rand/Month)

1,000,000,000 10 100,000,00020 50,000,00030 33,333,33340 25,000,000

For a stadium costing 1 billion rand and to be constructed over 30 months the disbursement rate will have to be 33 million

rand/month.

Example:

Overview of Impact…Additional Tourists Cup Visitors Construction Game

operationsExports

Expenditure Shock/Direct Impact/Injection

Demand for Goods & Services

Economic Environment

Labour Market Financing Capital Constraints Efficiency/Cost of Doing Business

Production Employment Prices Government Revenue

Economic Impact

Overview of Impact…

Positive• New event facilities

• Improved general infrastructure

• Urban revival

• Increased tourism

• Additional employment

• Local business opportunities

• City marketing

• Production of ideas

• Education

• Experience and knowledge

Negative• High construction costs

• Investments in non-needed structure

• Indebtedness of public sector

• Temporary crowding problems

• Property rental increases

• Temporary increases in employment and business activities

Assessment of Impact…

• To assess impact in more detail modeling is required on:– Infrastructure spend– Hospitality industry– Human capital development (specifically

project management skills)

Significant Risks…

Being ready on time to host the 2010 World Cup and achieving the objectives laid out in FIFA agreements

Financial viability of projects and activities directly related to the 2010 World Cup

Meeting the 2010 World Cup expectations of the communities of our country

Substitution of community development projects – hospitals, schools etc – for 2010 World Cup infrastructure projects

A compromised delivery processes – as opposed to improved delivery processes