At the end of October, figures showed that the UK economy had grown by 1% in the period July – September. Apparently, we are officially out of recession. According to the Office for National Statistics, Olympic ticket sales contributed 0.2 percentage points to this, and while contributions in terms of hotel stays and increased social activity related to the Olympics could not be estimated, such activity was noted. Going into the Olympics, it appeared that the most the majority of UK residents could hope for was that we wouldn’t be left broke by staging such a massive event (or embarrassed by poor performances), so overall this positive outcome has exceeded expectations. This news, combined with a report in The Economist (20 – 26 October 2012) on the demise of the South African economy, prompted me to question the long-term benefits of major construction projects.
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In the summer of 2010, South Africa hosted the FIFA World Cup. In the years leading up to the tournament, the government embarked on a massive infrastructure programme to build stadiums and improve transport links. Construction projects worth an estimated US$13.2 billion inspired an overhaul of other infrastructure across the private sector, and it seemed that the legacy of the World Cup would continue on into the future as the rest of the world got a taste of South Africa’s potential as a place to work, to do business, or to holiday. Of course, the timing was not ideal. As the most developed economy in the continent, South Africa suffered the most when the global economic downturn struck in 2008. Its ties with other mature markets left it at a disadvantage that its neighbours were not so exposed to. In the immediate wake of the crash, the government was adamant that it would not be affected and, even in the first quarter of 2009 when GDP plummeted to -6.9%, the National Planning Commission was assuring people that the economy was not in recession. In 3Q09, nearly half a million jobs were lost, taking the official unemployment rate to almost 25%. Today that official rate still stands, but The Economist suggests the actual figure is probably closer to 40%, adding ‘half of South Africans under 24 looking for work have none. Of those who have jobs, a third earn less than $2 a day. Inequality has grown since apartheid, and the gap between rich and poor is now among the world’s largest’. Much of the blame for this situation falls on the government, which is generally accused of failing to tackle corruption. Meanwhile, former President Thabo Mbeki has spoken about his fears that the country ‘is losing its sense of direction,’ saying, ‘we are allowing ourselves to progress towards a costly disaster of a protracted and endemic general crisis’.
The next FIFA World Cup will take place in Brazil in 2014. So far, preparations for the tournament have been slow, with poor planning and corruption being blamed. At this stage, the chance of all the infrastructure improvements being implemented as originally planned – particularly in terms of transport – is looking slim. However, unlike South Africa, Brazil’s cement industry is still going strong, though there has been a slowdown in the economy of late. With the impetus of a second major international event after the World Cup, one would expect Brazil to stand a better chance of following through with its development plans in the long-term. We’ll keep an eye out.