Whenever a country plays host to an international sporting event, it’s thought to be boon to its economy. But this may not necessarily be the case for this year’s World Cup host, South Africa, or its exchange traded fund (ETF).
The 2010 World Cup may benefit South Africa through increased employment, a rise in tourism, a better reputation for the country, investment in green energy and improved city infrastructure, writes Miko Schneider for Play the Game. Still, local businesses and industries had to accommodate FIFA regulations or government legislation, which could have a negative effect. [6 ETFs to Play the World Recovery.]
- The “2010 Soccer World Cup Liquor Policy” might force public establishments screening World Cup matches, such as bars, pubs and restaurants, to pay around $680 for a special liquor license.
- Informal traders’ have been barred from conducting business in certain areas.
- Domestic workers are angry that overseas manufacturers of clothing, flags, buses and beer will not benefit local industries.
- Barrie Jarrett, CEO of TEAMtalk Media, reasons that the short-term inflated pricing of flights, hotels and even beer may persuade tourists to go elsewhere.
- Additionally, the South African rand is too strong and may turn away foreign tourists.
In other ways, South Africa is looking more appealing: the South African economy is expanding at its fastest pace in more than a year, and inflation is expected to exceed the target range for a second month, which will make further interest rate cuts unlikely, reports Nasreen Seria for BusinessWeek.
South Africa’s manufacturing purchasing managers’ index has stayed above 50 since November, and output returned to growth with a 3.2% year-over-year increase in December, according to Times LIVE. Consumer inflation rate was at 6.4% year-over-year in January, above the 3% to 6% target, and at 0.4% on a monthly basis. January’s producer inflation rate is estimated to increase to 1.9% year-over-year from 0.7% and prices should rise 0.8% from December. [Africa’s ETFs, Forecast for Growth.]
Unemployment is still very high, standing at 24.3%. Ouch.
For more information on South Africa, visit our South Africa category.
- iShares MSCI South Africa Index Fund (NYSEArca: EZA)
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.