Cape Town Stadium: World Cup to White Elephant: Its troubled history from 2006 to present (Part 1)

 

Part 1: After the World Cup party, trouble on the horizon

 

The Cape Town Stadium has been described as "iconic" and "beautiful".  Its striking design does not detract –  compliments even – the natural beauty of the Green Point Common on which it rests and the city's Atlantic seaboard.  However, the controversy surrounding it erupted before it was even built, and continues today.  My interest in it is as a citizen of Cape Town and academic because it is a case study in the balancing of urban economic priorities, and how wrong decisions make things worse.

This article is the first part of a three-part series.

    Maryland Pride/ Wikimedia Commons

A 2014 article in Globe and Mail sums up Cape Town Stadium:

‘One of Africa’s most beautiful stadiums now sits empty and forgotten in the Atlantic Ocean breezes. Less than five years after being built for the World Cup, the $600-million Cape Town Stadium is largely abandoned. 

‘Like most of South Africa’s former World Cup stadiums, this one is haemorrhaging money badly. The occasional concert – along with the $4 tours for a few hundred visitors per week – is not nearly enough to cover its operating costs. The 55,000-seat stadium is losing an estimated $6-million to $10-million annually.

‘City officials say they are constantly bidding for events to hold at the stadium, but rarely succeed.’

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The story of how we arrived where we are with the Cape Town Stadium (CTS) is well known. The city originally proposed building a World Cup stadium in Athlone or upgrading Newlands Rugby Stadium, far cheaper options than an entirely new stadium. 

But as Globe and Mail states, ‘Fifa insisted on a new stadium on Cape Town’s spectacular waterfront – to make the matches more attractive to its global television audience. “A billion television viewers don’t want to see shacks and poverty,” a Fifa delegate told local officials’.

The government and Fifa spun the stadia as legacy projects from which economic and social benefits would arise.  However, the Danish Institute for Sports Studies, quoted by Globe and Mail, stated ‘(South Africans) have not seen any economic benefits from the venues, and therefore the sporting legacy of the event is highly questionable’.

Even back in 2006, the City of Cape Town was aware of concerns about the financial sustainability of the Green Point Stadium, as it was then known.  They commissioned an economic impact assessment from The Environmental Partnership, prepared by Independent Economic Researchers, ‘Economic Specialist Study: Green Point Stadium and Associated Developments’.

The September 2006 study investigated three alternatives. A ‘do nothing option’ – no new stadium would be built. Cape Town would either not host World Cup games or Newlands would be used after a R500 million upgrade. 

The second was a new stadium on the site of Metropolitan Golf Course.

The ‘Green Point Stadium alternative’ included an upgraded precinct and park, including selective commercialisation and other sources of financing that would reduce the need for subsidisation.

The findings are summarised: ‘A new 68 000 seat stadium is not a necessity for the country to host the World Cup and would raise the already high opportunity costs of 2010.  A semi-final (one of the games Fifa earmarked for Cape Town) could be played at stadia extant elsewhere in South Africa. 

‘The Green Point Stadium alternative will require substantial and guaranteed subsidisation from national government if it is not to become a burden to the city and its ratepayers and to result in a positive economic impact for the city and province.  The ‘do nothing’ alternative would entail lower financial risks and require substantially lower subsidies due to lower costs.’

Regarding Fifa dictating terms to host countries’, the report states ‘one can’t assume South African government bodies would be powerless in the face of higher costs’.

The assessment – like Fifa, government and Grant Thornton’s 2010 study – assumed substantial economic benefits would flow from the World Cup – construction, jobs, tourism, trade and property values.   

The World Cup benefited South Africa in accelerated infrastructure and transport development and city improvements.  The HSRC’s 2011 survey study, ‘Impact of the 2010 World Cup on Social Building, Nation Building and Reconciliation’, show that for the period immediately before and after the cup there were improved social cohesion, nation building and ‘connection with the African continent’, and a strong sense of patriotism – South Africa proving to the world that an African country could host a major international event.

However, economic benefits either did not materialise or people only partially benefitted due to Fifa’s restrictions regarding trade near venues, the short period of the games and the overstatement of potential benefits.  HSRC quoting the Cape Chamber of Commerce (2010):

‘Government and Fifa misrepresented expectations of potential benefits. It (World Cup) assisted some macro-economic indicators but not the entire country.  Sustainability was not on the priority list.  Even the (new) infrastructure is problematic.  Stadiums are not sustainable to manage, and it is not productive infrastructure and did not unlock capacities.’

Soon after becoming mayor, Helen Zille placed a moratorium on the appointments of consultants for the Green Point Stadium stating the city needed information on the project’s costs.  She lifted the moratorium a week later saying she was ‘satisfied the financial model’ would not be a ‘burden’ to the city’s ratepayers’.  Although she was criticised by the then Western Cape premier, Ebrahim Rasool, for placing the moratorium, it was the responsible thing to do. 

What was clear is the city bowed to pressure – Zille later admitted as much – by the provincial and national government and blackmail from Fifa, which was that unless the stadium was built at Green Point, the city would not be a host city. 

Independent Economic Researcher’s statement that South African government bodies were not powerless to Fifa’s demands was naive, knowing Fifa’s firm control over all matters relating to the World Cup.

In August 2006 I attended a seminar at which Anthony Leiman – co-author of the Green Point impact assessment and an UCT economics professor – spoke.  He was unequivocal the Green Point option would burden the city and ratepayers with significant costs into the future.  Newlands, costing only R500 million to upgrade, was a viable and sensible alternative to a new stadium, then estimated from R2.4 billion to R2.6 billion.  The final cost was R4.4 billion.   

(Like other World Cup stadia around the country, contractors colluded on tenders and cities paid excessive prices.)

But when presenting the new stadium option, Leiman never mentioned if and when – if ever – the city would receive the ‘significant subsidisation’ his report mentioned.  And because neither the city nor government ever spoke about such subsidisation in any form, we must assume the city knew it was not a possibility, and it and ratepayers would fund the running costs themselves.  Any notion that the finance model was sound, as Zille claimed, was untrue.   

It’s this deception Cape Town’s ratepayers continue to pay for.

End of part 1.

Updated: inserted picture.