High Cost of Having a Ball

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Concerns are mounting regarding the price South Africa will have to pay to stage the 2010 World Cup, the largest sporting extravaganza after the Olympics, with the project already facing massive cost overruns.

While no one is questioning South Africa's ability to have the entire infrastructure in place in time for the event, it appears that the prestige of hosting the World Cup will come at a far higher price than first thought.

A key part of the preparations is the building of five new stadiums and the upgrading of another five, along with the construction of new road and rail links to ensure fans can get to the games quickly and easily. Though most work is on or near schedule, the project's budget is well offside.

Having allocated $1.25bn for the construction or upgrading of the stadiums needed for the matches and a further $1.34bn for supporting infrastructure such as transport, the government is now faced with a cost overrun of between $417m and $507m.

On November 20, Deputy Finance Minister Jabu Moleketi announced a technical team had been formed to look into the massive blow out of the budget allocated to prepare for the World Cup.

He cited rising cement and steel prices as partially responsible for the increasing costs. Though saying there was no evidence that contracting firms working on the projects were charging above market prices, Moleketi said the investigation would look at the profit margins of companies involved in the World Cup preparations.

The committee is expected to look at all the figures to ensure accountability to the taxpayer, Moleketi said, with a final report due in mid-December.

According to Colin de Kock, the executive director of the Gauteng Master Builders' Association, the spiralling costs of hosting the World Cup were unavoidable due to rising costs for labour and materials.

"We have a building price escalation of 20%," he said in an interview with a local business paper on November 21. "A lot of the material that is being used to build these stadiums is fancy and has to be imported from overseas."

Another concern, one well down the track, is the financial viability of some of the venues once the World Cup is over. On November 16, Malcolm Simpson, the treasury deputy director-general in charge of the event's preparations, warned that not enough thought had been given to the future of the stadiums and the cost of maintaining and operating them in the years to come.

While the national government is funding most of the development work for the World Cup, local municipalities, who would need to call on state funds if unable to cover the costs of the massive sporting complexes, will own the venues.

According to Simpson, some of the difficulties being experienced highlight a deeper problem in the top end of the South African construction industry.

The sector lacks a competitive edge as it is dominated by some six or seven major contractors, he told a parliamentary hearing discussing progress on World Cup preparations in March. Added to this, he said there is a shortage of skilled professionals, such as project managers and civil engineers in South Africa, another issue affecting development work.

One solution to this would be to open up the South African construction industry to more overseas companies, a move Simpson said would be doubly beneficial in that projects would be completed on time and would also make the construction sector more competitive.

Another concern, one that seems to have been allayed at least for the moment, has been industrial action by construction sector unions, which have slowed progress.

Work on the Moses Mabhida Stadium in Durban was halted for two weeks after unions complained their members on the site were being paid below award wages. The strike ended on November 19, when employers agreed to pay a monthly bonus of $150 for the next six months and increase salaries.

Strike action has affected work at other venues, including at the Green Point Stadium in Cape Town in September, where building workers demanded free transport to and from the site and compensation for past travel costs.

South Africa already has a strong track record of hosting major sporting events, having been the venue for both the cricket and rugby world cups in the past. Though this event is on a much larger scale than either of the other two tournaments, there is little doubt South Africa will rise to the occasion and stage the event successfully, whatever the cost.

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