World Cup hangover persists
As a "wide-ranging" investigation into bid-rigging and price-fixing at 2010 Soccer World Cup stadiums continues, smaller host cities are spiralling into financial distress, bordering on bankruptcy.
Soccer City in Soweto is the only venue that has not drawn a "subsidy" from its host municipality. All the other newly built stadiums have become a financial burden from which South Africa might never recover - as warned when the country won the right to host the international soccer tournament.
"If you build a stadium, you are never going to get your money back," said Barry Pollen, director of Stadium Management SA, who has worked as a freelance consultant for stadium operations globally.
"If you borrow R3-billion to build a stadium at 10% interest, the stadium has to make R300-million a year just to pay the interest."
Municipalities - which effectively became "owners" of the stadiums after the soccer tournament - have been forced to cover the shortfall for losses incurred by stadiums and World Cup-related costs.
In turn, they have been driven into dire circumstances and desperate measures:
The Mbombela municipality is struggling to repay a R200-million loan from the Development Bank taken to cover World Cup costs;
The Polokwane municipality is still waiting for a R200-million payout from the Limpopo government to cover its World Cup costs;
Cape Town and Durban continue to struggle to draw events. The future of Cape Town Stadium, whose R82000-a-seat construction cost makes it one of the most expensive stadiums in the world, is currently being debated. Cosatu has called for it to be turned into low-cost housing; and
Durban (R72000 a seat) came in for heavy criticism this week for having sold only a quarter of the seats allocated for the Afcon tournament, which starts tomorrow. The city has spent vast amounts to secure events. It is estimated it paid R37-million for the privilege of hosting the Top Gear car show in June.
Trudi Makhaya, spokeswoman for the Competition Commission, yesterday confirmed a wide-ranging investigation into the construction companies that built the World Cup stadiums. There had not been any findings yet.
The investigation into 65 bid-rigging cases, involving more than 70 projects with an estimated value of R29-billion, started in 2009 - even before most of the stadiums had been completed.
Makhaya refrained from naming companies, but Group Five has reportedly applied for corporate leniency and has allegedly implicated others.
"In the original bid documents the total cost to build all the new World Cup stadiums was R1.6-billion," said Pollen. "It went up to more than R20-billion."
According to Jo Koster, DA whip in Mbombela, the city has "dire" cash-flow problems because of the World Cup.
The municipality took a R200-million loan from the Development Bank with annual instalments of R26-million for the next decade.
"[The municipality] went to Absa three months ago to get a loan of R50-million, but that was not allocated in full because the bank realised part of the loan was to cover the repayment of the Development Bank loan," Koster said.
The Mbombela Stadium cost R1-billion to build, she said. It is running at a loss of about R10-million. While it has an operational budget of some R12-million, Mbombela generates income only of between R2-million and R3-million.
In Polokwane, the council paid more than R64-million for the maintenance of the Peter Mokaba Stadium between 2010 and 2012.
The municipality has paid out a further R6.4-million for maintenance since March last year. Over the same period, the stadium made R2.3-million.
The city pays soccer clubs Kaizer Chiefs, Black Leopards and Supersport United R10-million to use the venue for games.
"Even before [the Peter Mokaba Stadium] was built,we recommended that they didn't build it here," said the DA's Frank Haas.
Simon Mokoatedi, spokesman for the city, had not responded to questions by yesterday.
In Port Elizabeth, there is optimism that the stadium might break even in the next two years.
Pierre Voges of the Nelson Mandela Bay Development Agency said: "We are lucky because we have all the rugby, soccer and cricket that were played at the old Telkom Park [Boet Erasmus] Stadium, and all live music events here."
It appears that small municipalities have been handicapped also by bad planning. Most stadiums did not have business plans before commitments to build them were in place.
According to a report by the Institute for Security Studies, Moses Mabhida Stadium's business plan was compiled only in 2006, after the city made commitments to Fifa to build the stadium.
Keeping the venues ticking over
Barry Pollen, director of Stadium Management SA, which runs the 90000-seater Soccer City, won a 10-year contract in 2009 to run the venue on a "full financial risk" basis. This means whatever profit the company makes, the company take, but it takes the risk of losses as well.
The stadium cost R3.3-billion to build at R39000 per seat.
It costs around R2.5-million a month to maintain, with an annual turnover of around R100-million. It has hosted major events like Lady Gaga and U2 and Springbok rugby Tests, with attendance figures of 1.3 million in the first year after the World Cup.
Cape Town Stadium
The stadium is at the centre of a heated debate about its future.
The city has launched an investigation to examine its business viability options and whether the stadium should be managed directly by the City of Cape Town or involve the private sector.
The stadium is one of the most expensive in the world, having cost R4.5-billion to build.
The operating budget for the 2011/12 financial year was R56-million - almost twice as much as Soccer City. In that period, it generated an annual income of R13-million and hosted U2, Lady Gaga and Neil Diamond and a Man United game against Ajax Cape Town.
The city secured a R306.5-million loan - with annual repayments of R12.8-million - to supplement funding provided by national and provincial government.
Negotiations are still under way to attract the Western Province Rugby Union to use the stadium.
Moses Mabhida Stadium
The stadium has failed to attract the Sharks rugby franchise away from Kings Park.
In a 2006 report, former city manager Mike Sutcliffe said the upgrading of Kings Park would cost at least R500-million. It was considered too old to use for the World Cup.
Tex Collins, caucus leader for the DA in eThekwini, cannot remember when last the stadium had been filled to capacity since the Soccer World Cup. He says most tickets are given away.
"When there's a football match, they will sell 1000 tickets and give 3000 away," he said. "We have the most beautifully designed white elephant in the country."
According to the stadium's general manager, Simon Ngubeni, the R3.2-billion stadium made R61-million last year, R42.3-million in 2011 and R25.2-million in 2010.
"The total operating expenses were R72-million. The deficit incurred by the stadium is within the approved council budget."
The R1-billion stadium has an annual operations budget of R12-million.
Stadium manager Roelf Kotze says they have worked hard to increase revenue of between R2-million and R3-million a year.
"We got Bidvest Wits to come and play here, and got the Pumas rugby team to move over."
As Nelspruit is slightly removed from mainstream sports, the stadium manages to attract slightly bigger crowds for games, compared to similar games in the main metropolitan areas, says Kotze.
The venue has hosted around 40 events over the past three years.
Port Elizabeth Stadium
"If you ask me whether a R2.4-billion stadium should have been built in Port Elizabeth, I would say 'no'," says Pierre Voges, CEO of the Nelson Mandela Bay Development Agency, which is responsible for running the Port Elizabeth Stadium.
The city has a small population and has trouble regularly filling the 48000-seater stadium.
"But we have it, so we have to make it work," says Voges.
The stadium was the first one of the six newly built stadiums to be finished.