Strategic Environmental Assessment continued . . .



e) Create and promote the use of a viable public transportation system

Opportunities

One of the most important opportunities of the Games is likely to come from the mobilisation of government funding for upgrading the CMR's transport system, including public transport. The Metropolitan Transport Planning branch of the Cape Metropolitan Council has drawn up a comprehensive transport proposal for the CMR up to the year 2010 - called "Moving Ahead" - which involves R 7 770 million in capital expenditure. Of this total, R 1 558 million is termed "accelerated expenditure". This accelerated expenditure is essential to hosting the Games, and is guaranteed, should the Bid be successful. (3)

The remaining R 6 212 million is money which the metropolitan transport authorities hope to get from the public, parastatal and private sectors between 1997 and 2010, if the Bid is successful. Hosting the Games has the potential to provide a "kick-start" for the "Moving Ahead" plan to attract further funds to upgrade the entire transportation system of the CMR. This has the potential to enhance the long term economic development of the region. There are, however, no guarantees that this remaining money will be made available.

The accelerated portion of the funding includes the expansion of Cape Town International Airport, investment in rail infrastructure, public transport interchanges, road priority projects, bicycle / pedestrian projects, planning and administration. This capital expenditure will occur before 2004 and will provide extensive upgrading of the road system and the train network. As a result, the general mobility of residents of the CMR will be improved, and residents of disadvantaged areas will have better access to recreation and community facilities. Significant opportunities do thus exist for upgrading the public transport system as a result of hosting the Games.

Limitations

Although access by disadvantaged communities to recreation facilities will be improved by the R1 558 million spending on Games-related accelerated transport investment, this investment will not have a direct effect on accessibility to work, because people will continue to live far away from where they work. In the long term, improved transport infrastructure could lead to changed patterns of economic investment which would bring work opportunities closer to people's homes. But this benefit is neither immediate nor certain. Careful consideration needs to be given to the further R 6 212 million of proposed expenditure for the region's long-term transportation needs, which is not directly related to the Games.

f) Sustainable use of natural resources

Opportunities

The Games have the potential to act as a showcase for implementing environmentally-friendly technologies, such as water-saving devices and techniques, and an integrated waste management system - a policy to which the OBC has already committed itself. The Games also provide an opportunity for local authorities to adopt an Environmental Charter, as a basis for planning and implementing appropriate policies to manage the CMR's natural resources in a sustainable manner.

Based on the findings of the population study, it would appear that there will not be a large increase in inward migration to the CMR as a result of the Games.(4) As a consequence, the impact on the region's natural resources is expected to be insignificant. If adequate management plans are put in place to deal with the growing demand for water resources, sewerage, electricity and waste management in an environmentally sustainable way, then the Games are unlikely to have a significant adverse impact on the region's natural resources. Even with the limited acceleration in population increase, water resources, water purification and waste disposal facilities for the CMR will need to be expanded at least six months earlier than would have been the case without the Games.

Similarly, the region's natural resources and amenities are not likely to be significantly impacted upon by visiting tourists, because the number of visitors expected (about 300 000) is of the same order of magnitude as the current number of peak summer holiday visitors (about 350 000). Increasing the profile of the CMR as an international tourist destination may create opportunities and incentives for the authorities to improve the management of the regions natural resources and increase their capacity for this purpose.

Limitations

The environmental policies and guidelines drawn up by the OBC need to be followed through by OCOG and various levels of government in order to have a meaningful impact. Environmental Impact Assessments still need to be conducted for several sites, particularly Wingfield and Culemborg, where concerns have been raised about the appropriateness of proposed development plans and the need to conserve threatened indigenous fynbos species. The impact of tourists, though not expected to exceed the normal summer peak, will need to be carefully managed to avoid damage to environmentally sensitive sites.

g) Nation-building

Opportunities

Hosting the Games provides a unique opportunity for building a unified South African nation. Although the intangible benefits associated with nation-building are difficult to quantify, they should not be underestimated, given the need to heal the divisions created by apartheid. In addition to promoting national pride and a sense of unity, the Games could boost and assist in unifying sport in South Africa, after decades of segregation and sporting isolation.

The Games could also provide energy, focus and inspiration for the youth, thus indirectly contributing to enhanced national morale, increased productivity and greater economic growth. Hosting the Games in South Africa could play a role in the "African renaissance" of the continent.

4.2.2 Risks Of Hosting the Games

Experience from past Olympic host cities indicates that there are a number of risks inherent in all Olympic events that are difficult to manage effectively. These risks include inaccurate budgeting, public debt, inappropriate transport infrastructure, construction of "white elephant" facilities, and the uneven allocation of benefits.

The SEA has identified a number of risks that apply to the Cape Town 2004 Games, the most significant of which relate to the macroeconomic implications of the Games and public finance issues. There are also specific risks associated with achieving the principles of employment and empowerment, spatial restructuring, nation-building and environmental sustainablity.

a) Macroeconomic risks

The DBSA model which informed the Cabinet's decision to underwrite the Bid has a number of weaknesses with serious macroeconomic implications. Macroeconomic risks are linked to the possibility of government sustaining a long term net loss as a result of the Games. This risk is associated with a less than expected increase in GDP which could result in government revenue generated by the Games not being sufficient to offset the government's capital expenditure for the period 1997-2006.

The macroeconomic risks are associated with the following:

Government borrowing

The probable need for government borrowing to finance expenditure has important financial implications. Given the nature of the Games-related projects, government spending on direct capital expenditure will be required up to five years ahead of the event itself. The bulk of government spending will therefore take place before any revenue is generated. In order to finance these costs, government will have to borrow at the prevailing interest rates. This would have an effect of reducing the predicted surplus generated by the Games. In addition, interest repayments on borrowing at a 5% real borrowing rate would add to the overall costs originally budgeted for by government. In the event of the private sector not providing the hoped-for 34% proportion of capital expenditure, the government may sustain a net loss.

Inflation

Capacity constraints in the construction sector are expected by the year 2000. This may result in an increase in construction-industry prices of between 20 and 30% per year. As a result of inflation, there is likely to be a crowding out of lower return projects and a slowdown in fixed investment, particularly in the private sector. This in turn increases the risk of a reduction in real economic activity and GDP.

Productivity losses

Short-term productivity losses associated with disruptions and distractions during the Games could contribute to a reduction in GDP and government revenue accruing from the Games. These productivity losses could, however, be minimised by effective organisation and management and may be further counterbalanced by a Games-related increase in economic activities over the same period.

Exchange rate fluctuations

An increase in foreign exchange earnings and the resultant appreciation of the Rand during the "boom period" associated with the Games would have negative implications for the regional and national export sector, particularly the small and medium exporters. Uncontrolled appreciation of the Rand could compromise the government's policy to promote export promotion.

Foreign direct investment

The optimistic level of foreign direct investment may not materialise, thereby reducing the overall increase in GDP. In Barcelona the increase in foreign direct investment associated with the Games was estimated at between 5-25% as compared to the expected increase of 200% for the Cape Town. The DBSA report repeatedly states that the level of foreign investment is a critical assumption to achieve the desired level of growth in GDP.

b) Public finance risks

* Government management of public finances is an all-important facet of the Games and one to which attention must be given if the Games are to succeed in developing the Cape Metropolitan Region's infrastructure in an appropriate manner without passing on significant expenditure to ratepayers.

* The government's current policy regarding public funds, as expressed in GEAR, is to reduce deficit and expenditure. Having to borrow money to finance Games-related investment could therefore compromise this position.

* Games-related expenditure in the CMR will also mean that funding is directed away from RDP-type basic needs spending and from the rest of the country. Hosting the Games may therefore impact on the ability of the government to meet other strategic, developmental and financial objectives.

* Although the government guarantees to underwrite the Games are necessary to meet IOC requirements, these guarantees could increase the risk to the public finance system by reducing the incentive for the private sector to invest in the Games.

* The risk to the public finance system is further increased by the fact that South Africa has a relatively small, developing economy with a limited tax-base on which there are diverse demands.

* The difficulty of accurately estimating the costs and containing inflation raises the risks of increased costs having to be borne by government. This will erode the contingency provisions and, if significantly large, will increase government's exposure to additional financial risk.

* Local governments in the CMR are expected to contribute a significant amount to finance direct and indirect costs of the Games. Lack of adequate financial planning may increase the risk of higher rates and unstable local government taxes, especially given that local governments in the CMR are currently heavily in debt.

c) Employment and empowerment

Opportunities for the involvement of small, medium and micro enterprises (SMMEs) may be optimistic, and barriers could exist preventing effective involvement at higher levels.

d) Spatial restructuring

* There is a risk that lower income groups in the vicinity of the Wingfield and Culemborg developments could be displaced, as a result of the significant property upgrading and urban renewal at these sites and the likely associated increase in property and rental prices.

* The development of competition facilities to IOC standards and high maintenance costs may make it difficult to ensure the long term sustainability of facilities and the venues may not be entirely appropriate to community needs - and could become "white elephants".

* The establishment of Games-related facilities in disadvantaged areas is also not sufficient by itself to guarantee future public and private sector investment in these areas.

e) Nation-building

* Nation-building benefits are intangible, and their precise nature and magnitude is difficult to assess. If the Games are not truly developmental, or if the organisers fail to communicate their developmental goals, there is a danger that the Games could become a divisive issue.

* If meaningful opportunities for public participation are not provided, there is a risk that the Games will not achieve their nation-building potential.

f) Environmental awareness

* The findings of the SEA on natural-urban systems depend to a large extent on the accuracy of the projections made in the population study.

* The rowing course at Wingfield and the slalom course on the Berg River may have negative environmental impacts.

* There is a risk that, without appropriate control mechanisms put in place by local government, certain sensitive areas could be impacted upon by the increased numbers of visitors to the CMR.

The above-mentioned risks assume particular importance in the light of the challenge of providing adequate institutional capacity at all levels of government to manage the Olympic Games effectively.

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Posted by the Olympics Assessment Team of the Stategic Environmental Assessment of the Cape Town 2004 Olympic Bid.
Email inquiries to the team from this point, or refer to the contact details above.