In summary, hosting the Games will create a number of unique opportunities for the Cape Metropolitan Region and South Africa as a whole. These relate primarily to nation-building, and the opportunity to promote economic development in the Cape Metropolitan Region and South Africa. Economic opportunities are essentially linked to two factors - firstly, the international profile of the Games and the likelihood of increased investment and job opportunities, and secondly the benefits associated with the accelerated capital expenditure required to host the Games.
In preparing a developmental Bid the OBC have, within the constraints imposed by financial considerations and the IOC requirements, produced a highly competent Bid Plan. Significant developmental benefits are likely to accrue from investment in Games-related transport infrastructure and Games-related facilities in historically disadvantaged areas. The bidding phase has already left a positive legacy in promoting South Africa's profile and providing investment in priority projects, including transport and facilities.
But it would be unrealistic to expect the hosting of the Games to solve all the developmental problems of the region and the country. The Games will not be able to alter fundamentally the unequal spatial pattern of development caused by apartheid. Games-related investment will not make a significant contribution to low-cost housing, and many of the jobs created will be temporary.
There are also a number of risks associated with hosting the Games. This study has found that Games-related population increases are not likely to pose a major risk to the region's natural resources and natural-urban systems, provided that effective environmental management is practised by the Organising Committee for the Olympic Games (OCOG) and local government. The major risks identified by the SEA are largely linked to the financial aspects of the Games and the allocation of government funds. These risks are further highlighted by the fact that South Africa has a relatively small, developing economy with a limited fiscus on which there are diverse demands.
In order to host the Games, government will have to provide a considerable amount of the capital expenditure required. (Total public sector investment will be R 4 037 million, if transport expenditure is limited to the portion which needs to be accelerated for the Games. Total public sector investment will increase to R 8 680 million if all the metropolitan transport needs are met.) While government expenditure will result in an increase in GDP, spending on this scale over the next seven years will mean that less money is available for the provision of other basic needs, and will place pressure on the public finance system. The opportunity costs and risks to the public finance system will be exacerbated if the private sector does not provide all the expected funding or if costs escalate beyond the contingencies provided for. (Total private sector investment will be R 2 445 million, if transport expenditure is limited to the portion which needs to be accelerated for the Games. Total private sector investment will increase to R 4 015 million if all the metropolitan transport needs are met.) The potential benefits associated with increased government expenditure therefore need to be assessed against the potential opportunity costs and risks to the public finance system.
Unless these risks are recognised and adequately managed, the developmental opportunities associated with the Games will be compromised and the limitations further exacerbated. Effective management of the risks associated with the Games is therefore a fundamental prerequisite for achieving the important developmental opportunities associated with the Games. Given the magnitude of the costs involved, failure to manage the risks successfully is likely to undermine the ability of national government to provide a stable environment for economic development and compromise the objectives of the RDP and GEAR.
In examining the likelihood of the risks being avoided, OAT is encouraged by a number of important factors:
* Government has in place two critical policies and strategies - GEAR and the RDP. Successful implementation of these policies provides an appropriate macroeconomic environment within which to gain maximum benefits from the Games investment.
* The activities of the OBC have been funded mainly by private sector resources. This bodes well for harnessing private sector involvement and resources for the hosting phase.
* It is encouraging that the government has made provision for significant contingency funding for innovative environmental programmes, urban upgrading which could be necessary as a result of Games-related inward migration to the CMR, and support for affirmative tendering. Effective use of these contingency provisions by OCOG will certainly increase the development potential of the Games.
Nevertheless, there are still major risks associated with the Games. These relate to the possibility of:
* The proposed Olympic Bid and Hosting Bill (Government Gazette Vol. 385 No. 18177, 31 July 1997) being passed, exempting the organisers of the Games from complying with the procedures of any legislation;
* Government failing to keep in line with GEAR targets, particularly its deficit reduction targets and macroeconomic growth management;
* Optimistic predicted increases in GDP (including foreign investment) not being achieved;
* OCOG being unable to mobilise the minimum level of required private sector funding;
* Significant cost overruns relating to operations and capital expenditure.
* Large increases will begin to erode the contingency provisions and may exceed them, thereby increasing the contribution of government to capital expenditure;
* Capacity constraints in the construction industry leading to higher than expected levels of inflation;
* Increased government borrowing to fund the commitment given to the Games. This is likely to increase interest rates and reduce local investment incentives; and
* The absence of a supportive environment to maximise the development and empowerment opportunities presented by the Games.
There are a number of preconditions that need to be met, in order to avoid these risks and to ensure that the Games benefit the CMR and South Africa as a whole. These preconditions are:
* The private sector provides the expected level of capital and operating expenditure;
* Inflation is contained at the desired levels and costs do not escalate beyond the contingencies provided for;
* The environment for economic expansion remains stable and conducive to economic development;
* Foreign direct investment levels remain above the critical levels identified;
* GEAR and government expenditure targets are stringently adhered to;
* Institutional capacity of all levels of government is improved, particularly in relation to environmental management; and
* The Games are well managed by OCOG.
Because the success of the Olympic Games will depend to a large extent on the efficacy with which these recommendations are implemented, it is important that there is a commitment by national, provincial, metropolitan and local government structures to implementing these recommendations, possibly by affording them (or more general policy directives derived from them) appropriate policy status. This is particularly important in the light of the Olympic Bid and Hosting Bill.
OAT is concerned about the implications of the proposed Bill, currently in the process of promulgation. The provisions of the Bill which exempt the CMR, the National Olympic Committee of South Africa (NOCSA) and OCOG from complying with specific procedures required by any law, including retrospectively, could seriously inhibit the management of the Games in achieving their stated developmental and sustainability goals. OAT believes that the Bill in its present form should not be passed. (5)
It is crucial that the findings of the SEA are widely disseminated in an accessible form to the public, to enable meaningful participation in the public opinion survey to which the OBC has committed itself. If the Games are awarded to Cape Town on 5 September, this SEA should be used as the basis for a process of further and wider public participation. The Cape Town Municipality is committed to hosting a public workshop to which interested and affected parties and various levels of government will be invited, to provide an opportunity for the public to debate the findings and recommendations of the final SEA report, and for government to provide undertakings as to how they propose to take the recommendations of the SEA forward in a constructive manner.
The following key recommendations should be implemented to address the risks and ensure that the developmental opportunities provided by the Games are achieved. More specific and detailed recommendations are outlined in Chapter 4 of this report.
* Government should put in place the necessary policies and mechanisms to maximise private sector involvement in the Games.
* Government should maintain a macroeconomic environment that is conducive to achieving GEAR targets and encouraging foreign and domestic investment.
* OCOG should be established as an independent body - accountable to representatives from the public sector, the private sector, civil society and labour; and operating under the requirements of the South African constitution, national, provincial and local laws, ordinances and regulations.
* OCOG's terms of reference should ensure that national, provincial, metropolitan and local public finance objectives are not compromised by expenditure on the Games.
* Public expenditure on the Games and the workings of OCOG should be carefully monitored by an independent commission appointed by national government. * OCOG should be audited annually and the findings made available to the public for review.
* OCOG must ensure that the Environmental Charter is in place and the capacity of all tiers of government must be improved so that they are able to implement the principles and guidelines contained in the Charter.
It is critical that the above preconditions are met and the key recommendations are implemented. If they are implemented, the Games will be affordable and beneficial. If they are not implemented, the financial burden on the public sector could become unacceptably high, which would seriously undermine the government's ability to meet its RDP and GEAR objectives.
On balance, the Olympics Assessment Team is cautiously confident that the Games will not pose an unmanageable burden on the economy and public finance system, and are likely to be affordable and beneficial to South Africa and the Cape Metropolitan Region.
1. The contract to host the Games has been signed by the Cape Town Municipality, one of the six local sub-structures in the Cape Metropolitan Region. In this report, the term Cape Town is used when referring to the Bid city, but the impacts of the Games are discussed in terms of the Cape Metropolitan Region as a whole. Return to text.
2. According to the DBSA Technical Summary, made available to the Press. Return to text.
3. All the figures on transportation expenditure contained in this SEA report come from and are supported by the following documents: the DBSA Report, Price Waterhouse (1996), Moving Towards 2004 (1997), Cape Town 2004 Candidature File (1996). Return to text.
4. A second workshop of participants in the population study was held to reassess the results of the study in the light of the recently released provincial results for the 1996 census. The workshop concluded that the work undertaken by Aberman is acceptable, and that the preliminary census findings do not constitute a basis for the reworking of the original report. Return to text.
5. See Appendix 1 containing a submission by OAT on the Bill to the Department of Constitutional Development. Return to text. 6. The Olympics Assessment Team comprises: Chittenden Nicks Partnership; Environmental Interface; Foundation for Contemporary Research; Ninham Shand; Steffen Robertson & Kirsten; and Zille Shandler Associates.
The Olympics Assessment Team
45 Lower Main Road, Observatory, Cape Town 7925, South Africa
Fax: (021) 448-1980
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