2010 FIFA WORLD CUP STADIUM
FUNDING
Presentation to the Portfolio Committee on Finance
National Treasury
March 7, 2007
Great work done by Host Cities and National Departments in Preparing
Plans and Cost Estimates for 2010 FIFA World Cup Projects…
Presentation Outline…
 2010 FIFA World Cup Project Budget Planning Considerations…
 2010 FIFA World Cup Project Classification…
 2010 FIFA World Cup Stadiums Funding Work Plan…
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 Execution of Work Plan…
 Analysis of Business Cases…
 Benchmark Capital Costs…
 Organizing Committee Analysis of Business Cases…
 Risks Associated with Stadium Construction…
 2010 FIFA World Cup Stadium Project Socio-Economic Impact…
Presentation to National Budget Committee…
Stadiums Project Cash Flow…
Stadium Allocation from National Government…
Analysis of Budget Shortfalls…
Conclusions…
Challenges…
Pulse Check…
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2010 FIFA World Cup Project Budget Planning
Considerations…
Macroeconomic stability
Manage 2010 FIFA World Cup budget
Targeted spending for
2010 FIFA World Cup
projects
Public expenditure
Accurate budget requests
for 2010 FIFA World Cup Projects
Reporting on expenditure
Distribution of resources
Distribution of resources directly to
the point of delivery
2010 FIFA World Cup
projects delivered
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2010 FIFA World Cup Budget Planning
Considerations…
Prioritization of capital projects (e.g. stadia and supporting
infrastructure come first on the critical path)…
Design the required financial discipline and reporting at the
point of delivery…
Guarantee disbursement of funds directly to the point of
delivery for a 2010 FIFA World Cup project…
Ensure speedy release of funds to the point of delivery…
Transparent 2010 FIFA World Cup Project budgets…
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2010 FIFA World Cup Budget Planning
Considerations…
Understand forward escalation of costs…
Understand the cash flow requirements
for 2010 FIFA World Cup priority capital
projects…
Direct disbursement of funds to Host
Cities gives incentives to deliver 2010
FIFA World Cup projects on time…
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2010 FIFA World Cup Project
Classification…
Project 1: Stadium
Project 2: Stadium Precinct Development
Project 3: Transport (fixed and commuter)
Project 4: Training Venues
Project 5: Fan Parks
Project 6: Supporting Infrastructure, Utilities
Project 7: ICT
Project 8: Accommodation
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2010 FIFA World Cup Project
Classification…
 Project 9: Tourism
 Project 10: Marketing Communication, Signage
 Project 11: City Beautification
 Project 12: Health
 Project 13: Disaster Management
 Project 15: Safety, Security and Justice
 Project 16: Volunteer Program
 Project 17: Environmental Rehabilitation
 Project 18: Waste Management
 Project 19: Business Closure during Event
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2010 FIFA World Cup Project
Classification…
Project 20: Protocol and Ports of Entry Matters
Project 21: Government Communication, Hosting Strategy,
Cultural Activities and Legacy
Project 22: Procurement Support
Project 23: Overall Co-ordination & Reporting
Project 24: 2010 FIFA World Finance
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2010 FIFA World Cup Stadiums
Funding Work Plan…
 To determine National Government’s Contribution a work plan was executed…
 Determination of critical dates…
 Preliminary review of candidate cities and cost estimates (Oct 2005)…
 Appropriation of planning funds for cities (R 241.5 million - Oct 2005)…
 Final stadium selection appointment of nine Host Cities (Jan 2006)…
 Engagement of project managers for disbursement of planning funds (DBSA - March 2006)
 Preparation of procurement guidelines (March 2006)…
 Protocol on funding stadiums (June 2006)…
 Stadium design for FIFA compliance and business plan guidelines (June 2006)…
 Stadium capital cost bench mark exercise (June 2006)…
 Analysis of stadium authority business cases (August 2006)…
 Recommendations on National Government’s contribution for stadiums (October 2006)…
 Presentation of Medium Term Budget Policy Statement (October 2006)…
 Estimation of cash flow to commence stadium construction for inclusion in October
Adjustments estimates…
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Execution of Work Plan...
 Review of candidate cities and preliminary costs (Oct 2005)…
 13 stadiums (“Bid Book in 2003”) cost of upgrading was R 1.96 billion
 10 stadiums could be constructed at R 2.92 billion
 12 stadiums could be constructed to FIFA requirements at R 3.69 billion
 Final determination of stadiums (January 2006)…
 Construction of five new stadiums: Polokwane, Mbombela, Nelson Mandela
Bay, eThekwini, Cape Town
 Upgrade of five existing stadiums: Soccer City and Ellis Park, Loftus Versfeld,
Mangaung, Royal Bafokeng
 Final determination of Nine Host Cities (January 2006)…
 Johannesburg, Tshwane, Rustenburg, Polokwane, Mbombela, eThekwini,
Nelson Mandela Bay, Manguang, Cape Town
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Execution of Work Plan...
Critical dates determined:
December 2006: Stadium and supporting infrastructure planning
phase (Complete)
January 2007: New stadium and supporting infrastructure
construction commences (Work in Progress)
September 2008: FIFA Inspection Team for Readiness
December 2008: Construction work on selected stadiums to be
completed
June 2009: Preparation for Confederations Cup
December 2009: 2010 stadiums and supporting infrastructure to
be completed
June 2010: World Cup Competition
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Execution of Work Plan...
Allocation of funds for preparation of Business Cases:
Johannesburg (Upgrade of Soccer City): R 30 million
Johannesburg (Upgrade of Ellis Park): R 1 million
Cape Town (New): R 30 million
eThekwini (New): R 30 million
Nelson Mandela Bay (New): R 20 million for Business Case + R 66
million for phase 1 construction
Mbombela (New): R 20 million
Polokwane (New): R 20 million
Manguang (Upgrade): R 2 million
Rustenburg (Upgrade): R 0 (Royal Bafokeng Nation funded business
case preparation)
Tshwane (Upgrade of Loftus Versfeld): R 1 million
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Execution of Work Plan...
 Contents of Business Case:
 Technical Specifications and Stadium Design to achieve FIFA compliance
 Implementation Plan and Procurement Schedule
 Status of Environmental Impact Assessment
 Organizational Requirements
 Ownership and Corporate Structure of Stadiums
 Financial Model:
Capital cost estimates
Stadium utilization rates
Sources and application of funds statement
Financial risk assessment
Projected operating and maintenance costs
 Business Cases analysed during August 2006.
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Analysis of Business Cases…
 Capital cost:
 Capital cost of 5 new stadiums: R 7,422,210,667
 Capital cost of upgrading 5 existing stadiums: R 2,346,961,240
 Total: R 9,769,171,907 (c.f. R 3,690,000,000 from October 2005 report and R
1,597,886,000 from 2003 “Bid Book”). FIFA compliance to be checked and
whether additional items were added that inflated the cost.
 Commercial viability:
 Analysis of the business cases confirmed stadiums were operationally
sustainable, excluding capital repayments, if further financial support was
provided from host city budgets.
 There is potential for an aggregated operating loss hence the fiscus may be
asked to provide operating subsidies after the 2010 competition.
 A 50,000 seat stadium operating in South Africa current turnover is
approximately R 20 million/annum with about 30 events/annum.
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Bench Mark Capital Costs for Stadiums…
To enable equitable comparison of business cases a bench
marking exercise was carried out:
45 000 seat stadium @ R 16,325/seat = R 734 million
70 000 seat stadium @ R 17,700/seat = R 1.24 billion
Applying bench marks the capital cost of the stadium is R 6.54
billion. This is made up as follows:
R 5.14 billion for new stadiums
R 1.4 billion for upgrading existing stadiums
Add additional amount for overlay (R 195 million) bulk services (R
600 million) then total: R 7.33 billion for FIFA compliance
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Organizing Committee Analysis of Business
Cases (September 2006)…
Location
Capacity (Seats)
Analysis (Rand)
eThekwini
70,000
1,850,990,513
Cape Town
70,000
1,640,462,146
Nelson Mandela
48,000
981,034,525
Mbombela
46,000
892,674,479
Polokwane
45,000
817,185,215
Soccer City
95,000
1,617,213,646
Loftus Versfeld
50,000
97,691,000
Ellis Park
61,000
149,671,793
Manguang
48,000
219,066,285
Royal Bafokeng
42,000
86,015,711
Grand Total
Analysis based on Design Guidelines and FIFA compliance
8,352,005,642
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Risks Associated with Stadium
Construction…
A risk matrix was developed (Risks are categorized
into high, medium and low):
Raw Materials Supply Side Constraints: High…
Economic: Medium (includes analysis on the impact on
the current account deficit)…
Construction: Medium to High…
Procurement: High (Litigation as a result of poor tender
evaluation technique). Procurement Task Team set up to
assist Host Cities in procurement matters…
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2010 FIFA World Cup Stadium Project SocioEconomic Impact…
NEW STADIA
N Mandela
Mbombela
C Town
eThekwini
Polokwane
Total
Capital Exp
963
948
2 500
1 800
700
GDP Impact
1 410
1 388
4 336
2 773
1 025
10 932
Skilled
2 256
2 221
6 938
4 437
1 640
17 492
Semi-skilled
4 218
4 152
12 970
8 295
3 066
32 701
Unskilled
3 740
3 681
11 501
7 355
2 718
28 995
199
196
611
390
144
1 540
Soccer City
Rustenburg
Tshwane
Ellis Park
Mangaung
Total
Capital Exp
1 530
147
97
229
219
GDP Impact
2 293
185
130
391
410
3 409
Skilled
3 669
296
209
626
657
5 457
Semi-skilled
6 858
554
390
1 170
1 228
10 200
Unskilled
6 082
491
346
1 037
1 089
9 045
323
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18
55
57
Employment
Low income households
UPGRADED
Employment
Low income households
479
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2010 FIFA World Cup Project Presentation to National
Budget Committee…
September 2006: Reports presented to National
Budget Committee including recommendation of R 8.3
billion from Organizing Committee. Decision to “cap”
stadium development funds at R 8.4 billion.
To fund construction of stadium construction 1
November 2006 to 31 March 2008 R 600 million to be
included in the adjustments estimates (October 2006).
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Stadium Development Cash Flow…
Cash flow determined for the MTEF:
Financial year 2006/2007: R 600 million
Financial year 2007/2008: R 2.7 billion
Financial year 2008/2009: R 3.8 billion
Financial year 2009/2010: R 1.3 billion
If cash flows increase due high levels of
construction activity then using adjustments
estimates to “bring forward from outer years”.
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Stadium Allocations…
Breakdown
Soccer City
Ellis Park
Green Point
eThekwini
NMM
Stadium
1,408,670,508
209,193,387
1,818,577,854
1,614,617,309
784,617,955
Services
91,329,492
4,806,613
81,422,146
155,382,691
95,416,570
Overlay
30,000,000
15,000,000
30,000,000
30,000,000
15,000,000
Total
1,530,000,000
229,000,000
1,930,000,000
1,800,000,000
895,034,525
Breakdown
Mbombela
Peter
Mokaba
Vodacom
Park
Royal
Bafokeng
Loftus
Versfeld
Stadium
735,207,023
666,161,853
179,438,072
122,830,705
82,691,229
Services
104,792,977
15,615,044
24,628,213
9,600,359
0
Overlay
15,000,000
15,000,000
15,000,000
15,000,000
15,000,000
Total
855,000,000
696,776,897
219,066,285
147,431,064
97,691,229
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Analysis of Budget Shortfalls…
Procurement Task Team set
up to assist Host Cities in
procurement matters
Analysis of tenders
indicated a high level
provisional sums.
Contractors therefore priced
accordingly and included
the risks associated.
 Communication to Host Cities on 15
December 2006 advising them to
negotiate with contractors to reduce
costs and ensure designs are
compliant with FIFA requirements
 Approach resulted in reduced cost of
approximately R 2 billion.
 If National Treasury had not taken
these steps budget overruns could
have been as high as R 4 billion.
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Conclusions…
 A work plan was prepared and executed…
 Stadium development funding provided to host cities was adequate to
design and cost FIFA compliant stadiums…
 Analysis of business cases was sound…
 Socio-economic impact was assessed…
 The capital and operating costs of the stadiums were understood…
 The risks of undertaking the “stadium project” were understood…
 The R 8.4 billion contribution from National Government is justified…
 Approach taken by National Treasury to determine the National
Government’s contribution for stadium development was sound…
 Host Cities are making contributions to meet shortfalls…
 FIFA compliant stadiums for the 2010 FIFA World Cup competition…
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Challenges…
Procurement of large ticket items
such as busses…
Implementation of infrastructure
projects (including stadiums and
transport) on time…
Timely information on the progress
of implementing 2010 FIFA World
Cup Projects…
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Pulse Check…
On Track…
Thank you for your time….
And again great work done by Host Cities and National
Departments in preparing plans and cost estimates for 2010
FIFA World Cup Projects…
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More information at:
Malcolm Simpson
2010 Unit, National Treasury, 240 Vermeulen
Street, Pretoria
27-12-315-5751
27-82-379-0028
malcolm.simpson@treasury.gov.za
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