Life after the Cup

The SA economic growth figure of 4.6% in the first quarter of 2010 was mainly driven by the manufacturing sector, which posted a growth rate of 8.4% and contributed 1.3% to GDP. The production figures released in May relating to the first three months of production for 2010 show an increase of 0.8% compared to the previous three months.

"Three of the 10 manufacturing divisions showed a decrease in activity over the first three months of 2010 compared to the preceding months. Sectors that showed negative production were the food and beverages, glass and aluminium and furniture," said Coface industry analyst Johan Coetzee. The biggest contributors to the increase in production over this period were the petroleum and chemical sectors as well as wood and publishing-related sectors.

Second half growth

Coface anticipates that the second half of 2010 will show continued low GDP levels gearing towards November/December activity. There could be an increase in consumer confidence and growth driven by international stabilisation and increased demand.

The World Cup-related foreign consumer spending will be directly channelled to retailers. Although the sector is crucial in terms of supplying the needs of tourists, the sector will not see substantial benefits.

In terms of the benefit and effects the World Cup will have on the manufacturing sector, the view is that in the short term, the cash injection will be limited to retail-related manufacturers, hospitality, with beverages also benefiting from the event, but the impact will be minimal.

In the long term, the benefit for the sector still largely remains dependent on international economic recovery, increased consumer spending and increased economic confidence.

Marketing SA

Another benefit derived from the World Cup is the fact that South Africa is being marketed across the world and this may relate into increased trading activity and establishing long-term relationships with foreign buyers as well as attracting foreign direct investment.

Another indirect impact of the World Cup relates to the domestic consumers' view of the economy and could support an increase in consumer confidence and consumer spending for the remainder of the year.

The World Cup may open up doors to new opportunities but manufacturers need to be careful in terms of the companies they will engage with because trading conditions and business environments differ from country to country due to the worldwide economic crisis.

Coface believes that the short term impact of the World Cup will be outweighed by the long-term prospects and awareness the event will create and still believes that economic growth will by driven by international economic stabilisation.

For more go to www.coface.com.