Weekly international investment round up to December 8, 2009
• World Cup offers Africa a massive rebranding opportunity
• For investors some lateral thinking must be applied
One of next year’s key events has just been showcased and offers an array of opportunities for years to come. For a short while the eyes of the world were focused upon one country in anticipation of what could prove to be one of the best sporting events ever and the catalyst for the much needed rebranding of a whole region.
The draw for 2010 World Cup in South Africa provided all the glitz and glamour expected from such an event and split the 32 qualified teams into groups of four who will then compete in the first ever World Cup to be held on African soil starting on June 11th next year. With the estimated audience of three billion people all giving their attention to this one place for a period of six weeks next summer surely investors should take note.
Although South Africa is already the continent’s largest economy the hosts of the World Cup will no doubt be counting upon the wide ranging benefits it brings to help boost its future growth aspirations. The country has just exited its first recession since 1992 by returning to growth in the third quarter of this year and although unemployment is still a huge problem and remains unacceptable high at 24.5% canny investors will no doubt be aware that the country’s stock market index the JSE Africa All Share has risen by 26% this year, the rand has appreciated against the dollar by 27% and gold, one of it’s main exports, has recently hit a record all time high. In truth, with the dollar likely to strengthen and gold prices falling back before the excitement of the tournament reaches fiver pitch some lateral thinking must be applied to benefit from the opportunities it presents.
Recession hit tour operators such as TUI and Thomas Smith could be winners along with airlines such as British Airways who have just announced an increase from 14 to 19 weekly flights from London to Johannesburg starting in March. Clever sporting goods manufacturers, fast food operators and brewers will also be among those rubbing their hands in anticipation.
The accounts of football’s ruling body ‘FIFA’ also make interesting reading. They show a US$902 cash reserve, double that of the International Olympic Committee, with only some US$133 million being spent on developing football in 2008 roughly the same amount it spent on operating and salary expenses. Interestingly, this cash reserve indicates that the cancellation of next year’s World Cup is not an option although postponement or relocation has been factored in. This stems from the planning of the 2002 World Cup when reportedly AXA SA pulled their insurance for the tournament just after the 9/11 terrorist attacks. Eventually, Warren Buffett’s Berkshire Hathaway stepped in to provide cover for the South Korea/Japan World Cup but ever since FIFA has been building up its reserves in order to prevent the possibility of cancellation while funding insurance premiums in case it needs to either postpone or relocate the event therefore, the likes of reinsurance giants Swiss Re will also prosper from a trouble free World Cup.