With less than two years to go to the 2010 Soccer World Cup, the government is beginning to feel the financial pressure of hosting the global event, with the cost of stadium construction and refurbishment now expected to be 20% more than the original budget.

Deputy Finance Minister Jabu Moleketi said yesterday the government, which is battling to cope with the unexpected increase in costs, would be asking host cities to help cover the shortfall.

Moleketi said the total overrun on the budget for stadium development was now expected to be upwards of R2bn, and that this was becoming “a burden on the fiscus”.

The government has already committed R28bn to projects related to the 2010 World Cup, with R9,8bn set aside for the building of five new stadiums and the renovation of five others.

Moleketi made it clear that the host municipalities, which he said were partly to blame for these overruns, would be expected to raise some of the funds. They had been given the go-ahead to apply for tariff increases in the current financial year to cover costs relating to infrastructure rehabilitation.

Increases in the cost of imported equipment, steel prices and other materials, the high oil price, the exchange rate as well as “complexities” in the design of some of the stadiums had added to the cost overruns.

Delays caused by strikes were also to blame, he said.

Moleketi said some host municipalities had come up with complex stadium designs, which had also resulted in the overruns. Project planning for stadium infrastructure “could have been done better” to avoid the overruns.

“The overruns can’t be a burden of the fiscus because (the) national treasury was not involved in issues such as design that have led to these cost overruns. It is only fair that they share the burden of these costs.”

Moleketi said that while preparations for the event were on schedule, host municipalities had indicated they would need more money to complete the stadiums.

“We are talking to the DBSA (Development Bank of Southern Africa) to see what packages can be made for host cities to meet some of their funding requirements,” Moleketi said.

He said that all 10 stadiums were on track for completion by the deadline of December next year set by world soccer governing body Fifa.

The government had a guarantee from Eskom that stadium construction and the World Cup tournament would be protected from power disruption.

PUBLICATION: Business Day
AUTHOR: Bheki Mpofu
DATED: 14th August 2008