Soccer: Fifa makes killing at S Africa's expense

Soccer's governing body Fifa is set to announce record earnings just as anger is building in South Africa over the final bill for hosting the World Cup.

Officials gathering for Fifa's annual congress in Johannesburg will reveal that annual income is up 50 per cent since the last World Cup four years ago.

Fifa is sitting on more than $1.6 billion in equity, according to a provisional copy of its financial report.

The announcement of the huge payday comes as the latest estimate for staging the finals comes to $13 billion in a country where nearly half the population live on less than $3 a day.

Forecasts predict profits in excess of $3.75 billion for the Swiss-registered charity, which means it will make more money from the World Cup than the host country will.

The most optimistic predictions see the month-long tournament giving the South African economy a 0.5 per cent bump in GDP. Fifa's profits would be equivalent to 0.7 per cent of GDP.

Despite the immense geopolitical power that Fifa wields, it is accountable only to the courts in Switzerland, where it enjoys tax-free status.

"It's completely wrong and deeply improper that Fifa is making money out of this," said Stefan Szymanski, an economist at City University's Cass Business School, who was called in to advise the South African Government after it won the bid in 2004.

In the euphoria that followed the announcement six years ago that South Africa had the cup, few questions were asked about the terms of the deal. In private, government officials are now accusing Fifa of acting like the "mafia" in sealing a one-sided licence to print money.

Under the terms of a confidential agreement with Fifa, the South African Government takes no share of television, marketing deals or ticketing - the main money spinners - and shoulders the cost of new stadiums and related infrastructure.

In addition, Fifa earnings are protected by a specially created "tax bubble" which means even the associated merchandising and match-day events are untaxed.

Adrian Lackay, a spokesman for the South African Revenue Service, said South Africa had paid a premium to Fifa to secure the World Cup, giving away millions of dollars in potential taxes that Germany had not agreed to when it hosted the 2006 tournament.

"This will not be a revenue-raising exercise for us," he said.

University of Cape Town researcher Sophie Nakueira said South Africa was "no longer calling the shots" and had effectively ceded sovereignty to the soccer overlords whose objective was profit.

The revelation of spiralling costs and reduced visitor numbers - down from initial estimates of 750,000 to 370,000 - has been greeted with dismay. It has prompted public calls for a fuller accounting of where the money has gone.

South Africa's Mail and Guardian newspaper yesterday won its bid to force Fifa and its local subsidiary organising committee, as well as the South African Government, to release full details of which businesses had profited from World Cup contracts.

Close attention will be paid to how the money was spent at lavish new stadiums like Cape Town's Green Point, built at Fifa's prompting, despite the existence of cheaper alternatives.

Szymanski said Fifa's insistence on "lavish spending" was at the heart of the problem. "There's so much evidence that there's not even an argument any more - mega-events don't deliver the financial extravaganza that is promised."

- INDEPENDENT