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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….

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2010 fifa world cup stadium funding

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
Presentation Outline…

  • 2010 FIFA World Cup Project Budget Planning Considerations…

  • 2010 FIFA World Cup Project Classification…

  • 2010 FIFA World Cup Stadiums Funding Work Plan…

    • 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…


2010 fifa world cup project budget planning considerations
2010 FIFA World Cup Project Budget PlanningConsiderations…

Macroeconomic stability

Targeted spending for 2010 FIFA World Cup projects

Manage 2010 FIFA World Cup budget

Public expenditure

Reporting on expenditure

Accurate budget requests

for 2010 FIFA World Cup Projects

Distribution of resources

2010 FIFA World Cup projects delivered

Distribution of resources directly to the point of delivery


2010 fifa world cup budget planning considerations
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…


2010 fifa world cup budget planning considerations1
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…


2010 fifa world cup project classification
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


2010 fifa world cup project classification1
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


2010 fifa world cup project classification2
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


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…

2010 FIFA World Cup Stadiums Funding Work Plan…


Execution of work plan
Execution of Work Plan... plan was executed

  • 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


Execution of work plan1
Execution of Work Plan... plan was executed

  • 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


Execution of work plan2
Execution of Work Plan... plan was executed

  • 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


Execution of work plan3
Execution of Work Plan... plan was executed

  • 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.


Analysis of business cases
Analysis of Business Cases… plan was executed

  • 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.


Bench mark capital costs for stadiums
Bench Mark Capital Costs for Stadiums… plan was executed

  • 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


Organizing committee analysis of business cases september 2006
Organizing Committee Analysis of Business Cases (September 2006)…

Analysis based on Design Guidelines and FIFA compliance


Risks associated with stadium construction
Risks Associated with Stadium Construction… 2006)…

  • 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…



2010 fifa world cup project presentation to national budget committee
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).


Stadium development cash flow
Stadium Development Cash Flow… Committee…

  • 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”.



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.

Analysis of Budget Shortfalls…


Conclusions
Conclusions… procurement matters

  • 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…


Challenges
Challenges… procurement matters

  • 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…


Pulse check
Pulse Check… procurement matters

  • 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…


More information at
More information at: procurement matters

  • Malcolm Simpson

  • 2010 Unit, National Treasury, 240 Vermeulen Street, Pretoria

  • 27-12-315-5751

  • 27-82-379-0028

  • [email protected]


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