How Taylor Swift and Formula One have the potential to boost South Africa’s economy

 ·30 Mar 2024

South Africa’s economic growth is minute, and large-scale events, such as sporting competitions or concerts, can have a positive effect on the economy.

Despite Minister in the Presidency Khumbudzo Ntshavheni praising the 0.6% GDP growth seen in 2023, Maarten Ackerman, Chief Economist at Citadel, said that the nation’s economy is not keeping up with the growth in population.

“Simply put, the economy is growing at around 1%, while the population is growing at around 1.5% to 1.6%. The economy isn’t producing enough goods and services to keep apace, and there is a greater need for social support while unemployment keeps increasing,” said Ackerman.

“Economic growth was flat in the last quarter of 2023. We are sitting at 1.2% year-on-year real unadjusted GDP growth, while the average real GDP growth for 2023 was only 0.6%.”

“Although this is not officially considered a recession, and some are celebrating it, in my view, this is still a very weak economic performance, as we are not outpacing population growth. And this, in fact, implies that we are in a per capita recession.”

With economists predicting around 1% growth for GDP, the picture in South Africa is less positive.

Concerts and events

Speaking to eNCA, NWU economics professor Waldo Krugell said that major events, such as the FIFA World Cup, Formula One, and now Taylor Swift concerts, can lead to additional spending, aiding economic growth.

Taylor Swift Era’s Tour, which is the highest-grossing tour in history, has popularised the term “Swiftonomics,” where her concerts generate substantial growth in the cities she plays at.

For instance, her shows in Singapore are projected to increase economic growth forecasts from 2.5% to 2.9% for the first three months of the year.

“The economics of the Eras Tour are massive. Spending on tickets is just the beginning. Many people travel to the concerts, stay over and eat out. They also spend money on souvenirs and costumes,” Krugell said.

The latter items are particularly important as there is normally a ratio of roughly three in regard to money spent on a concert ticket and additional spending on hotels, food, transportation, souvenirs etc.

“With Taylor Swift fans, that ratio increases to 1-to-10 and more. Local economies in the US were boosted by hundreds of millions of dollars in a single weekend,” Kruggell added.

“The macroeconomic impact obviously depends on different things. If the spending is shifted from other concerts, holidays or celebrations, the impact is smaller. If it is people’s savings, the impact on the economy is greater.”

“If more of the extra spending stays in the country, the impact is greater. And then the multiplier effect plays a role. Every hotel and Airbnb room that is full as a result of such a concert in a city is a little extra income for someone that they can spend again.”

“If the extra spending can be multiplied several times over, the impact is so much greater.”

However, there are risks, such as capacity being limited for major artists, which can cause inflation

For instance, Beyonce’s concert in Stockholm, Sweden, increased demand so much that the price of accommodation caused prices to increase rapidly.

That said, major events can still boost local economies.

For instance, if Taylor Swift visited South Africa during the off-peak tourism periods, it could lead restaurants and accommodation venues to fill up, which could spill over to other sectors of the economy.

However, in depressing news for Swifties, the Eras tour does not currently have a planned South Africa leg – even if a film of the concert headed to South African cinemas.

Motoring fans may, however, be in luck in the near future, with Formula 1 highly anticipated to return to the Kyalami circuit in Johannesburg.

With the backing of seven-time F1 champion Lewis Hamilton and the success of the Formula E race in Cape Town last year, it remains to be seen if the talks over an F1 race in South Africa are unpaused.

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