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Japan, November 2019. The Bokke were the perceived underdogs, facing an English team with unfavourable odds. Their victory under captain Siya Kolisi sent feel-good shockwaves through the streets, uniting a nation that’s often divided along lines of rich-and-poor, conflicting political opinion, and race.
But will this sudden boost in national morale have a positive impact on our fragile economy?
Research shows it’s possible. Economists the world over have spent considerable time and effort teasing out correlations between the behavioural financial phenomenon of “sports sentiment” and how it can impact economic growth after a win or a loss.
Indeed, the victory could help rebrand South Africa as a viable tourism destination after a recent spate of negative international press about Cape Town’s severe drought and crippling statistics on crime, gang violence, and femicide.
Apart from tourism, many stock markets have been particularly susceptible to fan feelings on game days. In Turkey, for instance, researchers discovered that wins or losses of local soccer teams could impact investors’ behaviour leading up to, and after, each match.
“Changing moods of investors negatively affect rationality and cause unexpected price deviations,” states a 2015 report published in the International Journal of Economics, Commerce and Management.
This hasn’t been the case in New Zealand, though, a small country with only one dominant sporting interest: rugby. A study published in Applied Financial Economics by G Boyle and B Walter found stock return behaviour was “independent of the success of the premier national sports team”.
Not so in the UK, where wins and losses of the English football team were shown to influence daily changes in the FTSE 100 index, according to 2003 research by JK Ashton and B Gerrard.
And this is not just specific to soccer. Stock prices of companies in the same geographical regions of teams competing in America’s NFL Super Bowl tournament showed movement depending on how teams performed.
According to a 2016 study in the Journal of Sports Economics titled “Sentiment and Stock Returns: Anticipating a Major Sporting Event”, researchers found that “firms associated with the winning team exhibit significant positive return drift over the 10-day period after their win. Firms associated with the losing team exhibit moderate downward drift”.
'Sugar rush'
Sports victories don’t just influence stock markets; a “winner’s glow” can also impact a country’s GDP, according to commentators. “Since 1990, the winner of the [FIFA] World Cup has also seen an increase in gross domestic product compared with the year before, with an average increase of 1.6 percent,” reports the Washington Times.
So it seems there is some truth to the “animal spirits” of national pride that British economist John Maynard Keynes argued could affect investor decisions after big sporting achievements - the irrational part of the economy that’s linked to self-confidence, desire and enthusiasm.
But these gains aren’t always lasting, wrote A St John in Forbes magazine in 2014. He compared big sports wins to a “sugar rush” that eventually wears off: “In the months that follow a Cup win, there seems to be a short-lived boost in productivity … followed by a gradual let-down as perhaps people realise that even a World Cup win won’t solve all the country’s problems.”
The crash
This, unfortunately, seems to be the case at home, which is unsurprising considering the bleak picture South Africa was facing before our momentary RWC sugar rush.
And in the weeks after outclassing the English rugby team, Moody’s slashed our economic growth outlook for 2020 from 1.5% to 1%, followed swiftly by the International Monetary Fund dampening our team spirit by predicting that our growth will “remain sluggish in 2020 - below population growth for the sixth consecutive year”.
But we don’t need Moody’s or the IMF to tell us what our challenges are – as South Africans we live with their effects every day: debt-laden Eskom posing the largest risk to already weak growth, with one of its board members suggesting that it “could collapse the country’s economy”; one of the highest unemployment rates in the world fuelling the scourge of poverty and inequality; a rapidly deteriorating fiscal situation and eroding tax-base; failing state owned enterprises, with SAA now in business rescue and PRASA placed under administration; and the list goes on.
The fact is, as much as I’d like to keep my Springbok jersey on and hope for the best, a bit of gees will not eradicate the nine years of former President Jacob Zuma’s plundering rule.
Much as “Ramaphoria” was quickly crushed by Zuma’s legacy of dysfunctional SOEs, massive debt, investor exodus, corruption and global lack of confidence, so too has any “animal spirit” market buoyancy been quashed by the very real and potentially devastating economic pressures South Africa is facing.
All this goes to show that, while a big win on the world stage may have been a great reprieve from the reality of our economic woes, we cannot, sadly, rely on any sporting event to save South Africa’s economy. We need real and decisive change. And we need it now.
David Hufton is Deputy Chief Executive Officer of Sygnia. Views expressed are his own.
