Tourism Economics 2011 17 (3) 603ndash624 doi 105367te20110049

The significance of festivals to regionaleconomies measuring the economic valueof the Grahamstown National Arts Festival

in South Africa

MELVILLE SAAYMAN

Institute for Tourism Wildlife Economics and Leisure Studies North-West UniversityPotchefstroom Campus Private Bag X6001 Potchefstroom 2520 South Africa

E-mail melvillesaaymannwuacza

RIAAN ROSSOUW

School of Economics North-West University Potchefstroom Campus South Africa andEon Consulting Midrand South Africa E-mail riaanrossouweoncoza

This paper estimates the economic value of South Africarsquos longestrunning national arts festival the Grahamstown National ArtsFestival in the Eastern Cape Province The Eastern Cape is a middle-income province (66 of national GDP) settles 96 of the SouthAfrican population and has a high unemployment rate A survey wasconducted in July 2009 with 450 visitors completing a structuredquestionnaire at various sampling locations across the festival areaA social accounting matrix (SAM) for the province was used toestimate the economic value of the arts festival to the regionrsquoseconomy (adopting the classical SAMs multiplier approach) withvisitor depending data This research shows that the festival makesa significant contribution to revenue generation as well as to jobcreation thereby confirming that investments made by governmentin arts and culture can address economic objectives

Keywords arts festivals events social accounting matrix South Africa

JEL classifications C6 D57 I32 O18 R15 Z11

In developing countries aspects such as arts and culture are not regarded asmain priorities as the governments in these countries are more concerned withhealth education housing and job creation issues However Bowitz and Ibenholt

The authors would like to thank Cecilia Punt at the Western Cape Department of Agriculture formaking the SAM of the Eastern Cape available to them for the purposes of the research as wellas the National Research Foundation (NRF) for funding received The usual disclaimers apply

TOURISM ECONOMICS604

(2009) state that economists are asking the question what is the positive effectfor the local economy from investing in arts and cultural festivals Althoughone might find that occasionally local or regional government agencies sponsorarts and cultural events in the case of South Africa most of these events areprivately managed sponsored and promoted Therefore one could say thatinvestment in the arts and culture sector is very dependent on private-sectorinvolvement This despite the fact that Long and Perdue (1990) have indicatedthat hosting of events such as arts festivals contributes to or benefits the localeconomy and its communities in various ways since such festivals create jobsgenerate income attract investment extend the tourist season educate visitorsimprove peoplersquos quality of life serve as attractions develop infrastructurepromote an area or destination grow arts and culture create tax revenues andboost citizen morale and pride In support of the economic benefits from artsfestivals Slabbert et al (2009) revealed that South Africarsquos largest arts festivalthe Klein Karoo National Arts Festival (KKNK) generated R913 million invisitor spending in 2009 so confirming the importance of festivals as generatorsof revenue

Grahamstown National Arts Festival celebrated its 34th year of existence in2008 and is South Africarsquos longest-running arts festival The festival is hostedin the small town of Grahamstown in the Eastern Cape Province The EasternCape is a middle-income province (66 of national GDP) settles 96 of theSouth African population and has a high unemployment rate Events are seenas one of the methods to generate revenue and to combat poverty in the regionThe festival began in 1974 with just over 60 items and exhibits Currentlyit offers over 500 productions that include dramas stage shows music cabaretjazz and rock It is held annually over an 11-day period during the month ofJuly during which time the first few days form the fringe programme and thelast eight days form the main programme The purpose of the event is toprovide a cultural experience for tourists and visitors (festinos) and to grow thelocal economy

This paper determines the economic value of the oldest national arts festivalin South Africa the Grahamstown National Arts Festival The paper will bestructured as follows The next section provides as theoretical background abrief survey of the relevant literature This is followed in the subsequent twosections by respectively a brief overview of the festival and an account ofthe method of research The penultimate section contains a profile of thevisitors to the 2009 Grahamstown National Arts Festival followed by adiscussion of the results and findings of our analysis The final section offersour conclusions

Literature review

Hoyle (2002) indicated that the number diversity and popularity of events havegrown spectacularly over the past several decades In support of this SouthAfrica offers approximately 300 festivals per year (Saayman and Saayman 2008)These festivals include arts music agriculture marine and food and wineCurrently the country offers four national arts festivals Jackson and OrsquoSullivan(2002) are also of the view that arts festivals are one of the fastest-growing

605The significance of festivals to regional economies

segments of the event sector The focus of arts festivals is twofold firstly topreserve and to grow arts and culture and secondly to contribute to theeconomy of a region or destination Therefore it is not just about growing thearts but is also an attempt to benefit the community in this case that ofGrahamstown

Ritchie and Goeldner (1994) define economic impact as the net economicchange in a host community that results from the spending of tourists orvisitors in a given area Therefore one can say that the purpose of an economicimpact analysis is to measure the economic benefits that a community receives(Fayos-Sola 1997 Van Heerden 2003) This knowledge will help to enhancethe way of life the economy and the environment of the host population Themagnitude of the economic impact of tourism however depends on thefollowing (Saayman 2007)

bull the total number of tourists who visit an areacountrybull the duration of the staybull the average spending of the tourists in that areacountrybull the circulation of tourism expenditure through the country

The last item implies the multiplier effect which is normally explained interms of the direct indirect and induced effect that expenditure has on theregional economy Since economic impacts do not end with the initial touristexpenditures multiplier effects should also be considered as an argument forcommunity and public support of festivals (Kim et al 1998) However itshould be kept in mind that not all expenditures accrue locally particularly inthe more rural regions (Long and Perdue 1990) The importance of this is thatit shows the leakages from the local economy ndash and the smaller the leakagesthe greater the economic impact of the initial spending To estimate economicimpacts the additional lsquonew moneyrsquo generated for the local economy due totourism is normally considered (Gelan 2003) Within tourism tourists (notlocals) visiting a province or region usually create this lsquonew moneyrsquo From aregional perspective both foreign (tourists from outside South Africarsquos borders)and domestic (tourists from provinces other than the Eastern Cape) touristsvisiting the region represent lsquonew moneyrsquo while day excursions (by festinos fromthe Eastern Cape) to the region are excluded but rather captured in the formof lsquoretained localsrsquo1

Economic impact analyses have been implemented in various fields of studyincluding areas as diverse as sport tourism (for example Kang and Perdue1994 Gelan 2003 Diakomihalis and Lagos 2008 Saayman and Rossouw2008) regional and country economic impacts (for example Kottke 1988Randall and Warf 1996 Saayman and Saayman 1997 Wagner 1997 Zhouet al 1997 Fretchling and Horvath 1999 Stynes 1999 Rhodes 2000Walpole and Goodwin 2000 Oh 2005 Ahlert 2009) Analyses have beenundertaken on the economic impact of events (for example Fayos-Sola 1997Gelan 2003 Van Heerden 2003 Saayman and Saayman 2004 Van der Merweand Saayman 2008) and into wildlife and culture tourism (for example Nijkamp2004 Getzner et al 2005 Bowitz and Ibenholt 2009)

It seems from the review of available literature that although economicimpact analyses have been conducted at arts festivals not much has been doneusing a social accounting matrix (SAM) This study provides estimates of the

TOURISM ECONOMICS606

total economic impact of a single short-term event in South Africarsquos EasternCape Province using multipliers calculated from a SAM model SAMs quantifyat a point in time the economic interdependencies in an economy such as aprovinceregion or country and contain more social detail Tourism studies thathave used SAM multipliers include Aruna et al (1998) Grado and Lord (1998)Kim et al (1998) Crompton (1999) and Frechtling and Horvath (1999) Theclassical SAMs multiplier approach is used in this study to determine how muchoutput income and value added are generated by tourist expenditures at thefestival

In recent years there has been a move to standardize the evaluation of festivalsand events through the adoption of applied general equilibrium (AGE)modelling for determining economic impact (Brown and Trimboli 2007) Whereinputndashoutput (IndashO) models which had provided results that often overstatedthe financial outcomes and economic impacts of the events or festivals underinvestigation were previously employed AGE models accounted forquantitative adjustments in demand leading to rising prices and so curtailed thefixed price adjustment that occurred under linear-type models (Jago and Dwyer2006)

Jago and Dwyer (2006) also contend that the social impact of festivals andevents rather than the economic impact may provide a more compellingargument for the continued existence financial support and sponsorship of suchfestivals or events It is therefore crucial for societies to look lsquoeconomy-widersquoin their development philosophies and policies For this reason AGE modelsalso seem to be a more suitable measurement tool

However despite these fundamental insights this study makes use ofmultipliers calculated from a linear (IndashO or SAM) model to evaluate the impactof spending at the Grahamstown National Arts Festival for numerous reasonsSome of these reasons are that to date methods or tools to assess the subnationalimpacts of events or festivals have been lacking One reason is that economicdata which allow quantitative simulation of policy impacts are much richerat the national level As a result top-down approaches are often used to estimatethe impact of events on South Africarsquos provinces This however ignores manyregional-level factors such as the effect of the local environment on economicactivity the proximity of firms from distinctive resources (clusters) and thequality of the regional labour market (Wing and Anderson 2004) Moreoverthe existing AGE models for South Africa are by now dated and would provideunreliable results For future studies of this sort it would however be moresuitable to use a current AGE model to conduct the analysis

Bowitz and Ibenholt (2009) believe that studies such as this are importantbecause policy makers and sponsors increasingly seem to demand estimates ofthe effects on the local or regional economy of investing or sponsoring arts andcultural events Saayman and Rossouw (2008) indicate that consultants seemto exaggerate the potential of economic spin-offs from hosting events whileanother school of thought is of the view that true impact cannot be determinedin the short run and it may take years before one can see the financial impactof these events Despite these diverse schools of thought it nevertheless remainsimportant to conduct research regularly in order to enable informed decisionsThese include policy marketing strategic management and investmentdecisions

607The significance of festivals to regional economies

Method of research

The method used in the research will be discussed in the following sectionsincluding the sampling method questionnaire used data collection and dataanalysis Since the research required the collection of primary data a visitorsurvey was conducted over a period of six days at the Grahamstown NationalArts Festival during JuneJuly 2009

Sampling

Sampling was based on the availability and willingness of visitors to completethe questionnaire Cooper and Emory (1995) show that for a population of100000 (N) the recommended sample size is 384 Since this festival attractedapproximately 33000 visitors (Slabbert et al 2009) it was decided to distribute450 questionnaires to ensure a sufficient number of completed questionnaires

Questionnaire

The questionnaire used was similar to previous questionnaires used by Saaymanand Saayman (2006) at the Klein Karoo National Arts Festival (KKNK) andat the Aardklop National Arts Festival in South Africa The questionnaireincluded questions of a demographic nature (age gender language occupationprovince of origin) as well as travel and participation behaviour (number ofpeople in the group days spent at the festival spending at the festival andgenres of productions attended)

Data collection

As mentioned earlier this festival consists of two parts a fringe programmeand the main programme The fringe programme is hosted first and thereafterthe main programme The focus of the survey was on the main programmeas the fringe programme was aimed specifically at the community ofGrahamstown All questionnaires were completed at the main festival groundswhere fieldworkers circulated to minimize bias Questionnaires were distributedprogressively during the last six days of the festival Therefore fieldworkersdistributed 50 questionnaires on day one and increased the number by 10 perday for six days Of the 450 questionnaires distributed 435 questionnaires werecollected for data capture during the festival

Data analysis

Data were coded in Microsoft Excel and processed using SPSS (StatisticalPackage for the Social Sciences) The method used to estimate the directindirect and induced effects of the festival was a SAM multiplier analysis Themain application of this form of analysis is to examine the effects on theeconomy of a change in final consumption expenditure by festinos

Multipliers derived from a SAM for the Eastern Cape Province have beenemployed as summary measures that quantify direct indirect and inducedeffects on all industries of changes in demand for the output of any one industryIn this way SAM multipliers allow the quantification of the increased activity

TOURISM ECONOMICS608

Table 1 Total festino spending at the 2009 Grahamstown National Arts Festival (in ZAR)

Spending item Foreign Eastern Cape Rest of SA Total

Shows 56800460 192885398 253383491 503069348Accommodation 119862069 298189881 484169149 902221098Food 82057471 251960061 374433932 708451464Alcoholic beverages 38133333 92794875 142066574 272994783Non-alcoholic beverages 16133333 73725819 59608132 149467284Retail 15298851 171540933 117681516 304521299Stalls 70172414 300827072 236706749 607706235Transport 39321839 95965237 317915884 453202960Parking 3224138 12512077 16244018 31980233Other 000 000 000 000

Total (ZAR) 441003908 1490401353 2002209444 3933614705

Source Visitor surveys

in other sectors of the economy which results indirectly from the expenditureby festinos It is also possible to examine the income and employment effectsof the festival

Spending data The economic impact of the Grahamstown National Arts Festivalbegins with an accounting of the direct expenditure by festinos in the variousexpenditure-related sectors Festino expenditure at the festival encompassesspending on shows accommodation food and beverages retail shoppingfestival vendors and related transport and parking services (refer to Table 1)Retailing includes locations where products are consumed lsquoon-premisersquo such asstalls or vendors lsquoOff-premisersquo retail outlets are supermarkets curiosrestaurants and similar locations

Festinos spent an estimated R823 million in the local area in 2009 (Table1) About a third of this spending was for accommodation 175 for food and143 for shows attended at the festival Festinos staying overnight in hotelsaccounted for 243 of the total spending

It is sometimes mistakenly thought that initial spending accounts for atotality of the impact of the festival For example at first glance it may appearthat festino expenditures are the sum total of the impact on the provincial orlocal economy (Dunham et al 2009) However one economic activity alwaysleads to a ripple effect whereby other sectors and industries benefit from thisinitial spending This inter-industry effect of festino spending can be assessedusing multipliers derived from the provincial SAM (PROVIDE 2006)

The economic activities of the festival are linked to other industries in thelocal and provincial economies The activities required for example to producea product sold at the festival (including packaging shipping etc) generatedirect effects on the economy Regional (or indirect) impacts occur when theseactivities require purchases of goods and services from local or regionalsuppliers Additional induced impacts occur when workers involved in directand indirect activities spend their wages in the region The ratio between totaleconomic and direct impact is termed the multiplier (Dunham et al 2009)

609The significance of festivals to regional economies

This method of analysis allows the impact of festino spending at the festivalto be quantified in terms of final demand earnings (income) and employmentin the province Once the direct impact of festino spending has been calculatedthe multiplier methodology discussed below is used to calculate thecontribution of the festival and of the re-spending in the economy

Multipliers and secondary effects Various techniques can be employed to estimatethe economic impact of a festival After estimating the initial additionaldemand that is created due to the festival which in this case includes spendingby festinos the direct indirect and induced impacts should be derived (Smeral2003) The multiplier concept is termed as the nature and extent of the impactof an autonomous change in a specific economic quantity (that is expenditure)on other economic quantities such as production or employment (ConningarthConsultants 2006b) More specifically Samuelson (1970 p 226) defines themultiplier concept as lsquothe number of times the change in investment must bemultiplied in order to present us with the resulting change in incomersquo

Multipliers can be used to estimate the total economic impact of festinospending in the region and the associated economic effects (indirect andinduced) in terms of production income and jobs The basic equation forestimating the economic impacts of the festival is

Economic impact = average spending per category times multiplier

The model is of course more detailed and complex than this simple equationmay indicate The analysis is based on the consistent and comprehensive dataset concerning all mutual transactions among productive and institutionalsectors of the economy which is represented by the SAM for the Eastern CapeProvince for 2000 SAMs extend the basic IndashO concept from production toincome distribution and include both social and economic data for an economy(Raa and Sahoo 2005) A SAM consists of data from IndashO tables nationalincome statistics and household income and expenditure statistics Contrary tonational accounts lsquo a SAM attempts to classify various institutions to theirsocio-economic backgrounds instead of their economic or functional activitiesrsquo(Chowdhury and Kirkpatrick 1994) In the present case the authors used aSAM for the Eastern Cape Province which was developed by the PROVIDEproject (2006) The SAM (based on 2000 prices) used in these analysesdistinguished 34 sectors 10 household types and 4 ethnic groups

In essence the analysis is based on two model approaches The first approachis presented by a standard IndashO Leontief model for which input coefficients andLeontief multipliers (ML) have been calculated

ML = (E ndash A)ndash1

where A is the matrix of input (technical) coefficientsThe second model approach is based on extending a linear Leontief model

to a SAM framework which is performed by partitioning the accounts intoendogenous and exogenous accounts and assuming that the column coefficientsof the endogenous accounts are all constant For determining the set ofendogenous accounts it is important to know whether changes in the level ofexpenditures directly follow any change in incomes (Pyatt and Round 1985)Exogenous accounts are those for which one assumes that the expenditures are

TOURISM ECONOMICS610

set independently on incomes Standard practice is to pick up for the exogenousaccounts one or more accounts among the government capital and the rest ofthe world accounts justifying the choice on the basis of the objectives of thestudy (Hajnovicova and Lapisakova 2002)

Multipliers calculated from the SAM are the simple indicators comprisingthe important information about the structure of the Eastern Cape economyThey are calculated from the matrix of expenditure shares (general technicalcoefficients) after excluding the exogenous accounts The computed multiplierswill be sensitive to the choice of exogenous accounts and express the sensitivityof the endogenous accounts on changes in demand for exogenous accounts(Hajnovicova and Lapisakova 2002) SAM multipliers (MS) are calculated as

MS = (E ndash A)ndash1

where M is the matrix of expenditure shares of endogenous accountsComparing the multipliers calculated from the IndashO and SAM models carries

new aspects in the economic analysis The SAM multipliers are much largerthan the corresponding IndashO multipliers Because value added is a leakage onlyintermediate demand serves as a multiplier in the IndashO analysis In contrastvalue added and incomes generate demand linkages in the SAM approach SAMmultipliers capture the different multiplier effects of exogenous accounts onproductive activities factors and institutions Based on the partition of theendogenous section of the SAM into three categories of accounts (activitiescommodities factors and institutions) a matrix of multipliers can bedecomposed into four components that is initial injection transfer effectsopen-loop effects and closed-loop effects Many versions of this decompositionhave been used (Hajnovicova and Lapisakova 2002)

In analysing the productive sphere of economy a decomposition ofmultipliers by Pyatt and Round (1985) and Cardenete and Sancho (2004) wasused The matrix MS which is reduced to the Leontief multiplier matrix ML

corresponds only to the production accounts To perform the impact analysisthe MS matrix is truncated to conform to the dimension of the matrix ML

The differences between both multiplier matrices MS and ML measure theinduced effects due to the added endogeneity while the direct and indirecteffects are measured by ML Matrix MS can be decomposed into threecomponents

(MS ndash ML) which measures induced effects

(E + A) which measures direct effects

(ML ndash E ndash A) which measures indirect effects

where

MS = (MS ndash ML) + (E + A) + (ML ndash E ndash A)

A vast array of inputs was required for the analysis These were obtained fromsurveys conducted by Statistics South Africa and published in their Supply andUse Tables Detailed information on the economic composition of each sectorin the economy was obtained from these tables and formed part of the basicexogenous inputs needed for the calculation of the various multipliers

611The significance of festivals to regional economies

Table 2 Profile of festinos

Gender Male 44 female 56Age 37 yearsLanguage English 75 Afrikaans 18Province of origin Eastern Cape 45 Gauteng 21 Western Cape

17Type of show Comedy 60 drama 48 dance 38 music 31Country of residence Foreign 4 SA 96

Moreover additional information pertaining to labour numbers and capital usedwas obtained from Census 2001 and the South African Reserve Bank QuarterlyBulletin respectively (Conningarth Consultants 2006a) The exogenous inputdata (shocks) were calculated and drawn from independent surveys conductedduring 2009 by the Institute for Tourism and Leisure Studies at the arts festivalThe SAM multipliers convert the exogenous input data (shocks) to the incomegenerated and the number of jobs supported by using sets of economic ratiosand multipliers for the province Total effects are presented in aggregate formand include both indirect and induced effects (see the section below)

Assessing the economic impact of the festival

The results are discussed in two sections In the first section a brief overviewis given of the descriptive results of the surveys The second section containsthe results of the economic impact study

Profile of festinos

From Table 2 it is clear that the profile of festinos is that of predominantlyEnglish-speaking females primarily falling in the 35ndash49 year age group livingin the Eastern Cape Province and spending approximately R4700 at thefestival Approximately 4 of festinos are foreigners It is interesting to notethat the festival attracts 21 of festinos from the Gauteng Province and thatthey enjoy comedies and drama

Economic impact

Festino spending is converted to the associated increase in production incomeand jobs in the region using economic multipliers from a SAM for the EasternCape Province The classical SAMs multiplier approach employs distinctmultipliers for each expenditure-related sector The multipliers convertexpenditure into the associated increase in production jobs and income andestimate secondary effects as the festino spending circulates through the regionaleconomy To do this it is necessary to lsquocorrectrsquo the direct impact (that isexpenditure figures in Table 1) by the multiplier effect These results basedon the lsquocorrectedrsquo spending by visitors (refer to Column 2 in Tables 3ndash5) arecontained in the following subsections

TOURISM ECONOMICS612

Table 3 Impact through production multipliers (ZAR 2000 prices) ndash foreign visitors

Sector Direct Indirect Induced Total Percentageimpacta impactb impactc impactd (total)

Agriculture 351970 190320 451460 993750 010Mining 955160 621300 1037950 2614410 030Manufacturing 88935280 83983630 77989940 250908860 2740Electricity and water 17430 10650 16540 44630 000Construction 347260 331970 363570 1042800 010Trade andaccommodation 104297460 76530590 115342850 296170900 3230

Transport andcommunication 34573690 29056620 31593670 95223980 1040

Financial andbusiness services 98805220 64722330 101694130 265221690 2890

Community services 1607850 1474150 1995690 5077690 060

Total (ZAR) 329891330 256921570 330485790 917298690 10000

Notes aInitial expenditures (for example by festinos) are generally called the direct costs of an activityand their effects on the economy are direct effects bPurchases by suppliers (for example vendors hoteland restaurant owners charter operators etc) of the final goods and services of materials and supplies tosustain the original purchases are called indirect effects cInduced effects occur when workers in thesectors stimulated by direct and indirect expenditures spend their additional income on consumergoods and services dThe direct plus indirect plus induced effects equal the total effect

New money impact

This section represents only the impact of the money spent by festinos on theregional economy of the festival The usefulness of this section is that it providesa model of economic impact that calculates how much money has been broughtinto the area from festinos specifically because of the festival and allows one tofocus on the money that has been spent in the area specifically by festinos

Foreign expenditure The quantification of the direct indirect and induced impactof foreign expenditure at the Grahamstown National Arts Festival in the regionis summarized in Table 3 As this expenditure is applied partially by the foreignfestinos of the festival in the purchase of goods and services in the region thisrepresents an inflow of money in the region mobilizing economic activitygenerating employment and generating additional revenues for the provincelsquoProductionrsquo is an indication of the total turnover generated by each sector inthe regional economy As such production comprises two components demandfor intermediate inputs (resources) by an activity (domestically produced andimported goods and services) and total value added generated by an activity(Conningarth Consultants 2006b) Table 3 reflects the effects on production(using the production multipliers) by foreign expenditure resulting from thefestival

The spending of the foreign festinos in 2009 was predominantly expenditureon tourist activities From Table 3 it is clear that the largest direct impactsare in trade and accommodation (323) financial and business services (289)and manufacturing (274) Through the lsquobackward linkagesrsquo large indirectand induced impacts are also experienced in the community services sector

613The significance of festivals to regional economies

Figure 1 Foreign expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

reflecting an indirect impact of R147 thousand and an induced impact ofR200 thousand Note that if the authors ignore the direct effect in thecommunity services sector 683 of the total increase in production is as aresult of lsquobackward linkagesrsquo with direct foreign expenditure representing only317 A more detailed (disaggregated) analysis of the various sectors can bemade but falls beyond the scope of this study

All the acquisitions of goods and services from non-regional suppliers thatis suppliers outside the Eastern Cape were included in the analysis and mighttherefore have had a significant direct or indirect effect on the provincersquoseconomy By including this indirect impact although small in significance wepresent a more comprehensive estimate of the impact of the GrahamstownNational Arts Festival on the province

The value of the purchases of goods and services from regional suppliers wasthen classified using the basic sector aggregation as classified by the SouthAfrican Reserve Bank and Statistics South Africa and its distribution byactivity sector is shown in Figure 1

In terms of the analysis of the expenditure by foreign festinos the firstconclusion is that the direct effect represents 36 the indirect effect 28 andthe induced effect 36 of the total increase in foreign expenditure The secondconclusion is that the activity sectors that benefited most from the expenditureof the festivalrsquos foreign festinos were trade and accommodation financial andbusiness services and manufacturing The total impact resulting fromexpenditure by foreigners in these sectors in 2009 surpassed R92 million andrepresented some 111 of the total expenditure made by all festinos of the 2009Grahamstown National Arts Festival in the region

The rest of South Africarsquos expenditure In order to estimate the economic impactof the expenditure made by festinos residing in the rest of South Africa anapproach was followed similar to that for the expenditure by foreign festinos

100

90

80

70

60

50

40

30

20

10

0

Direct impact Indirect impact Induced impact

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

TOURISM ECONOMICS614

Table 4 Impact through production multipliers (ZAR 2000 prices) ndash rest of South Africavisitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1606060 868450 2060020 4534530 010Mining 4342400 2822110 4720450 11884950 030Manufacturing 371464640 352132290 324543490 1048140420 2490Electricity and water 77620 47450 73660 198730 000Construction 1365670 1305530 1429810 4101000 010Trade andaccommodation 464604850 340914160 513807780 1319326800 3140

Transport andcommunication 277775630 233449830 253833250 765058700 1820

Financial andbusiness services 381484190 249891110 392638170 1024013470 2440

Community services 8100740 7427150 10054790 25582670 060

Total (ZAR) 1510821800 1188858060 1503161410 4202841280 10000

Table 4 reflects the effects on production (using the production multipliers)by expenditure of festinos from the rest of South Africa resulting from thefestival

Table 4 illustrates that the largest direct impacts are in trade and accom-modation (314) in manufacturing (249) and in financial and businessservices (244) Through the lsquobackward linkagesrsquo large indirect and inducedimpacts are also experienced in the transport and communication sector (see alsoFigure 2) reflecting an indirect impact of R23 million and an induced impactof R25 million If the direct effect in the transport and communication sectoris ignored 637 of the total increase in production is a result of lsquobackwardlinkagesrsquo with direct expenditure by festinos from the rest of South Africarepresenting only 363 of the total impact

Based on the data collected the authors estimated that total impact ofexpenditure by festinos from the rest of South Africa in the region might exceedR420 million (approximately 509 of total expenditure) Figure 2 presentsthe total expenditure per activity sector by festinos from the rest of South Africa

As in the case of foreigners the results of the study suggest that the sectorsthat benefit most from expenditure by festinos from the rest of South Africa arein order of importance trade and accommodation manufacturing and financialand business services (please refer to Figure 2) The expenditure in these threesectors of economic activity represents more than 81 of the total expenditureby the festinos from the rest of South Africa at the festival

The analysis of the expenditure by festinos from the rest of South Africaindicates that the direct effect represents 359 the indirect effect 283 andthe induced effect 358 of the total increase in local expenditure Given theestimation of the economic impact presented above it should be kept in mindthat by definition calculation of the economic impact should include only theexpenditure that would not have occurred in the absence of the event

615The significance of festivals to regional economies

Figure 2 Rest of South African expenditure in the region per activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

Retained locals

The retained local section focuses on money that would have left the area ifthe festival had not been held The retained local model allows us to see howfestivals and other events contribute to the local economy by encouraging theirresidents to stay and spend recreation rands within the area

Eastern Cape expenditure In order to estimate the economic impact of theexpenditure made by festinos residing in the Eastern Cape a similar approachwas followed as that with the expenditure of foreign festinos and festinos residingin the rest of South Africa Based on the information collected from the surveyscarried out during the 2009 festival the authors estimated that the directimpact in the region resulting from the localsrsquo expenditure amounted toapproximately R112 million (approximately 379 of total expenditure)distributed among the nine activity sectors as presented in Figure 3

The value of the purchases of goods and services made to regional suppliersby festinos residing in the Eastern Cape is presented in Figure 3

The activity sectors that benefited most from expenditure by locals inrelation with the Grahamstown National Arts Festival were trade and accom-modation financial and business services manufacturing and to a lesser extenttransport and communication Given that these festinos hailed from the EasternCape it was understandable that their expenditure in the latter sectors wouldbe less than that of foreigners and non-Eastern Cape residents (please refer toFigure 3)

It is important to note that the direct impact of the localsrsquo expenditure(R112 million) represents more than 379 of the adjusted total expenditureof all festinos (R297 million) of the festival in 2009 The quantification of thedirect indirect and induced impact of localsrsquo expenditure at the festival in theregion is summarized in Table 5

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

TOURISM ECONOMICS616

Figure 3 Local expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

In Table 5 it is clear that the largest direct impact is on trade andaccommodation (330) and on financial and business services (330) Throughthe lsquobackward linkagesrsquo large indirect and induced impacts are also experiencedin the manufacturing sector reflecting an indirect impact of R27 million andan induced impact of R25 million If the direct effect in the manufacturingsector is ignored 646 of the total increase in production is as a result oflsquobackward linkagesrsquo with direct local expenditure representing only 354 ofthe total impact

Regarding the analysis of the expenditure of festinos from the Eastern Capeit can be concluded that the direct effect represents 360 the indirect effect277 and the induced effect 363 of the total increase in local expenditureBy including the expenditure that would have occurred in the region independ-ently of the existence of the festival less conservative figures for the economicimpact are estimated It is reasonable to expect that in the absence of thefestival the available revenue from these local festinos would have been less andas such its volume of expenditure in the region would have been less

Overall impact

This section represents the overall spending in the local economy that can beattributed to the festival by festinos (locals and visitors from abroad and fromthe rest of South Africa) Although the locals do not bring money into thecommunity from outside regions as visitors do it is valuable to include theirspending as it has the effect of initiating economic activity within the localeconomy Examined in this way a festivalrsquos contribution to a local economy iscomparable to a local business that both draws money from and contributes toits community To consider only the tourist rand in terms of economic impactwould underestimate greatly the complete financial benefits of festivals and

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

617The significance of festivals to regional economies

Table 5 Impact through production multipliers (ZAR 2000 prices) ndash local visitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1080730 584390 1386210 3051330 010Mining 2953680 1924390 3207390 8085460 030Manufacturing 281313440 266795820 245513980 793623240 2540Electricity and water 60580 37030 57490 155100 000Construction 1332640 1273950 1395220 4001810 010Trade andaccommodation 362634420 266091090 401038400 1029763910 3300

Transport andcommunication 84956440 71399590 77633770 233989810 750

Financial andbusiness services 384186600 251661330 395419600 1031267530 3300

Community services 6239660 5720810 7744770 19705250 060

Total (in ZAR) 1124758190 865488410 1133396830 3123643440 10000

similar events In addition this study recognizes that without festivals asignificant amount of money would leave the area due to locals seeking analternative venue for entertainment in other regions

This study has determined that the usefulness of the overall impact is thatit allows one to measure the amount of money that the festival circulatesthrough the local economy from every source from which the festival drawsfinancial impact However in order to evaluate the total impact of the festivalin the region it is necessary to lsquocorrectrsquo the direct impact by the multipliereffect Hence as a way of estimating the total impact of the GrahamstownNational Arts Festival in the region production multipliers were used for eachone of the activity sectors The multiplication of the direct impact in eachactivity sector for the specific production multipliers gives the total impact ofthe festival for each of the regional economy sectors as indicated in Table 6below The sum of the impacts in each of the sectors gives us in turn anestimate of the total impact of the festival in the region

The analysis of the results indicates that the direct economic impact of thefestival and its visitors in the region (which is in the order of R297 million)can result in an additional R527 million of indirect impact giving a totalannual impact in the region in excess of R824 million That is equivalent toan aggregated production multiplier in the order of 277 Therefore for eachrand spent by festinos in the region 177 cents are generated additionally interms of indirect expenditure The aggregated production multiplier is obtainedby dividing the total impact by the direct impact

Considering the multipliers for each component (foreign local and the restof South Africa) of expenditures one can say that those resulting from out-of-province festinos have a greater impact as multiplier (279) than does spendingby foreign and local festinos on production (277) This means that for each randspent at the festival by out-of-province festinos an additional R179 is generatedin the Eastern Cape economy (see Tables 4 and 6)

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

TOURISM ECONOMICS604

(2009) state that economists are asking the question what is the positive effectfor the local economy from investing in arts and cultural festivals Althoughone might find that occasionally local or regional government agencies sponsorarts and cultural events in the case of South Africa most of these events areprivately managed sponsored and promoted Therefore one could say thatinvestment in the arts and culture sector is very dependent on private-sectorinvolvement This despite the fact that Long and Perdue (1990) have indicatedthat hosting of events such as arts festivals contributes to or benefits the localeconomy and its communities in various ways since such festivals create jobsgenerate income attract investment extend the tourist season educate visitorsimprove peoplersquos quality of life serve as attractions develop infrastructurepromote an area or destination grow arts and culture create tax revenues andboost citizen morale and pride In support of the economic benefits from artsfestivals Slabbert et al (2009) revealed that South Africarsquos largest arts festivalthe Klein Karoo National Arts Festival (KKNK) generated R913 million invisitor spending in 2009 so confirming the importance of festivals as generatorsof revenue

Grahamstown National Arts Festival celebrated its 34th year of existence in2008 and is South Africarsquos longest-running arts festival The festival is hostedin the small town of Grahamstown in the Eastern Cape Province The EasternCape is a middle-income province (66 of national GDP) settles 96 of theSouth African population and has a high unemployment rate Events are seenas one of the methods to generate revenue and to combat poverty in the regionThe festival began in 1974 with just over 60 items and exhibits Currentlyit offers over 500 productions that include dramas stage shows music cabaretjazz and rock It is held annually over an 11-day period during the month ofJuly during which time the first few days form the fringe programme and thelast eight days form the main programme The purpose of the event is toprovide a cultural experience for tourists and visitors (festinos) and to grow thelocal economy

This paper determines the economic value of the oldest national arts festivalin South Africa the Grahamstown National Arts Festival The paper will bestructured as follows The next section provides as theoretical background abrief survey of the relevant literature This is followed in the subsequent twosections by respectively a brief overview of the festival and an account ofthe method of research The penultimate section contains a profile of thevisitors to the 2009 Grahamstown National Arts Festival followed by adiscussion of the results and findings of our analysis The final section offersour conclusions

Literature review

Hoyle (2002) indicated that the number diversity and popularity of events havegrown spectacularly over the past several decades In support of this SouthAfrica offers approximately 300 festivals per year (Saayman and Saayman 2008)These festivals include arts music agriculture marine and food and wineCurrently the country offers four national arts festivals Jackson and OrsquoSullivan(2002) are also of the view that arts festivals are one of the fastest-growing

605The significance of festivals to regional economies

segments of the event sector The focus of arts festivals is twofold firstly topreserve and to grow arts and culture and secondly to contribute to theeconomy of a region or destination Therefore it is not just about growing thearts but is also an attempt to benefit the community in this case that ofGrahamstown

Ritchie and Goeldner (1994) define economic impact as the net economicchange in a host community that results from the spending of tourists orvisitors in a given area Therefore one can say that the purpose of an economicimpact analysis is to measure the economic benefits that a community receives(Fayos-Sola 1997 Van Heerden 2003) This knowledge will help to enhancethe way of life the economy and the environment of the host population Themagnitude of the economic impact of tourism however depends on thefollowing (Saayman 2007)

bull the total number of tourists who visit an areacountrybull the duration of the staybull the average spending of the tourists in that areacountrybull the circulation of tourism expenditure through the country

The last item implies the multiplier effect which is normally explained interms of the direct indirect and induced effect that expenditure has on theregional economy Since economic impacts do not end with the initial touristexpenditures multiplier effects should also be considered as an argument forcommunity and public support of festivals (Kim et al 1998) However itshould be kept in mind that not all expenditures accrue locally particularly inthe more rural regions (Long and Perdue 1990) The importance of this is thatit shows the leakages from the local economy ndash and the smaller the leakagesthe greater the economic impact of the initial spending To estimate economicimpacts the additional lsquonew moneyrsquo generated for the local economy due totourism is normally considered (Gelan 2003) Within tourism tourists (notlocals) visiting a province or region usually create this lsquonew moneyrsquo From aregional perspective both foreign (tourists from outside South Africarsquos borders)and domestic (tourists from provinces other than the Eastern Cape) touristsvisiting the region represent lsquonew moneyrsquo while day excursions (by festinos fromthe Eastern Cape) to the region are excluded but rather captured in the formof lsquoretained localsrsquo1

Economic impact analyses have been implemented in various fields of studyincluding areas as diverse as sport tourism (for example Kang and Perdue1994 Gelan 2003 Diakomihalis and Lagos 2008 Saayman and Rossouw2008) regional and country economic impacts (for example Kottke 1988Randall and Warf 1996 Saayman and Saayman 1997 Wagner 1997 Zhouet al 1997 Fretchling and Horvath 1999 Stynes 1999 Rhodes 2000Walpole and Goodwin 2000 Oh 2005 Ahlert 2009) Analyses have beenundertaken on the economic impact of events (for example Fayos-Sola 1997Gelan 2003 Van Heerden 2003 Saayman and Saayman 2004 Van der Merweand Saayman 2008) and into wildlife and culture tourism (for example Nijkamp2004 Getzner et al 2005 Bowitz and Ibenholt 2009)

It seems from the review of available literature that although economicimpact analyses have been conducted at arts festivals not much has been doneusing a social accounting matrix (SAM) This study provides estimates of the

TOURISM ECONOMICS606

total economic impact of a single short-term event in South Africarsquos EasternCape Province using multipliers calculated from a SAM model SAMs quantifyat a point in time the economic interdependencies in an economy such as aprovinceregion or country and contain more social detail Tourism studies thathave used SAM multipliers include Aruna et al (1998) Grado and Lord (1998)Kim et al (1998) Crompton (1999) and Frechtling and Horvath (1999) Theclassical SAMs multiplier approach is used in this study to determine how muchoutput income and value added are generated by tourist expenditures at thefestival

In recent years there has been a move to standardize the evaluation of festivalsand events through the adoption of applied general equilibrium (AGE)modelling for determining economic impact (Brown and Trimboli 2007) Whereinputndashoutput (IndashO) models which had provided results that often overstatedthe financial outcomes and economic impacts of the events or festivals underinvestigation were previously employed AGE models accounted forquantitative adjustments in demand leading to rising prices and so curtailed thefixed price adjustment that occurred under linear-type models (Jago and Dwyer2006)

Jago and Dwyer (2006) also contend that the social impact of festivals andevents rather than the economic impact may provide a more compellingargument for the continued existence financial support and sponsorship of suchfestivals or events It is therefore crucial for societies to look lsquoeconomy-widersquoin their development philosophies and policies For this reason AGE modelsalso seem to be a more suitable measurement tool

However despite these fundamental insights this study makes use ofmultipliers calculated from a linear (IndashO or SAM) model to evaluate the impactof spending at the Grahamstown National Arts Festival for numerous reasonsSome of these reasons are that to date methods or tools to assess the subnationalimpacts of events or festivals have been lacking One reason is that economicdata which allow quantitative simulation of policy impacts are much richerat the national level As a result top-down approaches are often used to estimatethe impact of events on South Africarsquos provinces This however ignores manyregional-level factors such as the effect of the local environment on economicactivity the proximity of firms from distinctive resources (clusters) and thequality of the regional labour market (Wing and Anderson 2004) Moreoverthe existing AGE models for South Africa are by now dated and would provideunreliable results For future studies of this sort it would however be moresuitable to use a current AGE model to conduct the analysis

Bowitz and Ibenholt (2009) believe that studies such as this are importantbecause policy makers and sponsors increasingly seem to demand estimates ofthe effects on the local or regional economy of investing or sponsoring arts andcultural events Saayman and Rossouw (2008) indicate that consultants seemto exaggerate the potential of economic spin-offs from hosting events whileanother school of thought is of the view that true impact cannot be determinedin the short run and it may take years before one can see the financial impactof these events Despite these diverse schools of thought it nevertheless remainsimportant to conduct research regularly in order to enable informed decisionsThese include policy marketing strategic management and investmentdecisions

607The significance of festivals to regional economies

Method of research

The method used in the research will be discussed in the following sectionsincluding the sampling method questionnaire used data collection and dataanalysis Since the research required the collection of primary data a visitorsurvey was conducted over a period of six days at the Grahamstown NationalArts Festival during JuneJuly 2009

Sampling

Sampling was based on the availability and willingness of visitors to completethe questionnaire Cooper and Emory (1995) show that for a population of100000 (N) the recommended sample size is 384 Since this festival attractedapproximately 33000 visitors (Slabbert et al 2009) it was decided to distribute450 questionnaires to ensure a sufficient number of completed questionnaires

Questionnaire

The questionnaire used was similar to previous questionnaires used by Saaymanand Saayman (2006) at the Klein Karoo National Arts Festival (KKNK) andat the Aardklop National Arts Festival in South Africa The questionnaireincluded questions of a demographic nature (age gender language occupationprovince of origin) as well as travel and participation behaviour (number ofpeople in the group days spent at the festival spending at the festival andgenres of productions attended)

Data collection

As mentioned earlier this festival consists of two parts a fringe programmeand the main programme The fringe programme is hosted first and thereafterthe main programme The focus of the survey was on the main programmeas the fringe programme was aimed specifically at the community ofGrahamstown All questionnaires were completed at the main festival groundswhere fieldworkers circulated to minimize bias Questionnaires were distributedprogressively during the last six days of the festival Therefore fieldworkersdistributed 50 questionnaires on day one and increased the number by 10 perday for six days Of the 450 questionnaires distributed 435 questionnaires werecollected for data capture during the festival

Data analysis

Data were coded in Microsoft Excel and processed using SPSS (StatisticalPackage for the Social Sciences) The method used to estimate the directindirect and induced effects of the festival was a SAM multiplier analysis Themain application of this form of analysis is to examine the effects on theeconomy of a change in final consumption expenditure by festinos

Multipliers derived from a SAM for the Eastern Cape Province have beenemployed as summary measures that quantify direct indirect and inducedeffects on all industries of changes in demand for the output of any one industryIn this way SAM multipliers allow the quantification of the increased activity

TOURISM ECONOMICS608

Table 1 Total festino spending at the 2009 Grahamstown National Arts Festival (in ZAR)

Spending item Foreign Eastern Cape Rest of SA Total

Shows 56800460 192885398 253383491 503069348Accommodation 119862069 298189881 484169149 902221098Food 82057471 251960061 374433932 708451464Alcoholic beverages 38133333 92794875 142066574 272994783Non-alcoholic beverages 16133333 73725819 59608132 149467284Retail 15298851 171540933 117681516 304521299Stalls 70172414 300827072 236706749 607706235Transport 39321839 95965237 317915884 453202960Parking 3224138 12512077 16244018 31980233Other 000 000 000 000

Total (ZAR) 441003908 1490401353 2002209444 3933614705

Source Visitor surveys

in other sectors of the economy which results indirectly from the expenditureby festinos It is also possible to examine the income and employment effectsof the festival

Spending data The economic impact of the Grahamstown National Arts Festivalbegins with an accounting of the direct expenditure by festinos in the variousexpenditure-related sectors Festino expenditure at the festival encompassesspending on shows accommodation food and beverages retail shoppingfestival vendors and related transport and parking services (refer to Table 1)Retailing includes locations where products are consumed lsquoon-premisersquo such asstalls or vendors lsquoOff-premisersquo retail outlets are supermarkets curiosrestaurants and similar locations

Festinos spent an estimated R823 million in the local area in 2009 (Table1) About a third of this spending was for accommodation 175 for food and143 for shows attended at the festival Festinos staying overnight in hotelsaccounted for 243 of the total spending

It is sometimes mistakenly thought that initial spending accounts for atotality of the impact of the festival For example at first glance it may appearthat festino expenditures are the sum total of the impact on the provincial orlocal economy (Dunham et al 2009) However one economic activity alwaysleads to a ripple effect whereby other sectors and industries benefit from thisinitial spending This inter-industry effect of festino spending can be assessedusing multipliers derived from the provincial SAM (PROVIDE 2006)

The economic activities of the festival are linked to other industries in thelocal and provincial economies The activities required for example to producea product sold at the festival (including packaging shipping etc) generatedirect effects on the economy Regional (or indirect) impacts occur when theseactivities require purchases of goods and services from local or regionalsuppliers Additional induced impacts occur when workers involved in directand indirect activities spend their wages in the region The ratio between totaleconomic and direct impact is termed the multiplier (Dunham et al 2009)

609The significance of festivals to regional economies

This method of analysis allows the impact of festino spending at the festivalto be quantified in terms of final demand earnings (income) and employmentin the province Once the direct impact of festino spending has been calculatedthe multiplier methodology discussed below is used to calculate thecontribution of the festival and of the re-spending in the economy

Multipliers and secondary effects Various techniques can be employed to estimatethe economic impact of a festival After estimating the initial additionaldemand that is created due to the festival which in this case includes spendingby festinos the direct indirect and induced impacts should be derived (Smeral2003) The multiplier concept is termed as the nature and extent of the impactof an autonomous change in a specific economic quantity (that is expenditure)on other economic quantities such as production or employment (ConningarthConsultants 2006b) More specifically Samuelson (1970 p 226) defines themultiplier concept as lsquothe number of times the change in investment must bemultiplied in order to present us with the resulting change in incomersquo

Multipliers can be used to estimate the total economic impact of festinospending in the region and the associated economic effects (indirect andinduced) in terms of production income and jobs The basic equation forestimating the economic impacts of the festival is

Economic impact = average spending per category times multiplier

The model is of course more detailed and complex than this simple equationmay indicate The analysis is based on the consistent and comprehensive dataset concerning all mutual transactions among productive and institutionalsectors of the economy which is represented by the SAM for the Eastern CapeProvince for 2000 SAMs extend the basic IndashO concept from production toincome distribution and include both social and economic data for an economy(Raa and Sahoo 2005) A SAM consists of data from IndashO tables nationalincome statistics and household income and expenditure statistics Contrary tonational accounts lsquo a SAM attempts to classify various institutions to theirsocio-economic backgrounds instead of their economic or functional activitiesrsquo(Chowdhury and Kirkpatrick 1994) In the present case the authors used aSAM for the Eastern Cape Province which was developed by the PROVIDEproject (2006) The SAM (based on 2000 prices) used in these analysesdistinguished 34 sectors 10 household types and 4 ethnic groups

In essence the analysis is based on two model approaches The first approachis presented by a standard IndashO Leontief model for which input coefficients andLeontief multipliers (ML) have been calculated

ML = (E ndash A)ndash1

where A is the matrix of input (technical) coefficientsThe second model approach is based on extending a linear Leontief model

to a SAM framework which is performed by partitioning the accounts intoendogenous and exogenous accounts and assuming that the column coefficientsof the endogenous accounts are all constant For determining the set ofendogenous accounts it is important to know whether changes in the level ofexpenditures directly follow any change in incomes (Pyatt and Round 1985)Exogenous accounts are those for which one assumes that the expenditures are

TOURISM ECONOMICS610

set independently on incomes Standard practice is to pick up for the exogenousaccounts one or more accounts among the government capital and the rest ofthe world accounts justifying the choice on the basis of the objectives of thestudy (Hajnovicova and Lapisakova 2002)

Multipliers calculated from the SAM are the simple indicators comprisingthe important information about the structure of the Eastern Cape economyThey are calculated from the matrix of expenditure shares (general technicalcoefficients) after excluding the exogenous accounts The computed multiplierswill be sensitive to the choice of exogenous accounts and express the sensitivityof the endogenous accounts on changes in demand for exogenous accounts(Hajnovicova and Lapisakova 2002) SAM multipliers (MS) are calculated as

MS = (E ndash A)ndash1

where M is the matrix of expenditure shares of endogenous accountsComparing the multipliers calculated from the IndashO and SAM models carries

new aspects in the economic analysis The SAM multipliers are much largerthan the corresponding IndashO multipliers Because value added is a leakage onlyintermediate demand serves as a multiplier in the IndashO analysis In contrastvalue added and incomes generate demand linkages in the SAM approach SAMmultipliers capture the different multiplier effects of exogenous accounts onproductive activities factors and institutions Based on the partition of theendogenous section of the SAM into three categories of accounts (activitiescommodities factors and institutions) a matrix of multipliers can bedecomposed into four components that is initial injection transfer effectsopen-loop effects and closed-loop effects Many versions of this decompositionhave been used (Hajnovicova and Lapisakova 2002)

In analysing the productive sphere of economy a decomposition ofmultipliers by Pyatt and Round (1985) and Cardenete and Sancho (2004) wasused The matrix MS which is reduced to the Leontief multiplier matrix ML

corresponds only to the production accounts To perform the impact analysisthe MS matrix is truncated to conform to the dimension of the matrix ML

The differences between both multiplier matrices MS and ML measure theinduced effects due to the added endogeneity while the direct and indirecteffects are measured by ML Matrix MS can be decomposed into threecomponents

(MS ndash ML) which measures induced effects

(E + A) which measures direct effects

(ML ndash E ndash A) which measures indirect effects

where

MS = (MS ndash ML) + (E + A) + (ML ndash E ndash A)

A vast array of inputs was required for the analysis These were obtained fromsurveys conducted by Statistics South Africa and published in their Supply andUse Tables Detailed information on the economic composition of each sectorin the economy was obtained from these tables and formed part of the basicexogenous inputs needed for the calculation of the various multipliers

611The significance of festivals to regional economies

Table 2 Profile of festinos

Gender Male 44 female 56Age 37 yearsLanguage English 75 Afrikaans 18Province of origin Eastern Cape 45 Gauteng 21 Western Cape

17Type of show Comedy 60 drama 48 dance 38 music 31Country of residence Foreign 4 SA 96

Moreover additional information pertaining to labour numbers and capital usedwas obtained from Census 2001 and the South African Reserve Bank QuarterlyBulletin respectively (Conningarth Consultants 2006a) The exogenous inputdata (shocks) were calculated and drawn from independent surveys conductedduring 2009 by the Institute for Tourism and Leisure Studies at the arts festivalThe SAM multipliers convert the exogenous input data (shocks) to the incomegenerated and the number of jobs supported by using sets of economic ratiosand multipliers for the province Total effects are presented in aggregate formand include both indirect and induced effects (see the section below)

Assessing the economic impact of the festival

The results are discussed in two sections In the first section a brief overviewis given of the descriptive results of the surveys The second section containsthe results of the economic impact study

Profile of festinos

From Table 2 it is clear that the profile of festinos is that of predominantlyEnglish-speaking females primarily falling in the 35ndash49 year age group livingin the Eastern Cape Province and spending approximately R4700 at thefestival Approximately 4 of festinos are foreigners It is interesting to notethat the festival attracts 21 of festinos from the Gauteng Province and thatthey enjoy comedies and drama

Economic impact

Festino spending is converted to the associated increase in production incomeand jobs in the region using economic multipliers from a SAM for the EasternCape Province The classical SAMs multiplier approach employs distinctmultipliers for each expenditure-related sector The multipliers convertexpenditure into the associated increase in production jobs and income andestimate secondary effects as the festino spending circulates through the regionaleconomy To do this it is necessary to lsquocorrectrsquo the direct impact (that isexpenditure figures in Table 1) by the multiplier effect These results basedon the lsquocorrectedrsquo spending by visitors (refer to Column 2 in Tables 3ndash5) arecontained in the following subsections

TOURISM ECONOMICS612

Table 3 Impact through production multipliers (ZAR 2000 prices) ndash foreign visitors

Sector Direct Indirect Induced Total Percentageimpacta impactb impactc impactd (total)

Agriculture 351970 190320 451460 993750 010Mining 955160 621300 1037950 2614410 030Manufacturing 88935280 83983630 77989940 250908860 2740Electricity and water 17430 10650 16540 44630 000Construction 347260 331970 363570 1042800 010Trade andaccommodation 104297460 76530590 115342850 296170900 3230

Transport andcommunication 34573690 29056620 31593670 95223980 1040

Financial andbusiness services 98805220 64722330 101694130 265221690 2890

Community services 1607850 1474150 1995690 5077690 060

Total (ZAR) 329891330 256921570 330485790 917298690 10000

Notes aInitial expenditures (for example by festinos) are generally called the direct costs of an activityand their effects on the economy are direct effects bPurchases by suppliers (for example vendors hoteland restaurant owners charter operators etc) of the final goods and services of materials and supplies tosustain the original purchases are called indirect effects cInduced effects occur when workers in thesectors stimulated by direct and indirect expenditures spend their additional income on consumergoods and services dThe direct plus indirect plus induced effects equal the total effect

New money impact

This section represents only the impact of the money spent by festinos on theregional economy of the festival The usefulness of this section is that it providesa model of economic impact that calculates how much money has been broughtinto the area from festinos specifically because of the festival and allows one tofocus on the money that has been spent in the area specifically by festinos

Foreign expenditure The quantification of the direct indirect and induced impactof foreign expenditure at the Grahamstown National Arts Festival in the regionis summarized in Table 3 As this expenditure is applied partially by the foreignfestinos of the festival in the purchase of goods and services in the region thisrepresents an inflow of money in the region mobilizing economic activitygenerating employment and generating additional revenues for the provincelsquoProductionrsquo is an indication of the total turnover generated by each sector inthe regional economy As such production comprises two components demandfor intermediate inputs (resources) by an activity (domestically produced andimported goods and services) and total value added generated by an activity(Conningarth Consultants 2006b) Table 3 reflects the effects on production(using the production multipliers) by foreign expenditure resulting from thefestival

The spending of the foreign festinos in 2009 was predominantly expenditureon tourist activities From Table 3 it is clear that the largest direct impactsare in trade and accommodation (323) financial and business services (289)and manufacturing (274) Through the lsquobackward linkagesrsquo large indirectand induced impacts are also experienced in the community services sector

613The significance of festivals to regional economies

Figure 1 Foreign expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

reflecting an indirect impact of R147 thousand and an induced impact ofR200 thousand Note that if the authors ignore the direct effect in thecommunity services sector 683 of the total increase in production is as aresult of lsquobackward linkagesrsquo with direct foreign expenditure representing only317 A more detailed (disaggregated) analysis of the various sectors can bemade but falls beyond the scope of this study

All the acquisitions of goods and services from non-regional suppliers thatis suppliers outside the Eastern Cape were included in the analysis and mighttherefore have had a significant direct or indirect effect on the provincersquoseconomy By including this indirect impact although small in significance wepresent a more comprehensive estimate of the impact of the GrahamstownNational Arts Festival on the province

The value of the purchases of goods and services from regional suppliers wasthen classified using the basic sector aggregation as classified by the SouthAfrican Reserve Bank and Statistics South Africa and its distribution byactivity sector is shown in Figure 1

In terms of the analysis of the expenditure by foreign festinos the firstconclusion is that the direct effect represents 36 the indirect effect 28 andthe induced effect 36 of the total increase in foreign expenditure The secondconclusion is that the activity sectors that benefited most from the expenditureof the festivalrsquos foreign festinos were trade and accommodation financial andbusiness services and manufacturing The total impact resulting fromexpenditure by foreigners in these sectors in 2009 surpassed R92 million andrepresented some 111 of the total expenditure made by all festinos of the 2009Grahamstown National Arts Festival in the region

The rest of South Africarsquos expenditure In order to estimate the economic impactof the expenditure made by festinos residing in the rest of South Africa anapproach was followed similar to that for the expenditure by foreign festinos

100

90

80

70

60

50

40

30

20

10

0

Direct impact Indirect impact Induced impact

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

TOURISM ECONOMICS614

Table 4 Impact through production multipliers (ZAR 2000 prices) ndash rest of South Africavisitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1606060 868450 2060020 4534530 010Mining 4342400 2822110 4720450 11884950 030Manufacturing 371464640 352132290 324543490 1048140420 2490Electricity and water 77620 47450 73660 198730 000Construction 1365670 1305530 1429810 4101000 010Trade andaccommodation 464604850 340914160 513807780 1319326800 3140

Transport andcommunication 277775630 233449830 253833250 765058700 1820

Financial andbusiness services 381484190 249891110 392638170 1024013470 2440

Community services 8100740 7427150 10054790 25582670 060

Total (ZAR) 1510821800 1188858060 1503161410 4202841280 10000

Table 4 reflects the effects on production (using the production multipliers)by expenditure of festinos from the rest of South Africa resulting from thefestival

Table 4 illustrates that the largest direct impacts are in trade and accom-modation (314) in manufacturing (249) and in financial and businessservices (244) Through the lsquobackward linkagesrsquo large indirect and inducedimpacts are also experienced in the transport and communication sector (see alsoFigure 2) reflecting an indirect impact of R23 million and an induced impactof R25 million If the direct effect in the transport and communication sectoris ignored 637 of the total increase in production is a result of lsquobackwardlinkagesrsquo with direct expenditure by festinos from the rest of South Africarepresenting only 363 of the total impact

Based on the data collected the authors estimated that total impact ofexpenditure by festinos from the rest of South Africa in the region might exceedR420 million (approximately 509 of total expenditure) Figure 2 presentsthe total expenditure per activity sector by festinos from the rest of South Africa

As in the case of foreigners the results of the study suggest that the sectorsthat benefit most from expenditure by festinos from the rest of South Africa arein order of importance trade and accommodation manufacturing and financialand business services (please refer to Figure 2) The expenditure in these threesectors of economic activity represents more than 81 of the total expenditureby the festinos from the rest of South Africa at the festival

The analysis of the expenditure by festinos from the rest of South Africaindicates that the direct effect represents 359 the indirect effect 283 andthe induced effect 358 of the total increase in local expenditure Given theestimation of the economic impact presented above it should be kept in mindthat by definition calculation of the economic impact should include only theexpenditure that would not have occurred in the absence of the event

615The significance of festivals to regional economies

Figure 2 Rest of South African expenditure in the region per activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

Retained locals

The retained local section focuses on money that would have left the area ifthe festival had not been held The retained local model allows us to see howfestivals and other events contribute to the local economy by encouraging theirresidents to stay and spend recreation rands within the area

Eastern Cape expenditure In order to estimate the economic impact of theexpenditure made by festinos residing in the Eastern Cape a similar approachwas followed as that with the expenditure of foreign festinos and festinos residingin the rest of South Africa Based on the information collected from the surveyscarried out during the 2009 festival the authors estimated that the directimpact in the region resulting from the localsrsquo expenditure amounted toapproximately R112 million (approximately 379 of total expenditure)distributed among the nine activity sectors as presented in Figure 3

The value of the purchases of goods and services made to regional suppliersby festinos residing in the Eastern Cape is presented in Figure 3

The activity sectors that benefited most from expenditure by locals inrelation with the Grahamstown National Arts Festival were trade and accom-modation financial and business services manufacturing and to a lesser extenttransport and communication Given that these festinos hailed from the EasternCape it was understandable that their expenditure in the latter sectors wouldbe less than that of foreigners and non-Eastern Cape residents (please refer toFigure 3)

It is important to note that the direct impact of the localsrsquo expenditure(R112 million) represents more than 379 of the adjusted total expenditureof all festinos (R297 million) of the festival in 2009 The quantification of thedirect indirect and induced impact of localsrsquo expenditure at the festival in theregion is summarized in Table 5

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

TOURISM ECONOMICS616

Figure 3 Local expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

In Table 5 it is clear that the largest direct impact is on trade andaccommodation (330) and on financial and business services (330) Throughthe lsquobackward linkagesrsquo large indirect and induced impacts are also experiencedin the manufacturing sector reflecting an indirect impact of R27 million andan induced impact of R25 million If the direct effect in the manufacturingsector is ignored 646 of the total increase in production is as a result oflsquobackward linkagesrsquo with direct local expenditure representing only 354 ofthe total impact

Regarding the analysis of the expenditure of festinos from the Eastern Capeit can be concluded that the direct effect represents 360 the indirect effect277 and the induced effect 363 of the total increase in local expenditureBy including the expenditure that would have occurred in the region independ-ently of the existence of the festival less conservative figures for the economicimpact are estimated It is reasonable to expect that in the absence of thefestival the available revenue from these local festinos would have been less andas such its volume of expenditure in the region would have been less

Overall impact

This section represents the overall spending in the local economy that can beattributed to the festival by festinos (locals and visitors from abroad and fromthe rest of South Africa) Although the locals do not bring money into thecommunity from outside regions as visitors do it is valuable to include theirspending as it has the effect of initiating economic activity within the localeconomy Examined in this way a festivalrsquos contribution to a local economy iscomparable to a local business that both draws money from and contributes toits community To consider only the tourist rand in terms of economic impactwould underestimate greatly the complete financial benefits of festivals and

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

617The significance of festivals to regional economies

Table 5 Impact through production multipliers (ZAR 2000 prices) ndash local visitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1080730 584390 1386210 3051330 010Mining 2953680 1924390 3207390 8085460 030Manufacturing 281313440 266795820 245513980 793623240 2540Electricity and water 60580 37030 57490 155100 000Construction 1332640 1273950 1395220 4001810 010Trade andaccommodation 362634420 266091090 401038400 1029763910 3300

Transport andcommunication 84956440 71399590 77633770 233989810 750

Financial andbusiness services 384186600 251661330 395419600 1031267530 3300

Community services 6239660 5720810 7744770 19705250 060

Total (in ZAR) 1124758190 865488410 1133396830 3123643440 10000

similar events In addition this study recognizes that without festivals asignificant amount of money would leave the area due to locals seeking analternative venue for entertainment in other regions

This study has determined that the usefulness of the overall impact is thatit allows one to measure the amount of money that the festival circulatesthrough the local economy from every source from which the festival drawsfinancial impact However in order to evaluate the total impact of the festivalin the region it is necessary to lsquocorrectrsquo the direct impact by the multipliereffect Hence as a way of estimating the total impact of the GrahamstownNational Arts Festival in the region production multipliers were used for eachone of the activity sectors The multiplication of the direct impact in eachactivity sector for the specific production multipliers gives the total impact ofthe festival for each of the regional economy sectors as indicated in Table 6below The sum of the impacts in each of the sectors gives us in turn anestimate of the total impact of the festival in the region

The analysis of the results indicates that the direct economic impact of thefestival and its visitors in the region (which is in the order of R297 million)can result in an additional R527 million of indirect impact giving a totalannual impact in the region in excess of R824 million That is equivalent toan aggregated production multiplier in the order of 277 Therefore for eachrand spent by festinos in the region 177 cents are generated additionally interms of indirect expenditure The aggregated production multiplier is obtainedby dividing the total impact by the direct impact

Considering the multipliers for each component (foreign local and the restof South Africa) of expenditures one can say that those resulting from out-of-province festinos have a greater impact as multiplier (279) than does spendingby foreign and local festinos on production (277) This means that for each randspent at the festival by out-of-province festinos an additional R179 is generatedin the Eastern Cape economy (see Tables 4 and 6)

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

605The significance of festivals to regional economies

segments of the event sector The focus of arts festivals is twofold firstly topreserve and to grow arts and culture and secondly to contribute to theeconomy of a region or destination Therefore it is not just about growing thearts but is also an attempt to benefit the community in this case that ofGrahamstown

Ritchie and Goeldner (1994) define economic impact as the net economicchange in a host community that results from the spending of tourists orvisitors in a given area Therefore one can say that the purpose of an economicimpact analysis is to measure the economic benefits that a community receives(Fayos-Sola 1997 Van Heerden 2003) This knowledge will help to enhancethe way of life the economy and the environment of the host population Themagnitude of the economic impact of tourism however depends on thefollowing (Saayman 2007)

bull the total number of tourists who visit an areacountrybull the duration of the staybull the average spending of the tourists in that areacountrybull the circulation of tourism expenditure through the country

The last item implies the multiplier effect which is normally explained interms of the direct indirect and induced effect that expenditure has on theregional economy Since economic impacts do not end with the initial touristexpenditures multiplier effects should also be considered as an argument forcommunity and public support of festivals (Kim et al 1998) However itshould be kept in mind that not all expenditures accrue locally particularly inthe more rural regions (Long and Perdue 1990) The importance of this is thatit shows the leakages from the local economy ndash and the smaller the leakagesthe greater the economic impact of the initial spending To estimate economicimpacts the additional lsquonew moneyrsquo generated for the local economy due totourism is normally considered (Gelan 2003) Within tourism tourists (notlocals) visiting a province or region usually create this lsquonew moneyrsquo From aregional perspective both foreign (tourists from outside South Africarsquos borders)and domestic (tourists from provinces other than the Eastern Cape) touristsvisiting the region represent lsquonew moneyrsquo while day excursions (by festinos fromthe Eastern Cape) to the region are excluded but rather captured in the formof lsquoretained localsrsquo1

Economic impact analyses have been implemented in various fields of studyincluding areas as diverse as sport tourism (for example Kang and Perdue1994 Gelan 2003 Diakomihalis and Lagos 2008 Saayman and Rossouw2008) regional and country economic impacts (for example Kottke 1988Randall and Warf 1996 Saayman and Saayman 1997 Wagner 1997 Zhouet al 1997 Fretchling and Horvath 1999 Stynes 1999 Rhodes 2000Walpole and Goodwin 2000 Oh 2005 Ahlert 2009) Analyses have beenundertaken on the economic impact of events (for example Fayos-Sola 1997Gelan 2003 Van Heerden 2003 Saayman and Saayman 2004 Van der Merweand Saayman 2008) and into wildlife and culture tourism (for example Nijkamp2004 Getzner et al 2005 Bowitz and Ibenholt 2009)

It seems from the review of available literature that although economicimpact analyses have been conducted at arts festivals not much has been doneusing a social accounting matrix (SAM) This study provides estimates of the

TOURISM ECONOMICS606

total economic impact of a single short-term event in South Africarsquos EasternCape Province using multipliers calculated from a SAM model SAMs quantifyat a point in time the economic interdependencies in an economy such as aprovinceregion or country and contain more social detail Tourism studies thathave used SAM multipliers include Aruna et al (1998) Grado and Lord (1998)Kim et al (1998) Crompton (1999) and Frechtling and Horvath (1999) Theclassical SAMs multiplier approach is used in this study to determine how muchoutput income and value added are generated by tourist expenditures at thefestival

In recent years there has been a move to standardize the evaluation of festivalsand events through the adoption of applied general equilibrium (AGE)modelling for determining economic impact (Brown and Trimboli 2007) Whereinputndashoutput (IndashO) models which had provided results that often overstatedthe financial outcomes and economic impacts of the events or festivals underinvestigation were previously employed AGE models accounted forquantitative adjustments in demand leading to rising prices and so curtailed thefixed price adjustment that occurred under linear-type models (Jago and Dwyer2006)

Jago and Dwyer (2006) also contend that the social impact of festivals andevents rather than the economic impact may provide a more compellingargument for the continued existence financial support and sponsorship of suchfestivals or events It is therefore crucial for societies to look lsquoeconomy-widersquoin their development philosophies and policies For this reason AGE modelsalso seem to be a more suitable measurement tool

However despite these fundamental insights this study makes use ofmultipliers calculated from a linear (IndashO or SAM) model to evaluate the impactof spending at the Grahamstown National Arts Festival for numerous reasonsSome of these reasons are that to date methods or tools to assess the subnationalimpacts of events or festivals have been lacking One reason is that economicdata which allow quantitative simulation of policy impacts are much richerat the national level As a result top-down approaches are often used to estimatethe impact of events on South Africarsquos provinces This however ignores manyregional-level factors such as the effect of the local environment on economicactivity the proximity of firms from distinctive resources (clusters) and thequality of the regional labour market (Wing and Anderson 2004) Moreoverthe existing AGE models for South Africa are by now dated and would provideunreliable results For future studies of this sort it would however be moresuitable to use a current AGE model to conduct the analysis

Bowitz and Ibenholt (2009) believe that studies such as this are importantbecause policy makers and sponsors increasingly seem to demand estimates ofthe effects on the local or regional economy of investing or sponsoring arts andcultural events Saayman and Rossouw (2008) indicate that consultants seemto exaggerate the potential of economic spin-offs from hosting events whileanother school of thought is of the view that true impact cannot be determinedin the short run and it may take years before one can see the financial impactof these events Despite these diverse schools of thought it nevertheless remainsimportant to conduct research regularly in order to enable informed decisionsThese include policy marketing strategic management and investmentdecisions

607The significance of festivals to regional economies

Method of research

The method used in the research will be discussed in the following sectionsincluding the sampling method questionnaire used data collection and dataanalysis Since the research required the collection of primary data a visitorsurvey was conducted over a period of six days at the Grahamstown NationalArts Festival during JuneJuly 2009

Sampling

Sampling was based on the availability and willingness of visitors to completethe questionnaire Cooper and Emory (1995) show that for a population of100000 (N) the recommended sample size is 384 Since this festival attractedapproximately 33000 visitors (Slabbert et al 2009) it was decided to distribute450 questionnaires to ensure a sufficient number of completed questionnaires

Questionnaire

The questionnaire used was similar to previous questionnaires used by Saaymanand Saayman (2006) at the Klein Karoo National Arts Festival (KKNK) andat the Aardklop National Arts Festival in South Africa The questionnaireincluded questions of a demographic nature (age gender language occupationprovince of origin) as well as travel and participation behaviour (number ofpeople in the group days spent at the festival spending at the festival andgenres of productions attended)

Data collection

As mentioned earlier this festival consists of two parts a fringe programmeand the main programme The fringe programme is hosted first and thereafterthe main programme The focus of the survey was on the main programmeas the fringe programme was aimed specifically at the community ofGrahamstown All questionnaires were completed at the main festival groundswhere fieldworkers circulated to minimize bias Questionnaires were distributedprogressively during the last six days of the festival Therefore fieldworkersdistributed 50 questionnaires on day one and increased the number by 10 perday for six days Of the 450 questionnaires distributed 435 questionnaires werecollected for data capture during the festival

Data analysis

Data were coded in Microsoft Excel and processed using SPSS (StatisticalPackage for the Social Sciences) The method used to estimate the directindirect and induced effects of the festival was a SAM multiplier analysis Themain application of this form of analysis is to examine the effects on theeconomy of a change in final consumption expenditure by festinos

Multipliers derived from a SAM for the Eastern Cape Province have beenemployed as summary measures that quantify direct indirect and inducedeffects on all industries of changes in demand for the output of any one industryIn this way SAM multipliers allow the quantification of the increased activity

TOURISM ECONOMICS608

Table 1 Total festino spending at the 2009 Grahamstown National Arts Festival (in ZAR)

Spending item Foreign Eastern Cape Rest of SA Total

Shows 56800460 192885398 253383491 503069348Accommodation 119862069 298189881 484169149 902221098Food 82057471 251960061 374433932 708451464Alcoholic beverages 38133333 92794875 142066574 272994783Non-alcoholic beverages 16133333 73725819 59608132 149467284Retail 15298851 171540933 117681516 304521299Stalls 70172414 300827072 236706749 607706235Transport 39321839 95965237 317915884 453202960Parking 3224138 12512077 16244018 31980233Other 000 000 000 000

Total (ZAR) 441003908 1490401353 2002209444 3933614705

Source Visitor surveys

in other sectors of the economy which results indirectly from the expenditureby festinos It is also possible to examine the income and employment effectsof the festival

Spending data The economic impact of the Grahamstown National Arts Festivalbegins with an accounting of the direct expenditure by festinos in the variousexpenditure-related sectors Festino expenditure at the festival encompassesspending on shows accommodation food and beverages retail shoppingfestival vendors and related transport and parking services (refer to Table 1)Retailing includes locations where products are consumed lsquoon-premisersquo such asstalls or vendors lsquoOff-premisersquo retail outlets are supermarkets curiosrestaurants and similar locations

Festinos spent an estimated R823 million in the local area in 2009 (Table1) About a third of this spending was for accommodation 175 for food and143 for shows attended at the festival Festinos staying overnight in hotelsaccounted for 243 of the total spending

It is sometimes mistakenly thought that initial spending accounts for atotality of the impact of the festival For example at first glance it may appearthat festino expenditures are the sum total of the impact on the provincial orlocal economy (Dunham et al 2009) However one economic activity alwaysleads to a ripple effect whereby other sectors and industries benefit from thisinitial spending This inter-industry effect of festino spending can be assessedusing multipliers derived from the provincial SAM (PROVIDE 2006)

The economic activities of the festival are linked to other industries in thelocal and provincial economies The activities required for example to producea product sold at the festival (including packaging shipping etc) generatedirect effects on the economy Regional (or indirect) impacts occur when theseactivities require purchases of goods and services from local or regionalsuppliers Additional induced impacts occur when workers involved in directand indirect activities spend their wages in the region The ratio between totaleconomic and direct impact is termed the multiplier (Dunham et al 2009)

609The significance of festivals to regional economies

This method of analysis allows the impact of festino spending at the festivalto be quantified in terms of final demand earnings (income) and employmentin the province Once the direct impact of festino spending has been calculatedthe multiplier methodology discussed below is used to calculate thecontribution of the festival and of the re-spending in the economy

Multipliers and secondary effects Various techniques can be employed to estimatethe economic impact of a festival After estimating the initial additionaldemand that is created due to the festival which in this case includes spendingby festinos the direct indirect and induced impacts should be derived (Smeral2003) The multiplier concept is termed as the nature and extent of the impactof an autonomous change in a specific economic quantity (that is expenditure)on other economic quantities such as production or employment (ConningarthConsultants 2006b) More specifically Samuelson (1970 p 226) defines themultiplier concept as lsquothe number of times the change in investment must bemultiplied in order to present us with the resulting change in incomersquo

Multipliers can be used to estimate the total economic impact of festinospending in the region and the associated economic effects (indirect andinduced) in terms of production income and jobs The basic equation forestimating the economic impacts of the festival is

Economic impact = average spending per category times multiplier

The model is of course more detailed and complex than this simple equationmay indicate The analysis is based on the consistent and comprehensive dataset concerning all mutual transactions among productive and institutionalsectors of the economy which is represented by the SAM for the Eastern CapeProvince for 2000 SAMs extend the basic IndashO concept from production toincome distribution and include both social and economic data for an economy(Raa and Sahoo 2005) A SAM consists of data from IndashO tables nationalincome statistics and household income and expenditure statistics Contrary tonational accounts lsquo a SAM attempts to classify various institutions to theirsocio-economic backgrounds instead of their economic or functional activitiesrsquo(Chowdhury and Kirkpatrick 1994) In the present case the authors used aSAM for the Eastern Cape Province which was developed by the PROVIDEproject (2006) The SAM (based on 2000 prices) used in these analysesdistinguished 34 sectors 10 household types and 4 ethnic groups

In essence the analysis is based on two model approaches The first approachis presented by a standard IndashO Leontief model for which input coefficients andLeontief multipliers (ML) have been calculated

ML = (E ndash A)ndash1

where A is the matrix of input (technical) coefficientsThe second model approach is based on extending a linear Leontief model

to a SAM framework which is performed by partitioning the accounts intoendogenous and exogenous accounts and assuming that the column coefficientsof the endogenous accounts are all constant For determining the set ofendogenous accounts it is important to know whether changes in the level ofexpenditures directly follow any change in incomes (Pyatt and Round 1985)Exogenous accounts are those for which one assumes that the expenditures are

TOURISM ECONOMICS610

set independently on incomes Standard practice is to pick up for the exogenousaccounts one or more accounts among the government capital and the rest ofthe world accounts justifying the choice on the basis of the objectives of thestudy (Hajnovicova and Lapisakova 2002)

Multipliers calculated from the SAM are the simple indicators comprisingthe important information about the structure of the Eastern Cape economyThey are calculated from the matrix of expenditure shares (general technicalcoefficients) after excluding the exogenous accounts The computed multiplierswill be sensitive to the choice of exogenous accounts and express the sensitivityof the endogenous accounts on changes in demand for exogenous accounts(Hajnovicova and Lapisakova 2002) SAM multipliers (MS) are calculated as

MS = (E ndash A)ndash1

where M is the matrix of expenditure shares of endogenous accountsComparing the multipliers calculated from the IndashO and SAM models carries

new aspects in the economic analysis The SAM multipliers are much largerthan the corresponding IndashO multipliers Because value added is a leakage onlyintermediate demand serves as a multiplier in the IndashO analysis In contrastvalue added and incomes generate demand linkages in the SAM approach SAMmultipliers capture the different multiplier effects of exogenous accounts onproductive activities factors and institutions Based on the partition of theendogenous section of the SAM into three categories of accounts (activitiescommodities factors and institutions) a matrix of multipliers can bedecomposed into four components that is initial injection transfer effectsopen-loop effects and closed-loop effects Many versions of this decompositionhave been used (Hajnovicova and Lapisakova 2002)

In analysing the productive sphere of economy a decomposition ofmultipliers by Pyatt and Round (1985) and Cardenete and Sancho (2004) wasused The matrix MS which is reduced to the Leontief multiplier matrix ML

corresponds only to the production accounts To perform the impact analysisthe MS matrix is truncated to conform to the dimension of the matrix ML

The differences between both multiplier matrices MS and ML measure theinduced effects due to the added endogeneity while the direct and indirecteffects are measured by ML Matrix MS can be decomposed into threecomponents

(MS ndash ML) which measures induced effects

(E + A) which measures direct effects

(ML ndash E ndash A) which measures indirect effects

where

MS = (MS ndash ML) + (E + A) + (ML ndash E ndash A)

A vast array of inputs was required for the analysis These were obtained fromsurveys conducted by Statistics South Africa and published in their Supply andUse Tables Detailed information on the economic composition of each sectorin the economy was obtained from these tables and formed part of the basicexogenous inputs needed for the calculation of the various multipliers

611The significance of festivals to regional economies

Table 2 Profile of festinos

Gender Male 44 female 56Age 37 yearsLanguage English 75 Afrikaans 18Province of origin Eastern Cape 45 Gauteng 21 Western Cape

17Type of show Comedy 60 drama 48 dance 38 music 31Country of residence Foreign 4 SA 96

Moreover additional information pertaining to labour numbers and capital usedwas obtained from Census 2001 and the South African Reserve Bank QuarterlyBulletin respectively (Conningarth Consultants 2006a) The exogenous inputdata (shocks) were calculated and drawn from independent surveys conductedduring 2009 by the Institute for Tourism and Leisure Studies at the arts festivalThe SAM multipliers convert the exogenous input data (shocks) to the incomegenerated and the number of jobs supported by using sets of economic ratiosand multipliers for the province Total effects are presented in aggregate formand include both indirect and induced effects (see the section below)

Assessing the economic impact of the festival

The results are discussed in two sections In the first section a brief overviewis given of the descriptive results of the surveys The second section containsthe results of the economic impact study

Profile of festinos

From Table 2 it is clear that the profile of festinos is that of predominantlyEnglish-speaking females primarily falling in the 35ndash49 year age group livingin the Eastern Cape Province and spending approximately R4700 at thefestival Approximately 4 of festinos are foreigners It is interesting to notethat the festival attracts 21 of festinos from the Gauteng Province and thatthey enjoy comedies and drama

Economic impact

Festino spending is converted to the associated increase in production incomeand jobs in the region using economic multipliers from a SAM for the EasternCape Province The classical SAMs multiplier approach employs distinctmultipliers for each expenditure-related sector The multipliers convertexpenditure into the associated increase in production jobs and income andestimate secondary effects as the festino spending circulates through the regionaleconomy To do this it is necessary to lsquocorrectrsquo the direct impact (that isexpenditure figures in Table 1) by the multiplier effect These results basedon the lsquocorrectedrsquo spending by visitors (refer to Column 2 in Tables 3ndash5) arecontained in the following subsections

TOURISM ECONOMICS612

Table 3 Impact through production multipliers (ZAR 2000 prices) ndash foreign visitors

Sector Direct Indirect Induced Total Percentageimpacta impactb impactc impactd (total)

Agriculture 351970 190320 451460 993750 010Mining 955160 621300 1037950 2614410 030Manufacturing 88935280 83983630 77989940 250908860 2740Electricity and water 17430 10650 16540 44630 000Construction 347260 331970 363570 1042800 010Trade andaccommodation 104297460 76530590 115342850 296170900 3230

Transport andcommunication 34573690 29056620 31593670 95223980 1040

Financial andbusiness services 98805220 64722330 101694130 265221690 2890

Community services 1607850 1474150 1995690 5077690 060

Total (ZAR) 329891330 256921570 330485790 917298690 10000

Notes aInitial expenditures (for example by festinos) are generally called the direct costs of an activityand their effects on the economy are direct effects bPurchases by suppliers (for example vendors hoteland restaurant owners charter operators etc) of the final goods and services of materials and supplies tosustain the original purchases are called indirect effects cInduced effects occur when workers in thesectors stimulated by direct and indirect expenditures spend their additional income on consumergoods and services dThe direct plus indirect plus induced effects equal the total effect

New money impact

This section represents only the impact of the money spent by festinos on theregional economy of the festival The usefulness of this section is that it providesa model of economic impact that calculates how much money has been broughtinto the area from festinos specifically because of the festival and allows one tofocus on the money that has been spent in the area specifically by festinos

Foreign expenditure The quantification of the direct indirect and induced impactof foreign expenditure at the Grahamstown National Arts Festival in the regionis summarized in Table 3 As this expenditure is applied partially by the foreignfestinos of the festival in the purchase of goods and services in the region thisrepresents an inflow of money in the region mobilizing economic activitygenerating employment and generating additional revenues for the provincelsquoProductionrsquo is an indication of the total turnover generated by each sector inthe regional economy As such production comprises two components demandfor intermediate inputs (resources) by an activity (domestically produced andimported goods and services) and total value added generated by an activity(Conningarth Consultants 2006b) Table 3 reflects the effects on production(using the production multipliers) by foreign expenditure resulting from thefestival

The spending of the foreign festinos in 2009 was predominantly expenditureon tourist activities From Table 3 it is clear that the largest direct impactsare in trade and accommodation (323) financial and business services (289)and manufacturing (274) Through the lsquobackward linkagesrsquo large indirectand induced impacts are also experienced in the community services sector

613The significance of festivals to regional economies

Figure 1 Foreign expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

reflecting an indirect impact of R147 thousand and an induced impact ofR200 thousand Note that if the authors ignore the direct effect in thecommunity services sector 683 of the total increase in production is as aresult of lsquobackward linkagesrsquo with direct foreign expenditure representing only317 A more detailed (disaggregated) analysis of the various sectors can bemade but falls beyond the scope of this study

All the acquisitions of goods and services from non-regional suppliers thatis suppliers outside the Eastern Cape were included in the analysis and mighttherefore have had a significant direct or indirect effect on the provincersquoseconomy By including this indirect impact although small in significance wepresent a more comprehensive estimate of the impact of the GrahamstownNational Arts Festival on the province

The value of the purchases of goods and services from regional suppliers wasthen classified using the basic sector aggregation as classified by the SouthAfrican Reserve Bank and Statistics South Africa and its distribution byactivity sector is shown in Figure 1

In terms of the analysis of the expenditure by foreign festinos the firstconclusion is that the direct effect represents 36 the indirect effect 28 andthe induced effect 36 of the total increase in foreign expenditure The secondconclusion is that the activity sectors that benefited most from the expenditureof the festivalrsquos foreign festinos were trade and accommodation financial andbusiness services and manufacturing The total impact resulting fromexpenditure by foreigners in these sectors in 2009 surpassed R92 million andrepresented some 111 of the total expenditure made by all festinos of the 2009Grahamstown National Arts Festival in the region

The rest of South Africarsquos expenditure In order to estimate the economic impactof the expenditure made by festinos residing in the rest of South Africa anapproach was followed similar to that for the expenditure by foreign festinos

100

90

80

70

60

50

40

30

20

10

0

Direct impact Indirect impact Induced impact

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

TOURISM ECONOMICS614

Table 4 Impact through production multipliers (ZAR 2000 prices) ndash rest of South Africavisitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1606060 868450 2060020 4534530 010Mining 4342400 2822110 4720450 11884950 030Manufacturing 371464640 352132290 324543490 1048140420 2490Electricity and water 77620 47450 73660 198730 000Construction 1365670 1305530 1429810 4101000 010Trade andaccommodation 464604850 340914160 513807780 1319326800 3140

Transport andcommunication 277775630 233449830 253833250 765058700 1820

Financial andbusiness services 381484190 249891110 392638170 1024013470 2440

Community services 8100740 7427150 10054790 25582670 060

Total (ZAR) 1510821800 1188858060 1503161410 4202841280 10000

Table 4 reflects the effects on production (using the production multipliers)by expenditure of festinos from the rest of South Africa resulting from thefestival

Table 4 illustrates that the largest direct impacts are in trade and accom-modation (314) in manufacturing (249) and in financial and businessservices (244) Through the lsquobackward linkagesrsquo large indirect and inducedimpacts are also experienced in the transport and communication sector (see alsoFigure 2) reflecting an indirect impact of R23 million and an induced impactof R25 million If the direct effect in the transport and communication sectoris ignored 637 of the total increase in production is a result of lsquobackwardlinkagesrsquo with direct expenditure by festinos from the rest of South Africarepresenting only 363 of the total impact

Based on the data collected the authors estimated that total impact ofexpenditure by festinos from the rest of South Africa in the region might exceedR420 million (approximately 509 of total expenditure) Figure 2 presentsthe total expenditure per activity sector by festinos from the rest of South Africa

As in the case of foreigners the results of the study suggest that the sectorsthat benefit most from expenditure by festinos from the rest of South Africa arein order of importance trade and accommodation manufacturing and financialand business services (please refer to Figure 2) The expenditure in these threesectors of economic activity represents more than 81 of the total expenditureby the festinos from the rest of South Africa at the festival

The analysis of the expenditure by festinos from the rest of South Africaindicates that the direct effect represents 359 the indirect effect 283 andthe induced effect 358 of the total increase in local expenditure Given theestimation of the economic impact presented above it should be kept in mindthat by definition calculation of the economic impact should include only theexpenditure that would not have occurred in the absence of the event

615The significance of festivals to regional economies

Figure 2 Rest of South African expenditure in the region per activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

Retained locals

The retained local section focuses on money that would have left the area ifthe festival had not been held The retained local model allows us to see howfestivals and other events contribute to the local economy by encouraging theirresidents to stay and spend recreation rands within the area

Eastern Cape expenditure In order to estimate the economic impact of theexpenditure made by festinos residing in the Eastern Cape a similar approachwas followed as that with the expenditure of foreign festinos and festinos residingin the rest of South Africa Based on the information collected from the surveyscarried out during the 2009 festival the authors estimated that the directimpact in the region resulting from the localsrsquo expenditure amounted toapproximately R112 million (approximately 379 of total expenditure)distributed among the nine activity sectors as presented in Figure 3

The value of the purchases of goods and services made to regional suppliersby festinos residing in the Eastern Cape is presented in Figure 3

The activity sectors that benefited most from expenditure by locals inrelation with the Grahamstown National Arts Festival were trade and accom-modation financial and business services manufacturing and to a lesser extenttransport and communication Given that these festinos hailed from the EasternCape it was understandable that their expenditure in the latter sectors wouldbe less than that of foreigners and non-Eastern Cape residents (please refer toFigure 3)

It is important to note that the direct impact of the localsrsquo expenditure(R112 million) represents more than 379 of the adjusted total expenditureof all festinos (R297 million) of the festival in 2009 The quantification of thedirect indirect and induced impact of localsrsquo expenditure at the festival in theregion is summarized in Table 5

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

TOURISM ECONOMICS616

Figure 3 Local expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

In Table 5 it is clear that the largest direct impact is on trade andaccommodation (330) and on financial and business services (330) Throughthe lsquobackward linkagesrsquo large indirect and induced impacts are also experiencedin the manufacturing sector reflecting an indirect impact of R27 million andan induced impact of R25 million If the direct effect in the manufacturingsector is ignored 646 of the total increase in production is as a result oflsquobackward linkagesrsquo with direct local expenditure representing only 354 ofthe total impact

Regarding the analysis of the expenditure of festinos from the Eastern Capeit can be concluded that the direct effect represents 360 the indirect effect277 and the induced effect 363 of the total increase in local expenditureBy including the expenditure that would have occurred in the region independ-ently of the existence of the festival less conservative figures for the economicimpact are estimated It is reasonable to expect that in the absence of thefestival the available revenue from these local festinos would have been less andas such its volume of expenditure in the region would have been less

Overall impact

This section represents the overall spending in the local economy that can beattributed to the festival by festinos (locals and visitors from abroad and fromthe rest of South Africa) Although the locals do not bring money into thecommunity from outside regions as visitors do it is valuable to include theirspending as it has the effect of initiating economic activity within the localeconomy Examined in this way a festivalrsquos contribution to a local economy iscomparable to a local business that both draws money from and contributes toits community To consider only the tourist rand in terms of economic impactwould underestimate greatly the complete financial benefits of festivals and

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

617The significance of festivals to regional economies

Table 5 Impact through production multipliers (ZAR 2000 prices) ndash local visitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1080730 584390 1386210 3051330 010Mining 2953680 1924390 3207390 8085460 030Manufacturing 281313440 266795820 245513980 793623240 2540Electricity and water 60580 37030 57490 155100 000Construction 1332640 1273950 1395220 4001810 010Trade andaccommodation 362634420 266091090 401038400 1029763910 3300

Transport andcommunication 84956440 71399590 77633770 233989810 750

Financial andbusiness services 384186600 251661330 395419600 1031267530 3300

Community services 6239660 5720810 7744770 19705250 060

Total (in ZAR) 1124758190 865488410 1133396830 3123643440 10000

similar events In addition this study recognizes that without festivals asignificant amount of money would leave the area due to locals seeking analternative venue for entertainment in other regions

This study has determined that the usefulness of the overall impact is thatit allows one to measure the amount of money that the festival circulatesthrough the local economy from every source from which the festival drawsfinancial impact However in order to evaluate the total impact of the festivalin the region it is necessary to lsquocorrectrsquo the direct impact by the multipliereffect Hence as a way of estimating the total impact of the GrahamstownNational Arts Festival in the region production multipliers were used for eachone of the activity sectors The multiplication of the direct impact in eachactivity sector for the specific production multipliers gives the total impact ofthe festival for each of the regional economy sectors as indicated in Table 6below The sum of the impacts in each of the sectors gives us in turn anestimate of the total impact of the festival in the region

The analysis of the results indicates that the direct economic impact of thefestival and its visitors in the region (which is in the order of R297 million)can result in an additional R527 million of indirect impact giving a totalannual impact in the region in excess of R824 million That is equivalent toan aggregated production multiplier in the order of 277 Therefore for eachrand spent by festinos in the region 177 cents are generated additionally interms of indirect expenditure The aggregated production multiplier is obtainedby dividing the total impact by the direct impact

Considering the multipliers for each component (foreign local and the restof South Africa) of expenditures one can say that those resulting from out-of-province festinos have a greater impact as multiplier (279) than does spendingby foreign and local festinos on production (277) This means that for each randspent at the festival by out-of-province festinos an additional R179 is generatedin the Eastern Cape economy (see Tables 4 and 6)

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

TOURISM ECONOMICS606

total economic impact of a single short-term event in South Africarsquos EasternCape Province using multipliers calculated from a SAM model SAMs quantifyat a point in time the economic interdependencies in an economy such as aprovinceregion or country and contain more social detail Tourism studies thathave used SAM multipliers include Aruna et al (1998) Grado and Lord (1998)Kim et al (1998) Crompton (1999) and Frechtling and Horvath (1999) Theclassical SAMs multiplier approach is used in this study to determine how muchoutput income and value added are generated by tourist expenditures at thefestival

In recent years there has been a move to standardize the evaluation of festivalsand events through the adoption of applied general equilibrium (AGE)modelling for determining economic impact (Brown and Trimboli 2007) Whereinputndashoutput (IndashO) models which had provided results that often overstatedthe financial outcomes and economic impacts of the events or festivals underinvestigation were previously employed AGE models accounted forquantitative adjustments in demand leading to rising prices and so curtailed thefixed price adjustment that occurred under linear-type models (Jago and Dwyer2006)

Jago and Dwyer (2006) also contend that the social impact of festivals andevents rather than the economic impact may provide a more compellingargument for the continued existence financial support and sponsorship of suchfestivals or events It is therefore crucial for societies to look lsquoeconomy-widersquoin their development philosophies and policies For this reason AGE modelsalso seem to be a more suitable measurement tool

However despite these fundamental insights this study makes use ofmultipliers calculated from a linear (IndashO or SAM) model to evaluate the impactof spending at the Grahamstown National Arts Festival for numerous reasonsSome of these reasons are that to date methods or tools to assess the subnationalimpacts of events or festivals have been lacking One reason is that economicdata which allow quantitative simulation of policy impacts are much richerat the national level As a result top-down approaches are often used to estimatethe impact of events on South Africarsquos provinces This however ignores manyregional-level factors such as the effect of the local environment on economicactivity the proximity of firms from distinctive resources (clusters) and thequality of the regional labour market (Wing and Anderson 2004) Moreoverthe existing AGE models for South Africa are by now dated and would provideunreliable results For future studies of this sort it would however be moresuitable to use a current AGE model to conduct the analysis

Bowitz and Ibenholt (2009) believe that studies such as this are importantbecause policy makers and sponsors increasingly seem to demand estimates ofthe effects on the local or regional economy of investing or sponsoring arts andcultural events Saayman and Rossouw (2008) indicate that consultants seemto exaggerate the potential of economic spin-offs from hosting events whileanother school of thought is of the view that true impact cannot be determinedin the short run and it may take years before one can see the financial impactof these events Despite these diverse schools of thought it nevertheless remainsimportant to conduct research regularly in order to enable informed decisionsThese include policy marketing strategic management and investmentdecisions

607The significance of festivals to regional economies

Method of research

The method used in the research will be discussed in the following sectionsincluding the sampling method questionnaire used data collection and dataanalysis Since the research required the collection of primary data a visitorsurvey was conducted over a period of six days at the Grahamstown NationalArts Festival during JuneJuly 2009

Sampling

Sampling was based on the availability and willingness of visitors to completethe questionnaire Cooper and Emory (1995) show that for a population of100000 (N) the recommended sample size is 384 Since this festival attractedapproximately 33000 visitors (Slabbert et al 2009) it was decided to distribute450 questionnaires to ensure a sufficient number of completed questionnaires

Questionnaire

The questionnaire used was similar to previous questionnaires used by Saaymanand Saayman (2006) at the Klein Karoo National Arts Festival (KKNK) andat the Aardklop National Arts Festival in South Africa The questionnaireincluded questions of a demographic nature (age gender language occupationprovince of origin) as well as travel and participation behaviour (number ofpeople in the group days spent at the festival spending at the festival andgenres of productions attended)

Data collection

As mentioned earlier this festival consists of two parts a fringe programmeand the main programme The fringe programme is hosted first and thereafterthe main programme The focus of the survey was on the main programmeas the fringe programme was aimed specifically at the community ofGrahamstown All questionnaires were completed at the main festival groundswhere fieldworkers circulated to minimize bias Questionnaires were distributedprogressively during the last six days of the festival Therefore fieldworkersdistributed 50 questionnaires on day one and increased the number by 10 perday for six days Of the 450 questionnaires distributed 435 questionnaires werecollected for data capture during the festival

Data analysis

Data were coded in Microsoft Excel and processed using SPSS (StatisticalPackage for the Social Sciences) The method used to estimate the directindirect and induced effects of the festival was a SAM multiplier analysis Themain application of this form of analysis is to examine the effects on theeconomy of a change in final consumption expenditure by festinos

Multipliers derived from a SAM for the Eastern Cape Province have beenemployed as summary measures that quantify direct indirect and inducedeffects on all industries of changes in demand for the output of any one industryIn this way SAM multipliers allow the quantification of the increased activity

TOURISM ECONOMICS608

Table 1 Total festino spending at the 2009 Grahamstown National Arts Festival (in ZAR)

Spending item Foreign Eastern Cape Rest of SA Total

Shows 56800460 192885398 253383491 503069348Accommodation 119862069 298189881 484169149 902221098Food 82057471 251960061 374433932 708451464Alcoholic beverages 38133333 92794875 142066574 272994783Non-alcoholic beverages 16133333 73725819 59608132 149467284Retail 15298851 171540933 117681516 304521299Stalls 70172414 300827072 236706749 607706235Transport 39321839 95965237 317915884 453202960Parking 3224138 12512077 16244018 31980233Other 000 000 000 000

Total (ZAR) 441003908 1490401353 2002209444 3933614705

Source Visitor surveys

in other sectors of the economy which results indirectly from the expenditureby festinos It is also possible to examine the income and employment effectsof the festival

Spending data The economic impact of the Grahamstown National Arts Festivalbegins with an accounting of the direct expenditure by festinos in the variousexpenditure-related sectors Festino expenditure at the festival encompassesspending on shows accommodation food and beverages retail shoppingfestival vendors and related transport and parking services (refer to Table 1)Retailing includes locations where products are consumed lsquoon-premisersquo such asstalls or vendors lsquoOff-premisersquo retail outlets are supermarkets curiosrestaurants and similar locations

Festinos spent an estimated R823 million in the local area in 2009 (Table1) About a third of this spending was for accommodation 175 for food and143 for shows attended at the festival Festinos staying overnight in hotelsaccounted for 243 of the total spending

It is sometimes mistakenly thought that initial spending accounts for atotality of the impact of the festival For example at first glance it may appearthat festino expenditures are the sum total of the impact on the provincial orlocal economy (Dunham et al 2009) However one economic activity alwaysleads to a ripple effect whereby other sectors and industries benefit from thisinitial spending This inter-industry effect of festino spending can be assessedusing multipliers derived from the provincial SAM (PROVIDE 2006)

The economic activities of the festival are linked to other industries in thelocal and provincial economies The activities required for example to producea product sold at the festival (including packaging shipping etc) generatedirect effects on the economy Regional (or indirect) impacts occur when theseactivities require purchases of goods and services from local or regionalsuppliers Additional induced impacts occur when workers involved in directand indirect activities spend their wages in the region The ratio between totaleconomic and direct impact is termed the multiplier (Dunham et al 2009)

609The significance of festivals to regional economies

This method of analysis allows the impact of festino spending at the festivalto be quantified in terms of final demand earnings (income) and employmentin the province Once the direct impact of festino spending has been calculatedthe multiplier methodology discussed below is used to calculate thecontribution of the festival and of the re-spending in the economy

Multipliers and secondary effects Various techniques can be employed to estimatethe economic impact of a festival After estimating the initial additionaldemand that is created due to the festival which in this case includes spendingby festinos the direct indirect and induced impacts should be derived (Smeral2003) The multiplier concept is termed as the nature and extent of the impactof an autonomous change in a specific economic quantity (that is expenditure)on other economic quantities such as production or employment (ConningarthConsultants 2006b) More specifically Samuelson (1970 p 226) defines themultiplier concept as lsquothe number of times the change in investment must bemultiplied in order to present us with the resulting change in incomersquo

Multipliers can be used to estimate the total economic impact of festinospending in the region and the associated economic effects (indirect andinduced) in terms of production income and jobs The basic equation forestimating the economic impacts of the festival is

Economic impact = average spending per category times multiplier

The model is of course more detailed and complex than this simple equationmay indicate The analysis is based on the consistent and comprehensive dataset concerning all mutual transactions among productive and institutionalsectors of the economy which is represented by the SAM for the Eastern CapeProvince for 2000 SAMs extend the basic IndashO concept from production toincome distribution and include both social and economic data for an economy(Raa and Sahoo 2005) A SAM consists of data from IndashO tables nationalincome statistics and household income and expenditure statistics Contrary tonational accounts lsquo a SAM attempts to classify various institutions to theirsocio-economic backgrounds instead of their economic or functional activitiesrsquo(Chowdhury and Kirkpatrick 1994) In the present case the authors used aSAM for the Eastern Cape Province which was developed by the PROVIDEproject (2006) The SAM (based on 2000 prices) used in these analysesdistinguished 34 sectors 10 household types and 4 ethnic groups

In essence the analysis is based on two model approaches The first approachis presented by a standard IndashO Leontief model for which input coefficients andLeontief multipliers (ML) have been calculated

ML = (E ndash A)ndash1

where A is the matrix of input (technical) coefficientsThe second model approach is based on extending a linear Leontief model

to a SAM framework which is performed by partitioning the accounts intoendogenous and exogenous accounts and assuming that the column coefficientsof the endogenous accounts are all constant For determining the set ofendogenous accounts it is important to know whether changes in the level ofexpenditures directly follow any change in incomes (Pyatt and Round 1985)Exogenous accounts are those for which one assumes that the expenditures are

TOURISM ECONOMICS610

set independently on incomes Standard practice is to pick up for the exogenousaccounts one or more accounts among the government capital and the rest ofthe world accounts justifying the choice on the basis of the objectives of thestudy (Hajnovicova and Lapisakova 2002)

Multipliers calculated from the SAM are the simple indicators comprisingthe important information about the structure of the Eastern Cape economyThey are calculated from the matrix of expenditure shares (general technicalcoefficients) after excluding the exogenous accounts The computed multiplierswill be sensitive to the choice of exogenous accounts and express the sensitivityof the endogenous accounts on changes in demand for exogenous accounts(Hajnovicova and Lapisakova 2002) SAM multipliers (MS) are calculated as

MS = (E ndash A)ndash1

where M is the matrix of expenditure shares of endogenous accountsComparing the multipliers calculated from the IndashO and SAM models carries

new aspects in the economic analysis The SAM multipliers are much largerthan the corresponding IndashO multipliers Because value added is a leakage onlyintermediate demand serves as a multiplier in the IndashO analysis In contrastvalue added and incomes generate demand linkages in the SAM approach SAMmultipliers capture the different multiplier effects of exogenous accounts onproductive activities factors and institutions Based on the partition of theendogenous section of the SAM into three categories of accounts (activitiescommodities factors and institutions) a matrix of multipliers can bedecomposed into four components that is initial injection transfer effectsopen-loop effects and closed-loop effects Many versions of this decompositionhave been used (Hajnovicova and Lapisakova 2002)

In analysing the productive sphere of economy a decomposition ofmultipliers by Pyatt and Round (1985) and Cardenete and Sancho (2004) wasused The matrix MS which is reduced to the Leontief multiplier matrix ML

corresponds only to the production accounts To perform the impact analysisthe MS matrix is truncated to conform to the dimension of the matrix ML

The differences between both multiplier matrices MS and ML measure theinduced effects due to the added endogeneity while the direct and indirecteffects are measured by ML Matrix MS can be decomposed into threecomponents

(MS ndash ML) which measures induced effects

(E + A) which measures direct effects

(ML ndash E ndash A) which measures indirect effects

where

MS = (MS ndash ML) + (E + A) + (ML ndash E ndash A)

A vast array of inputs was required for the analysis These were obtained fromsurveys conducted by Statistics South Africa and published in their Supply andUse Tables Detailed information on the economic composition of each sectorin the economy was obtained from these tables and formed part of the basicexogenous inputs needed for the calculation of the various multipliers

611The significance of festivals to regional economies

Table 2 Profile of festinos

Gender Male 44 female 56Age 37 yearsLanguage English 75 Afrikaans 18Province of origin Eastern Cape 45 Gauteng 21 Western Cape

17Type of show Comedy 60 drama 48 dance 38 music 31Country of residence Foreign 4 SA 96

Moreover additional information pertaining to labour numbers and capital usedwas obtained from Census 2001 and the South African Reserve Bank QuarterlyBulletin respectively (Conningarth Consultants 2006a) The exogenous inputdata (shocks) were calculated and drawn from independent surveys conductedduring 2009 by the Institute for Tourism and Leisure Studies at the arts festivalThe SAM multipliers convert the exogenous input data (shocks) to the incomegenerated and the number of jobs supported by using sets of economic ratiosand multipliers for the province Total effects are presented in aggregate formand include both indirect and induced effects (see the section below)

Assessing the economic impact of the festival

The results are discussed in two sections In the first section a brief overviewis given of the descriptive results of the surveys The second section containsthe results of the economic impact study

Profile of festinos

From Table 2 it is clear that the profile of festinos is that of predominantlyEnglish-speaking females primarily falling in the 35ndash49 year age group livingin the Eastern Cape Province and spending approximately R4700 at thefestival Approximately 4 of festinos are foreigners It is interesting to notethat the festival attracts 21 of festinos from the Gauteng Province and thatthey enjoy comedies and drama

Economic impact

Festino spending is converted to the associated increase in production incomeand jobs in the region using economic multipliers from a SAM for the EasternCape Province The classical SAMs multiplier approach employs distinctmultipliers for each expenditure-related sector The multipliers convertexpenditure into the associated increase in production jobs and income andestimate secondary effects as the festino spending circulates through the regionaleconomy To do this it is necessary to lsquocorrectrsquo the direct impact (that isexpenditure figures in Table 1) by the multiplier effect These results basedon the lsquocorrectedrsquo spending by visitors (refer to Column 2 in Tables 3ndash5) arecontained in the following subsections

TOURISM ECONOMICS612

Table 3 Impact through production multipliers (ZAR 2000 prices) ndash foreign visitors

Sector Direct Indirect Induced Total Percentageimpacta impactb impactc impactd (total)

Agriculture 351970 190320 451460 993750 010Mining 955160 621300 1037950 2614410 030Manufacturing 88935280 83983630 77989940 250908860 2740Electricity and water 17430 10650 16540 44630 000Construction 347260 331970 363570 1042800 010Trade andaccommodation 104297460 76530590 115342850 296170900 3230

Transport andcommunication 34573690 29056620 31593670 95223980 1040

Financial andbusiness services 98805220 64722330 101694130 265221690 2890

Community services 1607850 1474150 1995690 5077690 060

Total (ZAR) 329891330 256921570 330485790 917298690 10000

Notes aInitial expenditures (for example by festinos) are generally called the direct costs of an activityand their effects on the economy are direct effects bPurchases by suppliers (for example vendors hoteland restaurant owners charter operators etc) of the final goods and services of materials and supplies tosustain the original purchases are called indirect effects cInduced effects occur when workers in thesectors stimulated by direct and indirect expenditures spend their additional income on consumergoods and services dThe direct plus indirect plus induced effects equal the total effect

New money impact

This section represents only the impact of the money spent by festinos on theregional economy of the festival The usefulness of this section is that it providesa model of economic impact that calculates how much money has been broughtinto the area from festinos specifically because of the festival and allows one tofocus on the money that has been spent in the area specifically by festinos

Foreign expenditure The quantification of the direct indirect and induced impactof foreign expenditure at the Grahamstown National Arts Festival in the regionis summarized in Table 3 As this expenditure is applied partially by the foreignfestinos of the festival in the purchase of goods and services in the region thisrepresents an inflow of money in the region mobilizing economic activitygenerating employment and generating additional revenues for the provincelsquoProductionrsquo is an indication of the total turnover generated by each sector inthe regional economy As such production comprises two components demandfor intermediate inputs (resources) by an activity (domestically produced andimported goods and services) and total value added generated by an activity(Conningarth Consultants 2006b) Table 3 reflects the effects on production(using the production multipliers) by foreign expenditure resulting from thefestival

The spending of the foreign festinos in 2009 was predominantly expenditureon tourist activities From Table 3 it is clear that the largest direct impactsare in trade and accommodation (323) financial and business services (289)and manufacturing (274) Through the lsquobackward linkagesrsquo large indirectand induced impacts are also experienced in the community services sector

613The significance of festivals to regional economies

Figure 1 Foreign expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

reflecting an indirect impact of R147 thousand and an induced impact ofR200 thousand Note that if the authors ignore the direct effect in thecommunity services sector 683 of the total increase in production is as aresult of lsquobackward linkagesrsquo with direct foreign expenditure representing only317 A more detailed (disaggregated) analysis of the various sectors can bemade but falls beyond the scope of this study

All the acquisitions of goods and services from non-regional suppliers thatis suppliers outside the Eastern Cape were included in the analysis and mighttherefore have had a significant direct or indirect effect on the provincersquoseconomy By including this indirect impact although small in significance wepresent a more comprehensive estimate of the impact of the GrahamstownNational Arts Festival on the province

The value of the purchases of goods and services from regional suppliers wasthen classified using the basic sector aggregation as classified by the SouthAfrican Reserve Bank and Statistics South Africa and its distribution byactivity sector is shown in Figure 1

In terms of the analysis of the expenditure by foreign festinos the firstconclusion is that the direct effect represents 36 the indirect effect 28 andthe induced effect 36 of the total increase in foreign expenditure The secondconclusion is that the activity sectors that benefited most from the expenditureof the festivalrsquos foreign festinos were trade and accommodation financial andbusiness services and manufacturing The total impact resulting fromexpenditure by foreigners in these sectors in 2009 surpassed R92 million andrepresented some 111 of the total expenditure made by all festinos of the 2009Grahamstown National Arts Festival in the region

The rest of South Africarsquos expenditure In order to estimate the economic impactof the expenditure made by festinos residing in the rest of South Africa anapproach was followed similar to that for the expenditure by foreign festinos

100

90

80

70

60

50

40

30

20

10

0

Direct impact Indirect impact Induced impact

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

TOURISM ECONOMICS614

Table 4 Impact through production multipliers (ZAR 2000 prices) ndash rest of South Africavisitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1606060 868450 2060020 4534530 010Mining 4342400 2822110 4720450 11884950 030Manufacturing 371464640 352132290 324543490 1048140420 2490Electricity and water 77620 47450 73660 198730 000Construction 1365670 1305530 1429810 4101000 010Trade andaccommodation 464604850 340914160 513807780 1319326800 3140

Transport andcommunication 277775630 233449830 253833250 765058700 1820

Financial andbusiness services 381484190 249891110 392638170 1024013470 2440

Community services 8100740 7427150 10054790 25582670 060

Total (ZAR) 1510821800 1188858060 1503161410 4202841280 10000

Table 4 reflects the effects on production (using the production multipliers)by expenditure of festinos from the rest of South Africa resulting from thefestival

Table 4 illustrates that the largest direct impacts are in trade and accom-modation (314) in manufacturing (249) and in financial and businessservices (244) Through the lsquobackward linkagesrsquo large indirect and inducedimpacts are also experienced in the transport and communication sector (see alsoFigure 2) reflecting an indirect impact of R23 million and an induced impactof R25 million If the direct effect in the transport and communication sectoris ignored 637 of the total increase in production is a result of lsquobackwardlinkagesrsquo with direct expenditure by festinos from the rest of South Africarepresenting only 363 of the total impact

Based on the data collected the authors estimated that total impact ofexpenditure by festinos from the rest of South Africa in the region might exceedR420 million (approximately 509 of total expenditure) Figure 2 presentsthe total expenditure per activity sector by festinos from the rest of South Africa

As in the case of foreigners the results of the study suggest that the sectorsthat benefit most from expenditure by festinos from the rest of South Africa arein order of importance trade and accommodation manufacturing and financialand business services (please refer to Figure 2) The expenditure in these threesectors of economic activity represents more than 81 of the total expenditureby the festinos from the rest of South Africa at the festival

The analysis of the expenditure by festinos from the rest of South Africaindicates that the direct effect represents 359 the indirect effect 283 andthe induced effect 358 of the total increase in local expenditure Given theestimation of the economic impact presented above it should be kept in mindthat by definition calculation of the economic impact should include only theexpenditure that would not have occurred in the absence of the event

615The significance of festivals to regional economies

Figure 2 Rest of South African expenditure in the region per activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

Retained locals

The retained local section focuses on money that would have left the area ifthe festival had not been held The retained local model allows us to see howfestivals and other events contribute to the local economy by encouraging theirresidents to stay and spend recreation rands within the area

Eastern Cape expenditure In order to estimate the economic impact of theexpenditure made by festinos residing in the Eastern Cape a similar approachwas followed as that with the expenditure of foreign festinos and festinos residingin the rest of South Africa Based on the information collected from the surveyscarried out during the 2009 festival the authors estimated that the directimpact in the region resulting from the localsrsquo expenditure amounted toapproximately R112 million (approximately 379 of total expenditure)distributed among the nine activity sectors as presented in Figure 3

The value of the purchases of goods and services made to regional suppliersby festinos residing in the Eastern Cape is presented in Figure 3

The activity sectors that benefited most from expenditure by locals inrelation with the Grahamstown National Arts Festival were trade and accom-modation financial and business services manufacturing and to a lesser extenttransport and communication Given that these festinos hailed from the EasternCape it was understandable that their expenditure in the latter sectors wouldbe less than that of foreigners and non-Eastern Cape residents (please refer toFigure 3)

It is important to note that the direct impact of the localsrsquo expenditure(R112 million) represents more than 379 of the adjusted total expenditureof all festinos (R297 million) of the festival in 2009 The quantification of thedirect indirect and induced impact of localsrsquo expenditure at the festival in theregion is summarized in Table 5

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

TOURISM ECONOMICS616

Figure 3 Local expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

In Table 5 it is clear that the largest direct impact is on trade andaccommodation (330) and on financial and business services (330) Throughthe lsquobackward linkagesrsquo large indirect and induced impacts are also experiencedin the manufacturing sector reflecting an indirect impact of R27 million andan induced impact of R25 million If the direct effect in the manufacturingsector is ignored 646 of the total increase in production is as a result oflsquobackward linkagesrsquo with direct local expenditure representing only 354 ofthe total impact

Regarding the analysis of the expenditure of festinos from the Eastern Capeit can be concluded that the direct effect represents 360 the indirect effect277 and the induced effect 363 of the total increase in local expenditureBy including the expenditure that would have occurred in the region independ-ently of the existence of the festival less conservative figures for the economicimpact are estimated It is reasonable to expect that in the absence of thefestival the available revenue from these local festinos would have been less andas such its volume of expenditure in the region would have been less

Overall impact

This section represents the overall spending in the local economy that can beattributed to the festival by festinos (locals and visitors from abroad and fromthe rest of South Africa) Although the locals do not bring money into thecommunity from outside regions as visitors do it is valuable to include theirspending as it has the effect of initiating economic activity within the localeconomy Examined in this way a festivalrsquos contribution to a local economy iscomparable to a local business that both draws money from and contributes toits community To consider only the tourist rand in terms of economic impactwould underestimate greatly the complete financial benefits of festivals and

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

617The significance of festivals to regional economies

Table 5 Impact through production multipliers (ZAR 2000 prices) ndash local visitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1080730 584390 1386210 3051330 010Mining 2953680 1924390 3207390 8085460 030Manufacturing 281313440 266795820 245513980 793623240 2540Electricity and water 60580 37030 57490 155100 000Construction 1332640 1273950 1395220 4001810 010Trade andaccommodation 362634420 266091090 401038400 1029763910 3300

Transport andcommunication 84956440 71399590 77633770 233989810 750

Financial andbusiness services 384186600 251661330 395419600 1031267530 3300

Community services 6239660 5720810 7744770 19705250 060

Total (in ZAR) 1124758190 865488410 1133396830 3123643440 10000

similar events In addition this study recognizes that without festivals asignificant amount of money would leave the area due to locals seeking analternative venue for entertainment in other regions

This study has determined that the usefulness of the overall impact is thatit allows one to measure the amount of money that the festival circulatesthrough the local economy from every source from which the festival drawsfinancial impact However in order to evaluate the total impact of the festivalin the region it is necessary to lsquocorrectrsquo the direct impact by the multipliereffect Hence as a way of estimating the total impact of the GrahamstownNational Arts Festival in the region production multipliers were used for eachone of the activity sectors The multiplication of the direct impact in eachactivity sector for the specific production multipliers gives the total impact ofthe festival for each of the regional economy sectors as indicated in Table 6below The sum of the impacts in each of the sectors gives us in turn anestimate of the total impact of the festival in the region

The analysis of the results indicates that the direct economic impact of thefestival and its visitors in the region (which is in the order of R297 million)can result in an additional R527 million of indirect impact giving a totalannual impact in the region in excess of R824 million That is equivalent toan aggregated production multiplier in the order of 277 Therefore for eachrand spent by festinos in the region 177 cents are generated additionally interms of indirect expenditure The aggregated production multiplier is obtainedby dividing the total impact by the direct impact

Considering the multipliers for each component (foreign local and the restof South Africa) of expenditures one can say that those resulting from out-of-province festinos have a greater impact as multiplier (279) than does spendingby foreign and local festinos on production (277) This means that for each randspent at the festival by out-of-province festinos an additional R179 is generatedin the Eastern Cape economy (see Tables 4 and 6)

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

607The significance of festivals to regional economies

Method of research

The method used in the research will be discussed in the following sectionsincluding the sampling method questionnaire used data collection and dataanalysis Since the research required the collection of primary data a visitorsurvey was conducted over a period of six days at the Grahamstown NationalArts Festival during JuneJuly 2009

Sampling

Sampling was based on the availability and willingness of visitors to completethe questionnaire Cooper and Emory (1995) show that for a population of100000 (N) the recommended sample size is 384 Since this festival attractedapproximately 33000 visitors (Slabbert et al 2009) it was decided to distribute450 questionnaires to ensure a sufficient number of completed questionnaires

Questionnaire

The questionnaire used was similar to previous questionnaires used by Saaymanand Saayman (2006) at the Klein Karoo National Arts Festival (KKNK) andat the Aardklop National Arts Festival in South Africa The questionnaireincluded questions of a demographic nature (age gender language occupationprovince of origin) as well as travel and participation behaviour (number ofpeople in the group days spent at the festival spending at the festival andgenres of productions attended)

Data collection

As mentioned earlier this festival consists of two parts a fringe programmeand the main programme The fringe programme is hosted first and thereafterthe main programme The focus of the survey was on the main programmeas the fringe programme was aimed specifically at the community ofGrahamstown All questionnaires were completed at the main festival groundswhere fieldworkers circulated to minimize bias Questionnaires were distributedprogressively during the last six days of the festival Therefore fieldworkersdistributed 50 questionnaires on day one and increased the number by 10 perday for six days Of the 450 questionnaires distributed 435 questionnaires werecollected for data capture during the festival

Data analysis

Data were coded in Microsoft Excel and processed using SPSS (StatisticalPackage for the Social Sciences) The method used to estimate the directindirect and induced effects of the festival was a SAM multiplier analysis Themain application of this form of analysis is to examine the effects on theeconomy of a change in final consumption expenditure by festinos

Multipliers derived from a SAM for the Eastern Cape Province have beenemployed as summary measures that quantify direct indirect and inducedeffects on all industries of changes in demand for the output of any one industryIn this way SAM multipliers allow the quantification of the increased activity

TOURISM ECONOMICS608

Table 1 Total festino spending at the 2009 Grahamstown National Arts Festival (in ZAR)

Spending item Foreign Eastern Cape Rest of SA Total

Shows 56800460 192885398 253383491 503069348Accommodation 119862069 298189881 484169149 902221098Food 82057471 251960061 374433932 708451464Alcoholic beverages 38133333 92794875 142066574 272994783Non-alcoholic beverages 16133333 73725819 59608132 149467284Retail 15298851 171540933 117681516 304521299Stalls 70172414 300827072 236706749 607706235Transport 39321839 95965237 317915884 453202960Parking 3224138 12512077 16244018 31980233Other 000 000 000 000

Total (ZAR) 441003908 1490401353 2002209444 3933614705

Source Visitor surveys

in other sectors of the economy which results indirectly from the expenditureby festinos It is also possible to examine the income and employment effectsof the festival

Spending data The economic impact of the Grahamstown National Arts Festivalbegins with an accounting of the direct expenditure by festinos in the variousexpenditure-related sectors Festino expenditure at the festival encompassesspending on shows accommodation food and beverages retail shoppingfestival vendors and related transport and parking services (refer to Table 1)Retailing includes locations where products are consumed lsquoon-premisersquo such asstalls or vendors lsquoOff-premisersquo retail outlets are supermarkets curiosrestaurants and similar locations

Festinos spent an estimated R823 million in the local area in 2009 (Table1) About a third of this spending was for accommodation 175 for food and143 for shows attended at the festival Festinos staying overnight in hotelsaccounted for 243 of the total spending

It is sometimes mistakenly thought that initial spending accounts for atotality of the impact of the festival For example at first glance it may appearthat festino expenditures are the sum total of the impact on the provincial orlocal economy (Dunham et al 2009) However one economic activity alwaysleads to a ripple effect whereby other sectors and industries benefit from thisinitial spending This inter-industry effect of festino spending can be assessedusing multipliers derived from the provincial SAM (PROVIDE 2006)

The economic activities of the festival are linked to other industries in thelocal and provincial economies The activities required for example to producea product sold at the festival (including packaging shipping etc) generatedirect effects on the economy Regional (or indirect) impacts occur when theseactivities require purchases of goods and services from local or regionalsuppliers Additional induced impacts occur when workers involved in directand indirect activities spend their wages in the region The ratio between totaleconomic and direct impact is termed the multiplier (Dunham et al 2009)

609The significance of festivals to regional economies

This method of analysis allows the impact of festino spending at the festivalto be quantified in terms of final demand earnings (income) and employmentin the province Once the direct impact of festino spending has been calculatedthe multiplier methodology discussed below is used to calculate thecontribution of the festival and of the re-spending in the economy

Multipliers and secondary effects Various techniques can be employed to estimatethe economic impact of a festival After estimating the initial additionaldemand that is created due to the festival which in this case includes spendingby festinos the direct indirect and induced impacts should be derived (Smeral2003) The multiplier concept is termed as the nature and extent of the impactof an autonomous change in a specific economic quantity (that is expenditure)on other economic quantities such as production or employment (ConningarthConsultants 2006b) More specifically Samuelson (1970 p 226) defines themultiplier concept as lsquothe number of times the change in investment must bemultiplied in order to present us with the resulting change in incomersquo

Multipliers can be used to estimate the total economic impact of festinospending in the region and the associated economic effects (indirect andinduced) in terms of production income and jobs The basic equation forestimating the economic impacts of the festival is

Economic impact = average spending per category times multiplier

The model is of course more detailed and complex than this simple equationmay indicate The analysis is based on the consistent and comprehensive dataset concerning all mutual transactions among productive and institutionalsectors of the economy which is represented by the SAM for the Eastern CapeProvince for 2000 SAMs extend the basic IndashO concept from production toincome distribution and include both social and economic data for an economy(Raa and Sahoo 2005) A SAM consists of data from IndashO tables nationalincome statistics and household income and expenditure statistics Contrary tonational accounts lsquo a SAM attempts to classify various institutions to theirsocio-economic backgrounds instead of their economic or functional activitiesrsquo(Chowdhury and Kirkpatrick 1994) In the present case the authors used aSAM for the Eastern Cape Province which was developed by the PROVIDEproject (2006) The SAM (based on 2000 prices) used in these analysesdistinguished 34 sectors 10 household types and 4 ethnic groups

In essence the analysis is based on two model approaches The first approachis presented by a standard IndashO Leontief model for which input coefficients andLeontief multipliers (ML) have been calculated

ML = (E ndash A)ndash1

where A is the matrix of input (technical) coefficientsThe second model approach is based on extending a linear Leontief model

to a SAM framework which is performed by partitioning the accounts intoendogenous and exogenous accounts and assuming that the column coefficientsof the endogenous accounts are all constant For determining the set ofendogenous accounts it is important to know whether changes in the level ofexpenditures directly follow any change in incomes (Pyatt and Round 1985)Exogenous accounts are those for which one assumes that the expenditures are

TOURISM ECONOMICS610

set independently on incomes Standard practice is to pick up for the exogenousaccounts one or more accounts among the government capital and the rest ofthe world accounts justifying the choice on the basis of the objectives of thestudy (Hajnovicova and Lapisakova 2002)

Multipliers calculated from the SAM are the simple indicators comprisingthe important information about the structure of the Eastern Cape economyThey are calculated from the matrix of expenditure shares (general technicalcoefficients) after excluding the exogenous accounts The computed multiplierswill be sensitive to the choice of exogenous accounts and express the sensitivityof the endogenous accounts on changes in demand for exogenous accounts(Hajnovicova and Lapisakova 2002) SAM multipliers (MS) are calculated as

MS = (E ndash A)ndash1

where M is the matrix of expenditure shares of endogenous accountsComparing the multipliers calculated from the IndashO and SAM models carries

new aspects in the economic analysis The SAM multipliers are much largerthan the corresponding IndashO multipliers Because value added is a leakage onlyintermediate demand serves as a multiplier in the IndashO analysis In contrastvalue added and incomes generate demand linkages in the SAM approach SAMmultipliers capture the different multiplier effects of exogenous accounts onproductive activities factors and institutions Based on the partition of theendogenous section of the SAM into three categories of accounts (activitiescommodities factors and institutions) a matrix of multipliers can bedecomposed into four components that is initial injection transfer effectsopen-loop effects and closed-loop effects Many versions of this decompositionhave been used (Hajnovicova and Lapisakova 2002)

In analysing the productive sphere of economy a decomposition ofmultipliers by Pyatt and Round (1985) and Cardenete and Sancho (2004) wasused The matrix MS which is reduced to the Leontief multiplier matrix ML

corresponds only to the production accounts To perform the impact analysisthe MS matrix is truncated to conform to the dimension of the matrix ML

The differences between both multiplier matrices MS and ML measure theinduced effects due to the added endogeneity while the direct and indirecteffects are measured by ML Matrix MS can be decomposed into threecomponents

(MS ndash ML) which measures induced effects

(E + A) which measures direct effects

(ML ndash E ndash A) which measures indirect effects

where

MS = (MS ndash ML) + (E + A) + (ML ndash E ndash A)

A vast array of inputs was required for the analysis These were obtained fromsurveys conducted by Statistics South Africa and published in their Supply andUse Tables Detailed information on the economic composition of each sectorin the economy was obtained from these tables and formed part of the basicexogenous inputs needed for the calculation of the various multipliers

611The significance of festivals to regional economies

Table 2 Profile of festinos

Gender Male 44 female 56Age 37 yearsLanguage English 75 Afrikaans 18Province of origin Eastern Cape 45 Gauteng 21 Western Cape

17Type of show Comedy 60 drama 48 dance 38 music 31Country of residence Foreign 4 SA 96

Moreover additional information pertaining to labour numbers and capital usedwas obtained from Census 2001 and the South African Reserve Bank QuarterlyBulletin respectively (Conningarth Consultants 2006a) The exogenous inputdata (shocks) were calculated and drawn from independent surveys conductedduring 2009 by the Institute for Tourism and Leisure Studies at the arts festivalThe SAM multipliers convert the exogenous input data (shocks) to the incomegenerated and the number of jobs supported by using sets of economic ratiosand multipliers for the province Total effects are presented in aggregate formand include both indirect and induced effects (see the section below)

Assessing the economic impact of the festival

The results are discussed in two sections In the first section a brief overviewis given of the descriptive results of the surveys The second section containsthe results of the economic impact study

Profile of festinos

From Table 2 it is clear that the profile of festinos is that of predominantlyEnglish-speaking females primarily falling in the 35ndash49 year age group livingin the Eastern Cape Province and spending approximately R4700 at thefestival Approximately 4 of festinos are foreigners It is interesting to notethat the festival attracts 21 of festinos from the Gauteng Province and thatthey enjoy comedies and drama

Economic impact

Festino spending is converted to the associated increase in production incomeand jobs in the region using economic multipliers from a SAM for the EasternCape Province The classical SAMs multiplier approach employs distinctmultipliers for each expenditure-related sector The multipliers convertexpenditure into the associated increase in production jobs and income andestimate secondary effects as the festino spending circulates through the regionaleconomy To do this it is necessary to lsquocorrectrsquo the direct impact (that isexpenditure figures in Table 1) by the multiplier effect These results basedon the lsquocorrectedrsquo spending by visitors (refer to Column 2 in Tables 3ndash5) arecontained in the following subsections

TOURISM ECONOMICS612

Table 3 Impact through production multipliers (ZAR 2000 prices) ndash foreign visitors

Sector Direct Indirect Induced Total Percentageimpacta impactb impactc impactd (total)

Agriculture 351970 190320 451460 993750 010Mining 955160 621300 1037950 2614410 030Manufacturing 88935280 83983630 77989940 250908860 2740Electricity and water 17430 10650 16540 44630 000Construction 347260 331970 363570 1042800 010Trade andaccommodation 104297460 76530590 115342850 296170900 3230

Transport andcommunication 34573690 29056620 31593670 95223980 1040

Financial andbusiness services 98805220 64722330 101694130 265221690 2890

Community services 1607850 1474150 1995690 5077690 060

Total (ZAR) 329891330 256921570 330485790 917298690 10000

Notes aInitial expenditures (for example by festinos) are generally called the direct costs of an activityand their effects on the economy are direct effects bPurchases by suppliers (for example vendors hoteland restaurant owners charter operators etc) of the final goods and services of materials and supplies tosustain the original purchases are called indirect effects cInduced effects occur when workers in thesectors stimulated by direct and indirect expenditures spend their additional income on consumergoods and services dThe direct plus indirect plus induced effects equal the total effect

New money impact

This section represents only the impact of the money spent by festinos on theregional economy of the festival The usefulness of this section is that it providesa model of economic impact that calculates how much money has been broughtinto the area from festinos specifically because of the festival and allows one tofocus on the money that has been spent in the area specifically by festinos

Foreign expenditure The quantification of the direct indirect and induced impactof foreign expenditure at the Grahamstown National Arts Festival in the regionis summarized in Table 3 As this expenditure is applied partially by the foreignfestinos of the festival in the purchase of goods and services in the region thisrepresents an inflow of money in the region mobilizing economic activitygenerating employment and generating additional revenues for the provincelsquoProductionrsquo is an indication of the total turnover generated by each sector inthe regional economy As such production comprises two components demandfor intermediate inputs (resources) by an activity (domestically produced andimported goods and services) and total value added generated by an activity(Conningarth Consultants 2006b) Table 3 reflects the effects on production(using the production multipliers) by foreign expenditure resulting from thefestival

The spending of the foreign festinos in 2009 was predominantly expenditureon tourist activities From Table 3 it is clear that the largest direct impactsare in trade and accommodation (323) financial and business services (289)and manufacturing (274) Through the lsquobackward linkagesrsquo large indirectand induced impacts are also experienced in the community services sector

613The significance of festivals to regional economies

Figure 1 Foreign expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

reflecting an indirect impact of R147 thousand and an induced impact ofR200 thousand Note that if the authors ignore the direct effect in thecommunity services sector 683 of the total increase in production is as aresult of lsquobackward linkagesrsquo with direct foreign expenditure representing only317 A more detailed (disaggregated) analysis of the various sectors can bemade but falls beyond the scope of this study

All the acquisitions of goods and services from non-regional suppliers thatis suppliers outside the Eastern Cape were included in the analysis and mighttherefore have had a significant direct or indirect effect on the provincersquoseconomy By including this indirect impact although small in significance wepresent a more comprehensive estimate of the impact of the GrahamstownNational Arts Festival on the province

The value of the purchases of goods and services from regional suppliers wasthen classified using the basic sector aggregation as classified by the SouthAfrican Reserve Bank and Statistics South Africa and its distribution byactivity sector is shown in Figure 1

In terms of the analysis of the expenditure by foreign festinos the firstconclusion is that the direct effect represents 36 the indirect effect 28 andthe induced effect 36 of the total increase in foreign expenditure The secondconclusion is that the activity sectors that benefited most from the expenditureof the festivalrsquos foreign festinos were trade and accommodation financial andbusiness services and manufacturing The total impact resulting fromexpenditure by foreigners in these sectors in 2009 surpassed R92 million andrepresented some 111 of the total expenditure made by all festinos of the 2009Grahamstown National Arts Festival in the region

The rest of South Africarsquos expenditure In order to estimate the economic impactof the expenditure made by festinos residing in the rest of South Africa anapproach was followed similar to that for the expenditure by foreign festinos

100

90

80

70

60

50

40

30

20

10

0

Direct impact Indirect impact Induced impact

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

TOURISM ECONOMICS614

Table 4 Impact through production multipliers (ZAR 2000 prices) ndash rest of South Africavisitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1606060 868450 2060020 4534530 010Mining 4342400 2822110 4720450 11884950 030Manufacturing 371464640 352132290 324543490 1048140420 2490Electricity and water 77620 47450 73660 198730 000Construction 1365670 1305530 1429810 4101000 010Trade andaccommodation 464604850 340914160 513807780 1319326800 3140

Transport andcommunication 277775630 233449830 253833250 765058700 1820

Financial andbusiness services 381484190 249891110 392638170 1024013470 2440

Community services 8100740 7427150 10054790 25582670 060

Total (ZAR) 1510821800 1188858060 1503161410 4202841280 10000

Table 4 reflects the effects on production (using the production multipliers)by expenditure of festinos from the rest of South Africa resulting from thefestival

Table 4 illustrates that the largest direct impacts are in trade and accom-modation (314) in manufacturing (249) and in financial and businessservices (244) Through the lsquobackward linkagesrsquo large indirect and inducedimpacts are also experienced in the transport and communication sector (see alsoFigure 2) reflecting an indirect impact of R23 million and an induced impactof R25 million If the direct effect in the transport and communication sectoris ignored 637 of the total increase in production is a result of lsquobackwardlinkagesrsquo with direct expenditure by festinos from the rest of South Africarepresenting only 363 of the total impact

Based on the data collected the authors estimated that total impact ofexpenditure by festinos from the rest of South Africa in the region might exceedR420 million (approximately 509 of total expenditure) Figure 2 presentsthe total expenditure per activity sector by festinos from the rest of South Africa

As in the case of foreigners the results of the study suggest that the sectorsthat benefit most from expenditure by festinos from the rest of South Africa arein order of importance trade and accommodation manufacturing and financialand business services (please refer to Figure 2) The expenditure in these threesectors of economic activity represents more than 81 of the total expenditureby the festinos from the rest of South Africa at the festival

The analysis of the expenditure by festinos from the rest of South Africaindicates that the direct effect represents 359 the indirect effect 283 andthe induced effect 358 of the total increase in local expenditure Given theestimation of the economic impact presented above it should be kept in mindthat by definition calculation of the economic impact should include only theexpenditure that would not have occurred in the absence of the event

615The significance of festivals to regional economies

Figure 2 Rest of South African expenditure in the region per activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

Retained locals

The retained local section focuses on money that would have left the area ifthe festival had not been held The retained local model allows us to see howfestivals and other events contribute to the local economy by encouraging theirresidents to stay and spend recreation rands within the area

Eastern Cape expenditure In order to estimate the economic impact of theexpenditure made by festinos residing in the Eastern Cape a similar approachwas followed as that with the expenditure of foreign festinos and festinos residingin the rest of South Africa Based on the information collected from the surveyscarried out during the 2009 festival the authors estimated that the directimpact in the region resulting from the localsrsquo expenditure amounted toapproximately R112 million (approximately 379 of total expenditure)distributed among the nine activity sectors as presented in Figure 3

The value of the purchases of goods and services made to regional suppliersby festinos residing in the Eastern Cape is presented in Figure 3

The activity sectors that benefited most from expenditure by locals inrelation with the Grahamstown National Arts Festival were trade and accom-modation financial and business services manufacturing and to a lesser extenttransport and communication Given that these festinos hailed from the EasternCape it was understandable that their expenditure in the latter sectors wouldbe less than that of foreigners and non-Eastern Cape residents (please refer toFigure 3)

It is important to note that the direct impact of the localsrsquo expenditure(R112 million) represents more than 379 of the adjusted total expenditureof all festinos (R297 million) of the festival in 2009 The quantification of thedirect indirect and induced impact of localsrsquo expenditure at the festival in theregion is summarized in Table 5

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

TOURISM ECONOMICS616

Figure 3 Local expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

In Table 5 it is clear that the largest direct impact is on trade andaccommodation (330) and on financial and business services (330) Throughthe lsquobackward linkagesrsquo large indirect and induced impacts are also experiencedin the manufacturing sector reflecting an indirect impact of R27 million andan induced impact of R25 million If the direct effect in the manufacturingsector is ignored 646 of the total increase in production is as a result oflsquobackward linkagesrsquo with direct local expenditure representing only 354 ofthe total impact

Regarding the analysis of the expenditure of festinos from the Eastern Capeit can be concluded that the direct effect represents 360 the indirect effect277 and the induced effect 363 of the total increase in local expenditureBy including the expenditure that would have occurred in the region independ-ently of the existence of the festival less conservative figures for the economicimpact are estimated It is reasonable to expect that in the absence of thefestival the available revenue from these local festinos would have been less andas such its volume of expenditure in the region would have been less

Overall impact

This section represents the overall spending in the local economy that can beattributed to the festival by festinos (locals and visitors from abroad and fromthe rest of South Africa) Although the locals do not bring money into thecommunity from outside regions as visitors do it is valuable to include theirspending as it has the effect of initiating economic activity within the localeconomy Examined in this way a festivalrsquos contribution to a local economy iscomparable to a local business that both draws money from and contributes toits community To consider only the tourist rand in terms of economic impactwould underestimate greatly the complete financial benefits of festivals and

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

617The significance of festivals to regional economies

Table 5 Impact through production multipliers (ZAR 2000 prices) ndash local visitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1080730 584390 1386210 3051330 010Mining 2953680 1924390 3207390 8085460 030Manufacturing 281313440 266795820 245513980 793623240 2540Electricity and water 60580 37030 57490 155100 000Construction 1332640 1273950 1395220 4001810 010Trade andaccommodation 362634420 266091090 401038400 1029763910 3300

Transport andcommunication 84956440 71399590 77633770 233989810 750

Financial andbusiness services 384186600 251661330 395419600 1031267530 3300

Community services 6239660 5720810 7744770 19705250 060

Total (in ZAR) 1124758190 865488410 1133396830 3123643440 10000

similar events In addition this study recognizes that without festivals asignificant amount of money would leave the area due to locals seeking analternative venue for entertainment in other regions

This study has determined that the usefulness of the overall impact is thatit allows one to measure the amount of money that the festival circulatesthrough the local economy from every source from which the festival drawsfinancial impact However in order to evaluate the total impact of the festivalin the region it is necessary to lsquocorrectrsquo the direct impact by the multipliereffect Hence as a way of estimating the total impact of the GrahamstownNational Arts Festival in the region production multipliers were used for eachone of the activity sectors The multiplication of the direct impact in eachactivity sector for the specific production multipliers gives the total impact ofthe festival for each of the regional economy sectors as indicated in Table 6below The sum of the impacts in each of the sectors gives us in turn anestimate of the total impact of the festival in the region

The analysis of the results indicates that the direct economic impact of thefestival and its visitors in the region (which is in the order of R297 million)can result in an additional R527 million of indirect impact giving a totalannual impact in the region in excess of R824 million That is equivalent toan aggregated production multiplier in the order of 277 Therefore for eachrand spent by festinos in the region 177 cents are generated additionally interms of indirect expenditure The aggregated production multiplier is obtainedby dividing the total impact by the direct impact

Considering the multipliers for each component (foreign local and the restof South Africa) of expenditures one can say that those resulting from out-of-province festinos have a greater impact as multiplier (279) than does spendingby foreign and local festinos on production (277) This means that for each randspent at the festival by out-of-province festinos an additional R179 is generatedin the Eastern Cape economy (see Tables 4 and 6)

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

TOURISM ECONOMICS608

Table 1 Total festino spending at the 2009 Grahamstown National Arts Festival (in ZAR)

Spending item Foreign Eastern Cape Rest of SA Total

Shows 56800460 192885398 253383491 503069348Accommodation 119862069 298189881 484169149 902221098Food 82057471 251960061 374433932 708451464Alcoholic beverages 38133333 92794875 142066574 272994783Non-alcoholic beverages 16133333 73725819 59608132 149467284Retail 15298851 171540933 117681516 304521299Stalls 70172414 300827072 236706749 607706235Transport 39321839 95965237 317915884 453202960Parking 3224138 12512077 16244018 31980233Other 000 000 000 000

Total (ZAR) 441003908 1490401353 2002209444 3933614705

Source Visitor surveys

in other sectors of the economy which results indirectly from the expenditureby festinos It is also possible to examine the income and employment effectsof the festival

Spending data The economic impact of the Grahamstown National Arts Festivalbegins with an accounting of the direct expenditure by festinos in the variousexpenditure-related sectors Festino expenditure at the festival encompassesspending on shows accommodation food and beverages retail shoppingfestival vendors and related transport and parking services (refer to Table 1)Retailing includes locations where products are consumed lsquoon-premisersquo such asstalls or vendors lsquoOff-premisersquo retail outlets are supermarkets curiosrestaurants and similar locations

Festinos spent an estimated R823 million in the local area in 2009 (Table1) About a third of this spending was for accommodation 175 for food and143 for shows attended at the festival Festinos staying overnight in hotelsaccounted for 243 of the total spending

It is sometimes mistakenly thought that initial spending accounts for atotality of the impact of the festival For example at first glance it may appearthat festino expenditures are the sum total of the impact on the provincial orlocal economy (Dunham et al 2009) However one economic activity alwaysleads to a ripple effect whereby other sectors and industries benefit from thisinitial spending This inter-industry effect of festino spending can be assessedusing multipliers derived from the provincial SAM (PROVIDE 2006)

The economic activities of the festival are linked to other industries in thelocal and provincial economies The activities required for example to producea product sold at the festival (including packaging shipping etc) generatedirect effects on the economy Regional (or indirect) impacts occur when theseactivities require purchases of goods and services from local or regionalsuppliers Additional induced impacts occur when workers involved in directand indirect activities spend their wages in the region The ratio between totaleconomic and direct impact is termed the multiplier (Dunham et al 2009)

609The significance of festivals to regional economies

This method of analysis allows the impact of festino spending at the festivalto be quantified in terms of final demand earnings (income) and employmentin the province Once the direct impact of festino spending has been calculatedthe multiplier methodology discussed below is used to calculate thecontribution of the festival and of the re-spending in the economy

Multipliers and secondary effects Various techniques can be employed to estimatethe economic impact of a festival After estimating the initial additionaldemand that is created due to the festival which in this case includes spendingby festinos the direct indirect and induced impacts should be derived (Smeral2003) The multiplier concept is termed as the nature and extent of the impactof an autonomous change in a specific economic quantity (that is expenditure)on other economic quantities such as production or employment (ConningarthConsultants 2006b) More specifically Samuelson (1970 p 226) defines themultiplier concept as lsquothe number of times the change in investment must bemultiplied in order to present us with the resulting change in incomersquo

Multipliers can be used to estimate the total economic impact of festinospending in the region and the associated economic effects (indirect andinduced) in terms of production income and jobs The basic equation forestimating the economic impacts of the festival is

Economic impact = average spending per category times multiplier

The model is of course more detailed and complex than this simple equationmay indicate The analysis is based on the consistent and comprehensive dataset concerning all mutual transactions among productive and institutionalsectors of the economy which is represented by the SAM for the Eastern CapeProvince for 2000 SAMs extend the basic IndashO concept from production toincome distribution and include both social and economic data for an economy(Raa and Sahoo 2005) A SAM consists of data from IndashO tables nationalincome statistics and household income and expenditure statistics Contrary tonational accounts lsquo a SAM attempts to classify various institutions to theirsocio-economic backgrounds instead of their economic or functional activitiesrsquo(Chowdhury and Kirkpatrick 1994) In the present case the authors used aSAM for the Eastern Cape Province which was developed by the PROVIDEproject (2006) The SAM (based on 2000 prices) used in these analysesdistinguished 34 sectors 10 household types and 4 ethnic groups

In essence the analysis is based on two model approaches The first approachis presented by a standard IndashO Leontief model for which input coefficients andLeontief multipliers (ML) have been calculated

ML = (E ndash A)ndash1

where A is the matrix of input (technical) coefficientsThe second model approach is based on extending a linear Leontief model

to a SAM framework which is performed by partitioning the accounts intoendogenous and exogenous accounts and assuming that the column coefficientsof the endogenous accounts are all constant For determining the set ofendogenous accounts it is important to know whether changes in the level ofexpenditures directly follow any change in incomes (Pyatt and Round 1985)Exogenous accounts are those for which one assumes that the expenditures are

TOURISM ECONOMICS610

set independently on incomes Standard practice is to pick up for the exogenousaccounts one or more accounts among the government capital and the rest ofthe world accounts justifying the choice on the basis of the objectives of thestudy (Hajnovicova and Lapisakova 2002)

Multipliers calculated from the SAM are the simple indicators comprisingthe important information about the structure of the Eastern Cape economyThey are calculated from the matrix of expenditure shares (general technicalcoefficients) after excluding the exogenous accounts The computed multiplierswill be sensitive to the choice of exogenous accounts and express the sensitivityof the endogenous accounts on changes in demand for exogenous accounts(Hajnovicova and Lapisakova 2002) SAM multipliers (MS) are calculated as

MS = (E ndash A)ndash1

where M is the matrix of expenditure shares of endogenous accountsComparing the multipliers calculated from the IndashO and SAM models carries

new aspects in the economic analysis The SAM multipliers are much largerthan the corresponding IndashO multipliers Because value added is a leakage onlyintermediate demand serves as a multiplier in the IndashO analysis In contrastvalue added and incomes generate demand linkages in the SAM approach SAMmultipliers capture the different multiplier effects of exogenous accounts onproductive activities factors and institutions Based on the partition of theendogenous section of the SAM into three categories of accounts (activitiescommodities factors and institutions) a matrix of multipliers can bedecomposed into four components that is initial injection transfer effectsopen-loop effects and closed-loop effects Many versions of this decompositionhave been used (Hajnovicova and Lapisakova 2002)

In analysing the productive sphere of economy a decomposition ofmultipliers by Pyatt and Round (1985) and Cardenete and Sancho (2004) wasused The matrix MS which is reduced to the Leontief multiplier matrix ML

corresponds only to the production accounts To perform the impact analysisthe MS matrix is truncated to conform to the dimension of the matrix ML

The differences between both multiplier matrices MS and ML measure theinduced effects due to the added endogeneity while the direct and indirecteffects are measured by ML Matrix MS can be decomposed into threecomponents

(MS ndash ML) which measures induced effects

(E + A) which measures direct effects

(ML ndash E ndash A) which measures indirect effects

where

MS = (MS ndash ML) + (E + A) + (ML ndash E ndash A)

A vast array of inputs was required for the analysis These were obtained fromsurveys conducted by Statistics South Africa and published in their Supply andUse Tables Detailed information on the economic composition of each sectorin the economy was obtained from these tables and formed part of the basicexogenous inputs needed for the calculation of the various multipliers

611The significance of festivals to regional economies

Table 2 Profile of festinos

Gender Male 44 female 56Age 37 yearsLanguage English 75 Afrikaans 18Province of origin Eastern Cape 45 Gauteng 21 Western Cape

17Type of show Comedy 60 drama 48 dance 38 music 31Country of residence Foreign 4 SA 96

Moreover additional information pertaining to labour numbers and capital usedwas obtained from Census 2001 and the South African Reserve Bank QuarterlyBulletin respectively (Conningarth Consultants 2006a) The exogenous inputdata (shocks) were calculated and drawn from independent surveys conductedduring 2009 by the Institute for Tourism and Leisure Studies at the arts festivalThe SAM multipliers convert the exogenous input data (shocks) to the incomegenerated and the number of jobs supported by using sets of economic ratiosand multipliers for the province Total effects are presented in aggregate formand include both indirect and induced effects (see the section below)

Assessing the economic impact of the festival

The results are discussed in two sections In the first section a brief overviewis given of the descriptive results of the surveys The second section containsthe results of the economic impact study

Profile of festinos

From Table 2 it is clear that the profile of festinos is that of predominantlyEnglish-speaking females primarily falling in the 35ndash49 year age group livingin the Eastern Cape Province and spending approximately R4700 at thefestival Approximately 4 of festinos are foreigners It is interesting to notethat the festival attracts 21 of festinos from the Gauteng Province and thatthey enjoy comedies and drama

Economic impact

Festino spending is converted to the associated increase in production incomeand jobs in the region using economic multipliers from a SAM for the EasternCape Province The classical SAMs multiplier approach employs distinctmultipliers for each expenditure-related sector The multipliers convertexpenditure into the associated increase in production jobs and income andestimate secondary effects as the festino spending circulates through the regionaleconomy To do this it is necessary to lsquocorrectrsquo the direct impact (that isexpenditure figures in Table 1) by the multiplier effect These results basedon the lsquocorrectedrsquo spending by visitors (refer to Column 2 in Tables 3ndash5) arecontained in the following subsections

TOURISM ECONOMICS612

Table 3 Impact through production multipliers (ZAR 2000 prices) ndash foreign visitors

Sector Direct Indirect Induced Total Percentageimpacta impactb impactc impactd (total)

Agriculture 351970 190320 451460 993750 010Mining 955160 621300 1037950 2614410 030Manufacturing 88935280 83983630 77989940 250908860 2740Electricity and water 17430 10650 16540 44630 000Construction 347260 331970 363570 1042800 010Trade andaccommodation 104297460 76530590 115342850 296170900 3230

Transport andcommunication 34573690 29056620 31593670 95223980 1040

Financial andbusiness services 98805220 64722330 101694130 265221690 2890

Community services 1607850 1474150 1995690 5077690 060

Total (ZAR) 329891330 256921570 330485790 917298690 10000

Notes aInitial expenditures (for example by festinos) are generally called the direct costs of an activityand their effects on the economy are direct effects bPurchases by suppliers (for example vendors hoteland restaurant owners charter operators etc) of the final goods and services of materials and supplies tosustain the original purchases are called indirect effects cInduced effects occur when workers in thesectors stimulated by direct and indirect expenditures spend their additional income on consumergoods and services dThe direct plus indirect plus induced effects equal the total effect

New money impact

This section represents only the impact of the money spent by festinos on theregional economy of the festival The usefulness of this section is that it providesa model of economic impact that calculates how much money has been broughtinto the area from festinos specifically because of the festival and allows one tofocus on the money that has been spent in the area specifically by festinos

Foreign expenditure The quantification of the direct indirect and induced impactof foreign expenditure at the Grahamstown National Arts Festival in the regionis summarized in Table 3 As this expenditure is applied partially by the foreignfestinos of the festival in the purchase of goods and services in the region thisrepresents an inflow of money in the region mobilizing economic activitygenerating employment and generating additional revenues for the provincelsquoProductionrsquo is an indication of the total turnover generated by each sector inthe regional economy As such production comprises two components demandfor intermediate inputs (resources) by an activity (domestically produced andimported goods and services) and total value added generated by an activity(Conningarth Consultants 2006b) Table 3 reflects the effects on production(using the production multipliers) by foreign expenditure resulting from thefestival

The spending of the foreign festinos in 2009 was predominantly expenditureon tourist activities From Table 3 it is clear that the largest direct impactsare in trade and accommodation (323) financial and business services (289)and manufacturing (274) Through the lsquobackward linkagesrsquo large indirectand induced impacts are also experienced in the community services sector

613The significance of festivals to regional economies

Figure 1 Foreign expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

reflecting an indirect impact of R147 thousand and an induced impact ofR200 thousand Note that if the authors ignore the direct effect in thecommunity services sector 683 of the total increase in production is as aresult of lsquobackward linkagesrsquo with direct foreign expenditure representing only317 A more detailed (disaggregated) analysis of the various sectors can bemade but falls beyond the scope of this study

All the acquisitions of goods and services from non-regional suppliers thatis suppliers outside the Eastern Cape were included in the analysis and mighttherefore have had a significant direct or indirect effect on the provincersquoseconomy By including this indirect impact although small in significance wepresent a more comprehensive estimate of the impact of the GrahamstownNational Arts Festival on the province

The value of the purchases of goods and services from regional suppliers wasthen classified using the basic sector aggregation as classified by the SouthAfrican Reserve Bank and Statistics South Africa and its distribution byactivity sector is shown in Figure 1

In terms of the analysis of the expenditure by foreign festinos the firstconclusion is that the direct effect represents 36 the indirect effect 28 andthe induced effect 36 of the total increase in foreign expenditure The secondconclusion is that the activity sectors that benefited most from the expenditureof the festivalrsquos foreign festinos were trade and accommodation financial andbusiness services and manufacturing The total impact resulting fromexpenditure by foreigners in these sectors in 2009 surpassed R92 million andrepresented some 111 of the total expenditure made by all festinos of the 2009Grahamstown National Arts Festival in the region

The rest of South Africarsquos expenditure In order to estimate the economic impactof the expenditure made by festinos residing in the rest of South Africa anapproach was followed similar to that for the expenditure by foreign festinos

100

90

80

70

60

50

40

30

20

10

0

Direct impact Indirect impact Induced impact

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

TOURISM ECONOMICS614

Table 4 Impact through production multipliers (ZAR 2000 prices) ndash rest of South Africavisitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1606060 868450 2060020 4534530 010Mining 4342400 2822110 4720450 11884950 030Manufacturing 371464640 352132290 324543490 1048140420 2490Electricity and water 77620 47450 73660 198730 000Construction 1365670 1305530 1429810 4101000 010Trade andaccommodation 464604850 340914160 513807780 1319326800 3140

Transport andcommunication 277775630 233449830 253833250 765058700 1820

Financial andbusiness services 381484190 249891110 392638170 1024013470 2440

Community services 8100740 7427150 10054790 25582670 060

Total (ZAR) 1510821800 1188858060 1503161410 4202841280 10000

Table 4 reflects the effects on production (using the production multipliers)by expenditure of festinos from the rest of South Africa resulting from thefestival

Table 4 illustrates that the largest direct impacts are in trade and accom-modation (314) in manufacturing (249) and in financial and businessservices (244) Through the lsquobackward linkagesrsquo large indirect and inducedimpacts are also experienced in the transport and communication sector (see alsoFigure 2) reflecting an indirect impact of R23 million and an induced impactof R25 million If the direct effect in the transport and communication sectoris ignored 637 of the total increase in production is a result of lsquobackwardlinkagesrsquo with direct expenditure by festinos from the rest of South Africarepresenting only 363 of the total impact

Based on the data collected the authors estimated that total impact ofexpenditure by festinos from the rest of South Africa in the region might exceedR420 million (approximately 509 of total expenditure) Figure 2 presentsthe total expenditure per activity sector by festinos from the rest of South Africa

As in the case of foreigners the results of the study suggest that the sectorsthat benefit most from expenditure by festinos from the rest of South Africa arein order of importance trade and accommodation manufacturing and financialand business services (please refer to Figure 2) The expenditure in these threesectors of economic activity represents more than 81 of the total expenditureby the festinos from the rest of South Africa at the festival

The analysis of the expenditure by festinos from the rest of South Africaindicates that the direct effect represents 359 the indirect effect 283 andthe induced effect 358 of the total increase in local expenditure Given theestimation of the economic impact presented above it should be kept in mindthat by definition calculation of the economic impact should include only theexpenditure that would not have occurred in the absence of the event

615The significance of festivals to regional economies

Figure 2 Rest of South African expenditure in the region per activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

Retained locals

The retained local section focuses on money that would have left the area ifthe festival had not been held The retained local model allows us to see howfestivals and other events contribute to the local economy by encouraging theirresidents to stay and spend recreation rands within the area

Eastern Cape expenditure In order to estimate the economic impact of theexpenditure made by festinos residing in the Eastern Cape a similar approachwas followed as that with the expenditure of foreign festinos and festinos residingin the rest of South Africa Based on the information collected from the surveyscarried out during the 2009 festival the authors estimated that the directimpact in the region resulting from the localsrsquo expenditure amounted toapproximately R112 million (approximately 379 of total expenditure)distributed among the nine activity sectors as presented in Figure 3

The value of the purchases of goods and services made to regional suppliersby festinos residing in the Eastern Cape is presented in Figure 3

The activity sectors that benefited most from expenditure by locals inrelation with the Grahamstown National Arts Festival were trade and accom-modation financial and business services manufacturing and to a lesser extenttransport and communication Given that these festinos hailed from the EasternCape it was understandable that their expenditure in the latter sectors wouldbe less than that of foreigners and non-Eastern Cape residents (please refer toFigure 3)

It is important to note that the direct impact of the localsrsquo expenditure(R112 million) represents more than 379 of the adjusted total expenditureof all festinos (R297 million) of the festival in 2009 The quantification of thedirect indirect and induced impact of localsrsquo expenditure at the festival in theregion is summarized in Table 5

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

TOURISM ECONOMICS616

Figure 3 Local expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

In Table 5 it is clear that the largest direct impact is on trade andaccommodation (330) and on financial and business services (330) Throughthe lsquobackward linkagesrsquo large indirect and induced impacts are also experiencedin the manufacturing sector reflecting an indirect impact of R27 million andan induced impact of R25 million If the direct effect in the manufacturingsector is ignored 646 of the total increase in production is as a result oflsquobackward linkagesrsquo with direct local expenditure representing only 354 ofthe total impact

Regarding the analysis of the expenditure of festinos from the Eastern Capeit can be concluded that the direct effect represents 360 the indirect effect277 and the induced effect 363 of the total increase in local expenditureBy including the expenditure that would have occurred in the region independ-ently of the existence of the festival less conservative figures for the economicimpact are estimated It is reasonable to expect that in the absence of thefestival the available revenue from these local festinos would have been less andas such its volume of expenditure in the region would have been less

Overall impact

This section represents the overall spending in the local economy that can beattributed to the festival by festinos (locals and visitors from abroad and fromthe rest of South Africa) Although the locals do not bring money into thecommunity from outside regions as visitors do it is valuable to include theirspending as it has the effect of initiating economic activity within the localeconomy Examined in this way a festivalrsquos contribution to a local economy iscomparable to a local business that both draws money from and contributes toits community To consider only the tourist rand in terms of economic impactwould underestimate greatly the complete financial benefits of festivals and

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

617The significance of festivals to regional economies

Table 5 Impact through production multipliers (ZAR 2000 prices) ndash local visitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1080730 584390 1386210 3051330 010Mining 2953680 1924390 3207390 8085460 030Manufacturing 281313440 266795820 245513980 793623240 2540Electricity and water 60580 37030 57490 155100 000Construction 1332640 1273950 1395220 4001810 010Trade andaccommodation 362634420 266091090 401038400 1029763910 3300

Transport andcommunication 84956440 71399590 77633770 233989810 750

Financial andbusiness services 384186600 251661330 395419600 1031267530 3300

Community services 6239660 5720810 7744770 19705250 060

Total (in ZAR) 1124758190 865488410 1133396830 3123643440 10000

similar events In addition this study recognizes that without festivals asignificant amount of money would leave the area due to locals seeking analternative venue for entertainment in other regions

This study has determined that the usefulness of the overall impact is thatit allows one to measure the amount of money that the festival circulatesthrough the local economy from every source from which the festival drawsfinancial impact However in order to evaluate the total impact of the festivalin the region it is necessary to lsquocorrectrsquo the direct impact by the multipliereffect Hence as a way of estimating the total impact of the GrahamstownNational Arts Festival in the region production multipliers were used for eachone of the activity sectors The multiplication of the direct impact in eachactivity sector for the specific production multipliers gives the total impact ofthe festival for each of the regional economy sectors as indicated in Table 6below The sum of the impacts in each of the sectors gives us in turn anestimate of the total impact of the festival in the region

The analysis of the results indicates that the direct economic impact of thefestival and its visitors in the region (which is in the order of R297 million)can result in an additional R527 million of indirect impact giving a totalannual impact in the region in excess of R824 million That is equivalent toan aggregated production multiplier in the order of 277 Therefore for eachrand spent by festinos in the region 177 cents are generated additionally interms of indirect expenditure The aggregated production multiplier is obtainedby dividing the total impact by the direct impact

Considering the multipliers for each component (foreign local and the restof South Africa) of expenditures one can say that those resulting from out-of-province festinos have a greater impact as multiplier (279) than does spendingby foreign and local festinos on production (277) This means that for each randspent at the festival by out-of-province festinos an additional R179 is generatedin the Eastern Cape economy (see Tables 4 and 6)

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

609The significance of festivals to regional economies

This method of analysis allows the impact of festino spending at the festivalto be quantified in terms of final demand earnings (income) and employmentin the province Once the direct impact of festino spending has been calculatedthe multiplier methodology discussed below is used to calculate thecontribution of the festival and of the re-spending in the economy

Multipliers and secondary effects Various techniques can be employed to estimatethe economic impact of a festival After estimating the initial additionaldemand that is created due to the festival which in this case includes spendingby festinos the direct indirect and induced impacts should be derived (Smeral2003) The multiplier concept is termed as the nature and extent of the impactof an autonomous change in a specific economic quantity (that is expenditure)on other economic quantities such as production or employment (ConningarthConsultants 2006b) More specifically Samuelson (1970 p 226) defines themultiplier concept as lsquothe number of times the change in investment must bemultiplied in order to present us with the resulting change in incomersquo

Multipliers can be used to estimate the total economic impact of festinospending in the region and the associated economic effects (indirect andinduced) in terms of production income and jobs The basic equation forestimating the economic impacts of the festival is

Economic impact = average spending per category times multiplier

The model is of course more detailed and complex than this simple equationmay indicate The analysis is based on the consistent and comprehensive dataset concerning all mutual transactions among productive and institutionalsectors of the economy which is represented by the SAM for the Eastern CapeProvince for 2000 SAMs extend the basic IndashO concept from production toincome distribution and include both social and economic data for an economy(Raa and Sahoo 2005) A SAM consists of data from IndashO tables nationalincome statistics and household income and expenditure statistics Contrary tonational accounts lsquo a SAM attempts to classify various institutions to theirsocio-economic backgrounds instead of their economic or functional activitiesrsquo(Chowdhury and Kirkpatrick 1994) In the present case the authors used aSAM for the Eastern Cape Province which was developed by the PROVIDEproject (2006) The SAM (based on 2000 prices) used in these analysesdistinguished 34 sectors 10 household types and 4 ethnic groups

In essence the analysis is based on two model approaches The first approachis presented by a standard IndashO Leontief model for which input coefficients andLeontief multipliers (ML) have been calculated

ML = (E ndash A)ndash1

where A is the matrix of input (technical) coefficientsThe second model approach is based on extending a linear Leontief model

to a SAM framework which is performed by partitioning the accounts intoendogenous and exogenous accounts and assuming that the column coefficientsof the endogenous accounts are all constant For determining the set ofendogenous accounts it is important to know whether changes in the level ofexpenditures directly follow any change in incomes (Pyatt and Round 1985)Exogenous accounts are those for which one assumes that the expenditures are

TOURISM ECONOMICS610

set independently on incomes Standard practice is to pick up for the exogenousaccounts one or more accounts among the government capital and the rest ofthe world accounts justifying the choice on the basis of the objectives of thestudy (Hajnovicova and Lapisakova 2002)

Multipliers calculated from the SAM are the simple indicators comprisingthe important information about the structure of the Eastern Cape economyThey are calculated from the matrix of expenditure shares (general technicalcoefficients) after excluding the exogenous accounts The computed multiplierswill be sensitive to the choice of exogenous accounts and express the sensitivityof the endogenous accounts on changes in demand for exogenous accounts(Hajnovicova and Lapisakova 2002) SAM multipliers (MS) are calculated as

MS = (E ndash A)ndash1

where M is the matrix of expenditure shares of endogenous accountsComparing the multipliers calculated from the IndashO and SAM models carries

new aspects in the economic analysis The SAM multipliers are much largerthan the corresponding IndashO multipliers Because value added is a leakage onlyintermediate demand serves as a multiplier in the IndashO analysis In contrastvalue added and incomes generate demand linkages in the SAM approach SAMmultipliers capture the different multiplier effects of exogenous accounts onproductive activities factors and institutions Based on the partition of theendogenous section of the SAM into three categories of accounts (activitiescommodities factors and institutions) a matrix of multipliers can bedecomposed into four components that is initial injection transfer effectsopen-loop effects and closed-loop effects Many versions of this decompositionhave been used (Hajnovicova and Lapisakova 2002)

In analysing the productive sphere of economy a decomposition ofmultipliers by Pyatt and Round (1985) and Cardenete and Sancho (2004) wasused The matrix MS which is reduced to the Leontief multiplier matrix ML

corresponds only to the production accounts To perform the impact analysisthe MS matrix is truncated to conform to the dimension of the matrix ML

The differences between both multiplier matrices MS and ML measure theinduced effects due to the added endogeneity while the direct and indirecteffects are measured by ML Matrix MS can be decomposed into threecomponents

(MS ndash ML) which measures induced effects

(E + A) which measures direct effects

(ML ndash E ndash A) which measures indirect effects

where

MS = (MS ndash ML) + (E + A) + (ML ndash E ndash A)

A vast array of inputs was required for the analysis These were obtained fromsurveys conducted by Statistics South Africa and published in their Supply andUse Tables Detailed information on the economic composition of each sectorin the economy was obtained from these tables and formed part of the basicexogenous inputs needed for the calculation of the various multipliers

611The significance of festivals to regional economies

Table 2 Profile of festinos

Gender Male 44 female 56Age 37 yearsLanguage English 75 Afrikaans 18Province of origin Eastern Cape 45 Gauteng 21 Western Cape

17Type of show Comedy 60 drama 48 dance 38 music 31Country of residence Foreign 4 SA 96

Moreover additional information pertaining to labour numbers and capital usedwas obtained from Census 2001 and the South African Reserve Bank QuarterlyBulletin respectively (Conningarth Consultants 2006a) The exogenous inputdata (shocks) were calculated and drawn from independent surveys conductedduring 2009 by the Institute for Tourism and Leisure Studies at the arts festivalThe SAM multipliers convert the exogenous input data (shocks) to the incomegenerated and the number of jobs supported by using sets of economic ratiosand multipliers for the province Total effects are presented in aggregate formand include both indirect and induced effects (see the section below)

Assessing the economic impact of the festival

The results are discussed in two sections In the first section a brief overviewis given of the descriptive results of the surveys The second section containsthe results of the economic impact study

Profile of festinos

From Table 2 it is clear that the profile of festinos is that of predominantlyEnglish-speaking females primarily falling in the 35ndash49 year age group livingin the Eastern Cape Province and spending approximately R4700 at thefestival Approximately 4 of festinos are foreigners It is interesting to notethat the festival attracts 21 of festinos from the Gauteng Province and thatthey enjoy comedies and drama

Economic impact

Festino spending is converted to the associated increase in production incomeand jobs in the region using economic multipliers from a SAM for the EasternCape Province The classical SAMs multiplier approach employs distinctmultipliers for each expenditure-related sector The multipliers convertexpenditure into the associated increase in production jobs and income andestimate secondary effects as the festino spending circulates through the regionaleconomy To do this it is necessary to lsquocorrectrsquo the direct impact (that isexpenditure figures in Table 1) by the multiplier effect These results basedon the lsquocorrectedrsquo spending by visitors (refer to Column 2 in Tables 3ndash5) arecontained in the following subsections

TOURISM ECONOMICS612

Table 3 Impact through production multipliers (ZAR 2000 prices) ndash foreign visitors

Sector Direct Indirect Induced Total Percentageimpacta impactb impactc impactd (total)

Agriculture 351970 190320 451460 993750 010Mining 955160 621300 1037950 2614410 030Manufacturing 88935280 83983630 77989940 250908860 2740Electricity and water 17430 10650 16540 44630 000Construction 347260 331970 363570 1042800 010Trade andaccommodation 104297460 76530590 115342850 296170900 3230

Transport andcommunication 34573690 29056620 31593670 95223980 1040

Financial andbusiness services 98805220 64722330 101694130 265221690 2890

Community services 1607850 1474150 1995690 5077690 060

Total (ZAR) 329891330 256921570 330485790 917298690 10000

Notes aInitial expenditures (for example by festinos) are generally called the direct costs of an activityand their effects on the economy are direct effects bPurchases by suppliers (for example vendors hoteland restaurant owners charter operators etc) of the final goods and services of materials and supplies tosustain the original purchases are called indirect effects cInduced effects occur when workers in thesectors stimulated by direct and indirect expenditures spend their additional income on consumergoods and services dThe direct plus indirect plus induced effects equal the total effect

New money impact

This section represents only the impact of the money spent by festinos on theregional economy of the festival The usefulness of this section is that it providesa model of economic impact that calculates how much money has been broughtinto the area from festinos specifically because of the festival and allows one tofocus on the money that has been spent in the area specifically by festinos

Foreign expenditure The quantification of the direct indirect and induced impactof foreign expenditure at the Grahamstown National Arts Festival in the regionis summarized in Table 3 As this expenditure is applied partially by the foreignfestinos of the festival in the purchase of goods and services in the region thisrepresents an inflow of money in the region mobilizing economic activitygenerating employment and generating additional revenues for the provincelsquoProductionrsquo is an indication of the total turnover generated by each sector inthe regional economy As such production comprises two components demandfor intermediate inputs (resources) by an activity (domestically produced andimported goods and services) and total value added generated by an activity(Conningarth Consultants 2006b) Table 3 reflects the effects on production(using the production multipliers) by foreign expenditure resulting from thefestival

The spending of the foreign festinos in 2009 was predominantly expenditureon tourist activities From Table 3 it is clear that the largest direct impactsare in trade and accommodation (323) financial and business services (289)and manufacturing (274) Through the lsquobackward linkagesrsquo large indirectand induced impacts are also experienced in the community services sector

613The significance of festivals to regional economies

Figure 1 Foreign expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

reflecting an indirect impact of R147 thousand and an induced impact ofR200 thousand Note that if the authors ignore the direct effect in thecommunity services sector 683 of the total increase in production is as aresult of lsquobackward linkagesrsquo with direct foreign expenditure representing only317 A more detailed (disaggregated) analysis of the various sectors can bemade but falls beyond the scope of this study

All the acquisitions of goods and services from non-regional suppliers thatis suppliers outside the Eastern Cape were included in the analysis and mighttherefore have had a significant direct or indirect effect on the provincersquoseconomy By including this indirect impact although small in significance wepresent a more comprehensive estimate of the impact of the GrahamstownNational Arts Festival on the province

The value of the purchases of goods and services from regional suppliers wasthen classified using the basic sector aggregation as classified by the SouthAfrican Reserve Bank and Statistics South Africa and its distribution byactivity sector is shown in Figure 1

In terms of the analysis of the expenditure by foreign festinos the firstconclusion is that the direct effect represents 36 the indirect effect 28 andthe induced effect 36 of the total increase in foreign expenditure The secondconclusion is that the activity sectors that benefited most from the expenditureof the festivalrsquos foreign festinos were trade and accommodation financial andbusiness services and manufacturing The total impact resulting fromexpenditure by foreigners in these sectors in 2009 surpassed R92 million andrepresented some 111 of the total expenditure made by all festinos of the 2009Grahamstown National Arts Festival in the region

The rest of South Africarsquos expenditure In order to estimate the economic impactof the expenditure made by festinos residing in the rest of South Africa anapproach was followed similar to that for the expenditure by foreign festinos

100

90

80

70

60

50

40

30

20

10

0

Direct impact Indirect impact Induced impact

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

TOURISM ECONOMICS614

Table 4 Impact through production multipliers (ZAR 2000 prices) ndash rest of South Africavisitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1606060 868450 2060020 4534530 010Mining 4342400 2822110 4720450 11884950 030Manufacturing 371464640 352132290 324543490 1048140420 2490Electricity and water 77620 47450 73660 198730 000Construction 1365670 1305530 1429810 4101000 010Trade andaccommodation 464604850 340914160 513807780 1319326800 3140

Transport andcommunication 277775630 233449830 253833250 765058700 1820

Financial andbusiness services 381484190 249891110 392638170 1024013470 2440

Community services 8100740 7427150 10054790 25582670 060

Total (ZAR) 1510821800 1188858060 1503161410 4202841280 10000

Table 4 reflects the effects on production (using the production multipliers)by expenditure of festinos from the rest of South Africa resulting from thefestival

Table 4 illustrates that the largest direct impacts are in trade and accom-modation (314) in manufacturing (249) and in financial and businessservices (244) Through the lsquobackward linkagesrsquo large indirect and inducedimpacts are also experienced in the transport and communication sector (see alsoFigure 2) reflecting an indirect impact of R23 million and an induced impactof R25 million If the direct effect in the transport and communication sectoris ignored 637 of the total increase in production is a result of lsquobackwardlinkagesrsquo with direct expenditure by festinos from the rest of South Africarepresenting only 363 of the total impact

Based on the data collected the authors estimated that total impact ofexpenditure by festinos from the rest of South Africa in the region might exceedR420 million (approximately 509 of total expenditure) Figure 2 presentsthe total expenditure per activity sector by festinos from the rest of South Africa

As in the case of foreigners the results of the study suggest that the sectorsthat benefit most from expenditure by festinos from the rest of South Africa arein order of importance trade and accommodation manufacturing and financialand business services (please refer to Figure 2) The expenditure in these threesectors of economic activity represents more than 81 of the total expenditureby the festinos from the rest of South Africa at the festival

The analysis of the expenditure by festinos from the rest of South Africaindicates that the direct effect represents 359 the indirect effect 283 andthe induced effect 358 of the total increase in local expenditure Given theestimation of the economic impact presented above it should be kept in mindthat by definition calculation of the economic impact should include only theexpenditure that would not have occurred in the absence of the event

615The significance of festivals to regional economies

Figure 2 Rest of South African expenditure in the region per activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

Retained locals

The retained local section focuses on money that would have left the area ifthe festival had not been held The retained local model allows us to see howfestivals and other events contribute to the local economy by encouraging theirresidents to stay and spend recreation rands within the area

Eastern Cape expenditure In order to estimate the economic impact of theexpenditure made by festinos residing in the Eastern Cape a similar approachwas followed as that with the expenditure of foreign festinos and festinos residingin the rest of South Africa Based on the information collected from the surveyscarried out during the 2009 festival the authors estimated that the directimpact in the region resulting from the localsrsquo expenditure amounted toapproximately R112 million (approximately 379 of total expenditure)distributed among the nine activity sectors as presented in Figure 3

The value of the purchases of goods and services made to regional suppliersby festinos residing in the Eastern Cape is presented in Figure 3

The activity sectors that benefited most from expenditure by locals inrelation with the Grahamstown National Arts Festival were trade and accom-modation financial and business services manufacturing and to a lesser extenttransport and communication Given that these festinos hailed from the EasternCape it was understandable that their expenditure in the latter sectors wouldbe less than that of foreigners and non-Eastern Cape residents (please refer toFigure 3)

It is important to note that the direct impact of the localsrsquo expenditure(R112 million) represents more than 379 of the adjusted total expenditureof all festinos (R297 million) of the festival in 2009 The quantification of thedirect indirect and induced impact of localsrsquo expenditure at the festival in theregion is summarized in Table 5

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

TOURISM ECONOMICS616

Figure 3 Local expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

In Table 5 it is clear that the largest direct impact is on trade andaccommodation (330) and on financial and business services (330) Throughthe lsquobackward linkagesrsquo large indirect and induced impacts are also experiencedin the manufacturing sector reflecting an indirect impact of R27 million andan induced impact of R25 million If the direct effect in the manufacturingsector is ignored 646 of the total increase in production is as a result oflsquobackward linkagesrsquo with direct local expenditure representing only 354 ofthe total impact

Regarding the analysis of the expenditure of festinos from the Eastern Capeit can be concluded that the direct effect represents 360 the indirect effect277 and the induced effect 363 of the total increase in local expenditureBy including the expenditure that would have occurred in the region independ-ently of the existence of the festival less conservative figures for the economicimpact are estimated It is reasonable to expect that in the absence of thefestival the available revenue from these local festinos would have been less andas such its volume of expenditure in the region would have been less

Overall impact

This section represents the overall spending in the local economy that can beattributed to the festival by festinos (locals and visitors from abroad and fromthe rest of South Africa) Although the locals do not bring money into thecommunity from outside regions as visitors do it is valuable to include theirspending as it has the effect of initiating economic activity within the localeconomy Examined in this way a festivalrsquos contribution to a local economy iscomparable to a local business that both draws money from and contributes toits community To consider only the tourist rand in terms of economic impactwould underestimate greatly the complete financial benefits of festivals and

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

617The significance of festivals to regional economies

Table 5 Impact through production multipliers (ZAR 2000 prices) ndash local visitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1080730 584390 1386210 3051330 010Mining 2953680 1924390 3207390 8085460 030Manufacturing 281313440 266795820 245513980 793623240 2540Electricity and water 60580 37030 57490 155100 000Construction 1332640 1273950 1395220 4001810 010Trade andaccommodation 362634420 266091090 401038400 1029763910 3300

Transport andcommunication 84956440 71399590 77633770 233989810 750

Financial andbusiness services 384186600 251661330 395419600 1031267530 3300

Community services 6239660 5720810 7744770 19705250 060

Total (in ZAR) 1124758190 865488410 1133396830 3123643440 10000

similar events In addition this study recognizes that without festivals asignificant amount of money would leave the area due to locals seeking analternative venue for entertainment in other regions

This study has determined that the usefulness of the overall impact is thatit allows one to measure the amount of money that the festival circulatesthrough the local economy from every source from which the festival drawsfinancial impact However in order to evaluate the total impact of the festivalin the region it is necessary to lsquocorrectrsquo the direct impact by the multipliereffect Hence as a way of estimating the total impact of the GrahamstownNational Arts Festival in the region production multipliers were used for eachone of the activity sectors The multiplication of the direct impact in eachactivity sector for the specific production multipliers gives the total impact ofthe festival for each of the regional economy sectors as indicated in Table 6below The sum of the impacts in each of the sectors gives us in turn anestimate of the total impact of the festival in the region

The analysis of the results indicates that the direct economic impact of thefestival and its visitors in the region (which is in the order of R297 million)can result in an additional R527 million of indirect impact giving a totalannual impact in the region in excess of R824 million That is equivalent toan aggregated production multiplier in the order of 277 Therefore for eachrand spent by festinos in the region 177 cents are generated additionally interms of indirect expenditure The aggregated production multiplier is obtainedby dividing the total impact by the direct impact

Considering the multipliers for each component (foreign local and the restof South Africa) of expenditures one can say that those resulting from out-of-province festinos have a greater impact as multiplier (279) than does spendingby foreign and local festinos on production (277) This means that for each randspent at the festival by out-of-province festinos an additional R179 is generatedin the Eastern Cape economy (see Tables 4 and 6)

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

TOURISM ECONOMICS610

set independently on incomes Standard practice is to pick up for the exogenousaccounts one or more accounts among the government capital and the rest ofthe world accounts justifying the choice on the basis of the objectives of thestudy (Hajnovicova and Lapisakova 2002)

Multipliers calculated from the SAM are the simple indicators comprisingthe important information about the structure of the Eastern Cape economyThey are calculated from the matrix of expenditure shares (general technicalcoefficients) after excluding the exogenous accounts The computed multiplierswill be sensitive to the choice of exogenous accounts and express the sensitivityof the endogenous accounts on changes in demand for exogenous accounts(Hajnovicova and Lapisakova 2002) SAM multipliers (MS) are calculated as

MS = (E ndash A)ndash1

where M is the matrix of expenditure shares of endogenous accountsComparing the multipliers calculated from the IndashO and SAM models carries

new aspects in the economic analysis The SAM multipliers are much largerthan the corresponding IndashO multipliers Because value added is a leakage onlyintermediate demand serves as a multiplier in the IndashO analysis In contrastvalue added and incomes generate demand linkages in the SAM approach SAMmultipliers capture the different multiplier effects of exogenous accounts onproductive activities factors and institutions Based on the partition of theendogenous section of the SAM into three categories of accounts (activitiescommodities factors and institutions) a matrix of multipliers can bedecomposed into four components that is initial injection transfer effectsopen-loop effects and closed-loop effects Many versions of this decompositionhave been used (Hajnovicova and Lapisakova 2002)

In analysing the productive sphere of economy a decomposition ofmultipliers by Pyatt and Round (1985) and Cardenete and Sancho (2004) wasused The matrix MS which is reduced to the Leontief multiplier matrix ML

corresponds only to the production accounts To perform the impact analysisthe MS matrix is truncated to conform to the dimension of the matrix ML

The differences between both multiplier matrices MS and ML measure theinduced effects due to the added endogeneity while the direct and indirecteffects are measured by ML Matrix MS can be decomposed into threecomponents

(MS ndash ML) which measures induced effects

(E + A) which measures direct effects

(ML ndash E ndash A) which measures indirect effects

where

MS = (MS ndash ML) + (E + A) + (ML ndash E ndash A)

A vast array of inputs was required for the analysis These were obtained fromsurveys conducted by Statistics South Africa and published in their Supply andUse Tables Detailed information on the economic composition of each sectorin the economy was obtained from these tables and formed part of the basicexogenous inputs needed for the calculation of the various multipliers

611The significance of festivals to regional economies

Table 2 Profile of festinos

Gender Male 44 female 56Age 37 yearsLanguage English 75 Afrikaans 18Province of origin Eastern Cape 45 Gauteng 21 Western Cape

17Type of show Comedy 60 drama 48 dance 38 music 31Country of residence Foreign 4 SA 96

Moreover additional information pertaining to labour numbers and capital usedwas obtained from Census 2001 and the South African Reserve Bank QuarterlyBulletin respectively (Conningarth Consultants 2006a) The exogenous inputdata (shocks) were calculated and drawn from independent surveys conductedduring 2009 by the Institute for Tourism and Leisure Studies at the arts festivalThe SAM multipliers convert the exogenous input data (shocks) to the incomegenerated and the number of jobs supported by using sets of economic ratiosand multipliers for the province Total effects are presented in aggregate formand include both indirect and induced effects (see the section below)

Assessing the economic impact of the festival

The results are discussed in two sections In the first section a brief overviewis given of the descriptive results of the surveys The second section containsthe results of the economic impact study

Profile of festinos

From Table 2 it is clear that the profile of festinos is that of predominantlyEnglish-speaking females primarily falling in the 35ndash49 year age group livingin the Eastern Cape Province and spending approximately R4700 at thefestival Approximately 4 of festinos are foreigners It is interesting to notethat the festival attracts 21 of festinos from the Gauteng Province and thatthey enjoy comedies and drama

Economic impact

Festino spending is converted to the associated increase in production incomeand jobs in the region using economic multipliers from a SAM for the EasternCape Province The classical SAMs multiplier approach employs distinctmultipliers for each expenditure-related sector The multipliers convertexpenditure into the associated increase in production jobs and income andestimate secondary effects as the festino spending circulates through the regionaleconomy To do this it is necessary to lsquocorrectrsquo the direct impact (that isexpenditure figures in Table 1) by the multiplier effect These results basedon the lsquocorrectedrsquo spending by visitors (refer to Column 2 in Tables 3ndash5) arecontained in the following subsections

TOURISM ECONOMICS612

Table 3 Impact through production multipliers (ZAR 2000 prices) ndash foreign visitors

Sector Direct Indirect Induced Total Percentageimpacta impactb impactc impactd (total)

Agriculture 351970 190320 451460 993750 010Mining 955160 621300 1037950 2614410 030Manufacturing 88935280 83983630 77989940 250908860 2740Electricity and water 17430 10650 16540 44630 000Construction 347260 331970 363570 1042800 010Trade andaccommodation 104297460 76530590 115342850 296170900 3230

Transport andcommunication 34573690 29056620 31593670 95223980 1040

Financial andbusiness services 98805220 64722330 101694130 265221690 2890

Community services 1607850 1474150 1995690 5077690 060

Total (ZAR) 329891330 256921570 330485790 917298690 10000

Notes aInitial expenditures (for example by festinos) are generally called the direct costs of an activityand their effects on the economy are direct effects bPurchases by suppliers (for example vendors hoteland restaurant owners charter operators etc) of the final goods and services of materials and supplies tosustain the original purchases are called indirect effects cInduced effects occur when workers in thesectors stimulated by direct and indirect expenditures spend their additional income on consumergoods and services dThe direct plus indirect plus induced effects equal the total effect

New money impact

This section represents only the impact of the money spent by festinos on theregional economy of the festival The usefulness of this section is that it providesa model of economic impact that calculates how much money has been broughtinto the area from festinos specifically because of the festival and allows one tofocus on the money that has been spent in the area specifically by festinos

Foreign expenditure The quantification of the direct indirect and induced impactof foreign expenditure at the Grahamstown National Arts Festival in the regionis summarized in Table 3 As this expenditure is applied partially by the foreignfestinos of the festival in the purchase of goods and services in the region thisrepresents an inflow of money in the region mobilizing economic activitygenerating employment and generating additional revenues for the provincelsquoProductionrsquo is an indication of the total turnover generated by each sector inthe regional economy As such production comprises two components demandfor intermediate inputs (resources) by an activity (domestically produced andimported goods and services) and total value added generated by an activity(Conningarth Consultants 2006b) Table 3 reflects the effects on production(using the production multipliers) by foreign expenditure resulting from thefestival

The spending of the foreign festinos in 2009 was predominantly expenditureon tourist activities From Table 3 it is clear that the largest direct impactsare in trade and accommodation (323) financial and business services (289)and manufacturing (274) Through the lsquobackward linkagesrsquo large indirectand induced impacts are also experienced in the community services sector

613The significance of festivals to regional economies

Figure 1 Foreign expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

reflecting an indirect impact of R147 thousand and an induced impact ofR200 thousand Note that if the authors ignore the direct effect in thecommunity services sector 683 of the total increase in production is as aresult of lsquobackward linkagesrsquo with direct foreign expenditure representing only317 A more detailed (disaggregated) analysis of the various sectors can bemade but falls beyond the scope of this study

All the acquisitions of goods and services from non-regional suppliers thatis suppliers outside the Eastern Cape were included in the analysis and mighttherefore have had a significant direct or indirect effect on the provincersquoseconomy By including this indirect impact although small in significance wepresent a more comprehensive estimate of the impact of the GrahamstownNational Arts Festival on the province

The value of the purchases of goods and services from regional suppliers wasthen classified using the basic sector aggregation as classified by the SouthAfrican Reserve Bank and Statistics South Africa and its distribution byactivity sector is shown in Figure 1

In terms of the analysis of the expenditure by foreign festinos the firstconclusion is that the direct effect represents 36 the indirect effect 28 andthe induced effect 36 of the total increase in foreign expenditure The secondconclusion is that the activity sectors that benefited most from the expenditureof the festivalrsquos foreign festinos were trade and accommodation financial andbusiness services and manufacturing The total impact resulting fromexpenditure by foreigners in these sectors in 2009 surpassed R92 million andrepresented some 111 of the total expenditure made by all festinos of the 2009Grahamstown National Arts Festival in the region

The rest of South Africarsquos expenditure In order to estimate the economic impactof the expenditure made by festinos residing in the rest of South Africa anapproach was followed similar to that for the expenditure by foreign festinos

100

90

80

70

60

50

40

30

20

10

0

Direct impact Indirect impact Induced impact

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

TOURISM ECONOMICS614

Table 4 Impact through production multipliers (ZAR 2000 prices) ndash rest of South Africavisitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1606060 868450 2060020 4534530 010Mining 4342400 2822110 4720450 11884950 030Manufacturing 371464640 352132290 324543490 1048140420 2490Electricity and water 77620 47450 73660 198730 000Construction 1365670 1305530 1429810 4101000 010Trade andaccommodation 464604850 340914160 513807780 1319326800 3140

Transport andcommunication 277775630 233449830 253833250 765058700 1820

Financial andbusiness services 381484190 249891110 392638170 1024013470 2440

Community services 8100740 7427150 10054790 25582670 060

Total (ZAR) 1510821800 1188858060 1503161410 4202841280 10000

Table 4 reflects the effects on production (using the production multipliers)by expenditure of festinos from the rest of South Africa resulting from thefestival

Table 4 illustrates that the largest direct impacts are in trade and accom-modation (314) in manufacturing (249) and in financial and businessservices (244) Through the lsquobackward linkagesrsquo large indirect and inducedimpacts are also experienced in the transport and communication sector (see alsoFigure 2) reflecting an indirect impact of R23 million and an induced impactof R25 million If the direct effect in the transport and communication sectoris ignored 637 of the total increase in production is a result of lsquobackwardlinkagesrsquo with direct expenditure by festinos from the rest of South Africarepresenting only 363 of the total impact

Based on the data collected the authors estimated that total impact ofexpenditure by festinos from the rest of South Africa in the region might exceedR420 million (approximately 509 of total expenditure) Figure 2 presentsthe total expenditure per activity sector by festinos from the rest of South Africa

As in the case of foreigners the results of the study suggest that the sectorsthat benefit most from expenditure by festinos from the rest of South Africa arein order of importance trade and accommodation manufacturing and financialand business services (please refer to Figure 2) The expenditure in these threesectors of economic activity represents more than 81 of the total expenditureby the festinos from the rest of South Africa at the festival

The analysis of the expenditure by festinos from the rest of South Africaindicates that the direct effect represents 359 the indirect effect 283 andthe induced effect 358 of the total increase in local expenditure Given theestimation of the economic impact presented above it should be kept in mindthat by definition calculation of the economic impact should include only theexpenditure that would not have occurred in the absence of the event

615The significance of festivals to regional economies

Figure 2 Rest of South African expenditure in the region per activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

Retained locals

The retained local section focuses on money that would have left the area ifthe festival had not been held The retained local model allows us to see howfestivals and other events contribute to the local economy by encouraging theirresidents to stay and spend recreation rands within the area

Eastern Cape expenditure In order to estimate the economic impact of theexpenditure made by festinos residing in the Eastern Cape a similar approachwas followed as that with the expenditure of foreign festinos and festinos residingin the rest of South Africa Based on the information collected from the surveyscarried out during the 2009 festival the authors estimated that the directimpact in the region resulting from the localsrsquo expenditure amounted toapproximately R112 million (approximately 379 of total expenditure)distributed among the nine activity sectors as presented in Figure 3

The value of the purchases of goods and services made to regional suppliersby festinos residing in the Eastern Cape is presented in Figure 3

The activity sectors that benefited most from expenditure by locals inrelation with the Grahamstown National Arts Festival were trade and accom-modation financial and business services manufacturing and to a lesser extenttransport and communication Given that these festinos hailed from the EasternCape it was understandable that their expenditure in the latter sectors wouldbe less than that of foreigners and non-Eastern Cape residents (please refer toFigure 3)

It is important to note that the direct impact of the localsrsquo expenditure(R112 million) represents more than 379 of the adjusted total expenditureof all festinos (R297 million) of the festival in 2009 The quantification of thedirect indirect and induced impact of localsrsquo expenditure at the festival in theregion is summarized in Table 5

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

TOURISM ECONOMICS616

Figure 3 Local expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

In Table 5 it is clear that the largest direct impact is on trade andaccommodation (330) and on financial and business services (330) Throughthe lsquobackward linkagesrsquo large indirect and induced impacts are also experiencedin the manufacturing sector reflecting an indirect impact of R27 million andan induced impact of R25 million If the direct effect in the manufacturingsector is ignored 646 of the total increase in production is as a result oflsquobackward linkagesrsquo with direct local expenditure representing only 354 ofthe total impact

Regarding the analysis of the expenditure of festinos from the Eastern Capeit can be concluded that the direct effect represents 360 the indirect effect277 and the induced effect 363 of the total increase in local expenditureBy including the expenditure that would have occurred in the region independ-ently of the existence of the festival less conservative figures for the economicimpact are estimated It is reasonable to expect that in the absence of thefestival the available revenue from these local festinos would have been less andas such its volume of expenditure in the region would have been less

Overall impact

This section represents the overall spending in the local economy that can beattributed to the festival by festinos (locals and visitors from abroad and fromthe rest of South Africa) Although the locals do not bring money into thecommunity from outside regions as visitors do it is valuable to include theirspending as it has the effect of initiating economic activity within the localeconomy Examined in this way a festivalrsquos contribution to a local economy iscomparable to a local business that both draws money from and contributes toits community To consider only the tourist rand in terms of economic impactwould underestimate greatly the complete financial benefits of festivals and

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

617The significance of festivals to regional economies

Table 5 Impact through production multipliers (ZAR 2000 prices) ndash local visitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1080730 584390 1386210 3051330 010Mining 2953680 1924390 3207390 8085460 030Manufacturing 281313440 266795820 245513980 793623240 2540Electricity and water 60580 37030 57490 155100 000Construction 1332640 1273950 1395220 4001810 010Trade andaccommodation 362634420 266091090 401038400 1029763910 3300

Transport andcommunication 84956440 71399590 77633770 233989810 750

Financial andbusiness services 384186600 251661330 395419600 1031267530 3300

Community services 6239660 5720810 7744770 19705250 060

Total (in ZAR) 1124758190 865488410 1133396830 3123643440 10000

similar events In addition this study recognizes that without festivals asignificant amount of money would leave the area due to locals seeking analternative venue for entertainment in other regions

This study has determined that the usefulness of the overall impact is thatit allows one to measure the amount of money that the festival circulatesthrough the local economy from every source from which the festival drawsfinancial impact However in order to evaluate the total impact of the festivalin the region it is necessary to lsquocorrectrsquo the direct impact by the multipliereffect Hence as a way of estimating the total impact of the GrahamstownNational Arts Festival in the region production multipliers were used for eachone of the activity sectors The multiplication of the direct impact in eachactivity sector for the specific production multipliers gives the total impact ofthe festival for each of the regional economy sectors as indicated in Table 6below The sum of the impacts in each of the sectors gives us in turn anestimate of the total impact of the festival in the region

The analysis of the results indicates that the direct economic impact of thefestival and its visitors in the region (which is in the order of R297 million)can result in an additional R527 million of indirect impact giving a totalannual impact in the region in excess of R824 million That is equivalent toan aggregated production multiplier in the order of 277 Therefore for eachrand spent by festinos in the region 177 cents are generated additionally interms of indirect expenditure The aggregated production multiplier is obtainedby dividing the total impact by the direct impact

Considering the multipliers for each component (foreign local and the restof South Africa) of expenditures one can say that those resulting from out-of-province festinos have a greater impact as multiplier (279) than does spendingby foreign and local festinos on production (277) This means that for each randspent at the festival by out-of-province festinos an additional R179 is generatedin the Eastern Cape economy (see Tables 4 and 6)

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

611The significance of festivals to regional economies

Table 2 Profile of festinos

Gender Male 44 female 56Age 37 yearsLanguage English 75 Afrikaans 18Province of origin Eastern Cape 45 Gauteng 21 Western Cape

17Type of show Comedy 60 drama 48 dance 38 music 31Country of residence Foreign 4 SA 96

Moreover additional information pertaining to labour numbers and capital usedwas obtained from Census 2001 and the South African Reserve Bank QuarterlyBulletin respectively (Conningarth Consultants 2006a) The exogenous inputdata (shocks) were calculated and drawn from independent surveys conductedduring 2009 by the Institute for Tourism and Leisure Studies at the arts festivalThe SAM multipliers convert the exogenous input data (shocks) to the incomegenerated and the number of jobs supported by using sets of economic ratiosand multipliers for the province Total effects are presented in aggregate formand include both indirect and induced effects (see the section below)

Assessing the economic impact of the festival

The results are discussed in two sections In the first section a brief overviewis given of the descriptive results of the surveys The second section containsthe results of the economic impact study

Profile of festinos

From Table 2 it is clear that the profile of festinos is that of predominantlyEnglish-speaking females primarily falling in the 35ndash49 year age group livingin the Eastern Cape Province and spending approximately R4700 at thefestival Approximately 4 of festinos are foreigners It is interesting to notethat the festival attracts 21 of festinos from the Gauteng Province and thatthey enjoy comedies and drama

Economic impact

Festino spending is converted to the associated increase in production incomeand jobs in the region using economic multipliers from a SAM for the EasternCape Province The classical SAMs multiplier approach employs distinctmultipliers for each expenditure-related sector The multipliers convertexpenditure into the associated increase in production jobs and income andestimate secondary effects as the festino spending circulates through the regionaleconomy To do this it is necessary to lsquocorrectrsquo the direct impact (that isexpenditure figures in Table 1) by the multiplier effect These results basedon the lsquocorrectedrsquo spending by visitors (refer to Column 2 in Tables 3ndash5) arecontained in the following subsections

TOURISM ECONOMICS612

Table 3 Impact through production multipliers (ZAR 2000 prices) ndash foreign visitors

Sector Direct Indirect Induced Total Percentageimpacta impactb impactc impactd (total)

Agriculture 351970 190320 451460 993750 010Mining 955160 621300 1037950 2614410 030Manufacturing 88935280 83983630 77989940 250908860 2740Electricity and water 17430 10650 16540 44630 000Construction 347260 331970 363570 1042800 010Trade andaccommodation 104297460 76530590 115342850 296170900 3230

Transport andcommunication 34573690 29056620 31593670 95223980 1040

Financial andbusiness services 98805220 64722330 101694130 265221690 2890

Community services 1607850 1474150 1995690 5077690 060

Total (ZAR) 329891330 256921570 330485790 917298690 10000

Notes aInitial expenditures (for example by festinos) are generally called the direct costs of an activityand their effects on the economy are direct effects bPurchases by suppliers (for example vendors hoteland restaurant owners charter operators etc) of the final goods and services of materials and supplies tosustain the original purchases are called indirect effects cInduced effects occur when workers in thesectors stimulated by direct and indirect expenditures spend their additional income on consumergoods and services dThe direct plus indirect plus induced effects equal the total effect

New money impact

This section represents only the impact of the money spent by festinos on theregional economy of the festival The usefulness of this section is that it providesa model of economic impact that calculates how much money has been broughtinto the area from festinos specifically because of the festival and allows one tofocus on the money that has been spent in the area specifically by festinos

Foreign expenditure The quantification of the direct indirect and induced impactof foreign expenditure at the Grahamstown National Arts Festival in the regionis summarized in Table 3 As this expenditure is applied partially by the foreignfestinos of the festival in the purchase of goods and services in the region thisrepresents an inflow of money in the region mobilizing economic activitygenerating employment and generating additional revenues for the provincelsquoProductionrsquo is an indication of the total turnover generated by each sector inthe regional economy As such production comprises two components demandfor intermediate inputs (resources) by an activity (domestically produced andimported goods and services) and total value added generated by an activity(Conningarth Consultants 2006b) Table 3 reflects the effects on production(using the production multipliers) by foreign expenditure resulting from thefestival

The spending of the foreign festinos in 2009 was predominantly expenditureon tourist activities From Table 3 it is clear that the largest direct impactsare in trade and accommodation (323) financial and business services (289)and manufacturing (274) Through the lsquobackward linkagesrsquo large indirectand induced impacts are also experienced in the community services sector

613The significance of festivals to regional economies

Figure 1 Foreign expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

reflecting an indirect impact of R147 thousand and an induced impact ofR200 thousand Note that if the authors ignore the direct effect in thecommunity services sector 683 of the total increase in production is as aresult of lsquobackward linkagesrsquo with direct foreign expenditure representing only317 A more detailed (disaggregated) analysis of the various sectors can bemade but falls beyond the scope of this study

All the acquisitions of goods and services from non-regional suppliers thatis suppliers outside the Eastern Cape were included in the analysis and mighttherefore have had a significant direct or indirect effect on the provincersquoseconomy By including this indirect impact although small in significance wepresent a more comprehensive estimate of the impact of the GrahamstownNational Arts Festival on the province

The value of the purchases of goods and services from regional suppliers wasthen classified using the basic sector aggregation as classified by the SouthAfrican Reserve Bank and Statistics South Africa and its distribution byactivity sector is shown in Figure 1

In terms of the analysis of the expenditure by foreign festinos the firstconclusion is that the direct effect represents 36 the indirect effect 28 andthe induced effect 36 of the total increase in foreign expenditure The secondconclusion is that the activity sectors that benefited most from the expenditureof the festivalrsquos foreign festinos were trade and accommodation financial andbusiness services and manufacturing The total impact resulting fromexpenditure by foreigners in these sectors in 2009 surpassed R92 million andrepresented some 111 of the total expenditure made by all festinos of the 2009Grahamstown National Arts Festival in the region

The rest of South Africarsquos expenditure In order to estimate the economic impactof the expenditure made by festinos residing in the rest of South Africa anapproach was followed similar to that for the expenditure by foreign festinos

100

90

80

70

60

50

40

30

20

10

0

Direct impact Indirect impact Induced impact

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

TOURISM ECONOMICS614

Table 4 Impact through production multipliers (ZAR 2000 prices) ndash rest of South Africavisitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1606060 868450 2060020 4534530 010Mining 4342400 2822110 4720450 11884950 030Manufacturing 371464640 352132290 324543490 1048140420 2490Electricity and water 77620 47450 73660 198730 000Construction 1365670 1305530 1429810 4101000 010Trade andaccommodation 464604850 340914160 513807780 1319326800 3140

Transport andcommunication 277775630 233449830 253833250 765058700 1820

Financial andbusiness services 381484190 249891110 392638170 1024013470 2440

Community services 8100740 7427150 10054790 25582670 060

Total (ZAR) 1510821800 1188858060 1503161410 4202841280 10000

Table 4 reflects the effects on production (using the production multipliers)by expenditure of festinos from the rest of South Africa resulting from thefestival

Table 4 illustrates that the largest direct impacts are in trade and accom-modation (314) in manufacturing (249) and in financial and businessservices (244) Through the lsquobackward linkagesrsquo large indirect and inducedimpacts are also experienced in the transport and communication sector (see alsoFigure 2) reflecting an indirect impact of R23 million and an induced impactof R25 million If the direct effect in the transport and communication sectoris ignored 637 of the total increase in production is a result of lsquobackwardlinkagesrsquo with direct expenditure by festinos from the rest of South Africarepresenting only 363 of the total impact

Based on the data collected the authors estimated that total impact ofexpenditure by festinos from the rest of South Africa in the region might exceedR420 million (approximately 509 of total expenditure) Figure 2 presentsthe total expenditure per activity sector by festinos from the rest of South Africa

As in the case of foreigners the results of the study suggest that the sectorsthat benefit most from expenditure by festinos from the rest of South Africa arein order of importance trade and accommodation manufacturing and financialand business services (please refer to Figure 2) The expenditure in these threesectors of economic activity represents more than 81 of the total expenditureby the festinos from the rest of South Africa at the festival

The analysis of the expenditure by festinos from the rest of South Africaindicates that the direct effect represents 359 the indirect effect 283 andthe induced effect 358 of the total increase in local expenditure Given theestimation of the economic impact presented above it should be kept in mindthat by definition calculation of the economic impact should include only theexpenditure that would not have occurred in the absence of the event

615The significance of festivals to regional economies

Figure 2 Rest of South African expenditure in the region per activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

Retained locals

The retained local section focuses on money that would have left the area ifthe festival had not been held The retained local model allows us to see howfestivals and other events contribute to the local economy by encouraging theirresidents to stay and spend recreation rands within the area

Eastern Cape expenditure In order to estimate the economic impact of theexpenditure made by festinos residing in the Eastern Cape a similar approachwas followed as that with the expenditure of foreign festinos and festinos residingin the rest of South Africa Based on the information collected from the surveyscarried out during the 2009 festival the authors estimated that the directimpact in the region resulting from the localsrsquo expenditure amounted toapproximately R112 million (approximately 379 of total expenditure)distributed among the nine activity sectors as presented in Figure 3

The value of the purchases of goods and services made to regional suppliersby festinos residing in the Eastern Cape is presented in Figure 3

The activity sectors that benefited most from expenditure by locals inrelation with the Grahamstown National Arts Festival were trade and accom-modation financial and business services manufacturing and to a lesser extenttransport and communication Given that these festinos hailed from the EasternCape it was understandable that their expenditure in the latter sectors wouldbe less than that of foreigners and non-Eastern Cape residents (please refer toFigure 3)

It is important to note that the direct impact of the localsrsquo expenditure(R112 million) represents more than 379 of the adjusted total expenditureof all festinos (R297 million) of the festival in 2009 The quantification of thedirect indirect and induced impact of localsrsquo expenditure at the festival in theregion is summarized in Table 5

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

TOURISM ECONOMICS616

Figure 3 Local expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

In Table 5 it is clear that the largest direct impact is on trade andaccommodation (330) and on financial and business services (330) Throughthe lsquobackward linkagesrsquo large indirect and induced impacts are also experiencedin the manufacturing sector reflecting an indirect impact of R27 million andan induced impact of R25 million If the direct effect in the manufacturingsector is ignored 646 of the total increase in production is as a result oflsquobackward linkagesrsquo with direct local expenditure representing only 354 ofthe total impact

Regarding the analysis of the expenditure of festinos from the Eastern Capeit can be concluded that the direct effect represents 360 the indirect effect277 and the induced effect 363 of the total increase in local expenditureBy including the expenditure that would have occurred in the region independ-ently of the existence of the festival less conservative figures for the economicimpact are estimated It is reasonable to expect that in the absence of thefestival the available revenue from these local festinos would have been less andas such its volume of expenditure in the region would have been less

Overall impact

This section represents the overall spending in the local economy that can beattributed to the festival by festinos (locals and visitors from abroad and fromthe rest of South Africa) Although the locals do not bring money into thecommunity from outside regions as visitors do it is valuable to include theirspending as it has the effect of initiating economic activity within the localeconomy Examined in this way a festivalrsquos contribution to a local economy iscomparable to a local business that both draws money from and contributes toits community To consider only the tourist rand in terms of economic impactwould underestimate greatly the complete financial benefits of festivals and

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

617The significance of festivals to regional economies

Table 5 Impact through production multipliers (ZAR 2000 prices) ndash local visitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1080730 584390 1386210 3051330 010Mining 2953680 1924390 3207390 8085460 030Manufacturing 281313440 266795820 245513980 793623240 2540Electricity and water 60580 37030 57490 155100 000Construction 1332640 1273950 1395220 4001810 010Trade andaccommodation 362634420 266091090 401038400 1029763910 3300

Transport andcommunication 84956440 71399590 77633770 233989810 750

Financial andbusiness services 384186600 251661330 395419600 1031267530 3300

Community services 6239660 5720810 7744770 19705250 060

Total (in ZAR) 1124758190 865488410 1133396830 3123643440 10000

similar events In addition this study recognizes that without festivals asignificant amount of money would leave the area due to locals seeking analternative venue for entertainment in other regions

This study has determined that the usefulness of the overall impact is thatit allows one to measure the amount of money that the festival circulatesthrough the local economy from every source from which the festival drawsfinancial impact However in order to evaluate the total impact of the festivalin the region it is necessary to lsquocorrectrsquo the direct impact by the multipliereffect Hence as a way of estimating the total impact of the GrahamstownNational Arts Festival in the region production multipliers were used for eachone of the activity sectors The multiplication of the direct impact in eachactivity sector for the specific production multipliers gives the total impact ofthe festival for each of the regional economy sectors as indicated in Table 6below The sum of the impacts in each of the sectors gives us in turn anestimate of the total impact of the festival in the region

The analysis of the results indicates that the direct economic impact of thefestival and its visitors in the region (which is in the order of R297 million)can result in an additional R527 million of indirect impact giving a totalannual impact in the region in excess of R824 million That is equivalent toan aggregated production multiplier in the order of 277 Therefore for eachrand spent by festinos in the region 177 cents are generated additionally interms of indirect expenditure The aggregated production multiplier is obtainedby dividing the total impact by the direct impact

Considering the multipliers for each component (foreign local and the restof South Africa) of expenditures one can say that those resulting from out-of-province festinos have a greater impact as multiplier (279) than does spendingby foreign and local festinos on production (277) This means that for each randspent at the festival by out-of-province festinos an additional R179 is generatedin the Eastern Cape economy (see Tables 4 and 6)

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

TOURISM ECONOMICS612

Table 3 Impact through production multipliers (ZAR 2000 prices) ndash foreign visitors

Sector Direct Indirect Induced Total Percentageimpacta impactb impactc impactd (total)

Agriculture 351970 190320 451460 993750 010Mining 955160 621300 1037950 2614410 030Manufacturing 88935280 83983630 77989940 250908860 2740Electricity and water 17430 10650 16540 44630 000Construction 347260 331970 363570 1042800 010Trade andaccommodation 104297460 76530590 115342850 296170900 3230

Transport andcommunication 34573690 29056620 31593670 95223980 1040

Financial andbusiness services 98805220 64722330 101694130 265221690 2890

Community services 1607850 1474150 1995690 5077690 060

Total (ZAR) 329891330 256921570 330485790 917298690 10000

Notes aInitial expenditures (for example by festinos) are generally called the direct costs of an activityand their effects on the economy are direct effects bPurchases by suppliers (for example vendors hoteland restaurant owners charter operators etc) of the final goods and services of materials and supplies tosustain the original purchases are called indirect effects cInduced effects occur when workers in thesectors stimulated by direct and indirect expenditures spend their additional income on consumergoods and services dThe direct plus indirect plus induced effects equal the total effect

New money impact

This section represents only the impact of the money spent by festinos on theregional economy of the festival The usefulness of this section is that it providesa model of economic impact that calculates how much money has been broughtinto the area from festinos specifically because of the festival and allows one tofocus on the money that has been spent in the area specifically by festinos

Foreign expenditure The quantification of the direct indirect and induced impactof foreign expenditure at the Grahamstown National Arts Festival in the regionis summarized in Table 3 As this expenditure is applied partially by the foreignfestinos of the festival in the purchase of goods and services in the region thisrepresents an inflow of money in the region mobilizing economic activitygenerating employment and generating additional revenues for the provincelsquoProductionrsquo is an indication of the total turnover generated by each sector inthe regional economy As such production comprises two components demandfor intermediate inputs (resources) by an activity (domestically produced andimported goods and services) and total value added generated by an activity(Conningarth Consultants 2006b) Table 3 reflects the effects on production(using the production multipliers) by foreign expenditure resulting from thefestival

The spending of the foreign festinos in 2009 was predominantly expenditureon tourist activities From Table 3 it is clear that the largest direct impactsare in trade and accommodation (323) financial and business services (289)and manufacturing (274) Through the lsquobackward linkagesrsquo large indirectand induced impacts are also experienced in the community services sector

613The significance of festivals to regional economies

Figure 1 Foreign expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

reflecting an indirect impact of R147 thousand and an induced impact ofR200 thousand Note that if the authors ignore the direct effect in thecommunity services sector 683 of the total increase in production is as aresult of lsquobackward linkagesrsquo with direct foreign expenditure representing only317 A more detailed (disaggregated) analysis of the various sectors can bemade but falls beyond the scope of this study

All the acquisitions of goods and services from non-regional suppliers thatis suppliers outside the Eastern Cape were included in the analysis and mighttherefore have had a significant direct or indirect effect on the provincersquoseconomy By including this indirect impact although small in significance wepresent a more comprehensive estimate of the impact of the GrahamstownNational Arts Festival on the province

The value of the purchases of goods and services from regional suppliers wasthen classified using the basic sector aggregation as classified by the SouthAfrican Reserve Bank and Statistics South Africa and its distribution byactivity sector is shown in Figure 1

In terms of the analysis of the expenditure by foreign festinos the firstconclusion is that the direct effect represents 36 the indirect effect 28 andthe induced effect 36 of the total increase in foreign expenditure The secondconclusion is that the activity sectors that benefited most from the expenditureof the festivalrsquos foreign festinos were trade and accommodation financial andbusiness services and manufacturing The total impact resulting fromexpenditure by foreigners in these sectors in 2009 surpassed R92 million andrepresented some 111 of the total expenditure made by all festinos of the 2009Grahamstown National Arts Festival in the region

The rest of South Africarsquos expenditure In order to estimate the economic impactof the expenditure made by festinos residing in the rest of South Africa anapproach was followed similar to that for the expenditure by foreign festinos

100

90

80

70

60

50

40

30

20

10

0

Direct impact Indirect impact Induced impact

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

TOURISM ECONOMICS614

Table 4 Impact through production multipliers (ZAR 2000 prices) ndash rest of South Africavisitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1606060 868450 2060020 4534530 010Mining 4342400 2822110 4720450 11884950 030Manufacturing 371464640 352132290 324543490 1048140420 2490Electricity and water 77620 47450 73660 198730 000Construction 1365670 1305530 1429810 4101000 010Trade andaccommodation 464604850 340914160 513807780 1319326800 3140

Transport andcommunication 277775630 233449830 253833250 765058700 1820

Financial andbusiness services 381484190 249891110 392638170 1024013470 2440

Community services 8100740 7427150 10054790 25582670 060

Total (ZAR) 1510821800 1188858060 1503161410 4202841280 10000

Table 4 reflects the effects on production (using the production multipliers)by expenditure of festinos from the rest of South Africa resulting from thefestival

Table 4 illustrates that the largest direct impacts are in trade and accom-modation (314) in manufacturing (249) and in financial and businessservices (244) Through the lsquobackward linkagesrsquo large indirect and inducedimpacts are also experienced in the transport and communication sector (see alsoFigure 2) reflecting an indirect impact of R23 million and an induced impactof R25 million If the direct effect in the transport and communication sectoris ignored 637 of the total increase in production is a result of lsquobackwardlinkagesrsquo with direct expenditure by festinos from the rest of South Africarepresenting only 363 of the total impact

Based on the data collected the authors estimated that total impact ofexpenditure by festinos from the rest of South Africa in the region might exceedR420 million (approximately 509 of total expenditure) Figure 2 presentsthe total expenditure per activity sector by festinos from the rest of South Africa

As in the case of foreigners the results of the study suggest that the sectorsthat benefit most from expenditure by festinos from the rest of South Africa arein order of importance trade and accommodation manufacturing and financialand business services (please refer to Figure 2) The expenditure in these threesectors of economic activity represents more than 81 of the total expenditureby the festinos from the rest of South Africa at the festival

The analysis of the expenditure by festinos from the rest of South Africaindicates that the direct effect represents 359 the indirect effect 283 andthe induced effect 358 of the total increase in local expenditure Given theestimation of the economic impact presented above it should be kept in mindthat by definition calculation of the economic impact should include only theexpenditure that would not have occurred in the absence of the event

615The significance of festivals to regional economies

Figure 2 Rest of South African expenditure in the region per activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

Retained locals

The retained local section focuses on money that would have left the area ifthe festival had not been held The retained local model allows us to see howfestivals and other events contribute to the local economy by encouraging theirresidents to stay and spend recreation rands within the area

Eastern Cape expenditure In order to estimate the economic impact of theexpenditure made by festinos residing in the Eastern Cape a similar approachwas followed as that with the expenditure of foreign festinos and festinos residingin the rest of South Africa Based on the information collected from the surveyscarried out during the 2009 festival the authors estimated that the directimpact in the region resulting from the localsrsquo expenditure amounted toapproximately R112 million (approximately 379 of total expenditure)distributed among the nine activity sectors as presented in Figure 3

The value of the purchases of goods and services made to regional suppliersby festinos residing in the Eastern Cape is presented in Figure 3

The activity sectors that benefited most from expenditure by locals inrelation with the Grahamstown National Arts Festival were trade and accom-modation financial and business services manufacturing and to a lesser extenttransport and communication Given that these festinos hailed from the EasternCape it was understandable that their expenditure in the latter sectors wouldbe less than that of foreigners and non-Eastern Cape residents (please refer toFigure 3)

It is important to note that the direct impact of the localsrsquo expenditure(R112 million) represents more than 379 of the adjusted total expenditureof all festinos (R297 million) of the festival in 2009 The quantification of thedirect indirect and induced impact of localsrsquo expenditure at the festival in theregion is summarized in Table 5

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

TOURISM ECONOMICS616

Figure 3 Local expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

In Table 5 it is clear that the largest direct impact is on trade andaccommodation (330) and on financial and business services (330) Throughthe lsquobackward linkagesrsquo large indirect and induced impacts are also experiencedin the manufacturing sector reflecting an indirect impact of R27 million andan induced impact of R25 million If the direct effect in the manufacturingsector is ignored 646 of the total increase in production is as a result oflsquobackward linkagesrsquo with direct local expenditure representing only 354 ofthe total impact

Regarding the analysis of the expenditure of festinos from the Eastern Capeit can be concluded that the direct effect represents 360 the indirect effect277 and the induced effect 363 of the total increase in local expenditureBy including the expenditure that would have occurred in the region independ-ently of the existence of the festival less conservative figures for the economicimpact are estimated It is reasonable to expect that in the absence of thefestival the available revenue from these local festinos would have been less andas such its volume of expenditure in the region would have been less

Overall impact

This section represents the overall spending in the local economy that can beattributed to the festival by festinos (locals and visitors from abroad and fromthe rest of South Africa) Although the locals do not bring money into thecommunity from outside regions as visitors do it is valuable to include theirspending as it has the effect of initiating economic activity within the localeconomy Examined in this way a festivalrsquos contribution to a local economy iscomparable to a local business that both draws money from and contributes toits community To consider only the tourist rand in terms of economic impactwould underestimate greatly the complete financial benefits of festivals and

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

617The significance of festivals to regional economies

Table 5 Impact through production multipliers (ZAR 2000 prices) ndash local visitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1080730 584390 1386210 3051330 010Mining 2953680 1924390 3207390 8085460 030Manufacturing 281313440 266795820 245513980 793623240 2540Electricity and water 60580 37030 57490 155100 000Construction 1332640 1273950 1395220 4001810 010Trade andaccommodation 362634420 266091090 401038400 1029763910 3300

Transport andcommunication 84956440 71399590 77633770 233989810 750

Financial andbusiness services 384186600 251661330 395419600 1031267530 3300

Community services 6239660 5720810 7744770 19705250 060

Total (in ZAR) 1124758190 865488410 1133396830 3123643440 10000

similar events In addition this study recognizes that without festivals asignificant amount of money would leave the area due to locals seeking analternative venue for entertainment in other regions

This study has determined that the usefulness of the overall impact is thatit allows one to measure the amount of money that the festival circulatesthrough the local economy from every source from which the festival drawsfinancial impact However in order to evaluate the total impact of the festivalin the region it is necessary to lsquocorrectrsquo the direct impact by the multipliereffect Hence as a way of estimating the total impact of the GrahamstownNational Arts Festival in the region production multipliers were used for eachone of the activity sectors The multiplication of the direct impact in eachactivity sector for the specific production multipliers gives the total impact ofthe festival for each of the regional economy sectors as indicated in Table 6below The sum of the impacts in each of the sectors gives us in turn anestimate of the total impact of the festival in the region

The analysis of the results indicates that the direct economic impact of thefestival and its visitors in the region (which is in the order of R297 million)can result in an additional R527 million of indirect impact giving a totalannual impact in the region in excess of R824 million That is equivalent toan aggregated production multiplier in the order of 277 Therefore for eachrand spent by festinos in the region 177 cents are generated additionally interms of indirect expenditure The aggregated production multiplier is obtainedby dividing the total impact by the direct impact

Considering the multipliers for each component (foreign local and the restof South Africa) of expenditures one can say that those resulting from out-of-province festinos have a greater impact as multiplier (279) than does spendingby foreign and local festinos on production (277) This means that for each randspent at the festival by out-of-province festinos an additional R179 is generatedin the Eastern Cape economy (see Tables 4 and 6)

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

613The significance of festivals to regional economies

Figure 1 Foreign expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

reflecting an indirect impact of R147 thousand and an induced impact ofR200 thousand Note that if the authors ignore the direct effect in thecommunity services sector 683 of the total increase in production is as aresult of lsquobackward linkagesrsquo with direct foreign expenditure representing only317 A more detailed (disaggregated) analysis of the various sectors can bemade but falls beyond the scope of this study

All the acquisitions of goods and services from non-regional suppliers thatis suppliers outside the Eastern Cape were included in the analysis and mighttherefore have had a significant direct or indirect effect on the provincersquoseconomy By including this indirect impact although small in significance wepresent a more comprehensive estimate of the impact of the GrahamstownNational Arts Festival on the province

The value of the purchases of goods and services from regional suppliers wasthen classified using the basic sector aggregation as classified by the SouthAfrican Reserve Bank and Statistics South Africa and its distribution byactivity sector is shown in Figure 1

In terms of the analysis of the expenditure by foreign festinos the firstconclusion is that the direct effect represents 36 the indirect effect 28 andthe induced effect 36 of the total increase in foreign expenditure The secondconclusion is that the activity sectors that benefited most from the expenditureof the festivalrsquos foreign festinos were trade and accommodation financial andbusiness services and manufacturing The total impact resulting fromexpenditure by foreigners in these sectors in 2009 surpassed R92 million andrepresented some 111 of the total expenditure made by all festinos of the 2009Grahamstown National Arts Festival in the region

The rest of South Africarsquos expenditure In order to estimate the economic impactof the expenditure made by festinos residing in the rest of South Africa anapproach was followed similar to that for the expenditure by foreign festinos

100

90

80

70

60

50

40

30

20

10

0

Direct impact Indirect impact Induced impact

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

TOURISM ECONOMICS614

Table 4 Impact through production multipliers (ZAR 2000 prices) ndash rest of South Africavisitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1606060 868450 2060020 4534530 010Mining 4342400 2822110 4720450 11884950 030Manufacturing 371464640 352132290 324543490 1048140420 2490Electricity and water 77620 47450 73660 198730 000Construction 1365670 1305530 1429810 4101000 010Trade andaccommodation 464604850 340914160 513807780 1319326800 3140

Transport andcommunication 277775630 233449830 253833250 765058700 1820

Financial andbusiness services 381484190 249891110 392638170 1024013470 2440

Community services 8100740 7427150 10054790 25582670 060

Total (ZAR) 1510821800 1188858060 1503161410 4202841280 10000

Table 4 reflects the effects on production (using the production multipliers)by expenditure of festinos from the rest of South Africa resulting from thefestival

Table 4 illustrates that the largest direct impacts are in trade and accom-modation (314) in manufacturing (249) and in financial and businessservices (244) Through the lsquobackward linkagesrsquo large indirect and inducedimpacts are also experienced in the transport and communication sector (see alsoFigure 2) reflecting an indirect impact of R23 million and an induced impactof R25 million If the direct effect in the transport and communication sectoris ignored 637 of the total increase in production is a result of lsquobackwardlinkagesrsquo with direct expenditure by festinos from the rest of South Africarepresenting only 363 of the total impact

Based on the data collected the authors estimated that total impact ofexpenditure by festinos from the rest of South Africa in the region might exceedR420 million (approximately 509 of total expenditure) Figure 2 presentsthe total expenditure per activity sector by festinos from the rest of South Africa

As in the case of foreigners the results of the study suggest that the sectorsthat benefit most from expenditure by festinos from the rest of South Africa arein order of importance trade and accommodation manufacturing and financialand business services (please refer to Figure 2) The expenditure in these threesectors of economic activity represents more than 81 of the total expenditureby the festinos from the rest of South Africa at the festival

The analysis of the expenditure by festinos from the rest of South Africaindicates that the direct effect represents 359 the indirect effect 283 andthe induced effect 358 of the total increase in local expenditure Given theestimation of the economic impact presented above it should be kept in mindthat by definition calculation of the economic impact should include only theexpenditure that would not have occurred in the absence of the event

615The significance of festivals to regional economies

Figure 2 Rest of South African expenditure in the region per activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

Retained locals

The retained local section focuses on money that would have left the area ifthe festival had not been held The retained local model allows us to see howfestivals and other events contribute to the local economy by encouraging theirresidents to stay and spend recreation rands within the area

Eastern Cape expenditure In order to estimate the economic impact of theexpenditure made by festinos residing in the Eastern Cape a similar approachwas followed as that with the expenditure of foreign festinos and festinos residingin the rest of South Africa Based on the information collected from the surveyscarried out during the 2009 festival the authors estimated that the directimpact in the region resulting from the localsrsquo expenditure amounted toapproximately R112 million (approximately 379 of total expenditure)distributed among the nine activity sectors as presented in Figure 3

The value of the purchases of goods and services made to regional suppliersby festinos residing in the Eastern Cape is presented in Figure 3

The activity sectors that benefited most from expenditure by locals inrelation with the Grahamstown National Arts Festival were trade and accom-modation financial and business services manufacturing and to a lesser extenttransport and communication Given that these festinos hailed from the EasternCape it was understandable that their expenditure in the latter sectors wouldbe less than that of foreigners and non-Eastern Cape residents (please refer toFigure 3)

It is important to note that the direct impact of the localsrsquo expenditure(R112 million) represents more than 379 of the adjusted total expenditureof all festinos (R297 million) of the festival in 2009 The quantification of thedirect indirect and induced impact of localsrsquo expenditure at the festival in theregion is summarized in Table 5

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

TOURISM ECONOMICS616

Figure 3 Local expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

In Table 5 it is clear that the largest direct impact is on trade andaccommodation (330) and on financial and business services (330) Throughthe lsquobackward linkagesrsquo large indirect and induced impacts are also experiencedin the manufacturing sector reflecting an indirect impact of R27 million andan induced impact of R25 million If the direct effect in the manufacturingsector is ignored 646 of the total increase in production is as a result oflsquobackward linkagesrsquo with direct local expenditure representing only 354 ofthe total impact

Regarding the analysis of the expenditure of festinos from the Eastern Capeit can be concluded that the direct effect represents 360 the indirect effect277 and the induced effect 363 of the total increase in local expenditureBy including the expenditure that would have occurred in the region independ-ently of the existence of the festival less conservative figures for the economicimpact are estimated It is reasonable to expect that in the absence of thefestival the available revenue from these local festinos would have been less andas such its volume of expenditure in the region would have been less

Overall impact

This section represents the overall spending in the local economy that can beattributed to the festival by festinos (locals and visitors from abroad and fromthe rest of South Africa) Although the locals do not bring money into thecommunity from outside regions as visitors do it is valuable to include theirspending as it has the effect of initiating economic activity within the localeconomy Examined in this way a festivalrsquos contribution to a local economy iscomparable to a local business that both draws money from and contributes toits community To consider only the tourist rand in terms of economic impactwould underestimate greatly the complete financial benefits of festivals and

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

617The significance of festivals to regional economies

Table 5 Impact through production multipliers (ZAR 2000 prices) ndash local visitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1080730 584390 1386210 3051330 010Mining 2953680 1924390 3207390 8085460 030Manufacturing 281313440 266795820 245513980 793623240 2540Electricity and water 60580 37030 57490 155100 000Construction 1332640 1273950 1395220 4001810 010Trade andaccommodation 362634420 266091090 401038400 1029763910 3300

Transport andcommunication 84956440 71399590 77633770 233989810 750

Financial andbusiness services 384186600 251661330 395419600 1031267530 3300

Community services 6239660 5720810 7744770 19705250 060

Total (in ZAR) 1124758190 865488410 1133396830 3123643440 10000

similar events In addition this study recognizes that without festivals asignificant amount of money would leave the area due to locals seeking analternative venue for entertainment in other regions

This study has determined that the usefulness of the overall impact is thatit allows one to measure the amount of money that the festival circulatesthrough the local economy from every source from which the festival drawsfinancial impact However in order to evaluate the total impact of the festivalin the region it is necessary to lsquocorrectrsquo the direct impact by the multipliereffect Hence as a way of estimating the total impact of the GrahamstownNational Arts Festival in the region production multipliers were used for eachone of the activity sectors The multiplication of the direct impact in eachactivity sector for the specific production multipliers gives the total impact ofthe festival for each of the regional economy sectors as indicated in Table 6below The sum of the impacts in each of the sectors gives us in turn anestimate of the total impact of the festival in the region

The analysis of the results indicates that the direct economic impact of thefestival and its visitors in the region (which is in the order of R297 million)can result in an additional R527 million of indirect impact giving a totalannual impact in the region in excess of R824 million That is equivalent toan aggregated production multiplier in the order of 277 Therefore for eachrand spent by festinos in the region 177 cents are generated additionally interms of indirect expenditure The aggregated production multiplier is obtainedby dividing the total impact by the direct impact

Considering the multipliers for each component (foreign local and the restof South Africa) of expenditures one can say that those resulting from out-of-province festinos have a greater impact as multiplier (279) than does spendingby foreign and local festinos on production (277) This means that for each randspent at the festival by out-of-province festinos an additional R179 is generatedin the Eastern Cape economy (see Tables 4 and 6)

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

TOURISM ECONOMICS614

Table 4 Impact through production multipliers (ZAR 2000 prices) ndash rest of South Africavisitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1606060 868450 2060020 4534530 010Mining 4342400 2822110 4720450 11884950 030Manufacturing 371464640 352132290 324543490 1048140420 2490Electricity and water 77620 47450 73660 198730 000Construction 1365670 1305530 1429810 4101000 010Trade andaccommodation 464604850 340914160 513807780 1319326800 3140

Transport andcommunication 277775630 233449830 253833250 765058700 1820

Financial andbusiness services 381484190 249891110 392638170 1024013470 2440

Community services 8100740 7427150 10054790 25582670 060

Total (ZAR) 1510821800 1188858060 1503161410 4202841280 10000

Table 4 reflects the effects on production (using the production multipliers)by expenditure of festinos from the rest of South Africa resulting from thefestival

Table 4 illustrates that the largest direct impacts are in trade and accom-modation (314) in manufacturing (249) and in financial and businessservices (244) Through the lsquobackward linkagesrsquo large indirect and inducedimpacts are also experienced in the transport and communication sector (see alsoFigure 2) reflecting an indirect impact of R23 million and an induced impactof R25 million If the direct effect in the transport and communication sectoris ignored 637 of the total increase in production is a result of lsquobackwardlinkagesrsquo with direct expenditure by festinos from the rest of South Africarepresenting only 363 of the total impact

Based on the data collected the authors estimated that total impact ofexpenditure by festinos from the rest of South Africa in the region might exceedR420 million (approximately 509 of total expenditure) Figure 2 presentsthe total expenditure per activity sector by festinos from the rest of South Africa

As in the case of foreigners the results of the study suggest that the sectorsthat benefit most from expenditure by festinos from the rest of South Africa arein order of importance trade and accommodation manufacturing and financialand business services (please refer to Figure 2) The expenditure in these threesectors of economic activity represents more than 81 of the total expenditureby the festinos from the rest of South Africa at the festival

The analysis of the expenditure by festinos from the rest of South Africaindicates that the direct effect represents 359 the indirect effect 283 andthe induced effect 358 of the total increase in local expenditure Given theestimation of the economic impact presented above it should be kept in mindthat by definition calculation of the economic impact should include only theexpenditure that would not have occurred in the absence of the event

615The significance of festivals to regional economies

Figure 2 Rest of South African expenditure in the region per activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

Retained locals

The retained local section focuses on money that would have left the area ifthe festival had not been held The retained local model allows us to see howfestivals and other events contribute to the local economy by encouraging theirresidents to stay and spend recreation rands within the area

Eastern Cape expenditure In order to estimate the economic impact of theexpenditure made by festinos residing in the Eastern Cape a similar approachwas followed as that with the expenditure of foreign festinos and festinos residingin the rest of South Africa Based on the information collected from the surveyscarried out during the 2009 festival the authors estimated that the directimpact in the region resulting from the localsrsquo expenditure amounted toapproximately R112 million (approximately 379 of total expenditure)distributed among the nine activity sectors as presented in Figure 3

The value of the purchases of goods and services made to regional suppliersby festinos residing in the Eastern Cape is presented in Figure 3

The activity sectors that benefited most from expenditure by locals inrelation with the Grahamstown National Arts Festival were trade and accom-modation financial and business services manufacturing and to a lesser extenttransport and communication Given that these festinos hailed from the EasternCape it was understandable that their expenditure in the latter sectors wouldbe less than that of foreigners and non-Eastern Cape residents (please refer toFigure 3)

It is important to note that the direct impact of the localsrsquo expenditure(R112 million) represents more than 379 of the adjusted total expenditureof all festinos (R297 million) of the festival in 2009 The quantification of thedirect indirect and induced impact of localsrsquo expenditure at the festival in theregion is summarized in Table 5

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

TOURISM ECONOMICS616

Figure 3 Local expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

In Table 5 it is clear that the largest direct impact is on trade andaccommodation (330) and on financial and business services (330) Throughthe lsquobackward linkagesrsquo large indirect and induced impacts are also experiencedin the manufacturing sector reflecting an indirect impact of R27 million andan induced impact of R25 million If the direct effect in the manufacturingsector is ignored 646 of the total increase in production is as a result oflsquobackward linkagesrsquo with direct local expenditure representing only 354 ofthe total impact

Regarding the analysis of the expenditure of festinos from the Eastern Capeit can be concluded that the direct effect represents 360 the indirect effect277 and the induced effect 363 of the total increase in local expenditureBy including the expenditure that would have occurred in the region independ-ently of the existence of the festival less conservative figures for the economicimpact are estimated It is reasonable to expect that in the absence of thefestival the available revenue from these local festinos would have been less andas such its volume of expenditure in the region would have been less

Overall impact

This section represents the overall spending in the local economy that can beattributed to the festival by festinos (locals and visitors from abroad and fromthe rest of South Africa) Although the locals do not bring money into thecommunity from outside regions as visitors do it is valuable to include theirspending as it has the effect of initiating economic activity within the localeconomy Examined in this way a festivalrsquos contribution to a local economy iscomparable to a local business that both draws money from and contributes toits community To consider only the tourist rand in terms of economic impactwould underestimate greatly the complete financial benefits of festivals and

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

617The significance of festivals to regional economies

Table 5 Impact through production multipliers (ZAR 2000 prices) ndash local visitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1080730 584390 1386210 3051330 010Mining 2953680 1924390 3207390 8085460 030Manufacturing 281313440 266795820 245513980 793623240 2540Electricity and water 60580 37030 57490 155100 000Construction 1332640 1273950 1395220 4001810 010Trade andaccommodation 362634420 266091090 401038400 1029763910 3300

Transport andcommunication 84956440 71399590 77633770 233989810 750

Financial andbusiness services 384186600 251661330 395419600 1031267530 3300

Community services 6239660 5720810 7744770 19705250 060

Total (in ZAR) 1124758190 865488410 1133396830 3123643440 10000

similar events In addition this study recognizes that without festivals asignificant amount of money would leave the area due to locals seeking analternative venue for entertainment in other regions

This study has determined that the usefulness of the overall impact is thatit allows one to measure the amount of money that the festival circulatesthrough the local economy from every source from which the festival drawsfinancial impact However in order to evaluate the total impact of the festivalin the region it is necessary to lsquocorrectrsquo the direct impact by the multipliereffect Hence as a way of estimating the total impact of the GrahamstownNational Arts Festival in the region production multipliers were used for eachone of the activity sectors The multiplication of the direct impact in eachactivity sector for the specific production multipliers gives the total impact ofthe festival for each of the regional economy sectors as indicated in Table 6below The sum of the impacts in each of the sectors gives us in turn anestimate of the total impact of the festival in the region

The analysis of the results indicates that the direct economic impact of thefestival and its visitors in the region (which is in the order of R297 million)can result in an additional R527 million of indirect impact giving a totalannual impact in the region in excess of R824 million That is equivalent toan aggregated production multiplier in the order of 277 Therefore for eachrand spent by festinos in the region 177 cents are generated additionally interms of indirect expenditure The aggregated production multiplier is obtainedby dividing the total impact by the direct impact

Considering the multipliers for each component (foreign local and the restof South Africa) of expenditures one can say that those resulting from out-of-province festinos have a greater impact as multiplier (279) than does spendingby foreign and local festinos on production (277) This means that for each randspent at the festival by out-of-province festinos an additional R179 is generatedin the Eastern Cape economy (see Tables 4 and 6)

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

615The significance of festivals to regional economies

Figure 2 Rest of South African expenditure in the region per activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

Retained locals

The retained local section focuses on money that would have left the area ifthe festival had not been held The retained local model allows us to see howfestivals and other events contribute to the local economy by encouraging theirresidents to stay and spend recreation rands within the area

Eastern Cape expenditure In order to estimate the economic impact of theexpenditure made by festinos residing in the Eastern Cape a similar approachwas followed as that with the expenditure of foreign festinos and festinos residingin the rest of South Africa Based on the information collected from the surveyscarried out during the 2009 festival the authors estimated that the directimpact in the region resulting from the localsrsquo expenditure amounted toapproximately R112 million (approximately 379 of total expenditure)distributed among the nine activity sectors as presented in Figure 3

The value of the purchases of goods and services made to regional suppliersby festinos residing in the Eastern Cape is presented in Figure 3

The activity sectors that benefited most from expenditure by locals inrelation with the Grahamstown National Arts Festival were trade and accom-modation financial and business services manufacturing and to a lesser extenttransport and communication Given that these festinos hailed from the EasternCape it was understandable that their expenditure in the latter sectors wouldbe less than that of foreigners and non-Eastern Cape residents (please refer toFigure 3)

It is important to note that the direct impact of the localsrsquo expenditure(R112 million) represents more than 379 of the adjusted total expenditureof all festinos (R297 million) of the festival in 2009 The quantification of thedirect indirect and induced impact of localsrsquo expenditure at the festival in theregion is summarized in Table 5

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

TOURISM ECONOMICS616

Figure 3 Local expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

In Table 5 it is clear that the largest direct impact is on trade andaccommodation (330) and on financial and business services (330) Throughthe lsquobackward linkagesrsquo large indirect and induced impacts are also experiencedin the manufacturing sector reflecting an indirect impact of R27 million andan induced impact of R25 million If the direct effect in the manufacturingsector is ignored 646 of the total increase in production is as a result oflsquobackward linkagesrsquo with direct local expenditure representing only 354 ofthe total impact

Regarding the analysis of the expenditure of festinos from the Eastern Capeit can be concluded that the direct effect represents 360 the indirect effect277 and the induced effect 363 of the total increase in local expenditureBy including the expenditure that would have occurred in the region independ-ently of the existence of the festival less conservative figures for the economicimpact are estimated It is reasonable to expect that in the absence of thefestival the available revenue from these local festinos would have been less andas such its volume of expenditure in the region would have been less

Overall impact

This section represents the overall spending in the local economy that can beattributed to the festival by festinos (locals and visitors from abroad and fromthe rest of South Africa) Although the locals do not bring money into thecommunity from outside regions as visitors do it is valuable to include theirspending as it has the effect of initiating economic activity within the localeconomy Examined in this way a festivalrsquos contribution to a local economy iscomparable to a local business that both draws money from and contributes toits community To consider only the tourist rand in terms of economic impactwould underestimate greatly the complete financial benefits of festivals and

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

617The significance of festivals to regional economies

Table 5 Impact through production multipliers (ZAR 2000 prices) ndash local visitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1080730 584390 1386210 3051330 010Mining 2953680 1924390 3207390 8085460 030Manufacturing 281313440 266795820 245513980 793623240 2540Electricity and water 60580 37030 57490 155100 000Construction 1332640 1273950 1395220 4001810 010Trade andaccommodation 362634420 266091090 401038400 1029763910 3300

Transport andcommunication 84956440 71399590 77633770 233989810 750

Financial andbusiness services 384186600 251661330 395419600 1031267530 3300

Community services 6239660 5720810 7744770 19705250 060

Total (in ZAR) 1124758190 865488410 1133396830 3123643440 10000

similar events In addition this study recognizes that without festivals asignificant amount of money would leave the area due to locals seeking analternative venue for entertainment in other regions

This study has determined that the usefulness of the overall impact is thatit allows one to measure the amount of money that the festival circulatesthrough the local economy from every source from which the festival drawsfinancial impact However in order to evaluate the total impact of the festivalin the region it is necessary to lsquocorrectrsquo the direct impact by the multipliereffect Hence as a way of estimating the total impact of the GrahamstownNational Arts Festival in the region production multipliers were used for eachone of the activity sectors The multiplication of the direct impact in eachactivity sector for the specific production multipliers gives the total impact ofthe festival for each of the regional economy sectors as indicated in Table 6below The sum of the impacts in each of the sectors gives us in turn anestimate of the total impact of the festival in the region

The analysis of the results indicates that the direct economic impact of thefestival and its visitors in the region (which is in the order of R297 million)can result in an additional R527 million of indirect impact giving a totalannual impact in the region in excess of R824 million That is equivalent toan aggregated production multiplier in the order of 277 Therefore for eachrand spent by festinos in the region 177 cents are generated additionally interms of indirect expenditure The aggregated production multiplier is obtainedby dividing the total impact by the direct impact

Considering the multipliers for each component (foreign local and the restof South Africa) of expenditures one can say that those resulting from out-of-province festinos have a greater impact as multiplier (279) than does spendingby foreign and local festinos on production (277) This means that for each randspent at the festival by out-of-province festinos an additional R179 is generatedin the Eastern Cape economy (see Tables 4 and 6)

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

TOURISM ECONOMICS616

Figure 3 Local expenditure in the region by activity sectorNote The bars for lsquoconstructionrsquo lsquoelectricity and waterrsquo lsquominingrsquo lsquocommunity servicesrsquo andlsquoagriculturersquo are either not visible or hardly visible since each of these sectors represents less than06 of the total change across sectors

In Table 5 it is clear that the largest direct impact is on trade andaccommodation (330) and on financial and business services (330) Throughthe lsquobackward linkagesrsquo large indirect and induced impacts are also experiencedin the manufacturing sector reflecting an indirect impact of R27 million andan induced impact of R25 million If the direct effect in the manufacturingsector is ignored 646 of the total increase in production is as a result oflsquobackward linkagesrsquo with direct local expenditure representing only 354 ofthe total impact

Regarding the analysis of the expenditure of festinos from the Eastern Capeit can be concluded that the direct effect represents 360 the indirect effect277 and the induced effect 363 of the total increase in local expenditureBy including the expenditure that would have occurred in the region independ-ently of the existence of the festival less conservative figures for the economicimpact are estimated It is reasonable to expect that in the absence of thefestival the available revenue from these local festinos would have been less andas such its volume of expenditure in the region would have been less

Overall impact

This section represents the overall spending in the local economy that can beattributed to the festival by festinos (locals and visitors from abroad and fromthe rest of South Africa) Although the locals do not bring money into thecommunity from outside regions as visitors do it is valuable to include theirspending as it has the effect of initiating economic activity within the localeconomy Examined in this way a festivalrsquos contribution to a local economy iscomparable to a local business that both draws money from and contributes toits community To consider only the tourist rand in terms of economic impactwould underestimate greatly the complete financial benefits of festivals and

Construction

Electricity and water

Mining

Community services

Financial and business services

Transport and communication

Trade and accommodation

Manufacturing

Agriculture

Direct impact Indirect impact Induced impact

100

90

80

70

60

50

40

30

20

10

0

617The significance of festivals to regional economies

Table 5 Impact through production multipliers (ZAR 2000 prices) ndash local visitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1080730 584390 1386210 3051330 010Mining 2953680 1924390 3207390 8085460 030Manufacturing 281313440 266795820 245513980 793623240 2540Electricity and water 60580 37030 57490 155100 000Construction 1332640 1273950 1395220 4001810 010Trade andaccommodation 362634420 266091090 401038400 1029763910 3300

Transport andcommunication 84956440 71399590 77633770 233989810 750

Financial andbusiness services 384186600 251661330 395419600 1031267530 3300

Community services 6239660 5720810 7744770 19705250 060

Total (in ZAR) 1124758190 865488410 1133396830 3123643440 10000

similar events In addition this study recognizes that without festivals asignificant amount of money would leave the area due to locals seeking analternative venue for entertainment in other regions

This study has determined that the usefulness of the overall impact is thatit allows one to measure the amount of money that the festival circulatesthrough the local economy from every source from which the festival drawsfinancial impact However in order to evaluate the total impact of the festivalin the region it is necessary to lsquocorrectrsquo the direct impact by the multipliereffect Hence as a way of estimating the total impact of the GrahamstownNational Arts Festival in the region production multipliers were used for eachone of the activity sectors The multiplication of the direct impact in eachactivity sector for the specific production multipliers gives the total impact ofthe festival for each of the regional economy sectors as indicated in Table 6below The sum of the impacts in each of the sectors gives us in turn anestimate of the total impact of the festival in the region

The analysis of the results indicates that the direct economic impact of thefestival and its visitors in the region (which is in the order of R297 million)can result in an additional R527 million of indirect impact giving a totalannual impact in the region in excess of R824 million That is equivalent toan aggregated production multiplier in the order of 277 Therefore for eachrand spent by festinos in the region 177 cents are generated additionally interms of indirect expenditure The aggregated production multiplier is obtainedby dividing the total impact by the direct impact

Considering the multipliers for each component (foreign local and the restof South Africa) of expenditures one can say that those resulting from out-of-province festinos have a greater impact as multiplier (279) than does spendingby foreign and local festinos on production (277) This means that for each randspent at the festival by out-of-province festinos an additional R179 is generatedin the Eastern Cape economy (see Tables 4 and 6)

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

617The significance of festivals to regional economies

Table 5 Impact through production multipliers (ZAR 2000 prices) ndash local visitors

Sector Direct Indirect Induced Total Percentageimpact impact impact impact (total)

Agriculture 1080730 584390 1386210 3051330 010Mining 2953680 1924390 3207390 8085460 030Manufacturing 281313440 266795820 245513980 793623240 2540Electricity and water 60580 37030 57490 155100 000Construction 1332640 1273950 1395220 4001810 010Trade andaccommodation 362634420 266091090 401038400 1029763910 3300

Transport andcommunication 84956440 71399590 77633770 233989810 750

Financial andbusiness services 384186600 251661330 395419600 1031267530 3300

Community services 6239660 5720810 7744770 19705250 060

Total (in ZAR) 1124758190 865488410 1133396830 3123643440 10000

similar events In addition this study recognizes that without festivals asignificant amount of money would leave the area due to locals seeking analternative venue for entertainment in other regions

This study has determined that the usefulness of the overall impact is thatit allows one to measure the amount of money that the festival circulatesthrough the local economy from every source from which the festival drawsfinancial impact However in order to evaluate the total impact of the festivalin the region it is necessary to lsquocorrectrsquo the direct impact by the multipliereffect Hence as a way of estimating the total impact of the GrahamstownNational Arts Festival in the region production multipliers were used for eachone of the activity sectors The multiplication of the direct impact in eachactivity sector for the specific production multipliers gives the total impact ofthe festival for each of the regional economy sectors as indicated in Table 6below The sum of the impacts in each of the sectors gives us in turn anestimate of the total impact of the festival in the region

The analysis of the results indicates that the direct economic impact of thefestival and its visitors in the region (which is in the order of R297 million)can result in an additional R527 million of indirect impact giving a totalannual impact in the region in excess of R824 million That is equivalent toan aggregated production multiplier in the order of 277 Therefore for eachrand spent by festinos in the region 177 cents are generated additionally interms of indirect expenditure The aggregated production multiplier is obtainedby dividing the total impact by the direct impact

Considering the multipliers for each component (foreign local and the restof South Africa) of expenditures one can say that those resulting from out-of-province festinos have a greater impact as multiplier (279) than does spendingby foreign and local festinos on production (277) This means that for each randspent at the festival by out-of-province festinos an additional R179 is generatedin the Eastern Cape economy (see Tables 4 and 6)

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

TOURISM ECONOMICS618

Table 6 Grahamstown National Arts Festival impact on regional production

Sectors Foreign EC Rest of SA Direct Production Totalspending spending spending impact multipliers impact

Agriculture 0004 0011 0016 0031 2823 0086Mining 0010 0030 0043 0083 2745 0226Manufacturing 0889 2813 3715 7417 2815 20927Electricity andwater 0000 0001 0001 0002 2560 0004

Construction 0003 0013 0014 0030 3003 0091Trade andaccommodation 1043 3626 4646 9315 2840 26453

Transport andcommunication 0346 0850 2778 3973 2754 10943

Financial andbusiness services 0988 3842 3815 8645 2684 23205

Community services 0016 0062 0081 0159 3160 0504

Total (ZAR) 3299 11248 15108 29655 82438

Notes Unit is R million except for the variable lsquoProduction multipliersrsquo lsquoDirect impactrsquo is the sum offoreign EC and rest of SA spending

One of the elements of the additional value added that will result from thefestival is the remuneration of employees which in turn affects householdincome The household income multiplier thus measures the magnitude ofchanges that will occur both to household income and to spendingsavingpatterns In particular the impact on low-income households can be high-lighted as this can be used as an indicator of the extent to which the festivalcontributes to poverty alleviation throughout the provincial economy

Using the same SAM for the Eastern Cape region (PROVIDE 2006) it isalso possible to estimate the impact of the festival at the level of family incomeIn order to do so specific household income multipliers for each activity sectorwere calculated These were later multiplied by the values of the total sectorsrsquoimpacts (please refer to Table 7)

The aggregated income multiplier valued at 026 can be interpreted as theincrement of the Eastern Capersquos family income for each rand of expenditureincurred by the festinos in the region It should be emphasized that thismultiplier is intended more to illustrate the concept of money drawn into theregion being partly re-spent in the community perhaps through several roundsthan it is to be an exact figure that mirrors what is actually occurring in thelocal economy The multiplier will very much depend on the types of businessesbenefiting from spending by festinos with some businesses providing muchhigher value added to the region than others in terms of both personal (thatis employed local residents) and business (that is local ownership) income Theauthors estimated that currently a total of R213 million of remunerations inthe Eastern Cape would not have taken place annually if the event did not exist

Labour is a key element of the production process This indicator measuresjob creation and indicates the extent to which each sector contributes towardsthe creation of employment opportunities and ultimately each sectorrsquos

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

619The significance of festivals to regional economies

Table 7 Grahamstown National Arts Festival impact on family income

Indirect and induced impacts (R million)Sectors Total impact Rest of the Low-income Total Percentage

(R million) households households households (total)

Agriculture 0086 0032 0025 0057 030Mining 0226 0020 0022 0042 020Manufacturing 20927 2240 2309 4548 2140Electricity and water 0004 0000 0000 0001 000Construction 0091 0012 0012 0024 010Trade andaccommodation 26453 3738 4024 7762 3650

Transport andcommunication 10943 1226 1319 2544 1190

Financial andbusiness services 23205 2944 3213 6158 2890

Community services 0504 0076 0083 0159 070

Total 82438 10288 11007 21296 10000

contribution towards distributing salaries and wages between various types oflabourers which in turn should affect the economy positively

Accordingly and based on the values presented previously it is possible toestimate the impact of the Grahamstown National Arts Festival on the levelof jobs in the Eastern Cape region Based on figures contained in the EasternCape SAM and using data on the labour force per province relative to thebusiness volume and jobs per activity sector in South Africa for 2006 it waspossible to obtain an estimate of the impact of the festival regarding theregional job level as indicated in Table 8

Table 8 Grahamstown National Arts Festival impact on employment

Sectors Total impact Labour Equivalent jobs(R million) multipliers (number)

Agriculture 0086 21129 180Mining 0226 2272 050Manufacturing 20927 18542 38800Electricity and water 0004 2020 000Construction 0091 2362 020Trade and accommodation 26453 4726 12500Transport and communication 10943 4812 5270Financial and business services 23205 1655 3840Community services 0504 5082 260

Total 82438 asymp609

Note The labour multiplier is an indication of the number of job opportunities that will be created asa result of changes in the production of one million by a particular activity

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

TOURISM ECONOMICS620

With regard to the number of jobs generated in the regional economybecause of the existence of the Grahamstown National Arts Festival Table 8indicates that 609 job positions may depend on the festival in addition to thenumber of employees involved directly in the festival itself Consequently theabsence of the festival would have implied a reduction of 609 jobs in the regiontogether with a reduction in the number of positionsemployees directlyinvolved The most affected sectors would have been manufacturing trade andaccommodation and transport and communication activities The analysis foundthat employment multipliers were lowest in the service industries (for exampletourism) and highest in the resource-based industries (for examplemanufacturing) in nearly all regions of the province The resource industrieshave larger multiplier effects because their average wages tend to be higher andthey spend substantial amounts of money on goods and services Generallyspeaking the more money that can be drawn into and kept in the communitythe greater the employment benefits

Findings and implications

From the analyses above it is clear that the Grahamstown National ArtsFestival is a major economic generator for the region and the province by everymeasure This finding supports research by Gelan (2003) Van Heerden (2003)and Saayman and Saayman (2004) As a summary the estimated multipliereffects (along with the direct impacts already provided in the previous section)are presented in Table 9 below These multiplier impacts are for the whole ofthe Eastern Cape Province

The Grahamstown National Arts Festival as a whole generates 609 jobs intotal equivalent to 501 person years2 of employment Again this researchsupports findings by Walpole and Goodwin (2000) and Saayman and Rossouw(2008) This employment generates over R906 million in labour income As

Table 9 Socio-economic impacts of the Grahamstown National Arts Festival in theEastern Cape Province

Type of impact Jobs Labour income Capital GGPa Output(number) (R million) (R million) (R million) (R million)

Direct ndash 33358783 23372317 13483200 29654713Indirect ndash 21690178 17404522 9178633 23112680Induced ndash 35589183 20900837 12009043 29670440

Total 609 90638145 61677676 34670876 82437834

Note aGross geographic product (GGP) is a measure of the value that is added to each productproduced in the Eastern Cape economy by the various economic sectors at each stage of the productionprocess GGP for a specific sector is calculated as the difference between the revenue the sector earns andthe amount it pays for the products of other sectors it uses as intermediate goods (ConningarthConsultants 2006b) It is important to note that the concept of GGP was developed to prevent doublecounting and to attribute a part of the national GDP to each sector

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

621The significance of festivals to regional economies

well as employment the economic contribution of the festival can be measuredin terms of GDP and economic output As such the festival generates R135million in direct gross geographic product (GGP) and R297 million in directeconomic output With multiplier effects (that is direct + indirect + induced)the festival is estimated to generate a potential R347 million in GGP andR824 million in economic output for the Eastern Cape economy

Festinos to the Grahamstown National Arts Festival spent mostly on accom-modation food and beverages purchases and shows As might be expected fora multiple-day event accommodation was the largest expenditure category atthe festival whereas at short-term festivals and events food and beveragesusually attract the most spending These results are consistent with otherstudies of short-term events Restaurant meals other food and beverageslodging entertainment shopping admission fees and auto-related expenseshave been identified as the main categories of spending (see for exampleGartner and Holecek 1983 or Ryan 1998) The total spending figures are alsoconsistent with findings on other short-term events Adding to the above theresults also indicate that festinos from the rest of South Africa have a muchhigher impact than foreigners and locals Therefore the emphasis from amarketing policy point of view should be on attracting visitors from the otherprovinces It is also evident from the results that local festinos make up a highpercentage of the festinos which to a certain degree limits the economic impactof the event Even though it is important for locals to support festivals andevents from an economic point of view one would like to see more festinos fromother areas Again this supports the notion that marketing campaigns shouldattract visitors from further afield

In addition to these direct expenditures the Grahamstown National ArtsFestival has indirect and induced effects on its local host region In absoluteterms it represents significant contributions to the local economy particularlyto the accommodation and restaurant sectors

A key reason for the boundless impact is that the output value added andlabour income multipliers are high in the Eastern Cape region reflecting itsmore urban character and indicating less substantial leakages out of the localeconomy This is consistent with previous studies of short-term events that havefound output multipliers in the range of 161 to 339 and personal incomemultipliers between 183 and 887 (Kim et al 1998) The higher multipliersgenerally were found in urban areas Urban economies tend to have largermultipliers partly because of the vast number of sectors and partly because ofendless interaction among the sectors with a greater tendency to purchaseinputs from within the region In the key tourist spending sectors of accom-modation and food and beverages this is offset somewhat by the substantialinduced effects of increased employee earnings and hence spending To increasethe impact of the arts festival organizers should consider promoting otherattractions in the area adding events to the festival and encouraging visitorsto stay longer Organizers could also offer special show packages in order toincrease festinosrsquo length of stay as well as spending This however should bebased on proper market segmentation and need analysis

In order to limit money flowing out of the local economy the eventorganizers should also apply a policy of buying services and products from localsuppliers This approach could also contribute to more entrepreneurs entering

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

TOURISM ECONOMICS622

the event sector The policy should therefore make provision that a percentage(to be determined by event organizers) of the festival services and productsshould consist of local content This can apply to productions as well as sellinglocal arts and craft

Finally from this study it seems that the success of this event is determinedby four factors namely that it is an annual event taking place in the samemonth every year it offers a wide variety of genres therefore catering for a largemarket it is hosted at the same venue and the festival remains one that hasalways catered for the English-speaking market These factors contribute to thefact that festinos attending this festival are very loyal to the event

Conclusion

This article determines the economic value of the Grahamstown National ArtsFestival using SAM multipliers Results show that the festival has a positiveimpact concerning revenue generation and job creation These findings thereforeindicate that government could use investments in the arts and culture as away to achieve economic objectives

From a methodological point of view the economic impact determined bythis study is most likely underestimated because expenditures by sponsors andfestival organizers have been omitted These could add substantially to the totaleconomic impact of short-term events such as the Grahamstown National ArtsFestival Therefore future research should consider this The approach (applyinga SAM) followed in this research is a useful way of determining the economicimpact of events

Since the Grahamstown National Arts Festival in the Eastern Cape Provinceis an annual event the economic impacts calculated here occur every yearApproximately 86 of the festinos had plans to come back and 77 werethemselves repeat visitors This is also proof that other major events at this timeof the year do not have a significant impact on festinos attending this eventsince most of them come back These repeat visitors spend as much as first-time visitors year after year thus providing continuity for the festival Repeatvisitation reduces the risk of financial failure for the festival and reduces therisk in choosing a destination for the visitor For a non-local visitor (festino)a visit to a once-only event in an unknown destination is a high-risk traveldecision whereas the decision to visit an annual event that has been enjoyablein the past is much easier The festival also continues to attract new visitorsas evidenced by the upward trend in the number of festinos evidenced in thecurrent and past surveys Given its success both in bringing back repeat visitors(festinos) and in attracting new visitors (festinos) this festival will maintain itssmall but significant role in its host region

Endnotes

1 The common assumption for local resident spending at a festival or event is a zero sum gameexcept where money is captured that would have been spent outside the province In this studythe retained expenditures of local visitors are included The assumption is made that smallfestivals such as the Grahamstown National Arts Festival in areas with few other tourismattractions may be critical for retaining localsrsquo discretionary funds This spending is therefore

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

623The significance of festivals to regional economies

captured under lsquoretained localsrsquo and measured separately from the lsquonew moneyrsquo spending so asnot to give biased results of the potential impact of spending at the festival

2 A full-time position for one year constitutes a person-year of employment (also known as a full-time equivalent) As some jobs are part-time or seasonal these jobs have been converted to personyears

References

Ahlert G (2009) lsquoEstimating the economic impact of an increase in inbound tourism on theGerman economy using TSA resultsrsquo Journal of Travel Research Vol 47 No 3 pp 225ndash234

Aruna PB Cubbage F and Hamilton R (1998) Economic Impacts of Forestry on North CarolinaDepartment of Forestry College of Natural Resources North Carolina State University Raleigh NC

Bowitz E and Ibenholt K (2009) lsquoEconomic impacts of cultural heritage ndash research andperspectivesrsquo Journal of Cultural Heritage Vol 10 pp 1ndash8

Brown S and Trimboli D (2007) lsquoPolicy shift in the evaluation of South Australian festivals andevents (httpdspaceflinderseduaudspacehandle232812701 accessed 23 February 2011)

Cardenete MA and Sancho F (2004) lsquoReverse impact assessment using a regional social account-ing matrixrsquo Environment and Planning A Vol 36 No 5 pp 937ndash945

Chowdhury A and Kirkpatrick C (1994) Development Policy and Planning An Introduction to Modelsand Techniques Routledge London

Conningarth Consultants (2006a) Disaggregated Social Accounting Matrix for South Africa North WestProvince Government Printer Mafikeng

Conningarth Consultants (2006b) Economic Multipliers for the North West Province North WestProvince Government Printer Mafikeng

Cooper DR and Emory CW (1995) Research Methods Irwin Humewood ILCrompton J (1999) lsquoMeasuring economic impactrsquo Working paper (httprptswebtamuedufaculty

cromptonhtm accessed 13 July 2009)Diakomihalis MN and Lagos DG (2008) lsquoEstimation of the economic impacts of yachting in

Greece via the tourism satellite accountrsquo Tourism Economics Vol 14 No 4 pp 871ndash887Dunham J and Associates (2009) The Meat and Poultry Industry Economic Contribution Study 2009

(httpwwwmeatfuelsamericacomMeat20Impact20Methodologypdf accessed 21 September2009)

Fayos-Sola E (1997) lsquoThe impact of mega-eventsrsquo Annals of Tourism Research Vol 25 No 1 pp241ndash244

Frechtling DC and Horvath E (1999) lsquoEstimating the multiplier effects of tourism expenditureson a local economy through a regional inputndashoutput modelrsquo Journal of Travel Research Vol 37No 4 pp 324ndash332

Gartner WC and Holecek DF (1983) lsquoEconomic impact of an annual tourism industry expo-sitionrsquo Annals of Tourism Research Vol 10 pp 199ndash212

Gelan A (2003) lsquoLocal economic impacts the British Openrsquo Annals of Tourism Research Vol 30No 2 pp 406ndash425

Getzner M Spash CL and Stagl S (2005) Alternative for Environmental Valuation Routledge NewYork

Grado SC and Lord BE (1998) lsquoEconomic impacts of conferences and conventionsrsquo Journal ofConvention and Exhibition Management Vol 1 No 1 pp 33ndash44

Hajnovicova V and Lapisakova J (2002) InputndashOutput and SAM Multiplier Analysis The SlovakCase Proceedings of the 14th International Conference on InputndashOutput Techniques 10ndash15October Montreal

Hoyle LH (2002) Event Marketing How to Successfully Promote Events Festivals Conventions andExpositions John Wiley amp Sons Inc New York

Jackson MJ and OrsquoSullivan D (2002) lsquoFestival tourism a contributor to sustainable localeconomic developmentrsquo Journal of Sustainable Tourism Vol 10 No 4 pp 325ndash342

Jago L and Dwyer L (2006) Economic Evaluation of Special Events A Practitionerrsquos Guide CommonGround Publishing Victoria

Kang YS and Perdue R (1994) lsquoLong-term impact of a mega event on international tourismto the host country a conceptual model and the case of the 1988 Seoul Olympicsrsquo Journal ofInternational Consumer Marketing Vol 6 No 34 pp 250ndash275

Kim CW Scott D Thigpen JF and Kim S (1998) lsquoEconomic impact of a birding festivalrsquoFestival Management and Event Tourism Vol 5 pp 51ndash58

TOURISM ECONOMICS624

Kottke M (1988) lsquoEstimating economic impacts of tourismrsquo Annals of Tourism Research Vol 15pp 122ndash133

Long PT and Perdue RR (1990) lsquoThe economic impact of rural festivals and special eventsassessing the spatial distribution of expendituresrsquo Journal of Travel Research Vol 28 No 4 pp10ndash14

Nijkamp P (2004) Environmental Economics and Evaluation Edward Elgar Publishing LimitedNorthampton MA

Oh C (2005) lsquoThe contribution of tourism development to economic growth in the Koreaneconomyrsquo Tourism Management Vol 26 No 1 pp 39ndash44

PROVIDE (2006) lsquoCompiling national multiregional and regional Social Accounting Matrices forSouth Africarsquo PROVIDE Technical Paper 20061

Pyatt G and Round JI (1985) SAMs A Basis for Planning The World Bank Washington DCRaa TT and Sahoo A (2005) lsquoCompetitive pressure on the Indian household a general

equilibrium approachrsquo Economic Systems Research Vol 19 pp 57ndash71Randall JE and Warf B (1996) lsquoEconomic impacts of AAG conferencesrsquo Professional Geographer

Vol 48 No 3 pp 272ndash284Ritchie JRB and Goeldner CR (1994) Travel Tourism and Hospitality Research A Handbook for

Managers and Researchers 2nd edn Wiley New YorkRhodes JA (2000) lsquoEconomic implications of domestic tourist spending in the North West

Provincersquo unpublished MCom dissertation Potchefstroom University for CHE PotchefstroomRyan C (1998) lsquoEconomic impacts of small events estimates and determinants ndash a New Zealand

examplersquo Tourism Economics Vol 4 No 4 pp 339ndash352Saayman A and Saayman M (1997) lsquoThe economic impact of tourism on the South African

economyrsquo South African Journal for Economic and Management Science Vol 21 pp 162ndash174Saayman A and Saayman M (2006) lsquoDoes the location at arts festivals matter for economic

impactrsquo Papers in Regional Science Vol 85 No 4 pp 569ndash584Saayman M (2007) En Route with Tourism An introductory Text Leisure Consultants and

Publications PotchefstroomSaayman M and Rossouw R (2008) lsquoThe economic value of the 2010 Soccer World Cuprsquo Acta

Commercii Vol 8 pp 1ndash14Saayman M and Saayman A (2004) lsquoEconomic impact of cultural eventsrsquo South African Journal

of Economic and Management Sciences Vol 7 No 4 pp 629ndash641Saayman M and Saayman A (2008) Why Travel Motivation and Socio-demographics Matter in

Managing a National Park 1st QATEM (Quantitative Approaches in Tourism Economics andManagement) Perpignan

Samuelson PA (1970) Economics Eighth Edition McGraw-Hill Inc KogakushaSlabbert E Saayman M Saayman A Kruger M and Viviers P (2009) The Socio-economic Impact

of Visitors to the ABSA KKNK in Oudtshoorn 2009 Institute for Tourism and Leisure StudiesPotchefstroom

Smeral E (2003) lsquoA structural view of tourism growthrsquo Tourism Economics Vol 9 No 1 pp 77ndash93Stynes D (1999) Approaches to Estimating the Economic Impacts of Tourism Some Examples Michigan

State University Press East Lansing MIVan der Merwe P and Saayman M (2008) lsquoTravel motivations of tourists visiting Kruger National

Parkrsquo Koedoe Vol 50 No 1 pp 154ndash159Van Heerden A (2003) lsquoThe economic impact of the Aardklop National Arts Festival in

Potchefstroomrsquo MCom Thesis Potchefstroom University for Christian Higher EducationPotchefstroom 105 p

Wagner JE (1997) lsquoEstimating the economic impacts of tourismrsquo Annals of Tourism ResearchVol 24 pp 592ndash608

Walpole MJ and Goodwin HJ (2000) lsquoLocal economic impacts of dragon tourism in IndonesiarsquoAnnals of Tourism Research Vol 27 No 3 pp 559ndash576

Wing IS and Anderson WP (2004) lsquoModelling small area economic change in conjunction witha multiregional CGE modelrsquo paper read at the session on spatial evolution and modelling at theWorld Conference of the Regional Science Association International Port Elizabeth South Africa14-16 April 2004

Zhou D Yanagida JF Chakravorty U and Lueng P (1997) lsquoEstimating economic impacts fromtourismrsquo Annals of Tourism Research Vol 24 No 1 pp 76ndash89