The Cape Town International Jazz Festival: More than just jazz

Abstract

Economic impact studies have been used to value goods with the characteristics of both public and private goods, such as arts festivals, and have been useful in providing a quantifiable monetary estimate of their worth and, more accurately, of the impact of such events on a specific region. This paper provides just such a valuation, using economic impact analysis conducted on surveys of visitor and organiser spending at the 2009 Cape Town International Jazz Festival. On the basis of the survey data and event budget, a social accounting matrix (SAM) for the Western Cape Province was used to estimate the economic value of the festival to the province's economy (using the classic SAM's multiplier approach). The results of the analysis show that the festival generates approximately R158 million via visitor and organiser spending, and that 1059 jobs depend on it.

Keywords:

• events
• economic impact
• computable general equilibrium models
• music festival
• jazz festival
• South Africa

1. Introduction

The purpose of this study was to determine the economic impact of the Cape Town International Jazz Festival. This festival celebrated its inception in 2000 with approximately 14 000 visitors and has since increased visitor numbers to 32 000. It brings more than 40 international and local artists to perform over two days on five stages at the Cape Town International Convention Centre (CTICC). The purpose of the event is threefold: to provide a jazz experience for the tourists and visitors, to develop the community and to grow the local economy (Saayman et al., 2009). Using the definition of a festival (see Kruger, 2009), a music festival can be defined as a community event or celebration designed to showcase music with the intention of benefiting the local community. To examine the benefit to the community was the rationale for this research, following Getz's (1991) observation that events benefit local communities, especially from an economic point of view. Further motivation was that local tax payers are questioning the benefits of this event, since the local and provincial governments are sponsoring it, using taxpayers' money.

The paper reviews the literature, describes the research methods used, assesses the economic impact of the event, and concludes with implications and recommendations.

2. Literature review

Since South Africa is positioning itself as one of the main event destinations in the world (Saayman & Saayman, 2006), events are playing an increasingly important role in the tourism industry, from a development as well as a marketing point of view. Events are seen as attractions that create a flow of tourists and generate tourist activities, especially during the off season, thus curbing seasonality (Kruger, 2009), so South Africa has significantly increased the number and diversity of events. Some major sports events the country hosts are the Indian Premier League cricket, the Tri Nations, the Super 14 rugby competition, the British and Irish Lions Tour and the FIFA Confederations Cup in 2009. Examples of major music events it hosts are the 46664 Nelson Mandela Concert, the Oppikoppi Festival, Splashy Fen, Woodstock, the Africa Music Festival, the Southern Cross Music Festival, the Standard Bank Joy of Jazz Festival and the Cape Town International (CTI) Jazz Festival. It also hosts four national arts festivals, where music plays an important role. In total it hosts approximately 300 festivals per year, not including various once-off events (Saayman et al., 2008). Clearly, music is not only an important element in the events calendar but a major drawcard in the tourism industry.

This supports observations by Getz (1991) and Hoyle (2002) that the number, diversity and popularity of events have grown spectacularly since the 1980s. In addition, Jackson & O'Sullivan (2002) state that one of the fastest growing segments in event tourism is arts festivals, of which music festivals form part. Gursoy et al. (2004) and Snowball (2004) say events or festivals are being used as a vehicle to achieve objectives such as creating infrastructure, providing jobs, bringing in revenue, attracting investment, growing the arts, promoting a region, and building a better image.

The purpose of this study was to determine the economic impact of the CTI Jazz Festival on the economy of the Western Cape. Ritchie & Goeldner (1994) define ‘economic impact’ as the net economic change in a host community that results from tourist or visitor spending in a given area. The purpose of an economic impact analysis is therefore to measure the economic benefits received by a community (Archer, 1989; Fayos-Sola, 1997; Van Heerden, 2003). It also looks at how these economic benefits may enhance the host population's way of life and environment. The magnitude of the economic impact of tourism depends on:

• how many tourists visit an area or country,

• how long they stay,

• how much they spend there, and

• how tourism expenditure circulates through the country (Saayman, 2000).

The more visitors and the longer they stay, the greater the total spending, all things being equal. Higher multiplier effects also lead to greater economic impacts. The multiplier effect is normally explained in terms of the direct, indirect and induced impact that expenditure has on the regional economy. The importance of this is that it shows the leakages from the local economy: the smaller the leakages, the greater the economic impact. To estimate economic impacts, the additional ‘new money’ generated for the local economy from tourism is normally considered (Gelan, 2003). Tourist visits to a region usually create this ‘new money’. Both visitors and organisers spend money in an economy, and it is this influx of money that creates an economic impact. Once money is spent in an economy, it ripples through the economy as businesses buy stock from other businesses and pay their employees. These businesses and employees then spend the money in the economy, creating even more spending – and so it continues. This is referred to as the indirect and induced effects created by the initial spending, or the multiplier effect.

The direct spending effect is determined by assessing the magnitude of both visitor and organiser spending in hosting the event. To determine the indirect and induced effects of visitor spending, various methods can be used. Some of the most popular are input–output models, multipliers estimated from social accounting matrices (SAMs) and computable general equilibrium (CGE) models (Saayman & Rossouw, 2008).

Economic impact analyses have been done in fields of study as diverse as sport tourism (e.g. Kang & Perdue, 1994; Gelan, 2003; Diakomihalis & Lagos, 2008; Saayman & Rossouw, 2008), regional and country economic impacts (e.g. Kottke, 1988; Randall & Warf, 1996; Wagner, 1997; Zhou et al., 1997; Saayman & Saayman, 1997; Stynes, 1999; Fretchling & Horvath, 1999; Rhodes, 2000; Walpole & Goodwin, 2000; Oh, 2005; Ahlert, 2008), the economic impact of events (e.g. Fayos-Sola, 1997; Van Heerden, 2003; Gelan, 2003; Saayman & Saayman, 2004; Van der Merwe & Saayman, 2008), and wildlife and cultural tourism (e.g. Tisdell & Wilson, 2004; Nijkamp, 2004; Getzner et al., 2005; Bowitz & Ibenholt, 2009).

The literature review suggests that although economic impact analyses have been conducted at arts festivals not much has been done at music festivals specifically. This raises questions, such as: How much do visitors spend at music festivals, or in this case, a jazz festival? How do music and specifically jazz festivals compare with other festivals from an economic point of view? Answers to these questions will help organisers plan events and develop policy.

3. Method of research

3.1 Sampling

Since the research required the collection of primary data, a visitor survey was conducted at the CTI Jazz Festival on 3 and 4 April 2009. The sample was based on the availability of visitors and their willingness to complete the questionnaire. For a population of 100 000, Cooper & Emory (1995) recommend a sample size of 384. Since this festival attracts approximately 32 000 visitors (Saayman et al., 2008) it was decided to distribute 450 questionnaires to ensure a sufficient number would be completed, since respondents do not always answer all the questions.

3.2 Questionnaire design and collection

The questionnaire used was similar to previous ones used by Saayman & Saayman (2006) at the Klein Karoo National Arts Festival and the Aardklop National Arts Festival. It included demographic questions (age, gender, language, occupation, province of origin) and travel and participation behaviour questions (number of people in the group, how many people did the respondent pay for, days spent at the festival, spending at the festival, both on and off site, and genres attended).

All the questionnaires were completed at the CTICC. Fieldworkers moved around to minimise bias. Of the 450 questionnaires distributed, a total of 432 were collected for data capturing.

3.3 Data analysis

Data were coded in Microsoft Excel and processed using SPSS (Statistical Package for the Social Sciences). The study used the Western Cape SAM to determine the indirect and induced impact of visitor and organiser spending. The SAM shows the increase in production and employment of each sector in the economy that results from the increase in visitor and organiser spending.

3.3.1 Total direct spending

To determine the total direct spending in the economy due to the CTI Jazz Festival, the visitor survey was used to evaluate visitor spending and a breakdown of organiser spending was obtained from the organisers. The visitor spending was divided into foreign visitors, visitors who live in the Western Cape Province, and visitors from the rest of South Africa. The number of tickets sold for each entry method (i.e. weekend passes, day passes and packages) was multiplied by the average spending per person in that category to obtain total visitor spending (see Table 1).

Table 1: Total visitor spending at the 2009 CTI Jazz Festival (in ZAR)

Spending item	Foreign	Western Cape	Rest of South Africa	Total
Entry	5 072 686.92	526 949.13	6 268 310.66	11 867 946.72
Accommodation	489 217.37	890 326.94	8 799 973.99	10 179 518.31
Food and restaurant	1 076 855.96	513 211.56	5 200 744.35	6 790 811.87
Alcoholic drinks	757 770.61	278 596.26	2 028 388.05	3 064 754.91
Non-alcoholic drinks	739 997.74	34 018.62	939 996.30	1 714 012.66
Retail shopping	165 446.92	536 170.57	4 956 360.72	5 657 978.21
Transport	291 718.70	396 279.60	6 092 373.45	6 780 371.76
CDs/DVDs	317 490.57	97 844.59	653 617.00	1 068 952.16
Souvenirs	159 843.23	64 953.96	811 359.72	1 036 156.92
Other	13 718.59	5276.38	636 683.05	655 678.01
Total (in ZAR)	9 084 746.62	3 343 627.61	36 387 807.30	48 816 181.52
Source: Authors' own calculations based on visitor surveys.

In total, R48.8 million is spent by visitors attending the festival. Table 1 shows that the visitors from the rest of South Africa are by far the greatest contributors. In addition, organisers spend R32.2 million in preparation for the festival. Since this study looks at the contribution only to the economy of the Western Cape, some direct spending by organisers, such as artist remuneration and SABC airtime, which does not take place in the Western Cape, cannot be included, and income from day passes, which is included in the organisers' budget and captured in the survey figures, cannot be counted twice. After accounting for these items, total direct spending (visitor plus organiser spending) amounted to R74.3 million for the 2009 CTI Jazz Festival.

Table 2 shows that the festival visitors are predominantly English-speaking females, mostly in the 35–49 age group, living in the Western Cape and spending approximately R4700 at the festival. Seven per cent of visitors are foreigners. It is interesting to note that 22 per cent of the visitors are from Gauteng.

Table 2: Profile of visitors

Category	Visitor profile 2009
Gender	Female (57%), Male (43%)
Age	35–49 (38%), 25–34 (22%), 51–64 (18%)
	Average age: 37
Language	English (56%), other (39%)
Occupation	Professional (33%), management (15%), self-employed (11%)
Monthly income range	–
Country of residence	South African (93%)
Province of origin	Western Cape (51%), Gauteng (22%)
Foreign visitors	Germany, Namibia
Average spending per group	R4 678.17
Method of marketing	Word of mouth
Source: Compiled by the authors.

3.3.2 SAM multipliers and secondary effects

A SAM consists of data from input–output tables, national income statistics, and household income and expenditure statistics. It extends the basic input–output concept from production to income distribution and includes both social and economic data for an economy (Raa & Sahoo, 2005). Unlike national accounts, ‘a SAM attempts to classify various institutions to their socioeconomic backgrounds instead of their economic or functional activities’ (Chowdhury & Kirkpatrick, 1994:58). The analysis in this study was based on a SAM for the Western Cape, developed by Conningarth Consultants (2006a) – a consistent and comprehensive data set of all mutual transactions among productive and institutional sectors of the province's economy. Based on 2006 prices, it distinguishes 55 sectors, 12 household types and four ethnic groups.

The analysis is based on two models. The first is a standard input–output Leontief model for which input coefficients and Leontief multipliers (M ^L ) were calculated:

where A is a matrix of input (technical) coefficients.

The second extends the linear Leontief model to a SAM framework by partitioning the accounts into endogenous and exogenous accounts and assuming that the column coefficients of the endogenous accounts are all constant. To determine the set of endogenous accounts, it is important to know whether changes in the level of expenditures directly follow any change in incomes (Pyatt & Round, 1985). Exogenous accounts are those for which one assumes that the expenditures are set independently of incomes. Standard practice is to pick up, for the exogenous accounts, one or more accounts among the household, government, capital and rest of the world accounts, justifying the choice on the basis of the study's objectives (Hajnovicova & Lapisakova, 2002).

Multipliers calculated from the SAM are the simple indicators comprising the important information about the structure of the Western Cape economy. They are calculated from the matrix of expenditures shares (general technical coefficients) after excluding the exogenous accounts. The computed multipliers will be sensitive to the choice of exogenous accounts and express the sensitivity of the endogenous accounts to changes in demand for exogenous accounts (Hajnovicova & Lapisakova, 2002). SAM multipliers (M ^S ) are calculated as:

where M is the matrix of expenditures shares of endogenous accounts.

Comparing the multipliers calculated from the input-output and SAM models introduces new aspects into the economic analysis. The SAM multipliers are much larger than the corresponding input-output multipliers. Because value-added is a leakage, only intermediate demand serves as a multiplier in the input–output analysis. In contrast, value-added and incomes generate demand linkages in the SAM approach. SAM multipliers capture the different multiplier effects of exogenous accounts on productive activities, factors and institutions. On the basis of the partition of the endogenous section of the SAM into three categories of accounts (activities/commodities, factors and institutions), the matrix of multipliers can be decomposed into four components: initial injection, transfer effects, open-loop effects and closed-loop effects. Many versions of this decomposition have been used (Hajnovicova & Lapisakova, 2002).

In analysing the productive sphere of the economy, a decomposition of multipliers by Pyatt & Round (1985) was used. The matrix M ^S which is reduced to the Leontief multiplier matrix M ^L corresponds only to the production accounts. To perform the impact analysis, the M ^S matrix is truncated to conform to the dimension of the matrix M ^L .

The differences between the multiplier matrices M ^S and M ^L measure the induced effects due to the added endogeneity, while the direct and indirect effects are measured by M ^L . Matrix M ^S can be decomposed into three components:

• (M ^S –M ^L ), which measures induced effects,

• (E + A), which measures direct effects, and

• (M ^L –E–A), which measures indirect effects,

where

A vast array of inputs was required for the analysis. These were obtained from surveys conducted by Statistics South Africa and published in their Supply and Use Tables (StatsSA, 1998; Conningarth Consultants, 2006a). Detailed information on the economic composition of each sector in the economy was obtained from these tables and formed part of the basic exogenous inputs needed to calculate the various multipliers. Additional information about labour numbers and capital used was obtained from the 2001 Census (StatsSA, 2001) and the South African Reserve Bank Quarterly Bulletin, respectively (Conningarth Consultants, 2006a). The exogenous input data (shocks) were calculated and drawn from independent surveys conducted during 2009 by the Institute for Tourism and Leisure Studies.

4. Valuing the economic impact of the CTI Jazz Festival on the Western Cape

This section describes the direct, indirect and induced impact of the festival using the relevant multipliers, based on visitor spending (see Table 1), and discusses the results of applying the input data (shocks) to the multipliers.

4.1 Foreign expenditure

The direct, indirect and induced impact on the Western Cape of foreign expenditure at the CTI Jazz Festival is summarised in Table 3. As this spending is partly by the foreign visitors to the festival purchasing goods and services in the province, it represents an inflow of money to the province, mobilising economic activity and generating employment and additional revenues for the province. ‘Production’ is an indication of the total turnover generated by each sector in the province's economy. It has two components: demand for intermediate inputs (resources) by an activity (domestically produced and imported goods and services), and total value-added generated by an activity (Conningarth Consultants, 2006b). Table 3 shows the effects on production (using the production multipliers) of foreign expenditure resulting from the festival.

Table 3: Impact through production multipliers (rand, 2006 prices) – foreign visitors

Sector	Direct impact	Indirect impact	Induced impact	Total impact	Percentage (total)
Agriculture	0.0	0.0	0.0	0.0	0.0
Mining	0.0	0.0	0.0	0.0	0.0
Manufacturing	1 975 102.2	1 939 084.6	904 182.0	4 818 368.7	24.0
Electricity and water	0.0	0.0	0.0	0.0	0.0
Construction	0.0	0.0	0.0	0.0	0.0
Trade and accommodation	1 731 520.3	1 174 597.8	719 428.8	3 625 546.8	18.0
Transport and communication	291 718.7	227 234.9	127 214.9	646 168.6	3.2
Financial and business services	5 072 686.9	3 489 889.4	2 441 572.4	11 004 148.8	54.7
Community services	13 718.6	1720.8	6270.0	21 709.4	0.1
Total	9 084 746.6	6 832 527.5	4 198 668.1	20 115 942.3	100.0
Source: Authors' own calculations based on multiplier analysis.

The spending by foreign visitors in 2009 was mostly on tourist activities. It is clear from Table 3 that the largest direct impact was in financial and business services (54.7 per cent) and manufacturing (24.0 per cent). Through the ‘backward linkages’, large indirect and induced impacts were also experienced in the manufacturing sector, reflecting an indirect impact of R1.9 million and an induced impact of R904.2 000. Note that if the direct effect in the financial and business services sector is ignored, 53.9 per cent of the total increase in production is as a result of ‘backward linkages’, with direct foreign expenditure representing only 46.1 per cent. A more detailed (disaggregated) analysis of the various sectors can be made, but this falls beyond the scope of this study.

All the acquisitions of goods and services from non-regional suppliers, i.e. suppliers outside the Western Cape, were included in the analysis and may therefore have had a significant direct or indirect effect on the province's economy. By including this indirect impact, although small in significance, we present a more comprehensive estimate of the impact of the CTI Jazz Festival on the province.

The value of the purchases of goods and services from regional suppliers was then classified using the basic sector aggregation as classified by the South African Reserve Bank and Statistics South Africa, and its distribution by activity sector is shown in Figure 1. The analysis of the expenditure by foreign visitors in 2009 shows first that the direct effect was 45 per cent, the indirect effect 34 per cent and the induced effect 21 per cent of the total increase in expenditure. Second, the activity sectors that benefited most from the increased expenditure were financial and business services, manufacturing, and trade and accommodation. The expenditure in these sectors in the province by foreign visitors in 2009 surpassed R20.1 million, and represented some 12.7 per cent of the total spending in the province by all visitors to the festival.

Figure 1: Foreign expenditure in the region by activity sector

4.2 Western Cape expenditure

The economic impact of the spending by visitors living in the Western Cape was estimated using an approach similar to that used to estimate foreign visitor spending. The value of the purchases of goods and services from local suppliers by visitors living in the Western Cape is shown in Figure 2. On the basis of the information collected from the surveys done during the 2009 festival, it was estimated that the direct impact to the province of local visitors' spending was approximately R3.3 million, distributed among five of the nine activity sectors. The sectors that benefited most were trade and accommodation, financial and business services, and manufacturing. This relatively high level of expenditure by these visitors on trade and accommodation can be explained by the fact that the majority of local visitors hail from places in the Western Cape other than Cape Town.

Figure 2: Local expenditure in the region by activity sector

Figure 3: Rest of South Africa expenditure in the region per activity sector

Figure 4: Impact on capital through total visitor spending in the region by activity sector

It is important to note that the direct impact of the local visitors' spending (R3.3 million) represents less than 5 per cent of the total spending by all visitors (R49 million) to the festival in 2009. Table 4 summarises the direct, indirect and induced impact in the Western Cape of local expenditure at the festival. It is clear that the largest direct impact was on trade and accommodation (56.4 per cent), financial and business services (15.8 per cent) and manufacturing (15.6 per cent). Through the ‘backward linkages’, large indirect and induced impacts were also experienced in the manufacturing sector (despite a less significant direct impact), reflecting an indirect impact of R416.5 000 and an induced impact of R237.4 000. If the direct impact in the trade and accommodation sector is ignored, 52.6 per cent of the total increase in production was as a result of ‘backward linkages’, with direct local expenditure representing only 47.4 per cent of the total impact.

Table 4: Impact through production multipliers (rand, 2006 prices) – local visitors

Sector	Direct impact	Indirect impact	Induced impact	Total impact	Percentage (total)
Agriculture	0.0	0.0	0.0	0.0	0.0
Mining	0.0	0.0	0.0	0.0	0.0
Manufacturing	475 413.4	416 522.5	237 381.5	1 129 317.5	15.6
Electricity and water	0.0	0.0	0.0	0.0	0.0
Construction	0.0	0.0	0.0	0.0	0.0
Trade and accommodation	1 939 709.1	1 323 356.0	828 327.6	4 091 392.7	56.4
Transport and communication	396 279.6	308 682.9	172 812.6	877 775.1	12.1
Financial and business services	526 949.1	362 528.6	253 629.8	1 143 107.5	15.8
Community services	5276.4	661.9	2411.5	8349.8	0.1
Total	3 343 627.6	2 411 751.9	1 494 563.1	7 249 942.6	100.0
Source: Authors' own calculations based on multiplier analysis.

It can be concluded that, of the total increase in expenditure in the province, the direct impact of local spending represents 46.1 per cent, the indirect impact 33.3 per cent and the induced impact 20.6 per cent. By including the expenditure that would have occurred in the province independently of the festival, less conservative figures for the economic impact are estimated. It is reasonable to expect that in the absence of the festival the available revenue from these local visitors would have been less and thus the amount they spent in the province would also have been less.

4.3 The rest of South Africa's expenditure

The spending at the festival by visitors living in the rest of South Africa was estimated using an approach similar to that used to estimate the spending by foreign and Western Cape visitors. Using the production multipliers, Table 5 illustrates how this spending affected production in the Western Cape, showing the direct, indirect and induced impact. It shows that the largest direct impact was in trade and accommodation (50.9 per cent), followed by financial and business services (17.3 per cent) and transport and communication (17.2 per cent). Through the ‘backward linkages’, large indirect and induced impacts were also experienced in the transport and communication sector (despite a less significant direct impact; see also Figure 3), reflecting an indirect impact of R4.73 million and an induced impact of R2.7 million. If the direct effect in the transport and communication sector is ignored, 54.9 per cent of the total increase in production is a result of ‘backward linkages’, with direct expenditure by visitors from the rest of South Africa representing only 45.1 per cent of the total impact.

Table 5: Impact through production multipliers (rand, 2006 prices) – rest of South Africa visitors

Sector	Direct impact	Indirect impact	Induced impact	Total impact	Percentage (total)
Agriculture	0.0	0.0	0.0	0.0	0.0
Mining	0.0	0.0	0.0	0.0	0.0
Manufacturing	4 433 361.1	3 981 365.3	2 075 285.5	10 490 011.9	13.4
Electricity and water	0.0	0.0	0.0	0.0	0.0
Construction	0.0	0.0	0.0	0.0	0.0
Trade and accommodation	18 957 079.1	12 927 274.6	8 077 261.0	39 961 614.7	50.9
Transport and communication	6 092 373.5	4 745 667.8	2 656 808.9	13 494 850.1	17.2
Financial and business services	6 268 310.7	4 312 450.5	3 017 046.9	13 597 808.1	17.3
Community services	636 683.0	79 864.3	290 991.8	1 007 539.1	1.3
Total	36 387 807.3	26 046 622.5	16 117 394.1	78 551 823.9	100.0
Source: Authors' own calculations based on multiplier analysis.

It was estimated that the direct impact of visitors from the rest of South Africa in the province may exceed R36 million (approximately 74.5 per cent of total expenditure). Figure 3 presents the total expenditure per activity sector by visitors from the rest of South Africa. As in the case of foreign visitors, the results of the study suggest that the sectors that benefited most are, in order of importance, trade and accommodation, financial and business services, and transport and communication (see Figure 3). The expenditure in these four sectors of economic activity represents more than 85 per cent of the total expenditure by the visitors from the rest of South Africa at the festival. The direct impact represents 46.3 per cent, the indirect impact 33.2 per cent and the induced impact 20.5 per cent of the total increase in local expenditure. It is important to note that, by definition, the calculation of the economic impact includes only the expenditure that would not have occurred in the absence of the event.

4.4 Total impact

The analysis described in the three previous sections allowed us to estimate the direct impact of the CTI Jazz Festival in the Western Cape, based on spending by the festivals' visitors and organisers. However, to evaluate the total impact of the festival in the province, it is necessary to ‘correct’ the direct impact by the multiplier effect. Production multipliers were thus used for each of the activity sectors. Multiplying the direct impact in each activity sector for the specific production multipliers gives the total impact of the festival for each of the province's economy sectors (see Table 6). The sum of the impacts in each of the sectors gives us, in turn, an estimate of the total impact of the festival in the province.

Table 6: CTI Jazz Festival impact on regional production

Sector	Foreign spending	Western Cape spending	Rest of South Africa spending	Organiser spending	Direct impact	Production multipliers^a	Total Impact
Agriculture	–	–	–	–	–	2.239	–
Mining	–	–	–	–	–	1.383	–
Manufacturing	1.975	0.475	4.433	2.615	9.499	2.388	22.681
Electricity and water	–	–	–	0.142	0.142	2.093	0.297
Construction	–	–	–	–	–	2.258	–
Trade and accommodation	1.732	1.940	18.957	3.426	26.054	2.107	54.897
Transport and communication	0.292	0.396	6.092	4.125	10.905	2.215	24.155
Financial and business services	5.073	0.527	6.268	9.618	21.486	2.169	46.609
Community services	0.014	0.005	0.637	5.536	6.192	1.582	9.799
Total	9.085	3.344	36.388	25.461	74.278		158.438
^aUnit is R million except for the variable ‘production multipliers’.
Source: Authors' own calculations based on multiplier analysis.

The analysis of the results shows that the direct economic impact of the festival and its visitors in the province (which is in the order of R74.3 million), can result in an additional R84.2 million of indirect impact, giving a total annual impact in excess of R158 million. That is equivalent to an aggregated production multiplier in the order of 2.13. Therefore, for each rand spent in the province by the visitors to the festival, 113 cents are generated additionally in terms of indirect expenditure. The aggregated production multiplier is obtained by dividing the total impact by the direct impact.

One of the elements of the additional value-added that will result from the festival is remuneration of employees, which in turn affects household income. The household income multiplier thus measures the magnitude of changes that will occur to both household income and spending and saving patterns. In particular, the impact on low-income households can be highlighted, as this can be used as to indicate how much the festival contributes to poverty alleviation throughout the provincial economy.

Using the same SAM for the Western Cape (Conningarth Consultants, 2006a), it is thus possible to estimate the impact of total spending at the festival at the level of families' income. To do so, specific household income multipliers for each activity sector were calculated and these were then multiplied by the values of the total sector's impacts (see Table 6).

The aggregated income multiplier, valued at 0.36, can be interpreted as the increment of the Western Cape family's income for each rand of spending by the festival visitors in the province. We estimate that currently a total of R68 million of remunerations in the Western Cape would not have taken place annually if the festival had not happened (see Table 7).

Table 7: CTI Jazz Festival impact on family income

		Indirect and induced impacts (R million)
Total impact (R million)	Sector	Rest of the households	Low-income households	Total households	Percentage (total)
Agriculture	0.000	0.000	0.000	0.000	0.0
Mining	0.000	0.000	0.000	0.000	0.0
Manufacturing	22.681	0.603	9.339	9.942	14.6
Electricity and water	0.297	0.006	0.107	0.113	0.2
Construction	0.000	0.000	0.000	0.000	0.0
Trade and accommodation	54.897	1.062	20.930	21.992	32.4
Transport and communication	24.155	0.416	10.303	10.719	15.8
Financial and business services	46.609	0.692	20.367	21.059	31.0
Community services	9.799	0.387	3.746	4.133	6.1
Total	158.438	3.166	64.792	67.958	100.0
Source: Authors' own calculations based on multiplier analysis.

Labour is a key element of the production process. This indicator measures job creation and reveals how much each sector contributes to creating employment opportunities and, ultimately, to distributing salaries and wages between various types of labourers, which in turn should have a positive impact on the economy.

Finally, using the values presented above, it is also possible to estimate the impact of the festival at the level of jobs in the Western Cape. On the basis of figures from the Western Cape SAM, and using data on the labour force per province relative to the business volume and jobs per activity sector in South Africa for 2006, it was possible to estimate the impact of the festival on the province's job level, as shown in Table 8. The table shows that 1059 job positions may depend on the festival, in addition to the number of employees directly involved in the festival itself. A job is defined as one person working for at least part of year in which the festival takes place. Consequently, the absence of the festival would have implied a reduction of 1059 jobs in the province, and a reduction of the number of positions or employees directly involved. The most affected sectors in the absence of this festival would have been manufacturing, trade and accommodation, and financial and business services. Jobs in Table 8 include direct, indirect, and induced impact in a manner similar to total industrial output and include both full-time and part-time jobs.

Table 8: CTI Jazz Festival impact on employment

Sector	Total impact (R million)	Labour multipliers^a	Equivalent jobs (number)
Agriculture	–	3.455	–
Mining	–	1.375	–
Manufacturing	22.681	20.930	474.7
Electricity and water	0.297	2.450	–
Construction	–	5.630	–
Trade and accommodation	54.897	5.500	301.9
Transport and communication	24.155	1.963	47.4
Financial and business services	46.609	3.960	184.6
Community services	9.799	5.180	50.8
Total	158.438		≈ 1059
^aThe labour multiplier is an indication of the number of job opportunities that will be created as a result of changes in the production of 1 million by a particular activity.
Source: Authors' own calculations based on multiplier analysis.

4.5 Capital

For the Western Cape economy to operate at a specific level, a certain amount of capital investment is needed. Capital, labour and entrepreneurship are the basic factors needed for production in the provincial economy. The effectiveness and efficiency with which these factors are combined influences the overall level of productivity and profitability. The capital multiplier thus depicts the magnitude of change in the capital required, based on change in the production by a particular sector in the Western Cape.

Table 9 shows the impact on capital formation in the Western Cape of spending by all visitors and organisers at the festival (using the capital multipliers). Together with Figure 4, it shows that the impact of the event in terms of capital creation is significantly large. The sectors with the largest impact are financial and business services, trade and accommodation, and transport and communication. This indicates that there is a significantly large capital requirement (in these sectors specifically) in the hosting of such festivals. The analysis of the overall expenditure by all visitors to the festival and festival organisers indicates that the direct effect on capital in the Western Cape was 51.2 per cent, the indirect effect 30.5 per cent and the induced effect 18.3 per cent of the total increase in expenditure.

Table 9: CTI Jazz Festival impact through capital multipliers (rand, 2006 prices)

Sector	Direct impact	Indirect impact	Induced impact	Total impact	Percentage (total)
Agriculture	0.0	0.0	0.0	0.0	0.0
Mining	0.0	0.0	0.0	0.0	0.0
Manufacturing	9 534 133.7	17 062 131.3	9 866 212.1	36 462 477.1	10.2
Electricity and water	1 026 496.4	274 966.8	109 705.2	1 411 168.4	0.4
Construction	0.0	0.0	0.0	0.0	0.0
Trade and accommodation	56 002 142.9	35 050 960.0	21 155 891.0	112 208 993.9	31.4
Transport and communication	50 998 939.0	20 309 883.5	10 163 902.4	81 472 724.9	22.8
Financial and business services	62 581 916.7	34 384 548.4	19 489 927.9	116 456 393.0	32.6
Community services	2 569 228.0	1 913 001.7	4 578 344.3	9 060 574.0	2.5
Total	182 712 856.7	108 995 491.7	65 363 983.0	357 072 331.4	100.0
Source: Authors' own calculations based on multiplier analysis.

5. Key findings

The results of this study compare favourably with a study by Saayman et al. (2008) of the Pick n Pay Argus Cycle Tour, also held in Cape Town, which attracted 32 000 participants and generated R37 million in direct spending. A study by Van der Merwe (2009) revealed that the Klein Karoo National Arts Festival generated approximately R47 million in direct spending and attracted 36 811 visitors. It therefore seems that CTI Jazz Festival visitors spend significantly more than visitors at these events, if one takes the length of the event into consideration. (The cycle tour lasts two days, the national arts festival one week, and the CTI Jazz Festival two days.)

An interesting finding is that the direct impact of local spending of visitors to the CTI Jazz Festival represents less than 5 per cent of the total expenditure. Therefore from a methodological point of view the inclusion or exclusion of local spending has an insignificant effect on the total impact of the event. Added to this is the fact that if the purpose of the event is to make an economic contribution to the city or region then the focus should not be on local visitors. Hence attracting more visitors from further afield remains paramount for increasing the economic impact and this should be addressed in the marketing plan for the event. Visitors to the CTI Jazz Festival spent the most on accommodation, food and beverages, purchases of Western Cape goods, and admission fees. As expected for a multiple-day festival, food and beverages and admission were the largest expenditure categories. These results are consistent with other studies of short-term events. Restaurant meals, other food and beverages, accommodation, entertainment, shopping, admission fees and transport expenses have been identified as the main categories of spending (see e.g. Gartner & Holecek, 1983; Ryan, 1998).

The economic impacts determined by this study are most likely fairly accurate estimates for various reasons. First, the retained expenditures of local visitors are included. Small festivals like the CTI Jazz Festival in areas with few other tourism attractions may be critical for retaining locals' discretionary funds. Second, admission fees paid by the visitors are also included. It is highly probable that some portion of this revenue is injected back into the local economy. Since festival organisers have provided records on their spending, this information has facilitated more accurate (and higher) estimates of the economic impact. Finally, because spending not only by visitors but also by sponsors, the media, the festival organisers and others associated with the festival is considered, this adds substantially to the total economic impact of the festival.

The event also contributed significantly to job creation – again supporting research mentioned in the literature review (see Snowball, 2004; Gursoy et al., 2004; Kruger, 2009).

6. Implications and conclusions

The findings of this study show that the CTI Jazz Festival in the Western Cape has a significant economic impact and confirms that events can be used to generate income successfully, by attracting visitors from different areas of the country and abroad to Cape Town.

Because the festival is an annual event, the economic impacts calculated here occur every year. Approximately 85 per cent of festival visitors had plans to come back, and 52 per cent were repeat visitors. These repeat visitors spend as much as first-time visitors, year after year, thus providing continuity for the festival. Repeat visiting reduces the risk of financial failure for the festival. For a non-local visitor, a visit to a once-off event in an unknown destination is a high-risk travel decision, whereas the decision to visit an annual event that has been enjoyable in the past is much easier. Given its success in both bringing back repeat visitors and attracting new visitors, this festival will maintain its role in the Western Cape.

The study also established useful baseline figures for the CTI Jazz Festival and identified the portion of overall tourism and economic activity in the province associated with arts festival programmes and facilities. The sectors that benefit the most from this event are trade and accommodation, financial and business services, manufacturing, transport and commercial services and community services. The study has a number of implications. First, events such as these can be used as attractions to grow tourism, and therefore visitor numbers, for a particular region. They can also be used to address seasonality issues. Second, it seems that events of short duration (one or two days) are best offered in larger cities or towns, from which it is easier to draw visitors. Added to this, it also seems that a destination or city with many attractions and activities on offer can draw visitors from further afield, whereas in the case of a secondary town such as Oudtshoorn (where the Klein Karoo National Arts Festival is held) a festival needs to be hosted over a longer period, to make it worthwhile for tourists to travel the distance. This approach is confirmed if one looks at the location of the other three national arts festivals in South Africa, Aardklop (Potchefstroom), Innibos (Nelspruit) and Grahamstown (in the town with the same name). These are all held in secondary towns. Third, an event such as the CTI Jazz Festival should have less of a negative impact on the environment, for example in the form of noise pollution, since it is a short duration festival with fewer people spending larger amounts and hosted in an existing facility. The environmental aspect has, however, not been researched thoroughly and it is recommended that further research be undertaken on this topic. Fourth, event organisers need to work together with the tourism industry to promote the event to a larger audience and also to package it as a part of Cape Town's (and therefore South Africa's) product offering. Greater cooperation could lead to visitors staying longer and spending more money.

In terms of investment in arts and culture (especially music), results from this study of the CTI Jazz Festival clearly show that it makes economic sense for government and the private sector to get involved, as the event not only benefits the community directly associated with the festival, but also businesses and the tourism industry at large. Further research will be needed to evaluate specific CTI Jazz Festival programmes and to track changes in activity over time.

Notes