Soccer and Fintech 2: A contribution to the financing of youth sports (2. the solutions).
Dr. Gilles Klein
Paths
Last week, in the first episode of Soccer and Fintech, we drew attention to some memorable events in the career paths of three Cameroonian soccer players. Vincent Aboubacar, the liberator, scores the goal that brings the African Cup of nations (ACN) to Cameroon. Yannick Abega, the galley slave, passes from club to club, without ever signing a contract. Jean-Claude Mbouvim, the protector, is helping Yannick. His association, “Foot solidaire” lodges a complaint, among others, for child trafficking and exploitation. Today, I would like to put into perspective these career paths with the financing of soccer, more generally of sport, in the developing countries (DC).
Protection
Jean-Claude Mbouvim’s mission and the mission of the association “Foot Solidaire” will warrant a specific article in the blog. Let us summarize their purpose in order to introduce the solitary financing issues. The conference “Together for the protection of young soccer players in Africa” organized by the association, in Dakar – Senegal – in December 2015 set us on the way. The speakers unanimously acknowledged the existence of the trafficking of young soccer players in Africa. It is described as a scourge and modern slavery and they decide to take action and put forward solutions.
Wladimir Andreff
Among those, one has been a concern of ours: a tax on the transfers to develop sports in DC. It is up to the economist Wladimir Andreff who we already consulted for the article “Break the shop window!”. This time, our colleague examines the hypothesis of taxing the transfers of young African players. If CAN is always a success, illustrating the vitality of this sport in Africa, Yannick Abega’s sad history became the symbol of its misery.
Liberator
On the side of vitality, Andreff helps us to understand Vincent Aboubacar’s career path, liberator of Cameroon, and the ACN’s success which draws the attention of media and European sponsors. In 1995, the Bosman judgment states the illegality of foreign sportsmen’s quotas that prevents their transfers. It has the effect of creating a sportsmen/women’s worldwide market. Among foreign soccer players playing in Europe in 2006, almost 50% have been emigrating from DC. Vincent Aboubacar is a member of this cohort.
Country
In Andreff’s view, the African soccer’s vitality is a double-edged sword. Indeed, the talents’ immigration helps to increase the level of the best African players and that of national selections during ACN or FIFA’s world cup. By contrast, the national teams are increasingly comprised of foreign-based players. During the world cups of the 2000s, only a fifth of the players played at home. A country of origin that doesn’t have full latitude to use its talented players. A country that doesn’t have the opportunity to develop its national championship.
Galley slaves
All soccer players are far from being liberators. Many of them are galley slaves. Yannick Abega is a mere drop in the ocean. In Africa, the multiplication of championships for 15-17 years old players led to a wave of transfers of players, who are not yet 16. In 2001, Tshimanga Bakadiababu described as “slave market”, “child trade” and “human trafficking” the market of the under 18s. A system that put many young players into positions more than delicate.
Predation
This system is also predatory for African soccer. All is to the benefit of the recruiting clubs: “any revenue doesn’t top up the coffers of the national soccer federation of the country of origin or the training sports association” says Andreff. The transfer premiums don’t cover the training and coaching costs. The agents are heavily paid on the transactions.
Coubertobin
Drawing on the Tobin tax on the international currency transactions and the De Coubertin’s equal participation opportunity, Andreff suggests a Coubertobin tax: “A tax at a 1% average rate on all transfer premiums and the first salaries stipulated in the work contracts signed by the players coming from DCs with foreign partners, usually professional clubs and/or foreign agents”. The tax is complemented by a surtax for the transfer of young players. Tax and surtax should be paid by “individual or institution who takes in charge the transfer premium and the first yearly salary, professional club and/or a players’ agent”.
Funds
What is the aim of the tax? Cover the cost of training and coaching of every transferred player, pre-paid by the country of origin? Provoke a negative incentive to transfer a player from DC? Reduce the waves to developed countries (MEDC)? Generate sport development funds in the DCs? Funds could contribute to the financing of construction and maintenance of sports facilities and the implementation of physical education programs.
Palaver tree
The project is ambitious, although generous. Andreff himself, underlines two limitations to it, that are far from being anecdotal. The tax assumes a worldwide agreement with a deal by the major concerned institutions, such as FIFA. It could not be implemented without a general agreement of all the countries concerned by these transfers, their ministries of sports, federations and Olympic committees. In other words, the tax shall pass the test of the palaver tree and lead to a universal decision.
Intergovernmental
Our initiative aims also to finance Youth sport in the DCs. As I mentioned in the previous article, we want to gather states and governments within an intergovernmental organization. The longest and demanding step has been to create a financial institution that could generate funds to support Youth sport in the 33 member states. That objective has now been fulfilled.
VO2
We want to give some oxygen to youth. Such as maximal oxygen consumption, or VO2 max, it was a need to create a financial support bringing a maximum of oxygen to the financing of youth sport. To fulfill that mission, several services are bundled under the VO2 title. Among them, the financial technologies would have a certain value
Fintech
Recent innovations in financial services, known as financial technologies – or Fintech – are attracting a great deal of interest from companies, individuals, but also from States and their financial institutions. Fintech can contribute to the refinance of numerous areas which are related to economic and human development in the countries, notably the developing ones. With the support of the development of these technologies, we conceived a platform and services for the benefit of the participant members, as well as the candidate member states.
Hypothesis
Platform and services will bring two types of application. The first is a facilitation of cross-border financing transactions, for countries encountering difficulties in that area. The second is the introduction of a digital currency. We assume that the 33 member states of our organization constitute a financial market with a strong exchange potential. Using Fintech in their financial transactions, our member states could generate financing which, among others, will encourage the creation of funds for youth sports. Would our Fintech service offer fewer constraints than the Coubertobin tax? It will be the responsibility of our member states to provide the answer.
Next: 10 March 2017 – Youth lifestyles: all is not lost!
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