Friday, February 24, 2017

Soccer and Fintech 1: A contribution to the financing of youth sport (1. the context) Dr. Gilles Klein,24 March 2017

Soccer and Fintech 1: A contribution to the financing of youth sport (1. the context)
Dr. Gilles Klein 

Episodes

This blog lets us put seemingly remote universes in touch. Clearly, soccer has something to do with finance. Soccer is a booming sector in the sports economy. But how could financial technologies assist with the financing of soccer, or moreover youth sport? In two episodes, I would like to explain our thinking and our process. The first builds upon the case of three Cameroonian soccer players, thus explaining the context. However, let us start with the economy of soccer.

Market

Soccer is a market with an estimated turnover of 400 billion worldwide. British soccer, as early as the 1880s, sought to develop a real national, then international, business. A market in which the revenues increase just like the expenses, currently flirting with foolishness when compared to the salaries of most of the spectators in Europe. What can we say about Africa, the spectator of F.C. Barcelona with Messi and the African players at the African cup of Nations?

Revenues

Since 1880, the nature and amount of revenues have changed. At the outset, the sales at the turnstiles financed the adoption of professionalism and the construction of large stadiums.  Since the 1960s, the advertising industry has taken possession of the stadiums. A sector that continued to grow via the broadcast of the matches and the radio and television rights, first of the European cup matches, then national championships, at the beginning of the 1980s. Currently, related products and merchandising represent significant benefits as well.
Expenses

The nature and amount of the expenses have changed as well. Low for a long time, the players’ salaries increased with the appearance of contracts during the 1970s, leading to the huge salaries of Messi or Ronaldo. Players’ transfers are the subject of bidding contests. The salaries of great coaches, such as Mourinho, Ferguson or Ancelotti, follow the same process. Let us note the development of facilities, the large stadiums becoming the effigy of the major multinational companies.

Cameroon

African soccer takes place in this market. The African cup of Nations is a much-awaited encounter. On 5th February at the “Amiti√©” stadium in Libreville-Gabon, Cameroon wins its fifth cup beating Egypt. Cameroon sometimes called “Africa in miniature” takes revenge. Defeated in 1984 and 2005 by Egypt in the final of that event, the Indomitable Lions defeat the Pharaohs. In the stands, Roger Milla, the man of the 1990 World cup in Italy and Samuel Eto’o, best number nine in the history of F.C. Barcelona, express their joy.

Aboubacar

After the first half under pressure, the Indomitable Lions equal in the fifty-ninth minute. Two minutes before the end of the match, Vincent Aboubacar, our first Cameroonian player, frees his team, his supporters and his country. Coming in at half time, he offers the cup to Cameroon fifteen years after its last taste of continental glory. If Benjamin Moukanjo has been the man of the match, Aboubacar is the very symbol of the Lions. Thanks to his power in attack, he challenged the Egyptian defense which is close to breaking point, until this liberation. The team’s liberation was also the player’s liberation. Five times on the substitutes’ bench during the six qualifying matches, he becomes a decisive provider in the semi-final and liberator in the final.

Elite

For Vincent Aboubacar, this 88th minute is also the founding of a career. Sixth of seven children, he was spotted in the Coton sports club of Garoua, the main city of the northern region of Cameroon. While continuing his education, he begins a junior soccer player’s career. Very soon, he chooses to join the elite and becomes best goal scorer of his championship. Eighteen years old, he is a member of the national selection for the 2010 World cup. The press sees him as Samuel Eto’o’s successor. His capabilities allow him to have access to a national European championship. He is recruited by the first league club of Valenciennes – France, where he plays for five years, then Lorient-France for two years. He pursues his career within other European championships: F.C. Porto – Portugal, then BJK Besiktas - Turkey

Galley

Yannick Abega Onana Ezembe, our second Cameroonian player, has been less lucky. The newspaper Le Monde[1] reported his experiences, which I summarize thus. The hard work starts in Spring 2006. A cousin of his father places him in the hands of a Spanish agent, who has come to recruit players. “We were almost 500” he remembers. Extremely pleased, he travels to another tournament. After his return, he discovers the contract signed by his parents, the agent and his cousin.

Dear cousin

This one becomes his legal guardian. Her work? To select young people and put them in touch with agents. The tandem cousin-agent proposes to him a list of prestigious clubs, such as Real Madrid. He goes there, but the travel remains the responsibility of the family. Thirteen years old, it is the first trip in a long series. He spends three seasons at Real Majorque. He is welcomed by a foster family and enrolled in school, but without receiving any money. Under pressure from the family and club, the agent gives forty Euros to him… over two months. He set out then for Barcelona, Manchester, Almeria. He is still in an uncertain legal position: “I was often faced with an irregular situation”. He doesn’t know quite if the semblance of a contract was ever signed with a club.

Solidarity

Yannick, running away from his agent, ends up in Paris on a platform of Austerlitz station. He meets Jean-Claude Mbvoumin. This one is the third Cameroonian player of our episode. At the end of his career in 2000, he founds the “Foot solidaire” association that raises awareness and works to protect young players and fight against the trade in minor football players. He helps his young fellow citizen, then directs him to childhood social assistance. The Abega case that joins numerous others, leads the « Foot solidaire » association to lodge a complaint at FIFA for child trafficking, abuse, exploitation, fraud against the parents”.

Tax

From the Abega’s case, the economist Wladimir Andreff undertakes an analysis of the international mobility of African soccer players, particularly minors. He proposes taxing the international transfers from developing countries in such a way as to reduce the number of cases, similar to that of young Abega. The “Coubertobin” tax on the transfers of young Africans to the European clubs aims to limit “muscles exodus” from South to North and finance the development of the country of origin. Could a tax on the transfers finance African sport? It is a constructive proposal that could be extended to other financial transactions. We will analyze these solutions in the next episode of Soccer and Fintech.

Next: March 3, 2017 – Soccer and Fintech: a contribution to the financing of youth sport (2. the solutions).

[1] Newspaper Le Monde 2009, http://bit.ly/2kmLjIC
Newpaper Le Monde 2012, http://bit.ly/2jYaaUO

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