SA OPENS ITS DOORS — A CRACK
Allowing skilled immigration is a small policy shift that could pay big dividends. SA has been advised of this repeatedly since 2008 but progress remains agonisingly slow
Liberalising immigration requirements for highly skilled workers has been part of SA ’ s policy reform kit for years. However, the politicisation of the debate, coupled with ideological opposition from within the government, has stonewalled reforms that could stimulate growth at no cost to the fiscus.
The economic literature is conclusive, finding that immigrants the world over contribute positively to economic growth. Immigration is a positive-sum game; it benefits both locals and immigrants.
This is why enabling skilled immigration was one of the recommendations made by the international growth advisory panel convened by former president Thabo Mbeki. It was also included in President Cyril Ramaphosa’s economic stimulus & recovery plan in 2018.
Ramaphosa clearly needs no convincing. In this year’s state of the nation address, he said: “The world over, the ability to attract skilled immigrants is the hallmark of a modern, thriving economy. We are, therefore, streamlining and modernising the visa application process to make it easier to travel to SA for tourism, business, and work.”
In February, a revised critical skills list was published for the first time since 2014. In addition, an independent review of SA’s work permit system, aimed at achieving greater openness and efficiency, is under way, led by former home affairs director-general Mavuso Msimang.
The review is exploring the possibility of new visa categories that could enable economic growth, such as a start-up visa and a remote working visa. It was supposed to be concluded in November last year, but attempts by the FM to ascertain the reasons for the hold-up were unsuccessful.
Behind the scenes, Operation Vulindlela, a task team of officials from the presidency and the National Treasury, has been working hard over the past few years to provide the technical assistance to push these reforms over the line. But it has faced an uphill battle against entrenched ideological opposition, mainly from within the departments of labour and home affairs.
While SA has at last launched an e-visa system for 14 countries (including China, India, Kenya and Nigeria), the new critical skills list contains just 101 skills compared with 170 previously. It has also been criticised for serious omissions, including of most medical specialisations, maths and science teachers, and numerous artisanal skills.
Indeed, many economists ask why a country as skills starved as SA even needs a critical skills list. Instead of putting unnecessary obstacles in migrants’ way, they argue that SA should be welcoming and actively recruiting all skilled migrants for the positive economic spin-offs they generate, not just those that fit the gaps on the critical skills list.
Centre for Development & Enterprise executive director Ann Bernstein believes it is not enough for SA merely to change the relevant laws and lists.
“We need to change attitudes across government, but especially in the department of home affairs and foreign embassies,” she says. “We [also] need to work hard to persuade South Africans that immigration of skilled foreigners is not a threat to them, but a vital step in making the country more prosperous and inclusive.”
Business Unity SA CEO Cas Coovadia laments that the issue of immigration “is becoming a political football” in the run-up to the ANC electoral conference later this year.
“We should rise above this and acknowledge the severe shortage of skills in critical areas in our country,” he says.
“These critical skills should be brought in because more skilled people contribute to growth and jobs. We can [also] manage such importation of skills in ways that those skills also contribute to developing South
Africans in particular disciplines.”
SA’s problem is that it suffers from a serious skills mismatch, which is why it exhibits both skills shortages and high unemployment at the same time. It is the latter that fuels antipathy towards foreign workers.
“While there are serious shortages of people with scarce skills, our unemployment problem is mostly a problem of the low skilled. And the low skilled are unemployed not because foreign workers took their jobs, but because the SA economy has not nearly grown enough to provide jobs for all who want [one],” explains Prof Philippe Burger, dean of economics at the University of the Free State.
“The view that foreigners take the jobs of locals is a zero-sum view of the economy; it is a view that holds that what you have, I cannot have. Instead, many foreign workers bring skills that contributed to the little economic growth we do have. They also employ locals, buy SA goods and services, and pay taxes.”
Numerous studies have shown that making it easier for highly skilled foreigners to enter a country raises wages and creates employment for the locals.
For instance, the UN Conference on Trade & Development’s 2018 “Economic Development in Africa Report” found that far from being a drain on host countries’ resources, the net impact of immigrants is positive. Not only do migrants bring their skills with them, but they also spend about 85% of their incomes in their new destinations, contributing to development through taxes and consumption.
The report puts the contribution of international migrants to GDP at 19% in Ivory Coast (2008), 13% in Rwanda (2012), and 9% in SA (2011).
Last year, a new academic discussion paper, “Building Back Fairer from the Covid-19 Pandemic in SA”, argued that furthering skilled immigration is a “high-impact” policy that could rapidly improve SA’s growth prospects and reduce inequities.
And it could be achieved at little cost or risk to the government, according to the authors. They include Channing Arndt of the International Food Policy Research Institute, Michael Sachs of the Southern Centre for Inequality Studies at Wits University and Rob Davies of the UN UniversityWorld Institute for Development Economics Research.
Their modelling shows that a 1% increase in the supply of tertiary educated labour would drive up SA’s GDP by more than 1.2%, and employment for those with only primary school education by 1.25%.
The stimulus delivered by highly skilled immigrants relates partly to their expenditure patterns on items such as housing, food and services.
So, if 11,000 skilled migrants arrive, who earn on average about triple the average earnings of local tertiaryeducated workers, they would generate about 78,000 jobs for unskilled and semiskilled workers, according to the model.
That’s about seven jobs created for each highly skilled immigrant.
By increasing employment among unskilled and semiskilled South Africans, and by cooling the wage growth of top earners (through alleviating SA’s skills shortage), the policy should also reduce inequality.
As importantly, the study argues that by increasing the number of skilled and experienced managers and mentors, the job prospects of recent university graduates might brighten considerably.
It notes that SA’s graduate unemployment rate more than doubled from 6% to 15% between 2008 and 2019. The problem is concentrated among recent graduates. At the experienced end of the spectrum, the problem is reversed — a lack of highly skilled, experienced people has been constraining SA’s growth for more than a decade.
In short, the paper suggests that inexperienced and experienced graduates are complementary, not substitutes. For example, in nearly all knowledge-based organisations the productivity of skilled, experienced workers is augmented if they can assign some tasks to younger workers who have skills but not much experience.
This implies that increasing the supply of skilled, experienced workers could increase SA’s potential growth in two ways: by loosening a binding constraint on growth per se and by rapidly pulling recent graduates into the jobs market.
“Much more open immigration policies for highly skilled labour appear to offer high upsides with near zero investment requirements as well as limited downsides,” the paper concludes.
Business is growing increasingly frustrated with the slow progress being made in reforming the current work permit system. “We believe a review of SA’s work permit system is needed and it should be more transparent and easier to import necessary skills. This is an element of the red tape we believe government needs to address,” says Coovadia.
“This should not be an ideological issue, though it is being politicised. This should be a management and strategic issue informed by skills requirements for inclusive economic growth.”
Harvard development economist, Prof Ricardo Hausmann, who served on SA’s international growth advisory panel in 2008, has argued repeatedly that opening SA to skilled immigration would be the quickest way to boost its economic growth rate.
“Allowing skilled immigration is the easiest $500 bill lying on the ground,” he reiterated on a trip to SA a few years ago.
That $500 bill is still lying there, just waiting for SA policymakers to pick it up.