Financial Mail

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

- Claire Bisseker bisseker@fm.co.za

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.

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 ?? ?? Political football: Members of Operation Dudula march in Diepkloof in February. The group is demanding the removal of foreigners from SA
Political football: Members of Operation Dudula march in Diepkloof in February. The group is demanding the removal of foreigners from SA

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