South African emigrants: Tallying up the true cost of Saffers moving elsewhere

In the annual budget, finance minister Tito Mboweni announced that there would be moves to discourage emigration, which has depleted the country of specialist skills and taken its toll on national finances through lost taxes. As Tim Powell, Forex Director at Sable International, said in a piece on BizNews recently, the key change for expats is that financial emigration through the South African Reserve Bank is to be phased out from next year (March 2021), and the tax exemption on foreign remuneration you earn as a South African resident will increase from R1m to R1.25m on 1 March this year. The cost to the country of the steady stream of emigration is difficult to assess, but Johannes Breytenbach, who has a background in scientific research, has made a fascinating study of it. He has looked at a range of costs, to the country and families. Key take-aways include that:.About two-thirds of emigrants are highly skilled and end up in the top salary brackets in the countries in which they settle;They contribute billions of rands to their new homes, helping to stimulate economic growth;They enhance the global competitiveness of the land to which they emigrate; ___STEADY_PAYWALL___.The money South Africa spends on educating these emigrants benefits the host country;South Africans spend huge sums of their personal income returning to South Africa to visit relatives and friends, and their South Africa-based friends and relatives spent lots of money travelling to see emigrants. – Jackie Cameron.Migration conundrum.By Johann Breytenbach*.Since 1970 more than 1,000,000 South Africans emigrated and are lost not just to the country, but to the whole of the African continent as well..Migration drivers.In the meantime, emigration from South Africa continues unabated as the impact of current drivers of emigration from South Africa listed below, continue to escalate and negative perceptions intensify:-.Shrinking economy with inadequate and declining employment opportunities, especially for inexperienced youth. It leaves them with virtually no other option but to emigrate to find employment outside South Africa. (Even the number of young black well qualified emigrants are increasing).Escalating and poorly controlled xenophobic attacks, ensures that foreigners go back to their countries of origin. Unfortunately the first returnees, those that can afford to return home, contributed effectively to our GDP, the fiscus and also employed locals.Uncertainty about the potential impacts of Government intentions, policies and actions lead to increasing uncertainty. The following are included in this type of driver: –Continuous downgrading by the Rating Agencies has led to investment flight.'Failure of Government' to resolve the dismal performance of State Owned Enterprises (SOEs).Inability of Government to resolve bloated cadre-based personnel loads in SOEs and in all spheres of Government.Inadequate service delivery and the associated service delivery protests (often violent) that disrupt citizen's lives.The BBBEE process has failed to reach the poor. It mainly benefits those with political connections. (This policy supplies very little impetus to revive and grow the economy).Increasing inappropriate, poorly qualified and inadequate experienced cadre control of.Government administration, continues to weaken service delivery capacity..Inability of Government to create an environment for economic revival and growth.Potential and hardening position on redistribution of land without compensation.'Attacks' on 'white monopolistic capital' and redistribution of 'wealth'.Extremely high levels, ever present and continuously increasing corruption.No adherence to the 'rule of law'! (For example, virtually the whole population knowingly violates traffic regulations.) High crime rates prevail.Inequality that manifests along racial lines and continuous calls by politicians for redistribution of land and wealth and penalties for historic privilege..Neither Home Affairs, Migration, nor the South African Statistical Services monitored emigration until 2017. StatsSA noted that the emigration figures obtained in the recent Community Survey are probably an undercount because "the count is limited to those individuals who still have family members remaining in the country". They therefore did not count whole family emigrants. (The most recent Community Survey is the first such survey where an attempt to measure emigration from South Africa was made)..South Africa has therefore been slow, or it seems, even unwilling to acknowledge the potential cost of emigration to the country. It is therefore time to try and establish what the real impacts of emigration on the country are..Destinations of South African emigrants.Since 1970, over 1 million South African emigrants left the country. Even without taking births after migration into consideration, this represents just under 2% of the current population. Of them, nearly 280,000 migrated to the UK of which 50% or some 140,000 did so after 1990. Most emigrants opted for countries where 'The rule of law', is the prevailing paradigm. The preferred South African migrant destinations remain Britain, Australia, USA and Canada. The percentage increase between the pre 1990 and post 1990 destinations are however highest for countries such as Chile, Austria, Brazil, Greece, Portugal and New Zealand. For example, more than 90% of the 21,000 South Africans that moved to Chile, did so after 1990 (Figure 1)..Emigration impact on South Africa.This is a first attempt, albeit a superficial one, to evaluate the tangible implications and impacts of emigration on South Africa..Emotional consequences.The emotional consequences of emigration reflected by severed Family ties and loss of friends are obvious, as is the extremely vulnerable position of the migrants in their new country. Moreover, the experience and networks which the migrant built and formed part of here at home, is now the poorer for the loss. The loss of jobs, both in businesses closed down and from the homes of the migrants, destabilised hundreds of thousands of lives. These emotional impacts, even though severe, are almost impossible to quantify in monetary terms..Monetary impacts.Since little or no hard data on South African emigrants are available we assumed that there were 2.5 members per migrating family unit..To estimate the number of migrating families we divided the number of migrants to a country by 2.5.We also used current day prices to do the estimates of costs.We estimated costs mostly for the people that emigrated after 1990 unless otherwise mentioned..Estimated air travel expenses.We used current day quotes for a return air fare to each country. We assumed that only one family member visited and evaluated the destination country they intended to migrate to. Currently this would require them to spend R2.8bn on return airfares to assess the country. They would also have spent some R7.2bn on a one way air travel cost per family to emigrate. Therefore a minimal transport cost of R10bn was incurred on exploring and transporting RSA migrants to their country of destination (Figure 2). We also excluded the accommodation costs during the visit and the first few weeks of arrival in the destination country. This therefore represents a significant underestimate of costs since it also excludes the cost of moving some of their assets such as furniture and vehicles to the destination country..In addition, the family remaining in South Africa now spend money to visit their relatives overseas. We assumed that families visit their direct families at least once every three years. (We are aware of parents with children on three continents that visit each child every year) We conservatively estimate that two family members will travel together. That is 250,000 trips, or 500,000 individuals per annum at an average cost of some R20,000 per person. South African therefore spend a massive R10bn per annum, of which at least 50% or R5bn as foreign currency outside the country..The average cost to obtain a Visa for a migrant is about R1,000. The estimated 1 million South African emigrants therefore spent R1bn just on Visas and their Family spends about R500m per annum on visitors Visas..Each country also has immigrant entry requirements. Australia for example requires one to have at least R417,600 in liquid assets before they will allow you to permanently migrate to the country. (See table 1 for this basic requirement for each country.) We have assumed that this is required per family and not per individual. This is a prerequisite in order to ensure that you will not immediately become a financial liability in the country you are migrating to. Some of the numbers may seem exorbitant until you consider that the country is taking on a person/family who will now qualify for all the advantages of citizens, such as access to health care and education for family members. The Netherlands for example requires €1.5m..Table 1 Liquid assets required per family to migrate to a specific country..CountryLiquid AssetsTotal Moved by South Africans*AustraliaR 417,600R 21,715,200,000AngolaR 500,000R 6,000,000,000AustriaR 1,679,983R 6,047,939,520BotswanaR 688,800R 8,265,600,000BrazilR 943,785R 3,397,627,728ChileR 672,000R 5,107,200,000GermanyR 4,200,000R 16,800,000,000GreeceR 3,900,000R 14,040,000,000PortugalR 7,800,000R 28,080,000,000CanadaR 8,700,000R 104,400,000,000USAR 7,260,000R 203,280,000,000New ZeelandR 3,630,000R 72,600,000,000BritainR 1,000,000R 56,000,000,000NetherlandsR 21,000,000R 75,600,000,000TotalR 621,333,567,248.* Based on number of families and not the number of individuals..Unfortunately this means that this money also flows out of South Africa to the Destination country and in South Africa's case this now adds up to more than R600 Billion just since 1990..Impacts of skills moving from South Africa.Recipient countries have gained skills, whilst South Africa has lost skills. The South African Government listed the skills areas and the 'number of careers' in each skills area where we lack expertise in South Africa (Figure 3). For example there are more than 50 careers in the Academics and Research arena where we require skills. We of course exported many of these skills to other countries when migrants left our shores. However, we exported the skills acquired by the individuals at great cost to South Africa without as much as batting an eyelid. We could not find a logical way to make an estimate of the financial implications of the 'expertise and experience' linked to the skills we lost. Suffice it to say, it exceeds the costs we did estimate, by far..Emigrant education levels and cost implications.On average 48% of South African Migrants had a degree at the time they migrated, 38% had at least a matric and 16% had completed primary school, i.e. Grade 7 (Figure 4)..To estimate possible costs we looked at this in two ways..Firstly South Africa trained all the migrants, and to replace them with people with the same skills will now cost us a certain amount of money..Secondly, it also means that we invested all the training funds spent on the migrants going to the different countries in those countries, and therefore the recipient countries saved on training such people locally. They are getting them for free. So what are these costs?.In 2018 it cost us R61,960 per annum for the education of the average school learner. The average fee for a 3 year BA degree at a South African University was R 113,629 per annum. Most emigrants and their children attended Class C Schools and the top Universities in the country. We used the average Tertiary education training fees of R113,629 per annum whilst WITS and UCT for example charge at least R50,000 to R100,000 more per annum..In addition to this, the latest data from the education authorities show that only 36.9% of students at tertiary education institutions, complete their degrees in the allocated time! A further 22% require an additional 2 years to complete their degrees. We also ignored the cost incurred by the other 40% of students that never qualified. If included the actual annual tertiary training cost per student that passed, was just more than double at R234,832, and would push the calculated cost up to just over R1trn. The costs as listed in Table 1 is therefore again a gross underestimate of the actual costs incurred to get our 'relatively few graduates' through their training..If we assume that the average graduate migrant only had a four year degree, the RSA in fact donated/invested enormous sums of money (Table 1) based on current day training costs, in the various top RSA emigrant destination countries. These figures are only for the countries in Table 2 for which we could obtain the migrants qualifications data and does not include the costs incurred to educate the emigrants in countries for which we could not access data..Cost invested in SA emigrants to reach specific levels of educationCountryPrimarySecondaryTertiaryBritainR 7,078,407,065R 48,265,020,720R 104,351,247,622AustraliaR 14,241,080,880R 36,545,126,670R 88,650,983,922USAR 5,968,068,702R 23,737,819,770R 45,292,881,947CanadaR 3,033,603,028R 4,252,992,480R 29,545,041,690New ZeelandR 3,717,650,769R 16,794,487,350R 43,373,960,828AngolaR 2,404,080,831R 8,969,142,285R 23,145,994,818BotswanaR 2,404,080,831R 8,969,142,285R 23,145,994,818GermanyR 599,780,991R 3,511,940,760R 7,025,471,534ChileR 1,522,584,526R 5,680,456,781R 14,659,130,052AustriaR 539,802,892R 3,160,746,684R 6,322,924,381BrazilR 721,224,249R 2,690,742,686R 6,943,798,446GreeceR 539,802,892R 3,160,746,684R 6,322,924,381PortugalR 539,802,892R 3,160,746,684R 6,322,924,381NetherlandsR 539,802,892R 3,160,746,684R 6,322,924,381TotalR 43,849,773,438R 172,059,858,522R 411,426,203,201.Table 2 South Africa's current cost to train the same number of people to have similar qualifications to the migrants that left the country..The impacts of the loss of these qualified South Africans are even bigger. The latest education statistics shows that less than 10% of South Africa's population enrol at university and as of 2012, less than 7% of the SA population in any age cohort, complete their degrees..The loss for South Africa in terms of our Global competitive abilities, is enormous. We must compete globally! But how do you do that if less than 10% of the current population have tertiary qualifications. In fact this is the lowest percentage for all of the countries (OECD & BRICS) reviewed. Only seven of these countries have less than.20% of their population with degrees. More than 60% of the population of high performance economies such as those of Japan and South Korea have degrees..Moreover, our capacity building efforts must also compensate for the huge impact that apartheid had on the population's readiness for the Global arena. Apartheid severely limited and virtually prohibited access to a proper education to most of the country's inhabitants and created an enormous backlog and enormous skills deficit. We must now recover and drive processes to drastically improve skills levels. If we look at the age cohorts that attend tertiary education institutions to prepare for the workplace, i.e. the 17 to 24 year age group, it is frightening to say the least to note that we still have less than 10%, within those age groups attending tertiary education institutions (Figure 5.)..Why build a 4th industrial technology city, if we don't have suitably qualified people to man it. Even more worrisome is the lack of a focused or concerted effort to increase the proportion of the tertiary educated population..Income.In spite of the emotional impacts of social disruption and adaptations required to adjust in the destination countries, just over 74% of South African migrants end up in jobs in the top quartile income bracket of the recipient country. This in spite of the fact that competition is much higher than in South Africa, and the migrants are at a distinct disadvantage because they do not have access to supportive networks. The only possible conclusion, is that we lost high quality people that could have made a major difference (Figure 6) (Migration 2017)..Since the age of most people leaving South Africa is in the 30 to 45 year age group, the post 1990 migration cohorts would still be working should they have remained here at home. If we assume that had they remained, they would all also be on the top of the 75th percentile income group in South Africa. That means that they would each earn more than R977,976 per annum and would contribute some R404bn to the economy as salary earners. This again is an underestimate since at least 37% of them had been business owners and it is likely that their businesses would have contributed a further R500bn to the GDP but this is ignored. (Many would want to argue that they were replaced by others, but the 'Government's identified skills gaps' conclusively prove that they are needed here.).The salary earners through income tax, would have contributed close to R115bn to the fiscus per annum, enough to bail out several of the failed State Owned Enterprises for another year. Even though we don't want to hear this, there is also a possibility that had they stayed the SOE's would still be functional..Domestic services.If we assume that each of the families that emigrated after 1990 employed 1.5 domestic service providers per household, it means that we would have had nearly 332,000 additional people employed. Moreover, their combined annual income represents an additional buying power of at least R 29.95bn per annum..Housing.Emigration meant that at least 225,000 homes came onto the market as virtually 'forced sales'. Emigrants were 'forced' to sell their Homes for less than what they were actually worth and had a negative impact on the house market. FNB estimated that these forced sales constituted anything from 2% currently, to 20% in the last quarter of 2008. This of course also impact on the fiscus since the amounts payable for capital gains tax would have been minimal. The only income would have been the 28% on Estate Agents Company Tax, which at best would have totalled some R1.4bn. (Based on an assumed 20% net profit margin of these companies on sales of R1.25m homes).In addition, if we assume that we would have required an additional 225,000 homes to be built if the migrants had not left. At R1,500,000 per home, that would have meant an injection of over R337bn in the building industry, of which some R30bn would have been salaries, which equates to nearly 3 million job months at R10,000 per job per month. The additional homes would also have contributed an additional monthly R156,643,500 in property tax, to Municipalities based on a monthly Property Tax of R706.875 on a R1,500,000 home. A total of R1,879,722,000 per annum..VAT.Similarly, if we assume that the migrants would have spent 60% of their expendable income on items that carried VAT, they would have contributed an additional R26,033,017,657 to the fiscus..Summary.We have fairly superficially assessed some of the potential impacts of emigration on South Africa. At best the impacts are negative in the extreme! We believe these impacts are unbeknown to, or at least disregarded by most South Africans. This is in strong contrast to many countries such as Australia where detailed studies and models revealed that '… migration is central to Australia's future prosperity.' By 2050 migration and migrants will be contributing some R16.8 trillion to the Australian GDP, as well as, will have added 15.7% to workforce participation of locals, 21.9% to after tax wages for low skilled workers and 5.9% in GDP to per capita growth..Good controls on migration and specific pro-South African migration policies need to be developed and implemented..The International Organisation for Migration's (now the UN Migration Agency) 2018 World Migration Report, provides factual data that supports the theoretical approach we have used to estimate impacts of emigration on South Africa..Johannes Breytenbach is a scientist, with at least 35 papers published in academic journals. He has extensive project management experience and has also served as a South African representative in international fora, including Scope (Scientific Committee on Problems of the Environment) and the International Union for Forestry Research Organisations in the late 1980s. He has worked for, among others, the Council for Scientific and Industrial Research, the Department of Water Affairs and Forestry and the University of Pretoria.

South African emigrants: Tallying up the true cost of Saffers moving elsewhere

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