Unemployment has long been a major preoccupation for the South African Government. Based on a narrow definition of unemployment - those people who had not worked for the previous seven days but were actively looking for jobs - South Africa’s unemployment rate was 24.9 % of the labour force in the fourth quarter of 2012.⁽²⁾ Based on a broader definition of unemployment, which includes those who were not looking for jobs but would accept seasonal or contract work, South Africa’s unemployment rate in the first quarter of 2012 was at 35.4%.⁽³⁾ High unemployment over the last decade has led to heated debates about the extent and causes of the problem and policies to address it. The New Growth Path (NGP) endorsed by the South African cabinet in 2010 aims to create five million jobs by 2020 in order to reduce South African unemployment.

Despite its high unemployment rate, South Africa has the highest number of immigrants in the Southern African Development Community (SADC).⁽⁴⁾ According to the International Labour Organisation (ILO), labour migration in the SADC region dates back to the pre-colonisation period in Africa.⁽⁵⁾ It is motivated by the relatively high quality of life and strong business environment in South Africa. In 2012, 5.7% of the South African population was foreign born, comprising legal and illegal immigrants.⁽⁶⁾ Undocumented immigrants generally move from neighbouring countries for historical, political or social reasons.⁽⁷⁾ On the other hand, legal migrants, who are allowed to live permanently in South Africa, often move for business and economic purposes.

This CAI paper assesses whether migration contributes to unemployment in South Africa. It deals with the linkages between the high unemployment rate and immigration based on international evidence of the relationship between the two phenomena, perceptions and policies in South Africa, and the net impact of immigration on the South African labour market.

International evidence of the linkages between immigration and unemployment

Issues related to the impact of immigration on the labour market are not specific to South Africa. Labour immigrants constitute the fastest-growing group of migrants in the world.⁽⁸⁾ A report by the United Nations (UN) reveals that the approximate number of international immigrants in 2010 was 214 million.⁽⁹⁾ In Africa, the most common destinations for immigrants over the last three decades have been Côte d’Ivoire and Nigeria in West Africa, Gabon in Central Africa, Kenya in East Africa, and South Africa in southern Africa. History plays an important role when it comes to the reasons for and extent of migration in a specific region.

Modern theories of international trade attempt to explain the link between wages and immigration. Different kinds of skills are required where there are different dominant patterns of capital-intensive or labour-intensive production. Skills levels therefore have a key effect on the labour market.⁽¹⁰⁾

The impact of labour migration flows materialises through the demography, culture, economies and politics of both the origin and receiving countries. Changes in size and composition of the labour force as a result of immigration might have an effect on government efforts to create employment. ⁽¹¹⁾ Immigration modifies both the quality and the quantity of the labour market in the receiving country.⁽¹²⁾

International studies have shown that immigration has the potential to increase unemployment or decrease wages in the destination country.⁽¹³⁾ As immigration also modifies the size of the labour market, it has been shown that native workers may be displaced by immigrants. The literature also indicates that immigrants can be a cost to labour importing countries due to increased incidents of crime, violence and corruption, especially by undocumented immigrants.⁽¹⁴⁾

South African perceptions and policies

The impact of immigration on the South African labour market has been fiercely debated among economists and public authorities as the country has registered an unprecedented inflow of migrant workers from neighbouring countries and also the wider region. Prior to South Africa’s democratic transition in 1994, Europe was the leading source of skilled immigrants to South Africa.⁽¹⁵⁾ The discovery of gold in the country in 1886 benefited the whole of the Southern African region in terms of employment.⁽¹⁶⁾ Over the past century, South African mines have depended on cheap male migrant labour from neighbouring countries. South African employers systematically recruited foreign migrants to supplement what they deemed to be an insufficient supply of domestic labour.

The growth of the South African mining industry has benefited the whole Southern African region in terms of remittances. South Africa has received skilled and semi-skilled immigrants from Angola, Botswana, Lesotho, Malawi, Mozambique, Swaziland, Zambia and Zimbabwe.⁽¹⁷⁾ However, modifications in immigration laws and policies in South Africa have enhanced the contraction of its migrant labour force. The Alien Control Act of 1991, amended in 1995, implemented restrictions to limit working opportunities for migrants, including those from Southern Africa. The Department of Home Affairs stated in 1995 that “except for the mining industry, there is no longer a need for recruitment”.⁽¹⁸⁾ However, the Immigration Act enables the Department of Home Affairs to issue exceptional skills permits and quota visas, provided immigration requirements are satisfied.

South Africa was estimated to have 1.2 million illegal immigrants in 1990, 2 million in 1991, 2.5 million in 1992, 3 million in 1993, and 5 million in 2011.⁽¹⁹⁾ Illegal immigrants include holders of visitors’ visas who overstay in the country, and border jumpers. Illegal immigrants classify themselves as citizens as many of them hold fake South African identity documents. They are the most common type of immigrants, especially in the post-apartheid period. They are mainly unskilled, and therefore substitute South Africans in the labour market.⁽²⁰⁾

Besides these restrictionist policies, South Africa has bilateral agreements with some of its neighbouring countries, facilitating the entry of workers on a contract basis. However, it remains critical for the South African authorities to know if and how immigration, of both skilled and unskilled immigrants, affects the domestic labour market.

Positive linkages between unemployment and immigration

In order to provide efficient tools to South African decision-makers, precise research has been carried out by different institutes, such as the Centre for Economic Policy Research (CEPR), a London-based independent research network, and the Centre for the Study of African Economies, based at the University of Oxford. Such studies have concluded that immigrants create jobs. Some enter the country as entrepreneurs and business people. A large number join the small medium and micro enterprises (SMME) sector, which includes clothing and retail shops, salons, night clubs, restaurants, and music shops. These immigrants help to create employment, since they employ native South Africans to assist them.

Brain gain is a positive linkage between unemployment and immigration as immigrants with different skills enter the country. The brain gain contributes to a rise in gross domestic product (GDP) since South Africa receives skilled labour that fills gaps in communication, health and other sectors, thus improving productivity.

Immigration fills vacancies that would otherwise remain unfilled in needy sectors, and counters the effect of the brain drain from emigrants departing South Africa. It creates cost advantages for South Africa by saving on the costs of training, and the time taken to train. It also enables mentoring of South Africans. Immigrants create employment by increasing demand for goods and services and, in turn, demand for labour. Labour immigrants can therefore help to create employment and increase wages for host country natives.

Negative linkages between unemployment and immigration

A study led by the CEPR evaluating the impact of immigration throughout the South African labour market used methodologies developed in existing literature and analysed data from a 2007 South African community survey. It studied the variation in the characteristics of migrants and their geographical distribution within South Africa, and found a negative relationship between immigration and native employment rates. The study found that immigrants tend to modify wages as they increase labour supply, which is a negative causal impact of immigration on South African natives’ employment rate. The low average wages of migrants in the mining sector in South Africa confirms the difference of wages between natives and immigrants.⁽²¹⁾ In early 2000, Zimbabwean mining workers were paid US$ 80 per month against US$ 174 for South Africans.⁽²²⁾

Another negative causal impact of immigration is the replacement of South African native labour with migrant labour. Immigrants can worsen natives’ welfare by displacing them in the labour market. Labour immigrants who hold skills similar to those of natives compete for jobs and may displace them in the process.

On the other hand, brain drain, caused by emigration, heavily justifies immigration inflows. As South African workers move abroad, they may leave vacant positions which might be taken by migrants moving to South Africa. By 2010, brain drain from South Africa included 59% of the skilled work force from the education and health sectors, 47% from business services, 43% from banking and finance services, and 35% from information technology.⁽²³⁾

We have thus seen that immigration can have either positive or negative consequences for the labour market of a receiving country.

Actual net impact

Officially, the pattern of immigration has changed since 1994 in South Africa. The post-apartheid restrictionist policies have affected legal immigration. The number of people legally allowed in South Africa has dropped dramatically.⁽²⁴⁾ Migration has created brain gain, but at the same time, brain drain. From 1970 to 1997, South Africa gained more professional and semi-professional workers than it lost. For the same period, a total of 69,407 professionals and semi-professionals entered the country while only 42,262 left.⁽²⁵⁾ However, in 2010 at least 588,388 South African individuals were recorded in 19 Organisation for Economic and Co-operation and Development countries (OECD) as a result of emigration of South African workers.⁽²⁶⁾

The supply of immigrant labour in South Africa is on the rise and at the same time, the country’s growth in job creation is very slow. Current economic growth in South Africa, 2.5% in 2012 compared to 3.5% in 2011, is not sufficient to eradicate the unemployment crisis in the country.⁽²⁷⁾  Employment intensity of economic growth in South Africa appears to have weakened.

Concluding remarks

South Africa has experienced a surge of immigrants since democracy. Immigrants play a major role in the labour market. On the one hand, they can create employment by increasing demand for goods and services and consequently increasing demand for labour. On the other hand, they are accused of swelling the pool of labour, thereby displacing natives in the labour market and depressing wages. As a result, the South African authorities have strongly restricted immigration policies since the transition in 1994. Indeed, policy-makers do not appear to view immigration as a policy tool that could benefit South Africa.

Migration can benefit both receiving and origin countries. Receiving countries can benefit from some form of brain gain thanks to skilled migrants bringing innovative ideas, while countries of origin can benefit from remittances. However, receiving countries may experience pressure on existing resources while countries of origin may experience brain drain.

Because of the propensity for immigration to impact negatively on labour markets, governments need to monitor and control migratory flows.

Written by Stephane-Jacques Soami Mabiala ⁽¹⁾

NOTES:

(1) Contact Stephane-Jacques Soami Mabiala through Consultancy Africa Intelligence's Finance & Economy Unit ( finance.economy@consultancyafrica.com). This CAI discussion paper was developed with the assistance of Gaylor Montmasson-Clair and Ingi Salgado, and was edited by Nicky Berg.
(2) ‘Quarterly Labour Force Survey, Quarter 4 (October to December) 2012’, Statistics South Africa, 5 February 2013, http://www.statssa.gov.za.
(3) Berkowitz, P., ‘Labour Force Survey numbers: Running out of hope’, Daily Maverick, 12 February 2012, http://www.dailymaverick.co.za.
(4) Sibanda, N., 2008. The impact of immigration on the labour market: Evidence from South Africa. Unpublished Master’s thesis. University of Fort Hare, South Africa, http://ufh.netd.ac.za.
(5) Ibid.
(6) ‘Documented immigrants in South Africa 2011’, Statistics South Africa, 10 December 2012, http://www.statssa.gov.za.
(7) Sibanda, N., 2008. The impact of immigration on the labour market: Evidence from South Africa. Unpublished Master’s thesis. University of Fort Hare, South Africa, http://ufh.netd.ac.za.
(8) ‘Global: UN migrants, population’, Migration News, January 2010, http://migration.ucdavis.edu.
(9) Ibid.
(10) Smith, B.W. and McCarthy, C.L., 1998. International economics. Second edition. Heinemann: Johannesburg.
(11) Ibid.
(12) Carmel, U.C., 1989. The impact of immigration on the human capital of natives. Journal of Labour Economics, 7(4), pp. 464-486.
(13) Arnold, R.A., 2004. Economics. 7th Edition. South Western. Thompson: Cape Town.
(14) Maharaj, B., ‘Immigration to post-apartheid South Africa’, Global Migration Perspectives no. 1, Global commission on International Migration, June 2004, http://www.refworld.org.
(15) Crush, J., 2005. Migration in Southern Africa. Journal of Southern African Studies, 27(1), pp. 3-5.
(16) Ibid.
(17) Ibid.
(18) Crush, J., 2005. Migration in Southern Africa. Journal of Southern African Studies, 27(1), pp. 3-5; Minaar, A., Pretorius, S. and Wentzel, M., 1995.Who goes there? Illegals in South Africa. Indicator SA, 12 , pp. 33-40.
(19) Minaar, A., Pretorius, S. and Wentzel, M., 1995.Who goes there? Illegals in South Africa. Indicator SA, 12, pp. 33-40; Visa South Africa website, www.visasouthafrica.org. 
(20) Sibanda, N., 2008. The impact of immigration on the labour market: Evidence from South Africa. Unpublished Master’s thesis. University of Fort Hare, South Africa, http://ufh.netd.ac.za.
(21) Minaar, A., Pretorius, S. and Wentzel, M., 1995.Who goes there? Illegals in South Africa. Indicator SA, 12, pp. 33-40.
(22) Ibid.
(23) Phiri, K., December 2010. The contribution of skilled immigrants to the South African economy since 1994: a case study of health and higher education sectors. Unpublished Master’s thesis. University of Stellenbosch. South Africa. http://scholar.sun.ac.za.
(24) Mattes, R., Crush, J. and Richmond, W., ‘The brain gain:Skilled migrants and immigration policy post-apartheid South Africa’,Southern African Migration Project Migration Policy Series No 20, December 2008.
(25) Simelane, S.E., 1999. Trends in international migration: Migration among professionals, semi-professional and miners in South Africa, 1970-1997. Cape Town.
(26) ‘Global: UN migrants, population’, Migration News, January 2010, http://migration.ucdavis.edu. 
(27) ‘Gross domestic product, fourth quarter 2012’, Statistics South Africa, 26 February 2013, http://www.statssa.gov.za.