Illegal migrants actually creating more jobs for South African locals

Illegal migrants in South Africa face huge hostility and daily attacks; they are accused of taking jobs from locals. However, a new report has come up with an astonishing finding – these migrants are not only boosting the economy, they are creating thousands of new jobs for South African citizens. Report by Marietta Wessels.

According to a recent study by the South African Institute for Race Relations (IRR), desperate migrants from numerous countries in Africa, Pakistan and Bangladesh are teaching South Africans and the ANC government valuable lessons with regard to job creation.

These mostly illegal migrants are, against all the odds, building South Africa’s economy through entrepreneurial but sometimes unconventional business practices without the benefit of the protective legislation on the law book in order to enhance local job creation for black South Africans.

South Africa has an official unemployment rate of 27%, rising to around 40% if you apply the expanded definition, which includes people who have stopped looking for work. President Jacob Zuma reiterated the position when he commented in his 2017 State of the Nation address that the majority of black South Africans are still economically disempowered.

The ruling African National Congress party has introduced numerous pieces of legislation during the past 22 years in order to  help advance black South Africans by enforcing whites to hire, promote or take them into white-owned businesses as black empowerment partners. According to President Zuma, due to a lack of desired results, the solution is to deploy even more strict legislation in this regard.

During this time, enormous numbers of illegal migrants entered South Africa from elsewhere in Africa, despite warnings over the insuperable odds they faced. Numerous migrants found work where there was none and raised capital even though they had no access to bank accounts or loans.  They moved into territories where competition was brutal, such as the township grocery stores known as spaza shops, and informal trading in Johannesburg’s inner city. These migrants surprised all by beating South Africans at their own game.

It is not a question of local blacks lacking entrepreneurship skills. They dominate the informal food outlets, known as kasikos, taxi and tavern sectors. However, today towns and black townships are full of Ethiopian, Somali, Pakistani and Bangladeshi spaza shops rented from local owners that sell groceries, cell phones and other retail commodities. Mozambicans dominate the tricky fresh fruit and vegetable sector, the Cameroonians and Nigerians are stiff competition for the local hairstyling trade, Zimbabwean migrants are preferred employees in the restaurant industry and, there is an over-supply of Zimbabwean and Malawian artisans and tradesmen.

When retail chains started to move into black townships, the total number of locally-owned spaza shops started to decline rapidly, due to the inability to challenge such formidable competition. This was when the migrants stepped in, by seeing business opportunities that local business expertise failed to.

According to G. G. Alcock, an advisor for corporations on the workings of the South African informal settlement, 80% of the approximately 100,000 spaza shops were taken over by foreigners. These spaza shops turn over on average R25,000 ($1,900) a month, where the bigger spazarettes turn between $6,100 and $15,300 a month.

Going to a migrant-owned, nearby spaza does not require a taxi fare, they often sell cheaper products to customers than retail stores and can bend the rules for lucrative profits, for example by selling untaxed black market cigarettes, thus providing competition for grocery outlets such as Pick&Pay and Checkers. Foreigners are also moving upstream into territories dominated by giant wholesalers like Cambridge Food and Masscash.

What is amazing, according to the Institute for Race Relations, is that the unemployment rate  of 14.6% among these migrants, despite overwhelming odds,is roughly a third of the local unemployment rate. Furthermore, they make up 11% of South Africa’s workforce, and also make a huge contribution to the South African economy through providing goods and services, paying rent, buying from South African wholesalers and paying value added tax. So what is their secret to success?

After embarking from their countries of origin on dangerous and expensive journeys, that often leave them in debt to human smugglers, newcomers are prepared to start at the bottom while enduring a life of hardship, uncertainty and hostility from locals. They have to work for almost nothing, sometimes just for food and a place to sleep, until they prove themselves, at which point they may gain a profit share or partnership in a business. They often live in shacks, share overcrowded rooms, or live in the back of their shops and work extremely long hours, seven days a week.

Little Ethiopia

However, migrant traders generate their own income, are thrifty and, create ethnocentric joint ventures along national, tribal and religious lines. An excellent example in this regard was the creation of Little Ethiopia in downtown Johannesburg.

In the 1970s, new business developments outside the city centre and the influx of the poor led to an unavoidable inner city property crash. Gradually labour laws were not enforced, municipal policing and other authorities had lost control, hawkers overcrowded the sidewalks and warlords controlled dilapidated buildings.

In later years, the rescue, refurbishment, security and selling of some of these buildings by organisations like the Trust for Urban Housing Finance of Paul Jackson led to a spectacular rise in property prices and a fortune in rates and taxes for the municipality from buildings that once yielded nothing but headaches.

Jackson, who financed numerous acquisitions to Ethiopians, some of whom formed consortiums, states that roughly 70% of buildings in the two-kilometre-square chaos are either owned or controlled via head leases by Ethiopians. These various circumstances and the addition of cheap Chinese consumer goods and their mass availability created the conditions necessary for an explosion of informal trading. 

Little Ethiopia became a de facto free trade zone where evasion of import duties and counterfeit goods are common. Hence ultra-low prices that draw in customers from as far away as Kinshasa to buy goods for resale. Researchers estimate that the cross-border trading contributes R17bn ($1.27bn) a year to the economy of Johannesburg despite the lawlessness, mess and rampant violence.

Prof. J. Crush, head of the South African Migration Programme, says that the central source of hostility to immigration is the perception that foreigners are stealing jobs from South Africans. This perception is understandable as South Africa hosts far more undocumented aliens per capita than rich countries like the UK or Germany, and almost as many as the US. However, according to the IRR research, migrant businesses do not steal but create on average, three new jobs of which, despite their ethnocentric approach, is filled approximately by a third by South African citizens.

However, being a migrant in South Africa is not for the fainthearted. They must be prepared to play a nerve-racking cat-and-mouse game with law enforcement while being vulnerable outsiders who become the victims of robberies, murders and xenophobia, with the attendant looting and burning of their shops.

Should they have the money or intention to legalise their presence, they have to face corrupt officials. Some break under this pressure and return home while others disappear into the underworld of crime. However, South Africa still offers them a potentially bright and safe future in comparison to the collapsed economies, famine, political terror or war they have to face back home.