Xenophobia : Could South Africa be shooting its economic foot?

The sight was gory.

South africans beating up an almost lifeless man, pelting him with rocks and stones.

This is a common sight over the years in south Africa. From 2000 to date, over 300 foreigners have been killed and their properties destroyed in racial attacks.

And it does not seem to be stopping. South africa is home to over 2.2 million foreigners(2.7 percent of total population) drawn from many countries , notably neighbors zimbabwe , Angola and Somalia.

The common decry for these attacks are the economic failures propagated by politicians and traditional rulers and held as beliefs by the southAfrican people.

The SouthAfrican economy is the second largest in the continent, only behind Nigeria and is the most industrialized . However, unlike its closest rival , South Africa’s unemployment rate stands at 29% , 15 percent more than Nigeria.

Unemployment factors differ from country to country and while it is cannot be too loose from education standards, the influx of foreigners to take up available jobs has led to wide spread consternation . ( A revered Zulu leader had once incited violence by requesting all foreigners to go back) .

The southAfrican economic sector is a service based one (services taking up 68% of contribution to GDP) with Financial service, a large chunk of that contribution. The government owns a major stake in top sectors across the country , keeping its fiscal receipts on high. There are social support services provided to ease the unemployment burden and this has been the case for a while.

However,political instability, bureaucratic government procedures , a slowly weakened currency and a poor saving culture has further deteriorated the country.

In steps the foreigners.

They are accountable for 70-80 percent of informal sector labour and 43 percent of formal sector labour. While services might form a major part of the economy, the real value of the country’s earnings rests on mining and recently, Agriculture.

Poor education structures have meant that the system basically does not equip South Africans with knowledge to work and thrive in a highly technical sector like that of services. The resultant effect is the flooding of both sectors including trade and services. Somali , indian and Bangladeshi traders are a key part of trade while mozambicans, Angolans , Zimbabweans and Nigeria are a key part of construction and engineering. While these investments has led to infrastructural development and government control . It has also led to capital flight, leaving the country as a workers haven and weakening the Rand.

Its now easy to see how this has played out. A member of the small business committee, during one of the attacks had held the view that Somali traders were attacked because they were hiding trading secrets, by importing cheaply and making huge profits. Although , there was widespread criticism , but this had opened up a deep issue facing the country.

Economic Implications

It is safe to say that , as long as unemployment rates continue to rise as seen below, xenophobia would continually be seen.

However, the implications of their departure, outweigh whatever beliefs are held of them.

  • Labour rate reduction – labour for the informal sector like mining and agriculture are expected to drastically fall , leading to production and consumption declines
  • Trade – This is also an important cog of the Southern African economy. Increased imports are expected to be made, decreasing local consumption and reducing tax opportunities for the government.
  • Foreign capital decline – South African top businesses are majorly profitable outside the country( shop rite, MTN, DStv) and repatriate huge foreign capital. A decline is expected, caused by diplomatic tension.

The Forward thought?

An overhaul of the education system is needed ; creating better content and structure to equip and train southAfricans

2. Entrepreneurship: There is also a need to encourage business models and innovations from southAfricans and support in building and running their business.

3. Social benefit reductions : Being blunt , social intervention programs have made southAfricans lazy and less productive . A reduction in benefits would ensure that there is a plan for personal and community growth , built on entrepreneurship

4. Diversification: While it is commendable that , unlike other african countries , the country is not entirely dependent on natural resources , The country needs to diversify its economic sectors , to ensure stronger and wider skill force reach to cater different sets of skilled individuals in both formal and informal sectors.

Until then however, the country might be shooting off its economic foot.