Immigration policy suggestions for our economic recovery
Our government is intending to review rules around hiring foreign workers. While it might be politically opportune to close borders to foreign workers, facts and data suggest otherwise. Well-crafted and implemented immigration policies have significantly contributed to economic growth all over the world. It is important to point out that the policy changes suggested in this article are aimed at attracting highly skilled foreigners, their spouses, investors or well-off foreigners who spend their money in South Africa with only positive effects for the local economy and not unskilled migration.
Currently we are facing massive emigration. While the current emigration might be caused predominantly by our local political and economic situation, emigrating will be a very strong long-term trend and it already does and will increasingly effect all African countries. Europe, Japan and other developed markets are facing an ageing population. Their long-term needs are clear: These economies will need a younger labour force (ESPAS Global Trends 2030). Africa will provide a big part of this labour. We will therefore loose skilled talent in large numbers for the foreseeable future. Our economies are already facing a shortage of skilled talent. Planned immigration is an effective way to provide the economy with talent and therefore enable growth. It is not a coincidence that Australia is experiencing nearly 20 years of uninterrupted economic growth. There are many factors which contribute to this growth, but experts agree that Australia’s inward migration contributes significantly.
It is therefore in the vital interest of South Africa to position itself as a desired destination which attracts skilled workers, entrepreneurs and qualified artisans rather sooner than later. It will take years to get the administrative part right and then subsequently hopefully gain a positive reputation internationally. We cannot afford to lose years and our current policy review should take the above into consideration.
Compared to most other African countries South Africa has a well-defined and modern immigration legislation. We have three different kind of work visa, one specifically catering for the highly skilled. We have provisions for retirees, volunteers and cover life partners. We offer permanent residence not just to the financially independent, but also to foreign students graduating in South Africa in certain subjects. The validity of work visa compares favourably to all African countries. Our 4 to 5 year duration is considerable longer then the two year average in most African countries and is in line with international best practises. Our Constitution is modern and our immigration legislation offers options to life partners and does not discriminate against homosexuals.
Which changes would make a real difference? I have based my suggestions on countless client questions and discussions as well as international best practises.
The business visa is the applicable visa for all foreigners who wish to start or purchase and then work in this business. There are two core criteria: 60% of all employees must be local and the foreigner should invest at least 5 million Rand from abroad into the book value of the business. This threshold can be lowered when the business is in certain sectors. Each application must be recommended by the DTI.
The current interpretation of the DTI requires that the foreigner personally must provide the funding. In particular for the wider IT sector, think start-ups, it would be of paramount importance that third party funding will be allowed. Hardly any founder has 5 million Rand available for investment out of private funds. Seed funding, VC funding is normal and should be allowed. South Africa has established a decent start-up environment, but Nigeria and Kenya are closing in. Third party funding in terms of the business visa would be an important step to be more attractive.
We should also look at the 5 million Rand threshold. Yes, it can be lowered in certain cases, but compared to other countries this threshold is high and should be lowered. For instance Kenya and Singapore are requiring 100.000 USD, UAE and Namibia require around 2 million Rand only.
France recently introduced such visa and it is generally regarded as a huge success to boost the start-up scene in Paris. South Africa would firmly establish itself as the African start up location, ahead of Kenya and Nigeria. The Tech visa would accommodate entrepreneurs wishing to start their own business as well as individuals who wish to work for a company in the Tech sector but might not fall into the Critical skills IT category. We have an established incubator landscape.
Start-ups would have to be registered with an accredited incubator and individuals would have to work for registered companies in order to qualify for such a tech visa. It would also be worth to consider extending such a tech visa to foreigners who have at least 5 years of relevant work experience in the tech sector and wish to work as a freelances for 2 years in South Africa. This would enable for digital nomads to work and live in South Africa for a limited period of time and the startup ecosystem would gain valuable international expertise.
RESIDENCE BY INVESTMENT
Most South Africans know the residence by investment schemes from countries such as Cyprus, Portugal, Greece, Malta, USA and others. The principle is simple: The foreigner invests a certain amount of money into pre-approved investment funds or other asset classes and is rewarded with long-term residence, often permanent residence and for some countries even with citizenship. In most residence schemes, not citizenship, the investment is locked in for a specific duration, but will be repaid to the foreigner after a certain period of time.
South Africa currently grants permanent residence to foreigners whose worldwide assets exceed 12 million Rand. Not one cent must be invested into the country. The fee the department of home affairs charges on granting of the residence of 120.000 ZAR is not high compared to other countries, the current processing time of over 2 years is however very long and far outside any international benchmark. A potential improvement would be to guarantee processing of the permanent residence in under 10 months, but demand that 100 to 150.000 EUR must be invested into pre-determined financial instruments. With South Africa’s world class financial institutions, this should not be a problem. An idea could be to use section 12 J investments.
ATTRACT long term visitor
With our tourism industry suffering and with a high amount of uncertainty as to when international tourists will return, it is time to take bold steps to attract high spending visitors to our shores. We should take a serious look at the island of Barbados. In their aftermath of Covid 19 they introduced a one-year visitor visa, which allows visitors to stay uninterrupted on the island and continue to work for their overseas employer. The only requirement for such a visa is a minimum salary threshold, in case of Barbados they opted for 50.000 USD annual pay as a minimum. What is suggested here might require a change in tax legislation though, will have zero negative impact on local employment, but we would attract well-off long-term visitors who can bring their families, spend their foreign income in South Africa and may even convince their employers to invest in South Africa in the foreseeable future. DHA could charge a high fee of around 2.000 EUR for such visa to generate revenue.
RIGHT OF WORK FOR FOREIGN SPOUSES OF ICT AND CSV VISA HOLDERS:
Often the success of an international assignment is not decided by the fact whether the assignee is feeling at home in South Africa, but rather if his or her spouse is feeling the same. Often this is not the case. International studies proof that the right to work for a foreign spouse is a vital positive distinguishing factor. In most cases both spouses are highly educated and in our experience a high percentage of foreign spouses would love to be able to work here.
I suggest limiting such a right to spouses of Intra Company Transfer visa holders or Critical Skills Visa holders only. It would be ideal to offer such a right automatically for the spouse without the need to apply for a specific work visa. However, South Africa’s current immigration system does not know a work visa, which is not linked to a specific employer (there is one exception to this rule, but only for 1 year). If one does not want to break with this principle, then I submit to use the same practice at it is currently done with spouses or life partners of South African citizens or permanent residence holders (sec. 11 (6)). Thus, only an offer of employment would be needed, but no labor market testing.
I am aware that immigration in general will face quite a few obstacles taking high unemployment and lack of political will and leadership into account. However, this does not change the fact, that a well implemented immigration system can significantly contribute to the growth of our economy and is therefore to the benefit of all South Africans.
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By Andreas Krensel