Immigration policy in South Africa: does it make economic sense?

Abstract

Current levels of international labour migration are exceptional. Several thousand skilled South Africans leave the country each year. Historically, the country attracted more skilled workers than it lost, from Europe and, more recently, other African countries. But emigration is increasing and immigration is restricted by policy and a range of socio-economic factors. The trends in the ‘brain drain’ from South Africa and its causes and severity are relatively well understood and will be reviewed in this paper. However, the policy response has been slow and confused. The paper highlights some of the economic determinants and effects of South African emigration and immigration and reviews recent changes to South African migration legislation. It asks how South Africa can attract the right kind of skilled immigrants and what more can be done to stem the loss of professionals from the country.

1. Introduction

Current levels of international labour migration are exceptional. It is estimated that there were over 50 million foreigners living in the OECD (Organisation for Economic Cooperation and Development) countries in 1996 (Solimano, 2001) and 175 million people living outside their country of birth in 2000 (United Nations, 2000). Many of these migrants come from LDCs (least developed countries) and developing countries and are relatively skilled. This has raised concerns in these countries of a global ‘brain drain’: scarce skilled professionals leave their home countries, mainly in the South, to seek employment in generally more prosperous countries in the North (Adams, 1968).

South Africa is not untouched by this phenomenon. Several thousand skilled South Africans leave the country each year. Historically, the country attracted more skilled workers than it lost, from Europe and, more recently, other African countries. But emigration is increasing and immigration is restricted by policy and a range of socio-economic factors. As a result, the net inflow of migrants experienced in the 1970s and 1980s has turned into a significant net outflow in the 1990s. At the same time, there is growing evidence that the country is facing a skills shortage–the supply of skilled workers coming out of the education system is inadequate to meet the demand (Bhorat et al., 2002; Kahn et al., 2004).

The severity of the ‘brain drain’ from South Africa is relatively well understood and is reviewed in this paper; but the economic and policy implications of these flows remain unclear. This paper highlights some of the economic determinants and effects of South African emigration and immigration and reviews recent changes to South African migration legislation. It asks how South Africa can attract the right kind of skilled migrants and what more can be done to stem the loss of professionals from the country.

The paper is organised as follows. Section 2 reviews some of the main trends in immigration and emigration in South Africa, relative to other developing countries. The main determinants of these flows are explained and estimated in Section 3. Section 4 considers the economic and policy implications of this analysis in the light of the South African Government's response. Some concluding observations are made in Section 5.

2. Who goes where?

2.1 The level of migration

Like most other developing countries, South Africa has seen extensive emigration over the last few decades, but it has also experienced a large number of immigrants. Figure 1 shows the overall trend in migration according to official data (StatsSA, 2003). The number of people leaving the country has risen substantially since the late 1980s, with a marked increase over the past few years. On the other hand, immigration fell sharply from 1990 to 2000, leading to a turnaround in net migration. Immigrant numbers have improved recently, possibly in response to changes to domestic migration policy.

Figure 1: Official levels of migration 1989–2002

It is widely accepted that migration data collected by Statistics South Africa (StatsSA) underestimates the true extent of migration from South Africa (see, for example Kahn et al., 2004). This is for two main reasons. Some emigrants are reluctant to indicate emigration as their true motivation for travel (to avoid administrative hassles, feelings of guilt, evade financial controls); others did not intend to leave permanently at the time of departure. To gain a better understanding of the actual number of people leaving the country, most researchers supplement official data with statistics from the receiving countries.

Meyer et al. (2000) collected data on the number of South African immigrants in the five major receiving countries (Australia, Canada, New Zealand, the United Kingdom and the United States) from 1989 to 1997. They found that these five countries receive almost 70 per cent of all emigrants from South Africa, and their data should be relatively reliable: most South African emigrants are relatively skilled and unlikely to misinform customs officials or enter these countries illegally. We adopt the same approach as Meyer et al. (2000) to extend this data set to 2003.

Table A1 in Appendix A reports the official data collected by StatsSA alongside the results of Meyer et al. (2000) and our own numbers to 2003. To fill in missing data in the five receiving countries, estimates were made based on the proportions going to those countries in previous years for which data was available. This is the same approach used by Meyer et al. (2000) and it allows us to construct a continuous data set covering all the years of interest.

For the period 1989–2003 the data reported by the five recipient countries exceeds the StatsSA data for these same countries by a factor of 4. This suggests a very high level of undercounting. That said, there are many consistencies between the two data sets. The United Kingdom is the most important destination for South African emigrants, receiving between 44 per cent (StatsSA) and 60 per cent (adjusted data) of all emigrants over this period. Canada is the least important. Since 1989, New Zealand has seen the most rapid growth in South African migrants, albeit from a low base, and Canada the slowest. Finally, the annual increase in emigrants was particularly severe in 2003, exceeding 35 per cent in both data sets.

By applying the aggregate level of undercounting for the five largest recipient countries to the total number of emigrants reported by StatsSA, we estimate the total level of emigration to all countries for the period 1989–2003 at 521 571. This is more than 400 000 higher than the official data. Comparing the recalculated emigration figures to official immigration figures, the true extent of the ‘brain drain’ from South Africa becomes more obvious. The net number of migrants ‘lost’ over this four-year period is equivalent to about 1 per cent of the total population of South Africa (Table 1).

Table 1: Overall emigration and immigration figures

	1989–2003
Emigration (StatSA)	130 965
Emigration (recalculated)	521 571
Immigration (StatsSA)	110 679

Figure 2 shows how the pattern of migration has changed over the pre- and post-1994 period. The factors used to recalculate the emigration figures were taken separately for each period. Based on official statistics, there was a positive net migration to South Africa prior to 1994; but this no longer holds with the recalculated figures. In the post-1994 period the evidence is unambiguous: the sharp rise in emigration and decline in immigration has led to a net outflow from South Africa.

Figure 2: Structural break in migration

2.2 The quality of migration

The high level of emigration and much lower level of immigration reported over the last few decades is not in itself a problem. Much depends on the quality of the skills lost to the country, compared to those gained. The migration data collected by StatsSA is categorised by employment and includes a single high-skill category which StatsSA defines as ‘professionals, technicians and associated professionals’. From here onwards we will use the terms ‘professional’ and ‘skilled’ migrants interchangeably.

The 2001 National Census estimated that about 9.6 million people were employed in South Africa (StatsSA, 2001). ‘Professionals, technicians and associate professionals’ accounted for almost 1.6 million people, or approximately 17 per cent of the total labour force. They were also most in demand. Bhorat et al. (2002) show that rising capital–labour ratios have benefited skilled workers over unskilled, leading to a 312 per cent increase in the number of professional staff employed. As a result, most sectors are beginning to show significant shortages of skilled labour (Bhorat et al., 2002; Rogerson & Rogerson, 2000). This implies that any sustained loss of professional skills abroad could have serious ramifications in South Africa.

In the latest migration report published by StatsSA (2004), professional emigrants account for 27 per cent of the total (and around half of all economically active emigrants). On the other hand, just 4,7 per cent of immigrants fall into this category. The trend for overall migration is also borne out by professional migration figures: the number of professional emigrants has been increasing steadily while the number of skilled immigrants has declined. Of particular concern is the fact that the sharp turnaround in total migrant numbers seen in Figure 1 is not reflected in Figure 3–professional immigrants do not seem to have responded as strongly to the change in migration policy.

Figure 3: Professional migration 1989–2002

To obtain a more accurate picture of the net loss of skills from South Africa, the official emigrant data is again recalculated using data from the main receiving countries. The average discrepancy between the two data sets is in this case 4,03, marginally higher than that for overall emigration. And the total number of skilled emigrants that left South Africa from 1989–2003 was probably close to 118 000 (about 7 per cent of the total stock of professionals employed in South Africa). This is more than eight times the number of professional immigrants coming to South Africa over the same period. The overall professional and the recalculated figures are given in Table 2.

Table 2: Professional migration

		Average annual migration
	Total 1989–2003	1989–1993	1994–2003
Professional emigration (StatSA)	29 142	1 082	2 373
Professional emigration (recalculated)	117 554	3 896	9 858
Professional immigration (StatsSA)	14 221	1 634	605

The recalculated data indicates that South Africa has been losing over 6 900 skilled professionals annually. Moreover, the net loss of skills per year has worsened since 1994. On average, South Africa suffered a net loss of 2 300 skilled migrants from 1989 to 1993. This has risen to around 9 300 a year since 1994. The number of skilled emigrants tripled and the number of skilled immigrants more than halved between these two periods.

Appendix B shows the distribution of migration by main profession. In all employment categories, as defined by StatsSA, there has been a net outflow of skills since 1994. The largest net outflows are in engineering, medicine and the humanities (which includes legal professionals and accountants).

2.3 The pattern of migration

Five countries account for the majority of South African emigrants, but there have been some marked shifts in the relative popularity of these countries over the last few decades. As can be seen in Figure 4, the United Kingdom remains the most important emigrant destination and its share has increased slightly since 1989. Australia and Canada have been steadily declining, while New Zealand and the United States have attracted an increasing share of South African emigrants.

Figure 4: Shares in total emigration in selected periods

The profile of immigration has changed over the years. Under apartheid, white, skilled and mostly European immigrants were encouraged. But immigrants from African countries now exceed those from Europe, and in 2003 Nigeria dislodged the United Kingdom as the largest single source of immigrants. As can be seen in Table 3, European immigrants have fallen from 52 per cent of the total in 1990 to 28 per cent in 2002, while the share of African immigrants has risen from 21 per cent to 38 per cent over the same period. There has been a consistently high number of Asian immigrants, mainly from China, India and Pakistan.

Table 3: Immigration by skill and region

	Year
Region	1990	1995	2000	2002
Africa	3 084	1 343	855	2 472
Of which professionals	12%	19%	12%	8%
Americas	839	281	133	244
Of which professionals	22%	18%	15%	11%
Asia	2 837	1 063	1 041	1 841
Of which professionals	12%	11%	9%	12%
Australasia	179	85	33	65
Of which professionals	28%	20%	0%	8%
Europe	7 560	2 272	978	1 847
Of which professionals	13%	15%	9%	9%

Table 3 shows that for almost all regions the skills profile of immigrants has deteriorated since 1990. The decline in European professionals has been particularly severe: in 1990 Europe supplied more than half of all skilled immigrants; by 2002 its share had fallen to 31 per cent. Africa is now the largest source of professional immigrants, accounting for more than a third of all skilled immigrants in 2002. Perhaps of some encouragement is the strong increase in immigrants from all regions between 2000 and 2003. Even skilled immigrants increased from 325 to 567 over this period.

2.4 Cross-country comparisons

The last few decades have seen an upsurge in the movement of peoples from all countries. It is therefore impossible to assess the severity of the brain drain from South Africa without comparing it to the experiences of other developing countries; however, cross-country data are poor, particularly with regard to skilled migration. One possibility is to look at the flow of South Africans to the five main destination countries, relative to total immigration in these countries. This is shown in Figure 5.

Figure 5: South Africans as a proportion of total immigrant flows to selected countries

Movements of South Africans to Canada and the United States are relatively insignificant. On the other hand, South Africa has emerged as a major supplier of migrants to Australia, rising from 1,3 per cent of total immigrants in 1992 to just under 7 per cent in 2001. In the United Kingdom, South African immigrants have increased from about 2,5 per cent of the total in 1992 to 4,5 per cent in 2001. The relative share of South Africans in New Zealand's immigrant population has remained range-bound between 3 and 4 per cent of the total since 1994.

Carrington & Detragiache (1998) adopt a more sophisticated approach to evaluating the extent of the brain drain in a wide range of developing countries. They show the number of individuals from developing countries living in the OECD with a tertiary education, as a proportion of the tertiary-educated population in the source country. A summary of their results for 1990 is shown in Figure 6. The study finds evidence of a considerable brain drain from the Caribbean and Central America, and from a few African and Asian countries. South Africa was placed in the middle of the distribution–with 7,9 per cent of the tertiary educated population living in the OECD. This level is similar to that of Pakistan and the Philippines.

Figure 6: Percentage of tertiary educated population living in OECD countries

Professional migration from South Africa has risen particularly strongly since 1990. It is therefore possible that the proportion of tertiary educated South Africans living outside the country has increased significantly over the last two decades, placing South Africa closer to the top end of the distribution. Using the same approach and data sources as Carrington & Detragiache (1998), we recalculate the South African figure for 2000 [calculations available from the authors on request]. Interestingly, the situation seems to have improved over the 1990s, with just 5,4 per cent of tertiary educated individuals living outside the country by 2000. Most of this improvement arises from the rapid increase in tertiary educated individuals reported over this period (Barro & Lee, 2000).

3. What makes South Africans move?

The data in Section 2 demonstrate that South Africa has experienced substantial movements of skilled people over the last few decades, mainly to more developed countries. It also indicates that South Africa's experience is similar, in scale, to that of many other developing countries. For policy reasons, it would be useful to know whether the causes of emigration from South Africa are similar to those in other countries, or whether there are country-specific factors that need to be accounted for in addressing the ongoing drain in human capital from South Africa. In this section, the main determinants of international migration are reviewed and then compared to econometric estimations of the determinants of emigration from South Africa.

3.1 Determinants of migration

The increase in the global movement of people can be attributed to several factors: skills are increasingly interchangeable, job information is more readily available, travel and communication is more affordable and international recruitment firms are much more aggressive. Capital flows and multinational corporations extend well beyond national borders and have also contributed to the integration of global labour markets, particularly amongst high skilled workers (World Bank, 2003).

Most modern studies assume that ‘differences in net economic advantages, chiefly differences in wages, are the main causes of migration’ (Hicks, in Borjas, 2001). Decisions to migrate are based on a comparison of the net present value of lifetime earnings in alternative labour markets. Borjas (2001) adds living and working conditions in both source and destination countries, and terms these ‘amenities’. Migration will occur as long as income differentials outweigh the costs of migration after controlling for differences in the value of these amenities. In an efficient market, skilled workers will then live in regions with high rates of return on skills and low skilled workers will work in regions where the return on skills is low.

Existing analysis from South Africa confirms this view. Mattes & Richmond (2000) undertook a survey of a representative sample of South African skilled individuals to determine their main motives for emigration. More than two-thirds of the sample, evenly spread between black (68 per cent) and white (69 per cent) South Africans, indicated that they have considered emigrating. Important push factors identified by the study are ranked by response in Table 4. As predicted by the literature, living conditions are foremost in the minds of prospective emigrants, as is safety.

Table 4: Satisfaction with quality of life in South Africa

	% Total	% Whites	% Blacks
Dissatisfied or very dissatisfied with
Cost of living	71	72	64
Present level of taxation	74	75	74
Relative share of taxes paid in comparison to others	59	59	59
Personal safety	66	65	61
Family's safety	68	69	54
Upkeep of public amenities (e.g. parks, beaches, toilets)	70	79	37
Customer service	56	65	27
Future of children in South Africa	55	61	29
Availability of affordable/quality products	28	29	31
Job	23	18	39
Security of job	26	20	44
Level of income	37	30	60
Prospects for professional advancement	30	32	35
Ability to find the house wanted	21	17	37
Ability to find a good school for children	27	27	27
Ability to find medical services for family	21	19	23
N = 725
Source: Mattes & Richmond (2000).

There are also a number of pull factors that draw South Africans to foreign lands, many of which are common to other developing countries. The rapid rise in the global services sector has led to a growing demand for employees in these industries, most of which are located in OECD countries, and rising age demographics in developed countries have also opened new job opportunities for workers from developing countries, especially teachers and nurses (Bhorat et al., 2002).

3.2 Modelling migration

A number of economic models have been developed to describe the impact of foreign and home country economic opportunities on migration flows (Borjas, 1994, 2001). Exogenous variables usually include real wages, income differentials, levels of employment, working and social conditions and the degree to which this information is available in the sending country. Non-economic reasons also play a role. Network effects arise from family or countrymen in the destination country, while laws, policies, unrest and political conditions in the two countries are often the main determining factors. Costs ascribed to distance and cross-cultural differences, such as language and customs, can also be important (Solimano, 2001).

To test the relative importance of some of these key social, economic and geographic determinants of migration within South Africa, we employ a version of the gravity model proposed by Borjas (1987) and Adams & Page (2003). These models are typically used to describe the main determinants of migration from a range of sending countries to a single receiving country. In this case we use data from a range of receiving countries to explain the key determinants of migration from a single sending country, South Africa. Unless otherwise noted, all data was sourced from the World Bank's World Development Indicators Database.

The basic model is generally expressed as:

where M _i is the migration flow between South Africa and the migrant receiving country i, p _i is the population density of the labour receiving country i, y _i is the per capita income of the labour receiving country i, c _i is the cost of migration from South Africa to country i, X _i is a vector of variables discussed below and ϵ is the error term.

Because the cost of migration is not readily available, we use the shortest air distance between South Africa and the labour-receiving country as a proxy. Like Adams & Page (2003), we include measures of inflation and unemployment to account for economic conditions in the receiving countries. We add a measure of bilateral trade (exports + imports) to explain the intensity of economic relations between South Africa and the receiving country. Non-economic variables include an English language dummy and an index of political risk published by the PRS Goup (PRS, 2004). A higher value of the index represents a lower risk rating.

The dependent variable is constructed from the official migration flows reported by StatsSA and the level of undercounting is implicitly assumed to be constant across countries. This gives us a complete panel of migration data from 1989 to 2002 and a sample of between 69 and 75 receiving countries. We use three measures of migration to estimate equation (1): the total number of migrants, the number of economically active migrants and the number of professional migrants. The regression is estimated in its logarithmic form using a random effects model and the results are reported in Table 5.

Table 5: Random effects panel data regression results

	Dependent variable
	Total migrants	Economically active migrants	Professional migrants
Economic variables
GDP per capita (constant 1995 dollars)	0,687*** (0,104)	0,679*** (0,106)	0,435*** (0,108)
Rate of unemployment (% of total labour force)	0,103 (0,116)	−0,133 (0,112)	−0,216* (0,114)
Rate of inflation (consumer prices)	−0,033 (0,044)	−0,080** (0,042)	−0,031 (0,044)
Trade flows	0,222*** (0,041)	0,229*** (0,040)	0,243*** (0,051)
Demographic variables
Distance (kilometres)	−1,422*** (0,303)	−1,371*** (0,298)	−0,718*** (0,279)
Population density (people per square km)	−0,083 (0,084)	−0,153* (0,083)	−0,285*** (0,082)
English language dummy	1,878*** (0,311)	1,726*** (0,309)	1,782*** (0,293)
Political variables
Composite risk rating	0,026 (0,603)	−0,754 (0,593)	0,156 (0,635)
Constant	6,462* (3,606)	9,767*** (3,552)	1,900 (3,506)
N	479	460	372
χ^2	206,00	200,43	166,58
Note: Standard errors in parentheses. *Significance at the 10% level, **5%, ***1%.

The economic variables indicate that GDP per capita and trade flows are significant determinants of migration from South Africa. Migrants are attracted to more prosperous countries and to countries with which South Africa has established trade links. A 1 per cent increase in GDP per capita results in increased migration of between 0,435 per cent and 0,687 per cent, while the same increase in trade flows would lead an increase in migration of between 0,22 per cent and 0,24 per cent. Unemployment and inflation have a negative impact in all cases except one, but these impacts are generally insignificant. Given historically high levels of inflation and unemployment in South Africa it is perhaps not surprising that such factors carry little weight in the decisions of South African emigrants. Similarly, the country risk variable is of little significance.

In all three models the distance variable is significant and negatively related to migration flows: a 10 per cent increase in distance reduces overall migration flows by between 7,2 per cent and 14,2 per cent. But the effect of the distance variable is much smaller for professional migrants, who are willing and able to travel further for well-paid employment. English-speaking countries attract a much larger share of South African migrants. Holding all other things constant, a country where English is the official language would attract between 4,6 and 5,5 times as many migrants as a non-English-speaking country. Population density is negatively related to migration and is significant in two of the three regressions. This would suggest that South Africans gravitate towards less densely populated countries, such as Australia, New Zealand and Canada, where job opportunities are perhaps more numerous.

These results are qualitatively similar to those found by Adams & Page (2003) and confirm that migration from South Africa is not unique. It would seem that South African emigrants respond to the same kinds of factors as people from other parts of the world, and with the same effect. Critically, this means that the current level of outflows is unlikely to be reversed in the short or medium term. Skilled South Africans will continue to leave for better work opportunities in more prosperous countries abroad. These results have important economic and policy implications.

4. Economic and policy considerations

The above analysis confirms that skilled workers in less developed countries are especially likely to leave their home countries in search of better incomes and safer living conditions abroad. Although the world's poorest countries contribute very little to the stock of internationally mobile workers (World Bank, 2003), the impact of migration on these countries tends to be large; but the net economic impact can be positive. South Africa is also a recipient of skilled migrants, so the economic consequences of immigration for receiving countries should also be considered.

4.1 Economic considerations

Until recently, it was generally assumed that the impact of immigration on receiving countries must be positive. Immigrants were mainly skilled and complemented the domestic labour pool, their average earnings exceeded those of domestic citizens, and they were less likely to receive welfare assistance (Borjas, 1994). More recently, a number of contrasting facts have emerged. The relative skills of successive immigrants have declined: in the early 1990s, immigrants arriving in the United States had 1,3 fewer years of schooling and earned 32 per cent less than citizens (Borjas, 1996). Less skilled immigrants may also contribute to a decrease in the wages of less skilled citizens and are more likely to participate in welfare programmes. In the United States, the net economic effect of immigration might be negative (Borjas, 2001).

The net cost or benefit of migration to sending countries is also ambiguous and depends largely on the skills composition of those who depart. Benefits are normally captured in terms of remittances: in 2002, the total flow of remittances to developing countries reached US$80 million, more than official aid flows (Adams & Page, 2003). Most of these arise from low-skilled workers employed in OECD countries. Other possible gains arise if there is some counterflow of human capital, trade or investment from emigrants back into their home countries. But in many cases emigration leads to a net outflow of skills and capital and is a significant constraint on growth and competitiveness.

These different costs and benefits are summarised in Table 6. Importantly, this table merely lists the possible impacts of immigration and emigration on both sending and receiving countries. It is highly qualitative and does not purport to suggest that any or all of these costs or benefits might be realised in any particular country; but it does indicate the kinds of factors that should be considered in evaluating the economic impact of migration, as demonstrated in the case of South Africa below.

Table 6: Possible costs and benefits of migration

	Immigration	Emigration
Costs	Increased unemployment (particularly if immigrants are unskilled)	Loss of human capital
		Increased cost of skilled labour
	Social costs (burden on the welfare system)	Foreign exchange outflows
		Contraction in tax base
		Reduced competitiveness
		Lower quality of services
		Loss of investment in education
		Negative perceptions
Benefits	New and more skills	Remittances
	Knowledge and technology	Business and cultural integration
	Lower labour costs	Knowledge and technology (if emigrants return)
	Increased income and tax base
	Foreign exchange and capital flows
	Business and cultural linkages

There are few quantitative data available to calculate the net economic impact of emigration and immigration on South Africa, but by applying the factors outlined in Table 6 to what we know about South Africa, some preliminary deductions are possible. First, the cost of (official) immigration is low and not comparable to that of developed countries. There are, however, significant hurdles to new immigrants, particularly in lesser-skilled sectors, and few welfare benefits available. Secondly, the benefits of skilled immigration could be large, but current levels are too low to have a significant economic impact. Instead, there might be a large opportunity cost in terms of immigrants foregone arising from South Africa's historically restrictive immigration policy.

There are also few benefits from emigration. Although there are no data available on remittances, total non-official current transfers (which include remittances as a subcategory) amounted to R365 million in 2003, just 0,03 per cent of GDP (South African Reserve Bank, 2004). Compare this to subSaharan Africa as a region, where remittances alone contribute 1,3 per cent of GDP (World Bank, 2003). There is some evidence of South African emigrants returning home (Bhorat et al., 2002) and a number of networks have been established to mobilise the skills and resources of the South African expatriate population (Kaplan et al., 1999). It is also possible that the large South African emigrant populations in countries such as Australia have contributed to the very rapid rise in trade and investment between the two countries (see Figure 7). However, the benefits of emigration are probably relatively small compared to the ongoing loss of skills from South Africa.

Figure 7: South African trade with Australia

The main cost of emigration is in lost human capital and therefore production capacity. Bhorat et al. (2002) find that South African institutions of higher learning have failed to produce graduates with the skills demanded by the business sector. While the number of graduates has increased in fields where demand is low (home economics, public administration and social services), there has been a decline in science and mathematics degrees. The net loss of skills also impacts on the ability of the public sector to deliver key social services such as health care. The high proportion of skilled emigrants as a percentage of the total worsens the existing skills shortage, raises the wage premium on the remaining labour force and must impact on competitiveness and growth.

The financial loss is also considerable. South Africa's tertiary education system is highly subsidised and no attempt is made to recover the loss of public investment in emigrants. Kaplan et al. (1999) estimate that emigrants took R11 billion in financial assets out of the country between 1994 and 1997. The trade union Solidarity speculates that R800 million in tax contributions is lost annually through emigration (News24, 2004).

It would therefore seem that South Africa reaps few benefits from migration and that the net costs are probably large. Some of these costs could be assuaged if South Africans abroad were attracted back home or if the number and quality of skilled immigrants began to rise. To achieve this would require a sustainable improvement in economic and social conditions in South Africa. But it would also require an appropriate policy response.

4.2 Policy considerations

Globally, a number of strategies have been tried to counter the brain drain. According to Bailey (2003), restrictive policies that try to regulate or prevent the outward movement of skills, or those that try to limit the negative economic effect through taxation, have been largely unsuccessful. In the health sector, for example, the South African Government has negotiated an agreement with the United Kingdom to prohibit the recruitment of doctors and nurses to the British public health care system, but this does not extend to the private sector and private sector recruiters for the National Health Service. A different and more successful approach is to focus on the possible ‘brain gain’ to be had through attracting skilled labour into the country.

A number of policy measures are available to government to attract skilled people. At one extreme, it may be economically necessary to fund the return or repatriation of skilled emigrants, but this is likely to prove too costly for developing countries (Bailey, 2003) and there are other and more cost-effective ways to attract emigrants back home. For example, a number of private networks have been established to link the highly skilled South African diaspora back into the domestic economy, directly and by distance (e.g. SANSA–South African National Skills Abroad). These should be encouraged. Improvements to the overall social, economic and political climate can also contribute to more immigration. In South Africa, safety and security issues have been highlighted as a major concern for both emigrants and immigrants (Mattes & Richmond, 2000).

All these efforts need to be supported by immigration policy. Through well-targeted selection processes, countries such as Australia, New Zealand and Canada have successfully attracted large numbers of high skilled people to their countries. In these countries, the contribution of migrants to economic development is well understood. But in South Africa immigrants have been viewed as a threat to domestic jobs and restrictive immigration policies have hindered the movement of skilled people into the country. Foreign companies often cite immigration policy as a key constraint on investment (Bhorat et al., 2002).

4.3 Recent developments in South African immigration policy

Partly in response to such criticism, but also out of constitutional necessity, government replaced the apartheid-era Aliens Control Act with a new Immigration Act in 2002, further amended in 2004 (South Africa, 2002, 2004). The intention of the Act is good: it aims to promote economic growth by ensuring that businesses are able to employ needed foreigners and to increase the pool of skilled human resources in the Republic. But its design and implementation have been fraught with problems and it does not enjoy the wide support of labour, business, non-governmental organisations (NGOs) and government departments (Crush, 2003).

The new Act enables foreigners to take up permanent residence in South Africa on a number of grounds. Residency granted on the basis of birth, marriage, refugee status or retirement is important, but not relevant to this paper. It seems much more difficult for a foreigner working in South Africa to obtain permanent residence. Such applicants must have held a work permit for five years; receive a permanent offer of employment; demonstrate that this employment is intended for a foreigner; and obtain certification from the Department of Labour that all conditions of employment are not inferior to those ‘prevailing in the relevant market segment’.

The Act also provides for residence on ‘other grounds’, which it defines as including foreigners with extraordinary skills, or foreigners who intend to establish a business in South Africa. Annual and sector-specific limits for exceptional skills will be prescribed ‘from time to time’ by the Department of Home Affairs in consultation with the Departments of Trade and Industry, Labour and Education. These have not yet been published. In addition, regulations published in June 2005 require that a foreigner with exceptional skills must receive a permanent offer of employment and remain employed in a specified field for five years, that the job must first be advertised in the national media, and that letters of motivation must be obtained from a foreign or South African government, cultural or business body and from previous employers.

Business applicants must provide evidence of at least R2,5 million in investment, a short and long term business plan, and an undertaking to employ at least five South African citizens or permanent residents. These capitalisation requirements have been waived by the Department of Trade and Industry for specific industries deemed to be in the national interest. This list includes a very narrow range of mainly heavy industrial sectors (chemicals, auto, metals), some service sectors (tourism, crafts, and information technology) and clothing and textiles and agro-processing.

The new Immigration Act also makes provision for several types of temporary work permits. These are important, because in many cases foreigners must jump through one of these hoops before applying for permanent residence, as follows.

•	A general work permit can be issued to a foreigner if the prospective employer demonstrates that a South African candidate could not be found for a specific and vacant position. To acquire this permit requires certification from the Department of Labour that the terms of employment are not inferior to those that would be offered to a South African candidate.
•	An exceptional skills work permit may be issued by the Department of Home Affairs to individuals with exceptional skills or qualifications. The June 2005 regulations require that exceptional skills are corroborated by an acceptable foreign or South African institution, testimonials from previous employers, and a comprehensive curriculum vitae.
•	An intra-company transfer work permit may be issued to a foreigner for a period not exceeding two years. In this case, a chartered accountant must certify that the foreigner is needed in South Africa and that the employee will leave South Africa when the work permit expires.
•	A corporate permit may be issued to an employer to recruit a fixed number of foreigners, again subject to certification. Section 21(4)(b)(i) of the Act allows for agreements with foreign states for corporate permit holders to employ foreigners partly, mainly or wholly from such foreign countries and remit portions of salaries to the foreign countries.
•	A new quota work permit may be issued to foreigners who fall into specific skills categories determined annually by the Minister of Home Affairs and published in the Government Gazette. The June 2005 regulations require that holders of quota work permits must submit confirmation of employment within a specified field within 90 days of admission and every 12 months thereafter.

These initial regulations appear discriminatory, discretionary, and do not seem to recognise the skills problem in South Africa. For example, a medical doctor might qualify for a short-term work permit, but an ‘investor’ in a clothing factory receives priority permanent residence, even if he or she does not bring any new capital into the country. The proposed introduction of the quota system is encouraging because it will enable prospective work seekers to enter the country without proof of secure employment, but on the other hand the system's implementation is complex and remains the subject of great confusion. It requires government departments to identify, negotiate and monitor the specific skills needs of the economy on an annual basis.

5. Conclusion

The cross-country and econometric results presented in this study show that emigration from South Africa is far from exceptional. Like most other developing countries, South Africa experiences a large and consistent outflow of people in search of better work opportunities abroad. This is unsurprising and there is not much that government can do, in the short term, to stem this outflow. As long as income levels in South Africa remain, on average, below those of prospective recipient countries, skilled people will continue to move.

On the other hand, South Africa has demonstrated an ability to attract skilled immigrants in the past, and foreign workers have played an important role in economic development and in the provision of public services. For example, about a quarter of all public sector doctors are foreign (Van Rensburg & Van Rensburg, 1999). The fact that emigration continues unabated is therefore of much less concern than the sharp decline in skilled immigrants experienced over the last decade.

If emigration stays steady at 2003 levels, then about 9 000 professional immigrants are needed annually to maintain the existing skills balance. Yet in 2003 South Africa attracted just 500 skilled immigrants. This raises serious questions about the need for sector-specific quotas and burdensome certification requirements. It is also of concern that foreign workers may not be paid lower wages than South African workers. The wage premium on certain categories of skilled labour is already very high and the country might benefit significantly from foreign competition.

Government has recently passed a new Immigration Act. The evolution of this particular piece of legislation involved such acrimonious debate that it is unlikely to be reconsidered any time soon. But the accompanying regulations and quotas are subject to change. This seems to present South Africa with a second bite at a more open, simple and appropriate immigration policy. Here South Africa might learn from the policies and procedures of other countries that have been more successful in attracting skilled immigrants.

Acknowledgments

The authors are grateful to Sally Peberdy and referees of this journal for comments on earlier drafts of the paper.

Appendix A: Emigration by destination

Table A1: Total emigration to the five most important receiving countries according to StatsSA and receiving countries' data

		1989	1990	1991	1992	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003	1989–2003
Australia	StatsSA	1 275	1 292	928	694	1 309	1 298	1 507	1 767	1 508	1 631	1 544	1 544	1 820	1 580	2 276	21 973
	AUS	2 424	2 084	1 274	1 021	1 654	2 792	3 190	3 211	4 281	5 633	6 388	5 898	6 135	4 775	5 591	56 351
Canada	StatsSA	454	349	266	285	566	947	679	774	557	449	341	482	478	339	400	7 366
	CAN	1 558	1 083	1 014	1 141	1 822	2 910	1 753	1 526	1 898	1 530	1 162	1 642	1 629	1 155	1 363	23 186
New Zealand	StatsSA	83	64	50	126	242	1 465	939	1 266	1 157	869	961	894	1 091	939	966	11 112
	NZ	209	202	223	422	2 054	2 638	2 046	2 648	2 689	2 020	2 436	2 370	3 086	3 053	3 141	29 236
United Kingdom	StatsSA	1 420	1 804	1 800	1 987	3 716	2 880	2 045	2 243	2 162	2 310	2 316	2 852	4 043	3 626	5 204	40 408
	UK	11 700	6 400	8 000	6 600	8 800	9 400	4 500	11 000	13 200	20 300	28 900	22 600	21 500	19 282	27 674	219 856
United States	StatsSA	174	278	307	314	566	752	882	963	832	889	827	1 099	1 181	1 091	1 598	11 753
	USA	1 899	1 990	1 854	2 516	2 197	2 144	2 560	2 966	2 093	1 904	1 580	2 833	4 100	3 880	5 683	40 199
Five country StatsSA total		3 406	3 787	3 351	3 406	6 399	7 342	6 052	7 013	6 216	6 148	5 989	6 871	8 613	7 575	10 444	92 612
Five country recipient total		17 790	11 759	12 365	11 700	16 527	19 884	14 049	21 351	24 161	31 387	40 466	35 343	36 450	32 146	43 452	368 829
All countries StatsSA total		4 911	4 722	4 256	4 289	8 078	10 235	8 725	9 708	8 946	9 031	8 487	10 262	12 260	10 890	16 165	130 965

Table A2: Professional emigration to the five most important receiving countries according to StatsSA and receiving countries' data

		1989	1990	1991	1992	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003	1989–2003
Australia	StatsSA	312	291	198	189	356	274	308	420	310	374	354	354	418	363	523	5 044
	AUS	558	479	295	213	353	610	765	696	1 122	1 308	1 483	1 369	1 424	1 108	1 298	13 081
Canada	StatsSA	94	85	63	69	136	224	173	170	118	104	79	112	111	79	93	1 710
	CAN	327	227	213	243	407	677	421	315	421	338	257	363	360	255	301	5 126
New Zealand	StatsSA	25	24	12	49	93	349	209	297	286	217	240	223	272	234	241	2 770
	NZ	60	59	63	104	551	656	462	628	631	494	596	580	755	747	769	7 156
United Kingdom	StatsSA	275	331	296	349	661	450	368	422	444	414	415	511	725	650	933	7 245
	UK	2 574	1 408	1 760	1 518	2 068	1 782	924	2 508	2 417	4 325	6 157	4 815	4 581	4 108	5 896	46 841
United States	StatsSA	56	68	89	81	153	216	235	254	258	247	230	306	329	304	445	3 270
	USA	399	418	389	528	461	450	538	618	538	409	339	608	880	833	1 220	8 627
Five country StatsSA total		762	799	658	737	1 399	1 513	1 293	1 563	1 416	1 357	1 318	1 506	1 854	1 629	2 234	20 038
Five country recipient total		3 918	2 591	2 720	2 606	3 840	4 175	3 110	4 765	5 129	6 874	8 832	7 735	8 000	7 052	9 484	80 831
All countries StatsSA total		1 043	977	803	898	1 691	1 960	1 680	1 970	1 924	1 968	1 855	2 439	2 929	2 689	4 316	29 142

Appendix B

Table B1: Migration by professional categories

	1989			1990			1991			1992
	Immigrants	Emigrants	Net	Immigrants	Emigrants	Net	Immigrants	Emigrants	Net	Immigrants	Emigrants	Net
Grand total	11 270	4 911	6 359	14 499	4 722	9 777	12 379	4 256	8 123	8 686	4 289	4 397
Total economically active	5 093	2 372	2 721	6 727	2 377	4 350	6 040	2 008	4 032	4 132	2 077	2 055
Total professional, semi-professional and technical	1 410	1 043	367	1 863	977	886	1 834	803	1 031	1 608	898	710
Engineer, engineering technician, architect and related	463	285	178	655	274	381	573	250	323	498	279	219
Natural science occupations	206	120	86	234	146	88	212	96	116	171	110	61
Medical, dental and related health services	202	184	18	314	171	143	387	125	262	445	166	279
Educational and related	108	153	−45	137	164	−27	207	141	66	189	152	37
Humanities and related	308	226	82	341	172	169	285	139	146	189	126	63
Art, sport and entertainment	123	75	48	181	50	131	170	52	118	115	59	56
	1993			1994			1995			1996
	Immigrants	Emigrants	Net	Immigrants	Emigrants	Net	Immigrants	Emigrants	Net	Immigrants	Emigrants	Net
Grand total	9 824	8 078	1 746	6 398	10 235	−3 837	5 064	8 725	−3 661	5 407	9 708	−4 301
Total economically active	4 132			2 568	4 860	−2 292	1 762	4 526	−2 764	1 995	5 163	−3 168
Total professional, semi-professional and technical	1 454			1 103	1 960	−857	798	1 680	−882	843	1 970	−1 127
Engineer, engineering technician, architect and related	448			321	472	−151	208	373	−165	246	409	−163
Natural science occupations	181			95	194	−99	79	139	−60	89	185	−96
Medical, dental and related health services	368			260	349	−89	143	298	−155	139	384	−245
Educational and related	128			153	305	−152	127	314	−187	133	351	−218
Humanities and related	196			187	463	−276	178	404	−226	157	441	−284
Art, sport and entertainment	133			87	177	-90	63	152	-89	78	200	−122
	1997			1998			1999			2000
	Immigrants	Emigrants	Net	Immigrants	Emigrants	Net	Immigrants	Emigrants	Net	Immigrants	Emigrants	Net
Grand total	4 103	8 946	−4 843	4 371	9 031	−4 660	3 669	8 487	−4 818	2 400	10 262	−7 862
Total economically active	1 548	4 907	−3 359	1 198	5 105	−3 907	1 365	4 847	−3 482	662	6 434	−5 772
Total professional, semi-professional and technical	551	1 924	−1 373	449	1 968	−1 519	378	1 855	−1 477	331	2 439	−2 108
Engineer, engineering technician, architect and related	85	445	−360	89	425	−336	66	334	−268	24	433	−409
Natural science occupations	71	185	−114	56	218	−162	47	237	−190	38	324	−286
Medical, dental and related health services	115	336	−221	54	407	−353	51	326	−275	36	459	−423
Educational and related	136	320	−184	79	272	−193	69	314	−245	106	357	−251
Humanities and related	35	442	−407	144	454	−310	107	494	−387	114	616	−502
Art, sport and entertainment		196	−196	27	192	−165	38	148	−110	13	250	−237
	2001			2002			2003
	Immigrants	Emigrants	Net	Immigrants	Emigrants	Net	Immigrants	Emigrants	Net
Grand total	4 832	12 260	−7 428	6 545	10 890	−4 345	10 578	16 165	−5 587
Total economically active	953	7 591	−6 638	1 054	7 334	−6 280	1 011	10 540	−9 529
Total professional, semi-professional and technical	524	2 929	−2 405	576	2 689	−2 113	499	4 316	−3 817
Engineer, engineering technician, architect and related	62	474	−412	34	464	−430
Natural science occupations	59	427	−368	59	359	−300
Medical, dental and related health services	41	539	−498	88	447	−359
Educational and related	179	438	−259	189	410	−221
Humanities and related	162	785	−623	179	735	−556
Art, sport and entertainment	21	266	−245	27	274	−247