LETTER: Immigrants add value to host economies

The recent xenophobic attacks in South Africa came at a time when there is a push to establish free continental trade area with majority of African countries being a signatory to the Continental Free Trade Area (CFTA).

As per the World Bank, African population is rapidly expanding, and by 2060 the region will hold an estimated 2.8 billion people. This is by no means a small market given the push to bolster intra-African trade as a way of promoting growth of African economies based on their unique production capabilities based on absolute and comparative advantage paradigms.

The World Bank estimates the Sub-Saharan African population at slightly over one billion people (1,061,108,000) with South Africa contributing approximately 57 million people (56,717,000).

As per the African Development Bank (AfDB), the Real GDP growth in South Africa is projected to increase to 1.7 percent in 2018/19 and two percent in 2019/20. The question that lingers is what is the contribution of immigrants to the projected GDP growth?

An Economic analysis (2016) by the University of Pennsylvania finds little support for the view that inflows of foreign labour have reduced jobs or Americans’ wages. Economic theory predictions and the bulk of academic research confirms that wages are unaffected by immigration over the long-term and that the economic effects of immigration are mostly positive for natives and for the overall economy.

Quarterly Labour Force Survey in 2013 in South Africa notes that immigrants can become a significant driving force in the creation of new businesses and the reduction of South Africa’s high unemployment rate. Other researchers find that immigrant entrepreneurship creates opportunities that have important implications for the South African economy.

Immigrant entrepreneurs in South Africa are visible micro, small and medium sized enterprises (MSMEs) in retail or service rather. It is through the entrepreneurship opportunities that they partake in that they contribute to the South African economy. The immigrants turn to entrepreneurship due to difficulties and exploitation they find in the employment market despite their education and experience. They essentially work had to sustain successful businesses.

Despite the perceived growth of the immigrant communities to their host economies, we may need to examine the negative effects of immigration. The University of Pennsylvania report states that immigration has primarily raised the supplies of the least and the most skilled workers and that immigrants often impose a heavier tax burden on natives at the state and local level more-so those with low levels of education and income who generally have larger families and more children using public education, the largest component of state and local budgets.

Essentially, this points to the effect immigrants have on the overall cost of providing public services and the increase in labour supply which may create competition with the host communities on opportunities available. Further, some immigrants have engaged in crimes and other unlawful businesses like selling of hard drugs. A study by Jörg L. Spenkuch (2013) on “Understanding the Impact of Immigration on Crime” states that an influx of immigrants can be expected to increase crime rates given that that immigrants’ returns from participation in the formal labour market are on average lower than those of natives. As per US Census Bureau 2009, on average immigrants are less educated, have lower incomes, and are less proficient in English than Americans. This may drive immigrants into crime. Spenkuch asserts that a rise in the share of immigrants in the population may lead to an increase in crime rates.

Whereas the discourse on effects of migrant populations in host countries has been documented both in positive and negative light, emancipation of growth in Africa and importantly improvement in status of human development calls for increased mobility of people and goods and bolstering efforts to create a common market of over one billion people. The host governments must assure the migrants communities of their security and protect them from imminent dangers posed by xenophobic attacks to their lives and their businesses.

Roba Adan Abdi, PhD Finance candidate at Jomo Kenyatta Universtiy of Agriculture and Technology