SA needs expansion in remittances from our own people working abroad

It may sound bizarre, but a vast wave of South Africans could boost our economy — by going to work offshore.

SA has consistently had the highest unemployment rate of any country in the world for the best part of five years. Nearly 12-million adults do not have work; they do not earn a living but rather rely on the state or their families to survive.

Over the last year we have had more unemployed people in the formal sector than those employed. This suggests SA could double the size of the formal sector and the country would still have over 1-million unemployed adults. In the battle against unemployment — and the poverty, despair and indignity it creates — SA is missing an obvious policy tool. This tool is affordable and workable, even if it may need our diplomats to put down their cocktails and canapés and do some real work.

The magic balm for the SA economy is a huge expansion in remittances from our own people working in other countries. The 70-odd countries closest to our own GDP per capita income level enjoyed inflows from personal remittances averaging an impressive 7.3% of GDP. In contrast, SA has pitiful remittance inflows of a mere 0.3% of GDP. Our neighbours, too, have very low remittances-to-GDP levels.

Outside Southern Africa, in contrast, our income group’s average remittances are close to 8% of GDP.

We are missing a trick

If we in SA could also grow our remittances to about 8% of GDP that would have the same effect on our economy as doubling the size of the mining industry. If we could reach 7% of GDP it would be like adding a sector of similar size to transport or communications to the economy.

If we look further afield, substantial remittances are pouring in from citizens who plan to return to their country of birth but who have travelled to where there is work to be found. These expat economic warriors help countries like Egypt, the Philippines, Thailand, Lebanon and Sri Lanka receive substantial inflows and to increase living standards across their economies.

Looking at 2016 World Bank data, we see that there are about 170-million foreign-born people living in the world’s advanced countries, and a net 11-million people swell the workforces of the rich countries every year. If more South Africans could venture abroad and get just 1% of these expat jobs, it would mean 100,000 fewer unemployed people in SA every year.

A small dent in unemployment, yes. But it can be steadily grown and sustained for years if we can just get our thinking right. And don’t think it is just the very educated and the highly skilled (not always the same thing) who are in demand; the reality is different. LinkedIn research has highlighted that the richer countries desperately need more truck drivers, packers and merchandisers, caregivers, construction workers, delivery drivers, assistant teachers, assistant nurses, waiters and cooks, farmworkers, cattle herders and so on.

SA has all these skills in abundance and there is a chance for those workers who are visionary enough to make the leap to earn substantially if they trek offshore. Truck drivers in the US earned an average of $58,00 in 2019. That is about R870,000 in nominal terms or R420,000 in purchasing-power-parity (PPP) terms. Hardly small change.

Packers, cooks and caregivers can earn between $40,000 and $50,000 per year. That is about R290,000 per year. Is there any local supermarket packer who gets even close to this? Not on your nelly, they don’t.

Fast-food restaurants in the US pay from $12 per hour to $22 per hour. In PPP terms, that is four times SA’s minimum wage. Countries such as Germany are trying to fill workplaces and need construction workers and other tradespeople, while most Arab states need construction workers, cleaners and drivers.

Menial jobs? You might think so, but there has been an exodus to these richer countries from many poorer countries of people who seek a better life for themselves and their families. Why not more South Africans? Immigrants made up 9.8% of the total population of the OECD countries in 2016. That is far higher than SA’s 5.3%.

Yes, the world is becoming more protectionist, countries are more suspicious of those seeking to join their workforces — but the long-term trend still sees millions of people from developing countries seeking job opportunities in richer northern hemisphere countries. While employment rates there of the economically active are not 100%, they are certainly better than our 35% employment rate. And the jobs are available.

Seeing that the rich world hosts 170-million foreign-born people, if SA could get just a 1% share of this over the next decade it would reduce our number of unemployed by over 10%. That is something that can help SA — and the remittances themselves will catalyse more employment in the home economy. Not all would get a job, of course, but activity rates are far higher than here at home.

In the EU between 67% and 85% of immigrants are in formal work, while it is true that there are others in the shadow economy in areas such as prostitution and informal trading. Host governments can help facilitate South Africans seeking work in richer countries, and our own government should be working far harder to secure agreements that make it easier for South Africans in certain fields to get work abroad.

This strategy has twin benefits: it will help bring down the number of adults out of work in SA while the remittances will flow into the economy — boosting growth and helping to create further work here. If we could secure agreements to open overseas job markets to our truck drivers, merchandisers, home-carers and many others it would provide a new path into work for our young people and bring some desperately needed hope. 

Monetary inflows are not the only benefit though. A recent seminar at the University of Zululand revealed that the benefits go far beyond just money. Countries receiving high remittances have less inequality — and the challenge of inequality is a major one in SA. Of critical importance, too, is the fact that women are often the main beneficiaries of money sent back home — which can be life-changing, while the cash from abroad will help them to become less marginalised.

Moreover, higher flows abroad of SA job-seekers would boost and create new links such as air travel between the countries involved, while over time tourism would also grow from this interaction. The extra remittances will not just grow the economy but will increase tax revenue and reduce the need for social grants (albeit a small deduction). More tax and less expenditure would help reduce the deficit too.

Many other countries have embassy personnel in the host countries working to help their nation’s guest workers with issues such as visas, and are well placed to report cases of abuse to the relevant authorities (for their citizens are still important to them). We South Africans can, and must, learn from this.

When our guest workers decide to return home after, say, five years, they will have learnt new skills, and many will have saved enough money to open their own businesses or to buy or build a house. They will also have made contacts in the host countries, which will result in further trade and tourism. Some guest workers, of course, will elect to stay in their new countries — but that is fine.

It will not be easy to get all this moving, but we can start with many more government-to-government agreements — and then private enterprise can do the rest. Looking at other countries, the powerful flow of remittances is a tool in the box that SA is lacking.

It may seem far-fetched, but surely the argument is convincing: an excellent way to boost SA’s economy is for more of us to pack our bags and hop on a plane. It’s a win-win scenario. And we desperately need to start winning this battle against the social scourge of unemployment.

• Schussler heads Economists.co.za and Fraser is a business writer.