DANIËL ELOFF: Why SA should incentivise expats to return

There’s an Afrikaans saying: Oos wes, tuis bes (East west, home is best). Yet for hundreds of thousands of South Africans home is a fading memory, a postcard from a life left behind.

Between 800,000 and 1.2-million South Africans are estimated to live abroad, primarily in countries such as the UK, Australia, the US, New Zealand and Canada. Most of them are highly skilled professionals, business owners and entrepreneurs — the very people SA desperately needs. 

Many of them didn’t leave because they necessarily wanted to. They left because of crime, corruption, economic stagnation or the feeling that their talents were better appreciated elsewhere. And yet, for all the safety and stability of life in London, Sydney or Auckland, there’s a restlessness among South Africans abroad.

They miss the energy of their homeland, the undeniable rhythm of SA life. They long for biltong and a braai, the electric atmosphere of a packed Cape Town Stadium against the backdrop of Table Mountain, and the unmistakable smell of summer rain on the highveld. 

But nostalgia is not enough to lure them back. The reality of moving home is daunting. Taxes are high, the cost of repatriation is significant, and the economic risks — both perceived and real — can feel overwhelming. For SA to bring its lost talent back, it needs more than warm sentiment. It needs a serious incentive programme. 

Learning from Portugal 

If SA is to successfully lure its expats home, it would do well to study Portugal’s Nonhabitual Resident programme. Introduced in 2009, the scheme offered foreign professionals and Portuguese nationals returning from abroad a 10-year tax break, including a flat 20% income tax rate and exemptions on foreign income.

The result? A surge of wealthier individuals (estimates passed 50,000, with an accelerating number of US applicants joining European applicants) moving back to Portugal, bringing foreign capital, expertise, and job creation.

Though the programme is not without its critics and problems, the key lesson from Portugal is simple: skilled, high-income individuals are more likely to relocate when the tax regime is favourable. And if we want South Africans abroad to swap the London Tube for the Gautrain (with its borehole leaks and all), we must make it worth their while. 

An SA incentive plan for returning expats 

The solution is not to rely on sentimentality but to make the numbers work. SA should introduce the incentive programme that I have dubbed “Home” (helping our migrants & economy), a set of tax breaks and financial incentives designed to make moving home a financially smart decision. 

A crucial starting point would be to lower the tax burden. SA’s personal income tax rates are among the world’s highest, with top earners paying 45% of their income to the SA Revenue Service (Sars). Compare this to Australia’s 45%, the UK’s 45%, the US’s 37%, and New Zealand’s 39%. While these figures might seem comparable, the difference is in what taxpayers get in return.

In Australia taxes fund well-functioning public transport, reliable electricity and efficient healthcare. In SA, taxpayers endure crumbling infrastructure, collapsing services and load-shedding. This is why so many South Africans with global career opportunities choose to stay abroad while clinging to the hope of a prosperous SA. 

A flat 20% tax rate for returning expats in their first five years back would change the equation. It would make SA competitive with other countries in attracting skilled professionals while ensuring that those who return contribute to the economy instead of sitting out in financial limbo.

A skilled software developer in Rotterdam or an investment banker in London might hesitate at the thought of paying nearly half their income in tax after returning home. But at 20% the conversation changes. 

Beyond income tax, another major concern for potential returnees is foreign income. Many South Africans living abroad have offshore investments, pension funds or businesses that would become subject to SA tax laws the moment they set foot back home. That’s a powerful disincentive.

Instead of punishing them for bringing in foreign capital, SA should embrace it. A foreign income exemption for returning expats would allow them to spend their money freely in the local economy — buying homes, supporting businesses and investing in SA ventures — without fearing that Sars will take a bite out of earnings made elsewhere.

For returning expats who may already be dealing with the costs of moving, shipping and setting up their lives again, this becomes yet another reason to delay or avoid returning entirely. A simple fix would be to waive transfer duties for returnees who purchase property within their first two years back. Not only would this encourage homeownership, it would also provide a much-needed boost to the property market, which in places such as Joburg has struggled recently. 

The same logic applies to business owners and entrepreneurs. Many South Africans who have left are not just workers but job creators — people who have started successful companies abroad. The kind of people who don’t just look for opportunities but build them.

If we want them to do that here, we need to make it worth their while. A two-year company tax holiday for returning expats who start businesses would provide a strong incentive for them to invest in the SA economy, hire local employees and generate wealth that stays in the country. The long-term benefit would far outweigh the temporary absence of corporate tax revenue from those businesses. 

Critics might argue that these measures unfairly benefit the wealthy or create a two-tier tax system, but this is a narrow view. These skilled South Africans aren’t paying tax in SA at all. They aren’t soaking up a Sunday afternoon on the stoep, rooibos in hand, choosing Karoo lamb chops for the weekend braai or investing in Mzansi’s financial markets. By offering strategic incentives the country would gain more than it loses.

It’s win-win because 20% of something is more than 45% of nothing. These returnees wouldn’t just bring back their skills and expertise, they would bring capital, job creation and economic activity that benefits everyone. The people they hire will, in turn, buy groceries, pay VAT (even an increased VAT), and contribute to the same economy. 

Portugal’s Nonhabitual Resident programme has already proven that tax incentives can work. By offering foreign professionals and returning Portuguese nationals a 10-year tax break, Portugal saw an influx of high-earning individuals who brought investment, created jobs and boosted the economy. There’s no reason SA couldn’t achieve the same success with a well-designed expat incentive programme. 

The question isn’t whether we can afford to introduce these incentives. It’s, why would we not? SA is in desperate need of skilled professionals, business leaders and entrepreneurs. Many of them are South Africans who are already abroad, watching from a distance, wondering if returning is worth the risk.

If we make it an easy decision, if we make it make financial sense, they will come back. And when they do, they won’t just be bringing home their suitcases. They’ll be bringing back knowledge, capital and the belief that SA is still a place of opportunity. 

• Eloff, a writer and nonprofit executive, is a legal adviser to the mayor of Cape Town. He writes in his personal capacity.