Source: Daily Friend

By Jonathan Katzenellenbogen -Dec 2, 20205

Foreigners are once again in the sights of mobs and politicians who are building support on anti-immigrant sentiments.

Popular frustration at the deep economic slump due to the Covid-19 lockdown and poor government service delivery is leading to serious xenophobia. And, in this round, foreigners who have jobs are being targeted when often ill-founded, popular opinion views them as taking South African jobs.

SA’s poor border control has been a problem for years, but the targeting of foreigners is increasingly being made an excuse for violence, theft, and harassment. It will have wider economic costs.

So far, the most advanced measure to curb foreign activity is the draft Gauteng Township Economic Development Bill put forward by the ANC-controlled provincial government. If passed, foreigners who are not permanent South African residents, such as refugees, would be barred from owning or doing business in townships. Although not permanent residents, refugees are permitted to work in the country. One danger is that the bill might make foreigners targets for harassment in its enforcement, which could mean many entrepreneurs are scared away.

Pressures, often violent, for similar measures to that proposed in Gauteng are rising across the country. Along South Africa’s highways, petrol bomb attacks on trucks, sometimes accompanied by the killing of drivers thought to be foreign, has recently been mounting. The All Truckdrivers Foundation, which says it represents unemployed truck drivers – but denies involvement in the attacks – has issued an ultimatum to Transnet Port Authority, saying that no SA-registered truck driven by a foreigner should be allowed to enter a port.

Last month the Umkhonto we Sizwe Military Veterans Association (MKMVA) closed down foreign-owned businesses in Durban and forcibly removed from their stalls informal traders who they say are foreigners, according to a Daily Maverick report. MKMVA says foreigners are stealing the jobs from South Africans, and that when the veterans were in exile in other African countries they were not allowed to run businesses.

Non-South Africans

The ANC condemned the group’s actions against foreigners, but KwaZulu-Natal Premier Sihle Zikalala has said his government is looking at legislation to address the employment of non-South Africans in all sectors of the economy. Labour Minister Thulas Nxesi says the national government is also looking into legislation to curb employment of foreigners in the road freight, hospitality, restaurant, security, and agricultural industries.

The draft Gauteng Township Economic Development Draft Bill, which is the first such proposed measure, might be taken as a model for adoption by other provinces. With its proposals for setting up a fund to help the informal sector and prescribing that companies with government contracts buy from township enterprises, it can be cynically advanced as a means of assistance to the sector rather than one aimed at excluding foreigners without permanent residence. Its main effect, if passed, would be to undermine the township economy.

Legal opinion, including that from Lawyers for Human Rights, suggests the provisions in the bill to reserve certain sectors for South African citizens and permanent residents is unconstitutional, as it violates the Constitution’s right to equality, dignity, and the protection against arbitrary deprivation of property.

There is also case law which protects the rights of refugees to practise a trade and go into business. Apart from that being an established right, it also makes economic sense. After all, allowing refugees to make a contribution keeps them out of camps and means the government does not have to provide support.

Informal market

GG Alcock has written two books on the township economy, and ran a marketing agency which advises companies with international brands on the informal market. He says the big misconception about spaza shops, the informal convenience outlets in townships, is that immigrants displaced South African jobs and businesses. Alcock says that foreigners began to make inroads into the spaza sector at the time South Africans began to exit, due to the entry of the large local supermarket chains into the townships. South Africans could no longer compete, and those that remained went into selling emergency supplies like headache tablets and township fast food.

But it is not as though locals do not benefit from foreigners setting up new shops. The Ethiopians, Somalis, Bangladeshis, and Pakistanis that entered the sector often rent premises from South Africans who had shut down their shops.

There is no authoritative nationwide data to back up assertions that foreigners dominate the entire township economy or informal sector. Caroline Skinner, a UCT economist who has studied the sector for more than 20 years, says the foreign share of the South African township economy varies greatly by sector and by location. She says that while foreigners might dominate in some areas and sectors, South Africans are heavily predominant in others.

The informal sector has become crucial to the South African economy and could be a launch pad for faster growth. It accounts for about 20 percent of jobs, and around a third of those in employment are in the informal sector, according to Quarterly Labour Force Survey data. Any growth in this sector should be viewed as positive.

Popular world view

Just because a foreigner owns and runs a business does not mean, contrary to the ANC and much of the popular world view, that they are taking opportunities from South Africans. Besides, why can a foreigner based in London invest in a South African mine, for example, but a foreigner in, say, Ethiopia not be allowed a stake in his brother’s spaza shop?

Spazas have come to play an essential role in the township economy by complementing supermarkets and providing a great convenience for residents. Daily purchases are often made at spazas, but monthly bulk buying is at supermarkets. Skinner says that they also contribute to food security, as spazas tend to offer lower prices and operators often give credit in the last week of the month to their needy customers.

Moreover, while smaller operators may not pay tax, as they have an income under the tax threshold, they often do pay VAT to suppliers but cannot reclaim this if they are not registered with the SA Revenue Service. The informal sector is part of the wider economic value chain that generates turnover for their suppliers and hence contributes to employment, investment, growth, and the public good.

The government wines and dines foreigners to obtain large-scale foreign direct investment, but is not interested in the small business that a refugee might want to set up. Who knows, in a few years, the refugee that set up the hole-in-the-wall spaza might well be running a ‘spazarette’, which is similar to a small supermarket, employing a large number of South Africans, and contributing a good flow of tax revenue. Besides, there is a vast inconsistency: South Africa makes it difficult for investors from other African countries to invest in spaza shops, yet South African supermarket chains have gained a large market share in the rest of the continent.

For a government that tries to promote investment and opportunities for the marginalised, the Gauteng bill and the attitude to foreign participation is at odds with its claimed aims. Yet, there has been little high-profile leadership in seeing the Gauteng bill and other such proposals scrapped. Fundamentally, the bill is based on the false notion that the economic pie should be divided to ensure benefits to specific groups, rather than grown as fast as possible.

Cutting up rather than growing the pie is also the motivation behind ANC priorities such as empowerment, the moves to expropriate without compensation, the Mining Charter, prescribed assets, and propping up failed state-owned enterprises. All these may please much of the crowd, but only ensure benefits to a few at enormous cost to confidence, investment, and growth