Plugging the gap: the contribution of South Africa to the African economy through remittances

By Azwimpheleli Langalanga

November 2021 is ending giving way to December which would mark the official start of the festive season. This is the first time in two years that a semblance of normalcy returns to the South African and indeed much of the global calendar due to eased Covid-19 travel restrictions. It has been an eventful year in South Africa ranging from various levels of Covid-19 restrictions, the July riots that lefts hundreds of people dead, scores injured, and properties destroyed and vandalised. South Africa also held its municipal elections in which two things happened, the first being having migration as a key election issue and the governing ANC lost the national majority.

At a continental level, South Africa hosted the Intra-African Trade Fair in Durban while the war in Ethiopia rages on as the Tigray Liberation marches towards the capital, Addis. South African twitter spaces are melting down with discussions on whether Zimbabwean immigrants should have their special dispensation permits. Globally, world leaders gathered in Glasgow Scotland to engage and remind each other of the commitments made in Paris around tackling climate change. In early December, minister of trade will gather in Geneva, Switzerland for the 12th WTO Ministerial Conference that will tackle many issues affecting global trade except informal cross border trade. It has been 20 years since a conference was held in Durban to reflect on among other issues xenophobia and other related intolerances.

What is clear from the calendar is the absence of migrant issues where they should normally large. There is no doubt that the war in Ethiopia will trigger a wave of refugees and migrants who will eventually find themselves in other countries including South Africa. Climate change has already emerged as one of the main push factors responsible for the displacement of people from their home countries. This is usually manifest through increased incidences of cyclones, flooding and recurring droughts. An opportunity was therefore missed to put the issue of migration at the centre of COP26. The WTO Ministerial will tackle all things trade except the migration-based trade that accounts for 50-60% of total intra-Africa trade. South African municipal election campaigning was in many ways dominated by anti-immigrant rhetoric. No doubt policy will follow that rhetoric especially in Johannesburg where Action-SA is tipped to provide a mayoral candidate.

As the Special Dispensation permits issued to about 300 000 Zimbabwean nationals 11 years ago are about to expire, there has been a lot of talk around whether these should be renewed. As expected, the debate is divided into two with South Africans generally arguing that the permits should not be renewed as Zimbabweans’ presence in the country is a source of economic misery to locals. Zimbabweans on the other hand have been arguing that they have a right to be in South Africa since they supported the country in its fight against apartheid rule. For instance, a ‘twitter space’ discussion lasting seven hours was hosted on the matter with both sides throwing mud at each other.

One of the main missing all these global conferences, domestic elections and twitter space engagements is the real benefit of migration. South Africa has generally borne the brunt of criticism for its treatment of migrants. What is often not said is the huge economic benefits of the South African economy to African economies through remittances. Such a contribution helps plug many financial gaps in other African economies, both at a micro and macro sense. In some ways the remittances contribution helps in averting social, political, and economic crises. This in a way reduces the incidences of situations that could exacerbate further migration to South Africa. However, before focusing on what South Africa contributes

to the African economy in the form of remittances it may be worthwhile to focus on the global remittances’ contribution to the African continent.

Globally, remittances from developed countries to lower and middle-income countries totalled US$550bn. Out of this amount, Sub Saharan Africa received US$48bn with Nigeria receiving half of the amount at US$24bn. While Nigeria accounts for the largest share of remittances receipts in absolute terms, it is worth highlighting the biggest recipients as a share of GDP. The largest receiver of remittances as a share of GDP is South Sudan at 35%, followed by Lesotho at 22% and The Gambia accounting 15%. These figures show how much of remittances contribute to GDP, totally eclipsing any form of domestic resource mobilisation. However due to Covid-19, these global remittances to Africa decreased by 8,8% in 2020 and 5,8% in 2021.

As indicated, much of the discourse around migrants in South Africa focuses on the negative aspects. Migrants are generally viewed in bad light in host communities. South Africa generally gets criticism by its continental peers for having restrictive migrant policies. When there are incidences of anti-immigrant violence in South Africa does rightly get chastised even at continental fora such as the African Union. However, what is hardly mentioned is the economic contribution the country makes to other African economies through remittances.

By way of background, migration in the SADC region is made up of 6,4 million people. South Africa is home to an estimated 3,7 million migrants from the rest of the continent. Out of the 3,7million migrants, 68% are not regularised. Zimbabwe accounts for 59% of the total migrant population in South Africa. In terms of remittances contributions, South African based migrants from the SADC send an estimated ZAR13bn to the region. The top five recipients of South African remittances are Zimbabwe at ZAR6,6bn; followed by Lesotho that receives ZAR1,5bn, with Mozambique getting ZAR1,7bn while Swaziland’s receipts amount to ZAR$391m and Botswana ZAR182m. Within the SADC, Lesotho is the largest recipient of remittances as a percentage of GDP.

While some of the amounts may seem miniscule in absolute terms, they are quite significant at a micro scale. This is evident from some of the main reasons why the remittances are sent. The remittances are aimed at inter alia: buying immovable property, funding daily expenses, paying for health care and education among others. Therefore, the remittances, to a large degree cater for socio economic rights that those states would have had to provide for under normal circumstances. What has been worrisome to international finance institutions has been the exclusion of migrants from international financing mechanisms. This is something that is generally attributed to general financial exclusion and lack of harmonisation in the banking sector. The result has been migrants having to adopt unconventional and risky methods in sending out their remittances.

Besides the micro-economic impact of remittances, there is no doubt that these finances help fill a huge gap in the receiving countries. Indeed, at a geoeconomics level, remittances help stabilise some of the receiving countries fragile economies. This then has an economic and political stability dividend. On the flip side, the remittances’ effect of displacing domestic resource mobilisation methods. Just like aid, remittances may ringfence autocratic regimes from fiscal accounting to their citizens.

From an economic diplomacy perspective, South Africa could devise policies that will lead to a more inclusive financial services regime. This would make it easy for migrants to send money to their home countries. Further, the country could weave the remittances narrative into its foreign policy as a way of

building a more cohesive region and continent. Collectively, South Africa and its regional counterparts could encourage the use of remittances in trade finance and other investment related activities.

Indeed 2021 ends at a much positive note than 2020. While the Covid-19 pandemic has had an adverse impact on economies both formal and informal including to local and immigrant communities, there is no doubt that the latter would be able to spare some of their hard-earned capital to send back home. However, the 2021 activities calendar, both locally in South Africa and globally, has reflected a world that still has migration at the backseat.

There has been a lot of focus on formal trade, climate change diplomacy, resumption of international travel and a lot less around issues of migration and migrants’ rights. The Covid-19 pandemic will have far reaching negative impact on migrants’ economic wellbeing including those that are dependent on remittances. It can only be hoped that 2022 will witness a resurgence of economic activities, hopefully without the migrants’ woes witnessed in the Mediterranean, which had hitherto subsided due to Covid-19 related restrictions to movement.

Azwimpheleli Langalanga is an independent research and political analyst. He writes in his personal capacity.