27
Macroeconomic Immigration Determinants: an
Analysis of ‘Pull’ Factors of International Migration to
South Africa
Mulugeta F. Dinbabo and Themba Nyasulu
Abstract
This research empirically examines the macroeconomic determinants of ‘pull’
factors of international migration in South Africa. Using the neoclassical
economic model of international migration, an Ordinary Least Square (OLS)
regression was run on time-series data from the World Bank data base for
the period 1990-2012. Relevant data from the South African Department of
Home Affairs’ Annual Reports were also used. GDP per capita, inflation rate,
real interest rate, employment rate and public health expenditure were found
to be the key determinants which entice migrants away from their countries
and direct them to “better off” destinations. The country’s public education
system, on the other hand, is not a significant attraction for foreign migrants.
The study concludes that the South African government urgently needs to
implement not only skilled worker-attractive immigration policies but also
appropriate fiscal and monetary restructuring policies aimed at growing the
economy and creating employment opportunities.
Keywords: Education, employment, foreigners, government, inflation,
international, migration, ‘Pull’ factors and South Africa
Senior Lecturer at the Institute for Social Development, Faculty of Economic &
Management Sciences, University of the Western Cape (UWC), South Africa. He
obtained a PhD in Development Studies from the University of the Western Cape,
South Africa. E-mail: mdinbabo@uwc.ac.za
Independent Development Economics Researcher. He obtained an MA Economics
(Development) from the University of the Western Cape, South Africa.
mailto:mdinbabo@uwc.ac.za
28
Introduction
International migration is an escalating practice of our times. This process
whereby millions of people flow across traditional social and geographical
boundaries has altered the global landscape (Hatton, 1995; Lee, 1926). The
decision to emigrate depends on a combination of factors, such as lack of
social security and justice, political instability, a low level of confidence in
the state, as well as better opportunities for work abroad (Kurunova,
2013). However, these flows generate socio-economic and political
challenges in migrant destination countries and have thus raised complex
questions for policy makers and researchers. In this response, researchers
(Castles, 2010; Hatton, 1995; Lee, 1926; Mayda 2003; Mayda, 2010;
Nwajiuba, 2005; Rodrick 1995; Stark, 1984; Taylor, 1999) have developed
a wide range of theoretical and conceptual frameworks (both econometric
and mathematical) aimed at analysing international migration. For example
Kurunova (2013) indicates that each theory of international migration
focuses on a separate aspect of the migration relationship such as factors
that ‘push’ or ‘pull’ migrants, globalisation factors of migration, migration
networks, migration implications for the labour market in host countries or
the countries of origin, and the impact of migration on income distribution
in a given region.
The aim of this research is to provide an empirical investigation into the
macroeconomic determinants of ‘pull’ factors of international migration in
South Africa, using the neoclassical economic model of international
migration. However, in order to make a case for an empirical analysis, the
presence of reliable statistical data is very important, although at the same
time the research is limited by it. In this particular research, apart from
focusing on registered migration because only official statistics is readily
available, selected ‘pull’ factors such as GDP per capita, inflation rate, real
interest rate, employment rate, public health expenditure and education
expenditure are also included. Ordinary Least Square (OLS) regression was
run on time-series data for the period 1990-2012 collected from the World
Bank data base and the South African Department of Home Affairs. Results
of the study show that GDP per capita, inflation rate, real interest rate,
employment rate and public health expenditure are important migration
‘pull’ factors.
The paper is organised as follows. Section 1 gives a general introduction to
international migration. Section 2 presents a background to past and recent
29
trends in international migration in South Africa. Section 3 reviews
literature on the subject and generates a theoretical framework for the
study. Section 4 presents the econometric techniques used. Section 5
shows and discusses the empirical results. Section 6 presents the
conclusions and policy recommendations.
Background
The issue of international immigration into South Africa has a long history
spanning several centuries. Cross (2000) observes that its beginnings can
certainly be traced to 19th Century white settlement and the consequent
establishment of colonial rule, when hundreds of thousands of Europeans
permanently immigrated to the country. Thereafter, the opening up of large
sugar cane fields in Natal also attracted large flows of immigrants
especially from India, as did the establishment of diamond and gold mines
in Kimberly and on the Witwatersrand in the late 19th and early 20th
centuries which brought in large numbers of labourers from several
neighbouring countries such Mozambique, Lesotho and Zimbabwe. From
the beginning of the early 20th century South Africa’s population contained
a sizeable foreign migrant stock. The 1911 Census for example, revealed
that foreign migrants from neighboring countries made up 6 percent of
South Africa’s total population. The foreign migrant stock reached a total of
836, 000 in 1961 (Peberdy, 1997). Ayala et al. (2013) observe that even
though there is no reliable data on the exact immigrant numbers, especially
during the pre-Apartheid period, there are at least four international
immigration routes that are known in the country’s history. These include:
contract labourers on the mines, informal immigrants to work in the
construction and service sectors, refugees from the Mozambican conflict;
and white ‘asylum seekers’ from neighbouring countries.
The imposition of a white-supremacist form of government (Apartheid) in
1948 had a profound effect on South Africa’s migration policy (Peberdy and
Crush, 2000). Successive Apartheid governments pursued a racially-
oriented policy favouring white immigration while at the same time
restricting black/African and later on Jewish inflows into the country. Even
though successive Apartheid governments recognised the need for cheap
foreign labour to work on the mines and farms, they only encouraged
clandestine immigration from neighbouring countries and also blocked
foreign immigrants from acquiring temporary or permanent South African
residency. In contrast, white immigrants escaping from political
30
uncertainty in newly-independent African countries such as Zambia, Kenya,
and Zimbabwe were offered citizenship between 1960 and 1980 in order
to boost the white population in South Africa (Peberdy, 1997; Peberdy &
Crush, 1998). The above authors observe that some of the significant
colonial and Apartheid-era restrictive migration laws were passed in the
years 1913, 1930, 1937 and 1991.
With the end of Apartheid and the consequent ushering in of the
democratic era in the country in 1994, the African National Congress-led
government has continued pursuing a more restrictive migration policy in
the post-Apartheid era (Crush & Peberdy, 2003). Apart from giving out a
few amnesties to political asylum-seekers and refugees from some Sub-
Sahara African countries, the South African government has generally
shown little appetite for immigration. For example, legal labour migration
to the country has been on the decline since the early 1990s, as the more
restrictive policies put in place have made it difficult for employers to
obtain work permits for foreign contract workers (Crush & McDonald,
2003). Despite these restrictive migration policies, international migration
into South Africa has continued to surge. The majority of migrants have
come from Sub-Saharan African countries mainly in search of employment
and other economic opportunities in this regional economic super-power
(Adepoju, 1998). The increase in economic immigrants primarily from
neighbouring countries has occasionally been met with hostility from the
generally poor and unemployed sections of South African society who view
foreign migrants as direct competitors for jobs in the primary sectors of the
economy. This hostility erupted into violent xenophobic attacks in May,
2008 when several small-scale businesses mainly owned by Zimbabwean,
Mozambican, and Malawian immigrants were destroyed by groups of South
Africans across several cities (Friebel, Gallego & Mendola; 2013).
Klotz (2000) notes that each year hundreds of thousands migrants from all
over the world come to South Africa legally and illegally in search of socio-
economic and political opportunities. Kok et al. (2006) categorise these
migration inflows into three groups, namely labour mobility, refugees, and
permanent migrants. At present it is estimated that the total foreign
population in South Africa ranges between seven and eight million. This
constitutes approximately 5.7 percent of the country’s total population of
51 million (Stats SA, 2012). Although there is significant dispute with
regard to the exact number of illegal immigrants, the same cannot be said
about the statistics of foreign people living in the country legally. Statistics
31
South Africa (Stats SA) shows that a total of 142,833 temporary residence
permits (TRPs) and permanent residence permits (PRPs) were issued to
foreign nationals by the Department of Home Affairs in 2012. In fact, 45.6
percent of the TRPs were issued to nationals from overseas countries
(mainly India, China, Pakistan, and Britain), while 54.4 percent were issued
to people from the African continent (mainly Zimbabwe, Nigeria,
Democratic Republic of the Congo, and Lesotho). On the other hand, people
from the overseas countries accounted for 46.8 percent of PRPs while those
originating from the African continent constituted 53.2 percent of the total
PRPs issued in 2012 (Stat SA; 2013).
From the above description and other available literature, there seems to
be considerable agreement among researchers that economic factors are
the main driver of immigration to South Africa. For example the United
Nations Development Programme (UNDP) observes that the majority of
African migrants who go to South Africa do so simply because conditions in
their countries of origin have plummeted to a point below their tolerance
threshold. . A prime example is the high number of Zimbabwean
immigrants currently residing in the South Africa. The organisation further
points out that the main driving force is the ‘pull’ of opportunity in the
destination country, as well as the ‘push’ of abject poverty in their places of
origin (Crush & Frayne, 2007). Adepoju (2000) observes that socio-
economic insecurity, abject poverty and extreme unemployment in some
rural areas of Africa have transformed what could otherwise have been
internal migration to urban centres into international emigration to
neighbouring, more prosperous nations such as South Africa.
But despite this consensus on economic forces that drive migrants out of
their countries of origin, very little is known about the macroeconomic
factors that attract (‘pull’) people to South Africa. The majority of studies
(Lucas, 1987; Bhorat et al., 2002; Wocke and Klein, 2002; Bhorat, 2004;
Waller, 2006; Lindau and Segatti, 2009; Crush and Williams, 2010; Friebel
et al., 2013; Mayda et al., 2013) that have been conducted so far on the
subject in the country seem to focus mainly on migration trends and
migration effects on the labour market, but not on its macroeconomic
determinants. Against this background therefore; it is evident that there is
a major knowledge gap in the key macroeconomic determinants of
international migration in South Africa and how these ‘pull’ factors have
affected the foreign migrant inflows into the country in the post-Apartheid
era. This study aims, therefore, not only to fill this gap but also to come up
32
with relevant policy recommendations that can help the country maximise
the benefits of this human inflow. Furthermore, the aim of this paper is to
provide macroeconomic suggestions that could help stem the rising tide of
xenophobic feelings against foreigners which are held mainly by the
impoverished and unemployed section of the South African population
which perceives immigrants as a direct opponents vying for their jobs and
other economic opportunities.
Literature Review
There is a great deal of literature (Castles, 2010; Hatton, 1995; Lee, 1926;
Mayda 2003; Mayda, 2010; Nwajiuba, 2005; Rodrick 1995; Stark, 1984;
Taylor, 1999) on international migration both in developed and developing
countries. The majority of these migration theories seek to explain the
causes and effects of the movement of people across a specified boundary
for the purpose of establishing a new or semi-permanent residence. Two of
the major migration theories include Ravenstein’s theory of migration, and
the ‘pull-push’ theory of migration. The following section analyses the key
understanding of these major theories, and traces their main principles and
practical applications.
Ravenstein theory of migration. Ernst Georg Ravenstein (1834-1913)
developed a theory of human migration which today is still considered the
backbone of the modern migration theory. Using a combination of
individual rational choice theory, Newtonian physics, and other rural-
urban and developmental perspectives he came up with empirical
generalisations on the flow of human beings between places. These
empirical generalisations which have come to be called ‘Ravenstein’s Laws
of Migration’ were mainly developed from British and other European
census data in the 1800s (Ravenstein; 1885). de Haas (2009) gives a
summary of these seven laws as follows: (1) most migration occurs within
a short distance; (2) The majority of migration movements are from
agricultural to industrial regions; (3) expansion of most bigger town
centres is as a result of migration rather than natural growth; (4) migration
develops in tandem with industrial, commercial and transportation
expansion; (5) every migration flow produces a counter-flow; (6) Most
women undertake short distance migration while the majority of men
indulge in international migration; (7) economic causes are at the centre of
most migration flows.
33
‘Pull-Push’ theory of migration. This theory largely builds on Ravenstein
‘laws of migration’. According to King (2012) the ‘pull-push’ migration
theory argues that migration comes about because of economic and socio-
political factors present in both the source and destination migration
countries. Factors such as poverty, unemployment, political repression,
poverty etc. drive out (‘push’) people out of their home (source) countries.
On the other hand, there also factors present in the destination countries
which pull or attract migrants; these include better income and
employment prospects, better social welfare services, political freedom etc.
Lee (1966) adds that for the ‘pull and push’ factors to effectively influence
migration there are several intervening obstacles that must be overcome.
These obstacles can be physical (e.g. distance), economic (e.g. financial cost
of migration), political (international borders), and cultural barriers (e.g.
language problems). He further observes that personal factors also play a
vital role in migration since people’s response to the ‘pull and push’ stimuli
will vary depending of their socio-economic and cultural orientation. From
the above theoretical background several models explaining migration
have been developed, and these are normally classified in two categories:
(1) theoretical models that describe the initiation process of migration; and
(2) models that explain the continuation process of migration.
Models Explaining the Initiation and Process of International Migration
The literature identifies a variety of theoretical models (Massey et al., 1993,
1998; Schoorl, 1995) that can be used to model the effects of migration. In
the early 1950s, in particular, there was a large body of literature produced
on migration. This research does not propose to review all of this literature,
nor all of the models available. It surveys some of the main models
explaining the initiation and process of international migration. A brief
description of models explaining the initiation and process of international
migration is given below in Table 1.
34
Table 1: Models explaining the initiation and process of international
migration
Models explaining the initiation of international migration
Theories Brief description theories
Neoclassical
Economic
Theory
The theory argues that real wage differences between countries
drive people from lower to higher wage regions. This trend
continues until wages in all regions equalize and migration
stops (Massey et al., 1993, 1998; Borjas, 1989).
Dual Labour
Market
Theory
The dual labour market states that international migration is
determined by ‘push’ (supply) and ‘pull’ (demand) factors in
migrant sending and receiving countries respectively. Demand
pressures generated in primary sectors of labour markets of
more developed countries stimulate the supply of international
labour migration from less developed countries (Piore, 1979).
New
Economics of
Labour
Migration
Theory
This theory states that migration flows and patterns cannot be
explained solely at the level of individual workers and their
economic incentives, but that wider social entities must be
considered as well. Remittances, and more importantly the
possibility of achieving an uninterrupted flow of household
income, are the main drivers of international migration (Stark
& Bloom, 1985; Taylor, 1999)
Relative
Deprivation
Theory
The theory indicates that awareness among individuals of the
existence of income/wage differentials between migrant-
sending countries and migrant-receiving nations is the main
incentive for international migration (Stark & Taylor, 1993).
World
Systems
Theory
The basic argument of the theory is that the reliance on the
international market has led to richer countries (core
countries) dominating transitional capital at the expense of
poor countries (semi-peripheral and core countries). The
unequal exchange results in migration from poorer to richer
countries (Wallerstein, 1983; Amankwaa, 1995).
Models explaining the process of international migration
Network
Theory
The theory argues that international flows of people between
countries generate networks of migrants and other person-to-
person linkages between the migrant sending countries and the
receiving countries which serve to perpetuate more migration
(Esveldt et al., 1995).
Institutional
Theory
The theory shows that the international outflow and inflow of
migrants attracts and generates both legal and illegal profit and
charity organisations which help in perpetuating this tendency
by offering financial, material, legal, and logistical support to
immigrants (Massey et al., 1993).
35
In synthesizing all the above theories it is clear that economic factors have
played a very crucial role in the development of international migration
theory. Even though at first glance network and institutional theories do
not seem to place significant emphasis on economic variables, a close
examination of the two theories reveals that their vital aspects can be
rendered important drivers of migration. As clearly argued by Jenissen
(2004), the presence of a large migrant network will not only reduce the
costs of migration but will also increase the chances of migrants obtaining
jobs in the receiving country. A similar situation avails where institutions
created because of migration flows also reduce the cost of migration.
Empirical Studies Targeting the Macroeconomic Determinants
Several empirical studies (e.g. Bach, 2003; Jerome, 1926; Kelley, 1965;
Lichfield and Waddington, 2003; McDonald and Crush, 2002; Nwajiuba,
2005; Tsegai and Plotnikova, 2004; Wentzel and Bosman, 2001; Wentzel
and Viljoen, 2006; Wouterse and Van den Berg, 2004) have been
undertaken by researchers across the globe specifically targeting the
macroeconomic determinants of migration.
For example, Jerome (1926) was one of the first to study this issue. He
examined United States (US) immigration from Europe over a hundred
year period prior to the imposition of U.S. immigration quotas in the 1920s
and concluded that economic conditions in the United States were
primarily responsible for short-cycle movements in European emigration
to the U.S. On a similar note, Kelley (1965), in agreement with Jerome’s
findings, also observed that economic factors, mainly employment
opportunities, were the main reason for the rising emigration of people
from Britain to Australia between 1865 and 1935. All the different
migration models employed in his analysis confirmed the above findings.
Several similar studies have also been undertaken in Africa. In one such
study aimed at establishing the main reason for migration from Nigeria to
other countries, Nwajiuba (2005) found that economic factors account for
80 percent of the reasons people are attracted to foreign nations, while
educational factors take up only 18 percent of the ‘pull’ factors.
In Burkina Faso, Wouterse and Van den Berg (2004) found that
employment opportunities and the possibility of earning higher income
lure the country’s poor households into migrating to other African
countries. On the other hand, richer Burkinabe households are attracted to
36
overseas countries by the perceived wealth accumulation prospects
present in those countries. In a cross-border migration study targeting the
causes of migration by Mozambicans and Zimbabweans into South Africa,
Wentzel and Bosman (2001) found that macroeconomic variables were the
main determinant. Indeed the two authors found that nationals of the
above countries were compelled to emigrate because South Africa offered
these people better employment prospects, higher wages, lower average
prices of goods, and a more stable currency value relative to their home
countries. This study also found that non-economic factors had a very
insignificant ‘pull’ effect on cross-border migration to South Africa.
McDonald and Crush (2002) conducted several studies to determine the
factors that attract international immigrants to South Africa and Botswana.
Among all the considered variables, the study found that the economic
attraction of the above economies is the main ‘pull’ factor that lures
international migrants. In a similar vein, the 2001-02 HRSC international
migration survey conducted by Brown University also found that more
than two-thirds of all international skilled migrants come to South Africa
because of the lure of finding not only ‘suitable’ employment opportunities
but also increasing their income earnings (Wentzel & Viljoen, 2006).
Despite the dominance of economic factors in the international migration
literature, some surveys show that non-economic factors are the main
determinants of migration flows between countries. Researchers such as
Lichfield and Waddington (2003), and Tsegai and Plotnikova (2004) found
that in Ghana more-qualified citizens are more likely to migrate than less-
qualified citizens. They therefore conclude that the likelihood of migration
increases with education. Similarly, Bach (2003) found that emigration of
South African nurses to Britain has largely been driven by nurses
associations and other networks of the South African diaspora present in
the destination country. With the above contradiction in the empirical
literature it is therefore necessary to conduct empirical research to
determine whether or not economic (macroeconomic) factors are the main
‘pull’ factors for migration to South Africa.
Econometric Techniques Used
Todaro and Smith (2009) note that models play a major role in
econometric studies, whether theoretical or applied. According to them, a
model is a simplified representation of an actual phenomenon. The actual
phenomenon is represented by the model in order to explain it, to predict it,
37
and to control it, goals corresponding to the three purposes of
econometrics, namely structural analysis, forecasting, and policy evaluation.
In order to analyse the macroeconomic determinants of immigration into
South Africa the study employed a theoretical framework largely based on
the Neoclassical Economic Theory of Migration. Essentially this theory
which was founded by Todaro (1969) and Todaro and Harris (1970), views
migration as emanating from differences in endowments of labour relative
to capital. The resultant wage differentials drive workers to vacate low-
wage, labour-surplus regions in favour of high-wage, labour-scarce regions.
Simply put, migration is an economically rational process in which people
move from their places of origin to new areas when their net present value
income calculation in the new area is greater than the average income in
their place of origin (Todaro & Smith, 2009).
It is clear therefore that the theory looks at economic factors such as utility
maximization, wage and other factor-price differentials, and ease of labour
movement and substitution as the main determinants that drive out and
attract people in the process of migration. According to Massey et al.
(1998) these economic factors operate at both the micro and macro levels
of the economy. The above researchers argue that migration occurs at the
macroeconomic level as a result of uneven distribution of labour in relation
to other production factors. On the micro level, it is argued that migration
occurs on the household and individual level because people use the
information available and make rational choices on whether or not to
migrate based on informed cost-benefit analyses. To this end researchers
such as Sjaastad (1962) and Borjas (1989) derived calculus migration
models depicting how individuals come up with decisions to migrate both
to areas within and outside their countries, taking into account the costs
and benefits of the process. An illustration of this concept is given by
Massey et al. (1993) who incorporate computations of probability of
escaping deportation from the receiving country, the probability of
securing employment in both the country of destination and country of
origin and a time component (t). This is specified in the model below as
follows:
ER (0) = ʃ0t [P1 (t) P2 (t) Yd (t) - P3 (t) Y0 (t)] e-rt dt – C (0)
ER (0): expected net return to migration just before
departure at time 0
38
P1 (t): probability of avoiding deportation from the area of
destination
P2 (t): probability of finding work in the destination country
P3 (t): probability of finding work in the country of origin
Yd (t): total earnings if employed in the country of
destination
Y0 (t): total earnings if employed in the country of origin
r: rate of discount
C (0): total of the cost of migrating
From the above formulation, Massey et al. (1993) observe that if the
expected net return to migration has a value greater than zero, rationality
demands that the individual migrate. On the other hand, if the value is
negative then a rational individual stays in his/her home country. Suffice to
say that when an individual is faced with a positive net return on migration
for several countries, rationality will drive him/her to the country with the
greatest value. Borjas (1989) therefore indicates that the neo-classical
theory emphasises the importance of taking into account labour market
structures, human capital and income distribution both in the country of
origin and the country of destination in explaining the individuals’ choice of
where to migrate. Even though the theory was initially designed to explain
rural-urban migration, it has of late been extensively applied to analysing
the determinants of international migration. In this regard, Malmberg
(1999) points out that some of the advantages of Neoclassical Model of
Migration are that it forms the basis of most of the migration models. In
addition, Malmberg (1999) argues that the model has a clear logic and
simple economic explanation of the causes of both internal and
international migration. De Haas (2009) observes that the strength of the
neoclassical theory of migration is its dynamism in explaining and
forecasting the initial conditions in which it took place. The author further
observes that the theory perceives migration as a mode of optimally
allocating factors of production. Holding other things constant, migration
influences labour to become scarcer in the sending than in the origin region.
The opposite occurs with the capital factor of production. Schiff (1997)
states that this leads to equalisation of factors of production as wages
converge in both the migration source and the destination countries. With
this convergence of wages and factor prices, the above researcher argues
that migration stops as wage differentials and cost of migration equalise in
the long-run.
39
Despite the above strengths the Neoclassical Theory of Migration is
criticised for its minor emphasis on structure and agency which are
important notions in social relations (Castles, 2010). The crux of the
critique is that since the theory emphasises perfect information and human
behaviour as aggregated, it reduces individuals to ‘automatons’ who
passively respond to macro-level ‘pull-push’ migration determinants. Its
critics argue, therefore, that the theory has limited power to explain
migration transformations and social relation patterns (de Haas, 2010).
Formulation of the Empirical Model and Measurement
As already alluded to, a considerable amount of empirical literature is
available on international migration econometric modelling including
authoritative empirical surveys conducted by Borjas (1989, 1994, 1999);
Ghatak et al., (1996);, and Mitchel and Pain (2002. These studies have
suggested that it is not only macroeconomic factors but also socio-political
conditions in receiving countries that attract emigrants. However, since
this study contains a small dataset of 22 observations, it is not possible to
incorporate all the macroeconomic determinants suggested by some of the
above authoritative studies. Instead this study attempts to build an
econometric model based on the theoretical foundation set by the
Neoclassical Economic Model of Migration as expounded by researchers
such as Ahmad et al., 2008; Brucker et al., 2003; and Mitchell and Pain,
2003. The above models look at international migration as a function of
various macroeconomic variables. Mathematically this is depicted by the
formulation below.
IM = f (Ui, ...,Un)
Where IM represents international migration into South Africa, and U gives
a set of macroeconomic variables that attract foreign migrants to the
country.
Following the neoclassical theoretical framework and the majority of
empirical studies carried out on the subject, the model considered the
following macroeconomic variables: employment rate (ER); per capita
gross domestic product (GDPPC); inflation rate (INFLR); government
spending on health and educators (PUBEXPH and PUBEXPEDU); and
employment rate (EMPR). Therefore the relationship between
40
international migration and the above macroeconomic variables is given in
the mathematical formulations below.
IM = f (GDPPC, INFLR, RINTR, EMPR, PUBEXPH, PUBEXPEDU)
The above function is then reduced into the following linear regression
equation
IM =α0 + α1 GDPPC + α2 INFLR + α3 RINTR + α4 EMPR+ α5 PUBEXPH + α6
PUBEXPEDU + µ
Where αi represents regression coefficients, andµ represents the
random/stochastic error term.
Following the tradition used in many international migration studies, this
research operationalises the above macroeconomic determinants as
follows:
International migration is approximated by total migrant stock i.e.
the percentage of foreign nationals in the total population of South
Africa.
This is a more practical and feasible way of measuring the total number of
foreign migrants considering the unreliability and unavailability of data on
this topic. Annual per capita gross domestic product was used to
approximate the standard of living in South Africa which shows the average
distribution of national income to each individual residing in the country.
Additionally, the study used annual employment rate as the number of job
opportunities available in the country per year. Furthermore, the country’s
cost of living and the stability of the economy approximated by the annual
inflation rate are also used. Annual government expenditure on education
and health as a percentage of the GDP was used to approximate state
provision of social services and welfare. Similarly, the value of the annual
real interest rate was used to measure the stability of business and the
investment climate in South Africa. The model also incorporated the
random error term to approximate other unobservable macroeconomic
factors that affect international migration to South Africa but they have not
been captured in the model.
Data used in the study. It must be stated that data on immigration inflows
into South Africa are poor and unreliable, just as in other Sub-Saharan
41
African countries. This is mainly due to weaknesses in immigration data
collection agencies, and the laxity of border control regulations in the
country which sometimes makes it easy for illegal migrants to evade
border controls (Shaw, 2007). In order to address these concerns the study
used secondary annual data from the World Bank and Annual Reports’ of
the Department of Home Affairs from 1990 to 2012.
Diagnostic Tests for Ordinary Least-Squares (OLS) Regression: Before OLS
regression could be conducted on the time series, several regression
diagnostic tests had to be performed in order to come up with accurate,
efficient, and unbiased results. However, the reliability of the above OLS
regression estimation technique is guaranteed only if the assumptions of
the BLUE (Best Linear Unbiased Estimates) hold. Violation of these
properties leads to spurious regression and hence incorrect conclusions
(Gujarati & Porter, 2010). Therefore to ensure the adherence to the BLUE
properties the following diagnostic tests were conducted on the time
series: Augmented Dickey-Fuller Test, Multicollinearity Test, Breusch-
Godfrey Test, Ramsey RESET Test, and Shapiro-Wilk Test.
Research Findings and Interpretation
The OLS regression diagnostic results showed no evidence of non-
stationarity, multicollinearity, autocorrelation, model misspecification, and
abnormally distributed residuals. This therefore gave research license to
perform OLS regression, the results of which are summarised in the table
below.
Table 2: OLS regression results
Explanatory
Variables
(regressors)
Variable
Coefficient
Standard
Error.t
Prob>t Prob>
F
R-
Squared
Number of
observations
GDP per capita .0011725 .0002295 0.000
0.000
0.8723
22 years
Inflation rate -.0889871 .0975325 0.376
Real interest rate -.0282949 .1188547 0.815
Employment rate .0271968 .03098 0.394
Public health
expenditure
.5068833 .22313 0.038
Public education
expenditure
-.0009993 .1267186 0.994
Constant .0288834 2.58864 0.991
Source: authors’ secondary data analysis using Stata
42
From the above results it can be seen that GDP per capita has a positive
effect on immigration flows into South Africa. Indeed, a one percent
increase in the country’s standard of living results in a 0.0011725 increase
in the level of foreign migration. Being Africa’s leading economy and a
middle-income country, South Africa boasts a higher standard of living
relative to most of her Sub-Saharan counterparts. Its annual GDP per capita
of approximately $3000 U.S. is a major source of attraction to the majority
of immigrants from impoverished developing countries both from the
African continent and beyond (Adepoju, 2003). A study by Facchini et al.
(2013) on foreign labour migrants mainly from Zimbabwe and
Mozambique also concurs with the above assertion by concluding that the
prospect of a higher living standard relative to that present in their
countries of origin drives thousands of immigrants into South Africa.
Table 2 also reveals that in South Africa there is an inverse relationship
between inflation rate (cost of living) and the flow of foreign immigrants. In
other words, a unit decrease in South Africa’s cost of living increases the
volume of immigration by 0.0889871 percent. This is not surprising given
the fact that South Africa’s economy has generally been stable relative to
the majority of the source countries that the immigrants originate from, e.g.
the Sub-Saharan African countries. With the average annual inflation rate
(cost of living) averaging below 10 percent since the early 1990s, foreign
migrants have found the country attractive for settlement. Studies by
Macdonald and Crush (2004) also confirm the fact that cost of living is one
of the macroeconomic ‘pull’ factors for migration into South Africa.
A rise in the level of real rate of interest reduces the movement of foreign
citizens into South Africa. From the above results, it is clear that a
percentage expansion in the annual value of real interest rate reduces
immigration into the country by a factor of 0.0282949 percent. This is not
surprising considering that South Africa is one of the most stable
economies, and hence foreign-investor friendly, countries in Africa. This is
evident in the consistency of interest rates which have remained below 6
percent since the 1980s. Confirmation of the positive impact of this on
international migration inflows may be inferred from 2013 documented
migration statistics which showed that 1.1 percent of temporary residence
permits were issued for business/investment purposes (Stat SA, 2013).
South Africa’s employment rate is another factor that attracts foreign
migrants. From the above table, a unit increase in the employment level
43
generates a corresponding 0.0271968 percent increase in total
immigration into the country each year. Despite the current high
unemployment level in South Africa, it is slightly lower when compared to
that of most of its neighbouring countries, such as Zimbabwe. Additionally,
Cross (2006) observes that South Africa’s economy has the biggest
absorption capacity for urban labour migration in relation to any other
African economy. The country is widely viewed by most Sub-Sahara African
economic migrants as an attractive employment destination. The main ‘pull’
factors for skilled foreign workers in South Africa’s labour market include
better salary and retirement packages, opportunity to gain international
work experience and increased career choices (Du Plessis, 2009; Rogerson
& Rogerson, 2000). In addition; some researchers such as Sibanda and
Zuberi (2004) even claim that some South African employers prefer
recruiting immigrants to locals because of the former’s willingness to
accept lower wages and other poorer employment conditions.
In a similar vein, an increase in the level South African government
expenditure on health services results in a 0.5068833 percent expansion in
the number of foreign nationals attracted to the country. This shows that
well-funded public health facilities are a ‘pull’ factor for immigrants.
Gushulak and MacPherson (2001) observe that international migration
benefits the health status of migrants by offering them a chance of
treatment for pre-existing illnesses and/or reduces their probability of
contracting new illnesses in the destination country. Therefore increased
government spending on health services will more likely attract
immigrants to South Africa since the country will be able to provide better
public medical facilities than the countries that migrants originate from.
However, the study’s results also indicate that improved education
facilities are not a ‘pull’ factor for migrants into South Africa. This is shown
by the Table 2 which states that a 1 percent increase in government
spending on education reduces migration level by a factor of 0.0009993
percent. The negative relationship between education and immigration can
perhaps be explained by the deteriorating public education system which
paradoxically is one of the main reasons fuelling emigration of skilled
professionals, such as health personnel from the country (Williams & Shaw,
2006; Bezuidenhout et al., 2009). It is a known fact that South Africa’s
education standards are deteriorating quite rapidly in relation to other
middle-income countries and even some poorer Sub-Saharan African
countries. The public education system is now characterised, among other
44
things, by: low education quality; declining pass rates at all levels; under-
qualified teachers; poor teacher morale; and weak management (SACSIS,
2009). This may help to explain why the education standards do not have a
significant impact on foreign migration into the country as the regression
results in Table 2 show.
Conclusion and Recommendations
Conclusion
From the foregoing discussion it is clear that South Africa today faces an
unprecedented inflow of migrants from all over the globe, the majority of
whom have the potential to positively contribute to the country’s
development efforts. Several macroeconomic factors inside the country
have been identified as fuelling this international migration. In relation to
those of the origin countries these macroeconomic ‘pull factors’ include
South Africa’s higher standard of living, lower cost of living, stable economy,
attractive investment climate and better state funding of social services
such as health and education. Afolayan (2001) notes that if the government
and other relevant stakeholders do not critically analyse these ‘factors of
attraction’ the country’s socio-economic development agenda will not be
able to maximise the positive benefits from this human inflow but will
suffer the full brunt of its negative consequences.
Recommendations
From the study it is clearly evident that the South African government has
to holistically address some macroeconomic constraints that prevent it
from maximising the positive contribution that international migrants
make to the country, and hence achieve sustainable socio-economic
prosperity for all its population. This could greatly diminish the fears and
resentment that the local population generally harbour against foreign
migrants. Some of the major macroeconomic reforms the government can
implement are given below.
The country needs to significantly increase its annual GDP growth
rate so that it surpasses is demographic expansion rate. This can be
done by undertaking structural macroeconomic reforms using
monetary and fiscal instruments aimed at stimulating aggregate
demand, while at the same time controlling its population growth
45
rate through family planning and civic education programmes. In
the long run this will increase its standard of living as per capita
GDP growth rates rise, thereby attracting more skilled foreign
migrants and appeasing the majority of its poor citizens.
The government and the South African Reserve Bank also need to
control annual inflation rates by balancing the levels of aggregate
demand and supply in the economy. This will reduce and eventually
stabilise the cost of living as the country’s aggregate price indices
come down. The cost of living is a very important macroeconomic
variable determining migration in South Africa as shown in the
study by Rogerson and Rogerson (2003) which showed that high
inflation rates cause 71 percent of all emigration of skilled South
African medical workers to rich Western countries such as Britain,
Australia, Canada and the United States of America.
Monetary authorities in the country also need to implement policies
that optimize the bank rate and exchange rate values in order to
attract foreign investment. A lower bank rate and a stable value of
the South African Rand will boost investor confidence and as the
economy expands will attract not only direct foreign investment
but also skilled foreign workers. ;.
The high unemployment situation in the country also needs to be
addressed urgently. The OECD (2013) observes that South Africa’s
unemployment rate, which is currently in excess of 35 percent, can
be addressed by, among other things, relaxing state regulation in
product markets, encouraging competitive interaction between
product and labour markets, and increasing the GDP growth. These
reforms in the labour and product markets will generate
employment opportunities both qualitatively and quantitatively
and help to entice skilled immigrants into the country. At the same
time such reforms would ease xenophobic sentiments of the largely
unemployed native population.
The government also needs to employ appropriate fiscal policies,
such as increased funding of social services, in order to improve the
quality of its education and health sectors. Deteriorating public
education standards due to poor government funding, among other
things, has been blamed for the sluggish performance of the
46
economy and the emigration of skilled South African workers to the
West, respectively (OECD, 2013; Bezuidenhout et al., 2009).
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