Regressive Effects of Xenophobia on South Africa’s Economic Growth

South Africa is one of Africa’s most culturally diverse nations with 11 official languages and 5 racial groups, which include black African, white, colored, Indian, and Asian. According to the last census in 2013, South Africa is also the home to nationals from 53 African countries giving the country a wider range of ethnic variety than the rest of the continent.

As one of Africa’s leading economies, South Africa is not only supposed to take the mantle of a continental leader but should also provide the basis of Africa’s socio-economic integration. Post-colonial Africa should be more focused on economic prosperity through increased intra-African trade and local investment. The NEPAD initiative which was founded to accelerate continental development and the African Union (AU), has just launched Africa’s Agenda 2063 which is a 50-year roadmap to Africa’s economic success and envisions a continent united in its identity, vision, and progression.

The recent xenophobic attacks not only have an immensely negative effect on South Africa’s economy but it will also stifle the growth of local companies in their efforts to expand into other African countries. According to a report by PwC, more South African companies are either already expanding or considering expansion of their business operations across Africa. The report also states that foreign multinational companies seeking to invest in Africa are more likely to use South Africa as a base to ‘explore’ business opportunities in other African countries. These recent attacks are threatening to undo the repair done after similar attacks in 2008 and have the potential of further lowering foreign investor confidence not only in relation to South Africa but the continent as a whole.

Rating companies, Standard & Poor’s and Fitch recently downgraded South Africa’s sovereign credit rating to BBB- and warned of further downgrades if the economy does not improve. Citing concerns of South Africa’s inability to tackle its deeply rooted structural problems, Moody’s has followed suit and has downgraded South Africa’s major banks to BAA1. If not resolved quickly, the disruptions caused by the xenophobic attacks to normal business operations and the threat of more widespread attacks across the country will exacerbate the financial position of the South African economy and may add to the factors that will result in further downgrades.

In last year’s budget speech, Finance Minister, Pravin Ghordon anticipated a steady employment gain of some 2% a year, with the government, having committed to creating 5 million jobs in ten years through sizable cash injections into job creation programs and initiatives. The recent attacks on foreigners (who are also the owners of most small business operations in high-density suburbs) are going to counter the government’s plans and negatively impact employment projections.  The lack of jobs and a deep sense of disappointment by South Africans of non-delivery of promises by the government, has created the frustration which is at the root cause of these attacks as the perception is that foreigners are taking opportunities from South Africans.

South Africans have to remain cognizant of the fact that African countries united to fight against the apartheid regime and that it was through their support that South Africa attained its liberation in 1994. In 1961, the Organisation for African Unity (OAU) now the AU, under pan-Africanist Kwame Nkrumah imposed sanctions, which closed Africa’s harbors and airports to South Africa because of the atrocities committed by the apartheid regime. Neighboring nations, Zambia, Zimbabwe, Mozambique, Malawi, Botswana, Tanzania, and Namibia supported South Africa’s liberation movements as they hosted South African exiles and the country owes much of its freedom to the support provided by other African nations during this period.  These African countries are repatriating their citizens and are planning on boycotting South African businesses and retailers that have set up operations in their countries.

It is sad that South African nationals are welcomed in other African countries yet the same courtesy is not being afforded to foreign nationals in South Africa. The whole world is watching in horror as a people that were once segregated and victimized for being different, are now the perpetrators of violence against migrants in South Africa.

The NEPAD Business Foundation does not condone the aggressive violence and looting that is being meted out by the people of South Africa against foreign nationals.

We, therefore, call for all NBF members, stakeholders, partners, and the South African people to support initiatives that are driving campaigns against the attacks such as Lead SA’s #NoToXenophobia (on Twitter) and Khaya Dlanga and Shaka Sisulu’s Durban Peace March. We also urge corporates to offer financial support to the organizations such as Gift of the Givers Foundation and Churches which have been working tirelessly to provide food and shelter to those affected by the xenophobic attacks.