Skilled workers leave South Africa – this is where they go

Significant numbers of skilled South Africans are leaving the country in search of greener pastures, says Izak Smit, executive director of the Professional Provident Society (PPS).

Speak with Moneyweb radio, Smit said the reasons for leaving are numerous and can be positive – such as better career opportunities. However, he said there were several push factors as well, including the country’s high level of taxes, education, personal safety and health.

Smit said “traditional” expat countries are still the most popular travel destinations for these immigrant South Africans, with the UK, Canada, Australia and New Zealand usually topping the list.

In recent years, however, this has shifted with the goals of the people in America and Far East Asia, he said. Smit said not all of these South Africans would necessarily work for international companies.

He said that it is increasingly common for someone to settle in another country but still work for a South African company.

Smit said the decision to immigrate is also more detailed than just moving countries. There are often opportunities in a particular city that they could move to, he said.

Taxation is a push factor

In addition to having one of the highest corporate tax rates, South Africa also has one of the highest income tax rates in the world, said Dr. Brian Benfield, a former economics professor.

In an analysis for the Free Market Foundation, Benfield said South Africa’s maximum marginal rate of 45% is the second highest in Africa after Ivory Coast.

“Every other African country has a lower personal tax rate. How are we going to compete with African tax rates that are on average two-thirds of us and some are much lower than ours? It should be remembered that almost every time a South African employee spends their hard-earned after-tax income, an additional 15% sales tax is paid.

Benfield said that South Africa is a less and less attractive jurisdiction when you have to pay twice for the same essential services like security, police, education, health care, stable water and electricity supplies, and the like.

“This clear lack of attractiveness as a place to live, work or invest is made even more unattractive by crime and the incessant threat of further state confiscation of assets that have already been paid without compensation with falling after-tax income.”

Benfield said that South Africa also has one of the highest corporate tax rates in Africa at 42.4% (28% + 20% on dividends).

“What hope do we have if our neighbors like Botswana only collect 20% and Mauritius only 15%? Corporate taxation is zero in at least seven countries around the world. How can we compete with them?

“In a further 15 countries, the total tax rate for companies is less than 15%. Many more have corporate tax rates less than 30%. The global corporate tax rate is less than 24% overall. “

Brain drain

Rand Merchant Bank’s chairman James Formby previously warned that the country’s economy is likely to be set back after the lockdown by a brain drain of skills leaving the country.

In a February interview, Formby said the country was losing skilled and experienced people in their thirties and forties to positions abroad.

Data from the Boston Consulting Group shows that most people’s view of work has changed as a result of the pandemic, with the result that countries that “flattened the curve” coped well with the pandemic have gained popularity as emigration destinations.

Desired emigration countries are:

  • Canada;
  • US;
  • Australia;
  • Germany;
  • Japan;
  • Switzerland;
  • Singapore;
  • France;
  • New Zealand.

“On a very positive note, 57% of respondents would be willing to work remotely for a company that has no physical presence in their home country,” said the group.

Read: SARS Risks Enticing Wealthy Taxpayers To Get Their Money Out Of South Africa

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