Forget the myths about foreigners

01 March 2015 - 02:00 By Caroline Skinner and Jonathan Crush

As reports surfaced this week of a new wave of attacks on foreign migrants working in the informal economy, this time in Bellville and Philippi in Cape Town and near Secunda in Mpumalanga, it is clear that the problems that bubbled over recently are far from resolved.

The official response from Small Business Development Minister Lindiwe Zulu was to suggest that "foreigners" had certain underhand "trade secrets" that they should be made to share with their South African competitors.

This suggestion is akin to insisting that big formal retailers such as PicknPay share their business strategies with their competitors.

It is also off the mark because new research shows that far from resorting to underhand business practices that give them a competitive edge, foreign migrants are simply particularly hard-working entrepreneurs who employ similar techniques to those of formal retailers.

This finding is among many drawn from extensive surveys with foreign informal business owners in Johannesburg and Cape Town by the International Migration Research Centre, alongside researchers at the Southern African Migration Project, the University of the Witwatersrand and the University of Cape Town.

The research has just been completed, and the full results will soon be available.

Here is an early snapshot of the findings:

Foreign migrants create jobs. The Johannesburg study found that foreign informal operators were twice as likely as South Africans to employ people. Four in every 10 employees in foreign-owned businesses interviewed in Cape Town and Johannesburg were South Africans;

Foreign migrants pay rents to South Africans. Six in every 10 of those interviewed in Cape Town and four in every 10 in Johannesburg paid rent to either a South African landowner or the municipality. Together, the 500 migrants interviewed in Cape Town paid just under R10-million a year in rent; and

Foreign migrants source most of their goods from South African formal shops and contribute to the tax base. The vast majority of Johannesburg and Cape Town interviewees obtained their supplies from formal economy wholesalers, supermarkets and South African factories. They are paying VAT on these goods.

Taken as a whole, the study suggests that foreign-owned informal businesses are interwoven with the local economic landscape, and are making a contribution that has not been sufficiently acknowledged in recent debates and policy pronouncements.

Migrant entrepreneurs are celebrated in many countries for their contribution to economic growth and employment creation. In South Africa, the opposite appears to be true, as the ongoing violence against migrant businesses makes all too clear.

In fact, the problems foreign entrepreneurs face are similar to those faced by their South African counterparts - too many competitors, lack of access to credit, and theft and other crimes. In addition, as the new wave of violence has painfully demonstrated, they experience frequent verbal and physical abuse because they are foreign.

The truth is, most of the competitive strategies employed by foreign businesses simply follow the example of South Africa's formal retailers. For example, they tend to:

Have long opening hours. Most migrants and refugees work extremely long hours, and their spazas, for example, often open at 5am and close at 11pm;

Take care with sourcing goods. While some buy collectively from wholesalers, the importance of bulk buying is often exaggerated. Rather, most foreigner shopkeepers carefully compare prices of wholesalers and often share transport costs;

Have a loss leader, which involves selling a key commodity such as bread below its market cost to stimulate sales of more profitable goods; and

Rely on high turnover and a low mark-up on goods for profits. Even then the profitability of the foreign-owned business is often overestimated: the majority of Johannesburg migrant business owners, for example, reported profits of R5000 or less a month.

This suggests that there is nothing unique about the business practices and strategies of migrant entrepreneurs.

Creating platforms where foreign and South African entrepreneurs can engage with one another would be a positive step - but Zulu's plan for a detailed "sharing of business practices" is no answer. Rather than focusing on regulating foreign businesses and telling them to share their secrets, the government would do better to focus on putting in place policies that support the informal economy.

While initiatives such as that in Gauteng to revitalise township economies are promising, they should not exclude the foreign entrepreneurs, who contribute a great deal to the South African economy.

Crush is an honorary professor at UCT and director of the Southern African Migration Project's Growing Informal Cities project. Skinner is a senior researcher at the African Centre for Cities, and urban policies director for the global research policy network Women in Informal Employment: Globalising and Organising. Thom Pierce, a social documentary photographer, was commissioned to produce a series of images that reflect the experiences of foreign migrants working in the South African informal economy

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