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05 NOVEMBER 2016
Economists' call sparks real fear - not phobia

by Andile Khumalo: Chartered Accountant (SA), former investment banker, investor and operator of businesses in media, marketing, communications, technology and financial services.

Economists often tell us that “economic openness” - the extent to which factors of production are able to move freely between nations - plays a role in determining the growth and economic performance of a country.

In fact, my good friend and chief strategist at Citadel Wealth Management, Dr Adrian Saville, has this as one of the elements of his “six-pack” concept: six factors he found in common among countries that have consistently led economic development over three decades.

According to a paper published by Saville and his colleague at the Gordon Institute of Business Science, Dr Lyal White, titled “Ensuring that Africa Keeps Rising: The Economic Integration Imperative”, economic integration takes place through four main channels: goods and services in the form of international trade (T); financial integration via the movement of capital (C); knowledge and information (I); and the movement of people (P), from tourists to skilled workers.

This “TCIP framework”, developed by Indian economist Pankaj Ghemawat, demonstrates how cross-border interactions, economic openness and integration facilitate economic growth and socioeconomic

A recent illustration of the contribution that labour mobility can make to economic advancement comes from South Korea, where, in 2001, the government created a “gold visa” to allow more foreign information technology researchers to work in the country.

This initiative has been cited as one of the key reasons South Korea leapfrogged many advanced nations.

However, Saville and White admit that “with respect to Africa, to date researchers have largely sidestepped the key element of economic integration. Arguably, this is because of an uneven understanding of the true role and influence that economic integration plays.”

I would further argue that the trade, capital and information elements of the TCIP framework are much better understood than the benefits of the movement of people.

This is especially true of richer nations and how they relate with people from poorer countries.

I am very aware of the realities of xenophobia and the number of times it has reared its ugly head. In my view, what we call xenophobia is not often a phobia - an overwhelming and unreasonable fear of something.

I think it’s often a reasonable fear that comes from an honest place of vulnerability and threat, which provokes anxiety. Many South Africans see the “economic openness” of our borders as a threat to their livelihoods, jobs and business opportunities.

If you sift through the noise, the so-called xenophobic attacks have often been characterised by attacks on foreign-owned small businesses, and come from the frustration that foreigners, mainly from the rest of Africa, seem to be working longer hours for less pay, and at times at an even better output.

Here is the truth: the average South African cannot see the “enormous economic gains” of the cross-border flows of people, as touted by economists. For many, the free movement of people means an influx of foreigners into their country, and a strain on the resources that are limited enough for South Africans.

Themba, from Waterfall, called in to my radio show recently week saying: “When people emigrate from places like Zimbabwe, Nigeria and Congo, that will mean our country will struggle, because our population will increase and our clinics and hospitals will be overcrowded; more people are likely to go hungry as more people living in the country will be unemployed.”

I thought about how Themba must have agonised about calling in to share what he knows would have sounded “xenophobic”.

But this is no phobia. It is not an unreasonable fear of the foreigner. It is a pure, honest, unedited and genuine fear - one that needs to be acknowledged.

This article first appeared in the Business Times section of The Sunday Times

khumalo.co is the investment office of Andile Khumalo, a Chartered Accountant (SA), former investment banker, investor and operator of businesses in media, marketing, communications, technology and financial services. Visit our InfoCentre or website.

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