A significant number of skilled South Africans are leaving the country searching for greener pastures, says Izak Smit, chief executive of the Professional Provident Society (PPS).
Speaking to Moneyweb radio, Smit said that the reasons for leaving are numerous and can be positive – such as better career opportunities. However, he said that there are also several push factors, including the country’s high level of taxation, education, personal safety and health.
Smit said that ‘traditional’ expat countries are still the most popular destinations for these immigrating South Africans, with the UK, Canada, Australia and New Zealand typically at the top of the list.
However, in recent years this has shifted with the Americas and Far East Asia also population destinations, he said. Smit said not all of these South Africans are necessarily going to work for international firms.
He said it is increasingly common for someone to base themselves in another country but still work for a South African business.
Smit said that the decision to immigrate is also more granular than simply moving countries. It’s often opportunities in a particular city that they might move to, he said.
Taxation is a push factor
Apart from one of the highest rates of company taxation, South Africa also boasts one of the highest personal income tax rates globally, said Dr Brian Benfield, a former economics professor.
In an analysis for the Free Market Foundation, Benfield said that South Africa’s maximum marginal rate of 45% is the second-highest in Africa after Cote d’Ivoire.
“Every other African country has a lower rate of personal tax. How do” we intend to compete with African tax rates that average two-thirds of ours, and with several very much lower than ours? One should not forget that a further 15% VAT is paid almost every time a South African employee spends hard-earned, after-tax income.
Benfield said that having to pay twice for the same essential services of security, policing, schooling, health care, stable water and electricity supplies, and the like makes South Africa an ever less attractive jurisdiction.
“This distinct lack of appeal as a place of residence, employment or investment, is made yet more unattractive through crime and the incessant threats of further state confiscation of assets without compensation, the property already paid for with declining after-tax earnings.”
Benfield said that South Africa also has one of Africa’s highest company tax rates at 42.4% (28% + 20% on dividends).
“What hope do we have when our neighbours like Botswana levy only 20% and Mauritius just 15%? There are at least seven countries in the world where company taxation is zero. How do we possibly compete with them?
“There are another 15 countries where total company taxation is less than 15%. Many more have corporate tax rates of less than 30%. The overall global company tax rate average is less than 24%.”
Brain drain
Rand Merchant Bank chief executive James Formby has previously warned that the country’s post-lockdown economy is likely to be set back by a brain drain of skills leaving the country.
In a February interview, Formby said that the country is losing qualified and experienced people in their thirties and forties to positions overseas.
Data from the Boston Consulting Group shows that most people’s view of work has been changed by the pandemic, with the result that countries that have managed the pandemic well by ‘flattening the curve’ have grown in popularity as emigration destinations.
Desired emigration countries include:
- Canada;
- US;
- Australia;
- Germany;
- UK;
- Japan;
- Switzerland;
- Singapore;
- France;
- New Zealand.
“On an extremely positive note, 57% of respondents indicated that they would be willing to work remotely for a company that did not have a physical presence in their home country,” the group said.
Read: SARS risks pushing wealthy taxpayers to take their money out of South Africa
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