INTERNATIONAL MIGRATION, IMMIGRANT ENTREPRENEURS AND SOUTH AFRICA'S SMALL ENTERPRISE ECONOMY

by:

C.M. Rogerson

Southern African Migration Project

Migration Policy Series No. 3

PLEASE NOTE: Readers are welcome to reproduce and reference
this article as long as appropriate acknowledgments are given.

EXECUTIVE SUMMARY

Since 1990 there has been a growing movement of foreign migrants and refugees to South Africa. The migrants have come primarily from South Africa's traditional supply areas, including many SADC countries. An increasing number, however, are from elsewhere in Africa and further afield. South Africa's new migration regime has generated considerable controversy within the country. The policy debate focuses on the implications of migration for the national labour market and for the development of new national immigration policy.

The best-documented form of migration by temporary workers is from surrounding African countries in such sectors as mining and agriculture. Less well-known are the migrants and new immigrants who have established themselves in the informal and small enterprise economy. This report examines and analyses the role of new foreign migrants working in the SMME sector of South Africa's major city. Johannesburg is of particular interest because the city is the focal point for much of the current international migratory flow into South Africa.

The study is based on a detailed survey of 70 immigrant entrepreneurs who have established small businesses in Johannesburg. These entrepreneurs operate their businesses in the inner-city of Johannesburg, an area which has experienced dramatic changes in its organization, residential complexion and business make-up over the last decade. Large parts of the inner-city have, in fact, been taken over by foreign migrants. Foreign owned SMMEs are now particularly a significant element of the changing economy and landscape of the Johannesburg inner-city. Several general conclusions can be drawn about foreign migrant involvement in the SMME sector:

• The kinds of businesses established by immigrant entrepreneurs fall within a relatively narrow band of activities. Most SMMEs are in retail or service rather than production activities. In our sample, business activities included selling curios, retailing ethnic clothes and foods, motor-car repairs/panelbeating and hairdressing salons. Other activities included the operation of restaurants, nightclubs, cafes, a music shop, several import-export businesses and one traditional healer.
  
  
• Among the group of production SMMEs, many are clustered in the clothing sector. Activities include the making of traditional African clothes, wedding dresses, and general tailoring activities.
  
  
• Distinct clusters emerged in the kinds of businesses operated by migrants from particular countries. Malawian immigrants tend to concentrate in clothes production or curio selling; Zimbabweans and Mozambicans in both motor-car repair and curio selling activities; and West Africans in ethnic businesses related to clothes, food retailing and the operation of restaurants.
  
  
• Typically, these new immigrant businesses are run by single, young, male entrepreneurs who work long hours. On average the entrepreneurs work a 64-hour work week for six days a week. Employees work similar hours.
  
  
• The entrepreneurs often endure considerable hostility towards both themselves and their businesses as a result of xenophobic sentiment and actions. Despite a sometimes difficult local climate in which to operate, most immigrant entrepreneurs express optimism and look to the possibilities to further expand their existing business enterprise in South Africa.
  
  
• Despite Johannesburg's tarnished popular image of crime, violence and economic crime, the entrepreneurs interviewed preferred to run their businesses there. Proximity to home (for SADC citizens), strong market potential and networks of family and friends are all important reasons. Among these immigrants Johannesburg enjoys a far more positive image than might be expected.
  
  

The study allows us to distinguish between two distinct groups of migrant-entrepreneurs, namely migrants from the Southern African Development Community (SADC) countries and non-SADC migrants. The research points to a number of marked differences between SMMEs operated by SADC and non-SADC migrants:

• Many of the businesses operated by migrants from non-SADC origins are integrated into and supported by wider international (non-SADC migrants) and regional (SADC migrants) migrant networks. Overall, some 65% of the sample operated like businesses in their countries of origin. Non-SADC entrepreneurs have wide international family and business connectivity including links to West Africa, Canada and the US and Europe.
  
  
• Most SADC entrepreneurs acquired their start-up capital from previous jobs in South Africa. Most non-SADC entrepreneurs financed their businesses with funds brought in from outside South Africa. Businesses run by SADC immigrants are smaller and seemingly less well-capitalized than those of their non-SADC counterparts.
  
  
• Part of the diversity and strength of the non-SADC run businesses derives from their exploitation of income niches as "ethnic businesses" and of Francophone culture in general.
  
  
• Immigrant entrepreneurs from non-SADC countries are better educated than those from SADC countries and have wider horizons in their business development strategies. Some 50% of non-SADC entrepreneurs had some university-level education. Three had Master's degrees and one was a qualified dentist. The majority of SADC entrepreneurs had a secondary school education.

The entrepreneurs face a number of problems operating their businesses. Most frequently cited were (a) access to finance and credit including difficulties opening bank accounts; (b) problems associated with acquiring visas and permits and dealing with customs (with SADC migrants experiencing greater problems); (c) harassment by police and local officials; and (d) being targeted by criminals and gangs.

The most important set of policy-relevant findings in this study relate to the role of foreign-owned SMMEs in job creation:

• The SMME's in the study had created a total of 227 job opportunities (or 3.33 jobs per business).
  
  
• Non-SADC businesses created more jobs on average (4.06 per enterprise) than SAC businesses (2.65), but both groups clearly created employment.
  
  
• Within SADC enterprises, some 53% of employees are from the home country. The figure for non-SADC enterprises is much lower (at 27%).
  
  
• Non-SADC enterprises, particularly Francophone-owned, tend to employ non-home country migrants as well but some 50% of employees are South Africans.
  
  
• Most entrepreneurs begin by employing relatives or fellow immigrants from the home country. After a period of consolidation and growth, they begin to employ more South Africans.
  
  

These small immigrant-run businesses are thus clearly contributing directly towards local job creation in Johannesburg for South African workers. Once the business is well-established the major beneficiaries in job creation are South Africans. In the long-term, given the continuing prosperity and growth of these enterprises, an ever-increasing proportion of South African workers will be absorbed into these small businesses.

In ameliorating the xenophobia that surrounds foreign-owned business, it is essential that national and local policy-makers appreciate and openly acknowledge the positive role - both existing and potential - of these businesses. In particular, this issue will be crucial in the context of future job creation and local economic development planning for Johannesburg. In fact, given the concentration of businesses and entrepreneurs' residences in the inner-city areas of Johannesburg, the potential role of these SMMEs in contributing towards the economic and social regeneration of decaying areas of inner-city Johannesburg must not be overlooked by Johannesburg city planner and policy-makers. The same could be true of other South African cities as well.