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The term ‘brain drain’ refers to the international transfer of human capital resources, and it applies mainly to the migration of highly educated individuals from developing countries, like South Africa (we’re still a relatively young democracy), to developed, wealthier countries.
Despite the high cost of emigration, especially if your family is tagging along, more and more skilled citizens are jumping on a plane and setting up elsewhere, leaving South Africa at a deficit.
As of October 2020, statistics showed a 70% increase in enquiries over the course of the previous two years on the process of relocating, with a focus on New Zealand, Australia and the UK.
This is problematic for several reasons, not least of which, as Rand Merchant Bank Chief James Formby told CapeTalk, because in the fourth industrial revolution South Africa needs to retain those with specialist skills to remain competitive on a global scale.
While hard data is not available to concretely determine the full extent of emigrations, the estimated number of people leaving per year is roughly 23 000, with anecdotal evidence suggesting that it’s higher.
South Africans, according to CapeTalk’s The Money Show host Bruce Whitfield, aren’t leaving for economic reasons. Rather, they are driven by disillusionment with the current state of the country, citing load shedding, along with safety and security, as some of the primary reasons.
In a separate interview, Formby told BusinessDay, that a majority of qualified and experienced people jumping ship are in their 30s and 40s.
As reported by BusinessTech, one of the most concerning effects that the brain drain will have on the country is a “shrinking tax base”, which is largely bolstered by the middle to upper classes – the pool from which a majority of emigrating South Africans are drawn.
Jean du Toit, head of tax technical at Tax Consulting SA, says that there are only “a handful of South Africans who contribute to the tax pool”.
Between 2017 and June 2020, this sector of the population declined from 6 million to 2,7 million, amounting to a 55,73% reduction.
“In terms of the 2020 Budget Review, roughly 90% of the income tax payable by individuals are paid by the middle-class and above – as defined in terms of the survey.
“This puts the result of the survey into perspective; in a three-year period, our personal income tax base appears to have more or less halved, and it is likely that a large chunk of that reduction occurred after February 2020.”
Those numbers are pretty darn worrying.
You can listen to the full CapeTalk interview with Formby below:
[sources:businesstech&capetalk&businessday]
