Exploitation of South Africa's Marriage Law for Immigration Purposes Causes Concern

Protests against migrants are occurring in South Africa, fueled by dissatisfaction with unemployment rates, crime, and a prolonged period of weak economic growth. However, economists warn that the departure of thousands of foreign workers could harm the very businesses and labor markets defended by anti-migrant sentiment.

Impact on the Economy and Labor Market

Anti-migrant sentiments have intensified in recent months, culminating in a nationwide march on June 30th. Although the protests were largely peaceful, fears of violence prompted thousands of African migrants to leave South Africa. Their departure could lead to labor shortages in sectors long dependent on foreign workers, including farming, construction, delivery services, and small shops, and undermine the country's extensive informal economy.

Mpho Lenoke, a lecturer at the University of the Western Cape, noted that migrants typically find work in hard-to-fill roles such as retail, hospitality, transport, construction, and agriculture. According to UN data, around 2.6 million migrants called South Africa home in 2024, representing approximately 5% of the population. While recent data on their economic contribution is limited, OECD-ILO estimates from 2018, based on 2010 modeling, indicated that migrants contributed 9% to GDP.

Lenoke also emphasized that many foreign nationals start businesses that hire South African citizens and create competition, which benefits consumers. He added that international experience shows that restrictions on migrant labor often have unintended economic consequences.

Consequences of Protests and Financial Risks

The protests have already caused disruptions in parts of the retail sector. Informal spaza shops, which operate from temporary stalls, garages, or containers, are a vital part of South Africa's informal economy, supporting wholesalers, landlords, and local employees. For instance, the food delivery platform Sixty60, owned by Africa's largest retailer Shoprite Group, experienced interruptions during the recent protests, with company data showing that less than a quarter of its drivers were South African citizens.

The situation is exacerbated by weak growth. The World Bank lowered its forecast for South Africa's growth in 2026 from 1.4% to 1.0% in June, and Statistics South Africa reported that the unemployment rate reached nearly one-third in the first quarter, leaving 8.1 million people jobless. These conditions have fueled discontent regarding migrants.

However, a study by the International Labour Organization (ILO) based on labour force survey data showed that as immigrant participation in the workforce increases, employment opportunities for South African citizens also rise. Susanna Dittlefsen from ACLED noted that protests can disrupt economic activity through looting and business closures, as escalating tensions lead to supply chain disruptions, job losses, and restricted access to goods and services.

Investor Reaction and Regional Significance

Investors have so far reacted calmly but view the protests as adding a new risk factor. Kaan Nazli, a manager of emerging market debt portfolios at Neuberger Berman, stated that while this is a significant social issue in South Africa, investors have not yet seen a tangible impact from this phenomenon. Now, with these protests, it is becoming a risk.

The significance of the issue extends beyond South Africa, as the country is a major source of remittances in the region and the largest recipient center for working-age populations, according to ILO data. A joint report by FinMark Trust and the South African Reserve Bank showed that the outflow of remittances more than tripled between 2016 and 2024, reaching over 19 billion Rand in 2024. Nearly 90% of remittances to South Africa were directed to Lesotho, Malawi, Mozambique, and Zimbabwe, with Zimbabwe receiving over 60% of the total amount.