In May 2014, in a bid to make the immigration system work more effectively while protecting national security and the economic welfare of its citizens, the South African government unveiled new and more stringent immigration regulations. Among other things, the new rules stipulated that visas to South Africa must be applied for in person, can only be changed outside the country, and require entrepreneurs seeking to start a business in the country to commit to ensuring that South Africans comprise at least 60% of their workforce. The rules also replaced the previous Quota and Exceptional skills work permits with Critical Skills permits, yet failed to publish the list of critical skills covered under the amendments. This lack of specification has essentially hampered companies and individuals from applying for work permits under this new category.
The sweeping regulations caught many affected parties unaware and drew protests from businesses, the opposition party and the tourism and airline industries. Initial analysis focused attention on the adverse effects the implementation of these rules would have on businesses operating in the country. The government’s measures to encourage the employment of suitably qualified South Africans was expected to slow the growth of innovative companies looking for employees with skills that are difficult to acquire locally. Adrian Kitimbo of the Brenthurst Foundation, a Johannesburg-based think-tank, noted that there was a need to have a “home grown repository of such skills” but South Africa’s under-performing education system was not producing sufficient numbers of skilled personnel. Implementation of the proposed changes was therefore expected to adversely affect foreign workers whose expertise played a critical role in addressing short-term skills deficits in the labor market.
A year later, the potential effect of the amended visa regulations on businesses remains ambiguous. What is clear is the confusion around the channels of implementation of the amendments. The Department of Home Affairs (DHA) has had a long history of difficulties in dealing with an enormous backlog of applications under the previous system. As a result, many foreign workers had their work permits and visas expire while still undergoing processing. The new regulations, which complicate the application process and increase the time required for foreign workers to get temporary residence permits, critical skills visas, or inter-company transfer visas, have called into question the bureaucratic capacity of the DHA to administer a more complex immigration system. Furthermore, the new system demands an unprecedented level of coordination between a range of government departments, including but not limited to the DHA, the Department of Trade and Industry, and the Department of Labor which has not yet been achieved.
Training on the new regulations for the DHA staff in embassies abroad also seems to have been introduced in an unstructured manner following the introduction of these regulations. Consequently, embassy staff members in many countries are still struggling to fully understand and apply the new rules. Overhauling the country’s visa system is an endeavor that will require considerable coordination and systems change which unfortunately translates to longer processing times and a cumbersome application process which is further aggravated by the requirement for applicants to be physically present at the time of the application.
Implications for Executives and HR Directors
HR Directors of companies that employ highly skilled foreign nationals as part of the management teams overseeing their operations in South Africa face the challenge of navigating an unpredictable immigration system. Full implementation of the regulations would require companies to further anticipate their hiring needs and potentially adapt their strategies for on-boarding expatriate hires. Companies would also need to develop comprehensive skills transfer plans as prescribed by the new regulations which prohibit renewal of business and critical skills visas and limit their duration to 3 and 4 years respectively.
For each work permit application, companies will be required to obtain certification from the Department of Labor stating among other things that the salary and benefits for the expat hires are commensurate with those paid to South Africans in similar positions. The Department of Trade and Industry is expected to conduct a thorough assessment of the feasibility of the business entity as well as evaluate its contribution to the national interest of South Africa. At a minimum, the business in question should be able to show that it has invested R5 million into South Africa. A recommendation would then be issued to the DHA to facilitate processing of the application. The length of time required to complete this process remains indeterminate under the new regulations. The persisting uncertainty surrounding these changes begs the questions: what is the potential impact of a drawn out immigration process on a company’s performance and how should executives and HR Directors of companies operating in South Africa manage this risk?
To stay or go?
As South Africa-based multinationals and other firms move to expand into other countries in Africa, stronger leadership skills will be needed at the board and executive levels to spearhead this growth. Companies which have a significant percentage of foreign executives will ultimately have to determine if the increased bureaucracy inherent in the amended system, when weighed against the benefits of doing business in South Africa, warrant their continued presence in the country. Some companies may choose to relocate their senior leadership teams or regional headquarters to countries with less restrictive immigration laws. Others may be tempted to relocate their entire teams and manage their operations in South Africa on an ad hoc or virtual basis. For corporations looking to establish a presence in Africa, South Africa may no longer be the default option. Deutsche Bank, for example, has opted to relocate its Africa business hub to Dubai while still maintaining an office in South Africa. This is in contrast to moves made by Standard Chartered Plc and Barclays Plc to relocate their Africa businesses to Johannesburg from Dubai in recent years. While unclear if their decision was partly influenced by the amended visa regulations, the move by Deutsche Bank reinforces the idea that South Africa faces competition as location of preference for businesses in Africa.
Despite the current ambiguity surrounding the amended regulations, companies operating in South Africa cannot afford to take a passive stance towards the reforms. HR directors, in particular, can play an integral role in developing and implementing robust strategies for managing talent within the context of this new reality; whether this involves assessing and initiating a relocation to alternative office locations or proactively building a talent pipeline to conform to the government’s intended shift towards increased local hires.
Indeed, the disruptive immigration situation in South Africa may present a unique opportunity for forward-looking executives to drive meaningful and sustained changes in the way organizations operating in Africa approach the objectives of skills transfer, cross-cultural team integration, and other critical elements of talent management which are currently overlooked.