Semigration is creating a hidden tax problem in South Africa

 ·13 Oct 2021

The Bureau for Economic Research (BER) has published a new research note on the state of South Africa’s municipalities, focusing on why so many towns and cities fail to deliver on their mandates and basic service delivery.

While well-known issues such as lack of skills, corruption and revenue management are all identified as problem areas – the BER said that South Africa’s growing semigration push has also impacted tax collection and the capabilities of municipalities.

“Migration patterns can have a large impact on service delivery. While urbanisation gives households greater access to employment and services, it also presents specific challenges to urban development,” it said.

“Rural to urban in-migration means that cities need to acquire new land, build houses, and install services – all of which takes time.”

By comparison, ‘outmigration’ creates a different set of problems for rural municipalities since the people who leave are often more entrepreneurial or economically active in search of better wages, job opportunities, education, or the availability and affordability of housing or food, the BER said.

It can also cause rural municipalities to lose an important part of their tax base, it said.

“On average, the number of people living in metros increased annually by 2% between 2000 and 2020, while intermediate city municipalities (ICMs) experienced an average annual population increase of only 1.2%,” the BER said.

ICMs, previously known as secondary cities, are a subcategory of local municipalities classified by the National Treasury. Their population density, potential economic activity, and resource base suggest that good and efficient local government could unlock substantial economic opportunities in these hubs.

“Other local municipalities saw population growth of only 0.6% – far below the national average.”

Unfortunately, the population trends can, in part, be ascribed to the slower pace of economic development in local municipalities, creating a “push factor” for outmigration towards metros, the BER said.

“Local municipalities (including ICMs) have been slower than metros in creating new employment opportunities and are also characterised by higher rates of unemployment.

“Household growth further contributes to the service delivery challenges, with the number of households growing by 2.4% per year between 2002 and 2018 – this is above the population growth rate.23 The growing number of households lead to an increased demand for basic services.”

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