Jul 07 2010 13:30 Helena Wasserman
Johannesburg - Many South Africans seeking a land of milk and honey in the UK are finding misery and Marmite instead.
While the majority of the estimated 250 000 to 500 000 South Africans in the UK are expected to stick it out, many are returning to SA amid weak employment prospects, alarm over the effects of staggering public cuts and tax increases.
The new coalition government has asked state departments to prepare for spending cuts of up to 40% over four years (although 25% is more likely) in an effort to tackle the country's budget deficit (11% of gross domestic product, compared to 9.9% in the US and 7.3% in SA), the highest in the European Union.
But an estimated 1.2 million people may lose their jobs over the next five years as a result.
Youth unemployment is already at its highest level in 17 years. One in five 18-year-old youths are not in education or jobs, and claim state welfare payments.
The effect of the government's austerity measures will be felt across all age and income groups.
According to estimates of the UK's Higher Education Careers Service, the jobless rate among graduates could reach 20% in the next five years (unemployment for highly skilled professionals in SA is 1.4%, according to a recent survey).
Even for those who get to keep their jobs, tough times are ahead.
While some state functions, like the employer of Anton Böhmer, a South African who works for the National Health Service, have been ring-fenced from cuts, he is facing a salary freeze for the foreseeable future.
"It is not getting better," says Böhmer, who plans to return to SA.
On top of that, tax changes will take their toll.
While the corporate tax rate has been cut, VAT will rise from 17.5% to 20%, the national insurance levy has been hiked and government has scaled back personal tax allowances and child tax credits. Capital gains tax has been increased to 28% for the higher income groups.
The budget cuts are expected to shrink the economy by 6% over the next three years, hurting an already faltering UK economic recovery and weak job market.
Rebecca Davis of the SA Business Club in London says members have particularly noticed a disillusionment with the labour situation among South Africans in the UK.
"At the SA Business Club we've observed over the past year a definite trend of reverse migration.
"Disenchantment with unemployment, or with poorer employment prospects than imagined, in combination with positive reports about the 2010 FIFA World Cup from South Africa and a feeling that it's generally a good place to live right now, are definitely motivating this move."
According to a recent Adcorp survey, about 39 000 South African job-seekers returned from foreign countries over the past year. This figure is expected to rise to 120 000 as foreign work contracts expire.
Mike Jackson, CEO of PPS, says his company - which offers financial services products to graduate professional - has seen trends among its members that indicate they are considering returning home.
"We have seen an increased interest from our overseas members to maintain and upgrade their benefits, which can be a good indicator that they intend returning to South Africa.
"Also encouraging is the fact that we have seen a noticeable decrease in the number of our members cancelling their policies due to emigration," says Jackson. "This suggests that many South African graduate professionals are not only more optimistic about the future in South Africa but are also seeing improved career prospects here as well."
But one SA-born investment banker in the City, London's financial centre, says the increase in capital gains tax is making some South Africans hesitant to sell up and move back to SA.
Many South Africans would kill for UK problems
He thinks the crisis will affect South Africans living outside London more. "London is a country on its own."
Also, many South Africans would kill for the UK's problems.
Schools remain free and healthcare too, says Adri Kotzé, a freelance writer and mother of two. State benefits remain lavish to South African eyes, with some unemployed couples able to fund overseas holidays for their families on "job-seeker" allowances and child benefits.
Kotzé plans to stay on in the UK.
"We arrived in the midst of the financial crisis – if we can survive that, we'll survive (Chancellor of the Exchequer) George (Osborne), the Axeman."
A thirty-something South African living in London, Maia Suhr, says she also plans to remain in the UK and – apart from VAT – the austerity measures won't affect her.
"The main reasons I won't go back to SA are security concerns and the fact that I can travel easily from here."
For those who are thinking of returning, there are a number of considerations.
The local labour market, particularly in financial services, may be tougher than they expect.
Some expats who fled the banking implosion in London during the financial crisis have struggled to find a job, Craig Thompson, SA director of international recruitment agency Michael Page, recently told Fin24.com.
South African expatriates also need to ascertain whether their life and healthcare benefits are still applicable, says Jackson.
"Insurance cover can vary substantially between countries and it is important to bear in mind that switching providers typically involves waiting periods on new medical insurance, critical illness and disability policies as well as pre-existing condition exclusions, which may apply to some insurance policies and medical insurance.
"It is important for anyone who is considering returning home to engage with a qualified financial adviser, who will be familiar with all the challenges entailed with helping someone returning from overseas and how best to structure the various policies and benefits," says Jackson.