Business looks to government for action on global labor mobility, finds KPMG International survey

• Favorable conditions, including tax incentives, are more important than availability of a well-educated workforce in determining business location.

• Preference for local workers, but foreign talent fills gaps, can improve global understanding and provides insight into new markets.

• Personal tax incentives, pension portability and flexible immigration controls among ideas favoured to attract foreign talent.

Tax incentives for businesses and migrants, cross-border portability of pensions and a significant relaxation of restrictions on immigration are important measures if governments are to attract businesses and foreign talent, a new survey from KPMG International has shown.

The poll covered 260 senior HR decision makers representing large multinationals in 12 countries, Australia, China, Hong Kong, Singapore, Japan, India, the UK, the US, Germany and Switzerland, including South Africa.

Asked where they prefer to locate operations, nearly three quarters (74 percent) of companies polled said that they look for favorable business conditions, including tax incentives, and then either train local workers or bring in workers from elsewhere.

A similar majority (80 percent) wanted to see governments implement policies to encourage business to settle in a country, and then allow them to build the workforce that they need by hiring from wherever the best talent can be found.

85 percent of South African respondents see tax incentives for business as a priority for governments wanting to attract foreign workers, but only half believe that incentives should be extended to the workers themselves.

Nevertheless, there is a large degree of support for a range of different individual tax measures, with low personal tax rates, targeted concessions for qualified migrants and even direct payments to migrants regarded as effective in attracting labour.

Beyond simply filling roles, many companies believed that hiring foreign workers improves the company, with 69 percent claiming that they help foster better understanding of global markets, and 76 percent saying that foreign workers help develop a valuable global mindset. But for nine out of ten this also meant that governments would need to collaborate on reducing barriers to immigration.

South African business holds a range of views on where the responsibility for attracting and keeping foreign labour actually lies; with 45 percent saying it lies with governments, 35 percent saying it lies with business as a whole, and a further 45 percent saying it is the responsibility of individual businesses. There is strong agreement, however, among 75 percent of respondents on the importance of tax policy as a factor in the decision making process when choosing a location.

Harmonisation of tax rates between countries is a popular option for 95 percent of respondents as a means of improving flows of labour, and 85 percent see measures to improve the portability of pensions in the same light.

65 percent said they preferred to locate where business conditions are favourable and then bring in labour. Of that 65 percent, 25 percent is made from the South African respondents. South Africa has the largest proportion choosing this option from all the countries surveyed, labour mobility is clearly a particularly important issue for this group.

The South African opinion is clear as many companies are integrating their business into Africa and most, if not all send middle management and senior management to start up the business in the new African countries.

Competition for good managers extends world wide. Among these countries are China, Singapore, Hong Kong, Australia, UK and Germany. They are all interested in hiring qualified foreign people and all share this problem with South Africa.

Companies would prefer to hire qualified people from wherever they can find them in the world, but in practice, 60 percent hire locals, not because they are necessarily the most productive workers, but because they are easier to hire than foreigners.

In South Africa, the skills shortage creates disconnect between what businesses want and what they are able to acquire. The requirements for businesses in South Africa cause additional layers of red-tape to the process.

Many companies are not operating as efficiently or productively as they might because of a lack of local talent. These companies are looking to fill the gaps with foreign talent. South Africa has a slight upper hand in this regard when investing in African countries, as South Africa has a tax treaty network with many African countries. This in turn eliminates a few barriers to employing foreign workers from South Africa.

Lastly, respondents were asked what they would consider the top three locations to be, now and in 5 years, if they had the opportunity to set up a business operation anywhere in the world. South Africa only received 1 percent for the 1^st year and 4% for the next 5 years. This implies a short-term lack of confidence in the country, but a slightly more optimistic, confident medium-term outlook.

South Africa should continue to market itself as the “gateway” to business in Africa and should continually strive to streamline its taxation and immigration policies to be more attractive to investors.

A challenge for governments seeking international investment will be the measures they take to develop the local workforce and attract foreign talent. At a time when global confidence is at a low point, it is a far-sighted action that will help countries ride out the storm and lay the groundwork for future growth.