Impact of Xenophobia on the Economy

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Impact of Xenophobia on the Economy
Walk For Peace And Unity

Various studies have indicated that there is no precise definition of the term xenophobia. Nonetheless, it is widely accepted that this word is a strong distaste or fear of foreigners and strangers, or of people from other nations. According to some definition, xenophobia is derived from two Greek words, “Xenos” and “Phobos,” which mean “stranger” or “foreign,” and “fear” respectively.

Xenophobia was referred to as a manifest of perceptions and relations of an “in-group” towards the “outgroup,” with an added suspicion of its activities, the fear of losing one’s identity, aggression, and the desire or need to eradicate its presence to safeguard a presumed perception of purity. Other definitions offered by researchers and scholars state that xenophobia can be demonstrated in the form of “uncritical admiration of a different culture” where the culture is presumed “unreal, stereotyped, as well as exotic quality.”

One of the most famous countries for xenophobic attacks is South Africa. Despite the absence of data that can be directly compared with South Africa, Xenophobia in this country is perceived to have tremendously increased after the inception of a democratic government back in 1994. From a study published by SAMP (Southern Africa Migration Project), the government, in its effort to mitigate the past divides and create a formidable cohesion among its citizens undertook an inclusive as well as an aggressive nation-building project. ⁱ  An anticipated outcome of these efforts has been the growth of dislike and intolerance to foreigners. Violence against African refugees and outsiders has become common, and suspicion and hostility separate the communities.

How foreigners are perceived

A study conducted in 2001 indicates that immigrants in South Africa are linked to crimes such as drugs, human trafficking, and prostitution. The immigrants are believed to bring illnesses such as HIV/AIDS, take their jobs and increase the rate of crime.

A similar view was also shared when Crush suggested that South Africans do not have any direct contacts or connection with foreigners and thus lack experience of them. According to his study, it was revealed that only 4% of South Africans interact with foreigners. The remaining 80% are likely to have adverse feelings towards people from other countries. If citizens can interact more with foreign nationals, there are high chance they would peacefully coexist. ⁱ ⁱ

Foreign Direct Investment

The recent xenophobic attacks have had a great negative impact on the economy of countries with these unrests such as South Africa, stifling the growth of local businesses, foreign developments, tourism, and affecting the survival of citizens where such attacks have occurred.

According to a report compiled by PwC, some companies in South Africa are already considering expanding or are already expanding their operation across Africa. ⁱ ⁱ ⁱ  This reports also indicates that foreign firm looking to invest in Africa are highly likely to utilize South Africa as a platform to explore other business opportunities in most parts of the African continent. The recent xenophobic attacks have threatened to undo the restoration that was already done after the 2008 attacks. As a result, the attacks have lowered the confidence of foreign investors due to their fear of losing their investment as well as their lives. In turn, this has lowered the Foreign Direct Investment not only in South Africa but in other countries where xenophobic attacks tend to occur.

Foreign Direct Investment can be in the monetary form (equities) or in the physical form which may include investments in land, operations, and buildings. FDI is critical as it contributes to the economic growth of any nation in income, employment, tax, and infrastructure. In basic Economics, this is how it works:

  • A foreign country establishes a physical operation in another country, thereby creating employment opportunities for the local citizens who are able to earn an income to spend on products. As a result, this increases the revenue of that company, the GDP of the country increases, and economic growth is achieved.

Outcome of Xenophobic attacks

The social security and sociopolitical status of countries with these attacks (such as South Africa) can easily be downgraded by the Rating Agencies which is usually bad when it comes to Foreign Direct Investment. As a result, exports could be sanctioned by other nations, creating a huge burden on that country’s economy. In turn, this leads to a huge multiplier effect: loss of employment, loss of production, loss of income, and subsequent decrease in the standards of living.

In addition to that, other countries can make it impossible for South Africans to obtain Visa’s when they travel to other nations, making it slightly difficult to do business. It is imperative to remember that the emerging economies are highly volatile. Any acts such as xenophobic attacks could have a great impact on the economy of any country.

Impact of xenophobia on tourism

Tourism has developed to be a massive economic and social force in the world. Tourism is a great earner of foreign exchange and contributes greatly to a country’s balance of payment. In today’s economy, tourism serves as a generator of employment and a multiplier of income. Xenophobia has been a significant barrier to tourism achieving it social and economic objectives. Safety is a vital prerequisite in attracting international tourists. Xenophobic attacks place tourism in an awkward place because violence scares tourists away.iv Since tourism aids in building the image of a country, this can easily be damaged by xenophobic attacks, hindering international relation. The attack on foreigners destroys the economic structure of a nation built by tourists and minimizes socio-economic benefits that are accrued to a nation as a result of tourism.

Impact of Xenophobia on the Economy
Exiles finds themselves out in the open again after several displaced families were evicted from a shelter in the vaal, south africa.

Suffering of township economies

The reduction in FDI leads to eradication of competition which in turn affects the micro-economy of townships in nations affected. As a result, commodity prices rise making it difficult for the low-income earners to afford basic products.

During xenophobic attacks, local citizens tend to invade supermarkets and spaza shops that are owned by foreigners. People who own similar businesses are able to trade without competition, presenting great problems to the consumers. Although traders attribute the increase in prices to the increase in electricity tariffs, the obvious reason during xenophobic attacks has been the weakened competition.


Both the foreigners and local citizens are victims of an irresponsive and weak political economy; yet, for people to get rid of xenophobia and its consequences, a comprehensive approach is necessary to encourage the socio-economic progression within the affected regions such as South Africa.

To stop xenophobia, a comprehensive approach is needed for a successful integration of foreigners into the society. No economy or country that can progress in isolation as profit, money and economic sustainability is globalized. People who attack foreign nationals who come to their country to seek refuge or conduct businesses do not realize that such actions are affecting their economy in a negative way.

Integration can be attained by ensuring that the migrants’ right are enforced and respected. Continued and extensive collaboration is needed among stakeholders and institutions in the private, public, civil sectors, and academic sectors to restore the damage created and prevent the occurrence of similar events in the future.


References :

[0]Dodson, B. (2008) Gender, Migration and Remittances in Southern Africa. SAMP Migration Policy Series No. 49, Cape Town.

[1]Crush, J. (1999). The Discourse and Dimensions of Irregularity in Post-Apartheid South Africa. International Migration, 37(1), 125-151.

[2]Mawere, M. (2016). Myths of Peace and Democracy? Towards Building Pillars of Hope (1st ed.). Oxford, CAMEROON: Langaa RPCIG.

[3]Adeleke, B., Omitola, A., & Olukole, O. (2008). Impacts Of Xenophobia Attacks On Tourism. IFE Psychologia, 16(3).


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