There is no South database module 'south.db.postgresql_psycopg2' for your database

Try pip uninstall South, then you will see if your application is 1.8 ready.

Please note that South is now end of lifed in favour of the ​new migrations framework in Django 1.7, which is based on South but with significant design improvements.

For more details about Django migration framework you can refer release note - https://docs.djangoproject.com/en/1.9/releases/1.7/#schema-migrations

South will not work with Django 1.7; It supports only versions 1.4, 1.5 and 1.6.

This happened to me when I upgraded various modules using pip and one of the dependencies automatically upgraded Django to the current version (1.8). You might just check what is your current Django version (pip freeze) and if it's 1.8 just downgrade to 1.6 line (pip install -U "Django<1.7").