The error you're seeing is due to a missing package. Just install
psycopg2 from pip.
After that everything should work since Mezzanine provides an
uninterrupted migration history for the transition between South and
Django migrations.
My general process for this upgrades is:
1. Upgrade the site to the latest Mezzanine version in the 3.X branch
(and run South migrations)
2. Follow Josh's guide to upgrade to Mezzanine 4
3. Make sure all my apps are now switched to Django migrations. The
0001_initial migration should describe the same schema as the the last
South migration.
4. Run "manage.py migrate --fake-initial"
At this point the migrations should run without issue and the site
should work (provided nothing is broken in your code due to
Django/Mezzanine upgrades).
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