South Africa: Ruling ANC party faces biggest loss in support since the end of apartheid
On 29 May, South Africans will head to the polls to elect the 400 members of the National Assembly, which will then select a president. This contest is set to be the tightest in three decades, when apartheid ended and the ruling African National Congress (ANC) party first came to power.
The ANC is expected to win the vote, but fall short of a majority. Consequently, incumbent president Cyril Ramaphosa is expected to secure a second five-year term, but will likely need to form a coalition to do so.
There are round 70 different political parties and 11 independents running in the May elections. The ANC’s main contesters include the Democratic Alliance (DA), the Economic Freedom Fighters (EFF), the Inkatha Freedom Party (IFP) and the uMkhonto weSizwe Party (MKP).
Ahead of the election, the ANC has promised to phase in a permanent monthly welfare stipend for the vulnerable, to create 2.5 million jobs and to implement a national health insurance. If, as is expected, the ANC falls short of a majority and is forced to form a coalition, it could be forced to adopt more market-friendly policies.
The right-leaning DA, the second-largest party, has vowed to lift six million citizens out of poverty, to halve the crime rate and to stabilize public debt levels.
The populist, left-wing Economic Freedom Fighters (EFF), the third-largest party, wants to enlarge the size of the government and its involvement in the economy by, among other policies, nationalizing mines. It also intends to hike the corporate tax and has promised to solve the power supply crisis within six months by putting all coal-fired power plants back to work.
The right-wing, nationalist IFP—the fourth-largest party—wants to tackle unemployment by forcing companies to allocate at least 80% of positions to locals.
Meanwhile, the DA has enacted an 11-party pre-election alliance: The Multi-Party Charter (MPC). The coalition includes the DA, IFP and nine other smaller parties. The MPC aims beat the ANC, but polls suggest its vote share will not reach 40%. The bloc’s manifesto vows to decentralize the government, implement a zero-tolerance policy against corruption, make public spending efficient and foster an open market economy.
Lastly, the newly formed MKP is backed by former President Jacob Zuma and its manifesto, with a more radical socialist tone, plans to raise capital gains and inheritance taxes, nationalize mines and banks and expropriate land without compensation.
Any party that forms the next government should focus on implementing structural reforms to set the economy free from the various crises that have held growth hostage in recent years: Crippling corruption, rampant crime—taking away around USD 40 billion yearly from GDP, according to the World Bank—sky-high unemployment, mass poverty and the world’s greatest level of inequality. Moreover, recurrent power supply cuts and decaying infrastructure have further hampered economic activity in recent years. This, in turn, has led to weak public revenue, hurting fiscal consolidation and leaving the government unable to control public debt levels, which our panelists expect to peak in 2027 at around 80% of GDP.
With the ANC’s anticipated loss of support, the country will be entering unexplored waters, triggering jitters among investors, hurting the rand and investment in the short term. More positively, if the ANC sees the writing on the wall, it might get more serious about implementing much-needed structural reforms to get the economy out of the doldrums. Otherwise, social unrest might grow, threatening the stability of Africa’s largest economy..
The next government will face multiple challenges and should focus on implementing structural reforms to set the economy free from the various crisis that have held growth hostage in recent years: Crippling corruption, rampant crime—taking away around USD 40 billion yearly from GDP, according to the World Bank—sky-high unemployment, mass poverty and the world’s most unequal. Moreover, recurrent power supply cuts and decaying infrastructure have hampered GDP growth in recent years. This, in turn, has led to weak public revenue, hurting fiscal consolidation efforts and leaving the government unable to bring public debt under control—which our panelists expect it will peak in 2024 at around 80% of GDP.
With the ANC’s anticipated loss of support, the country will be entering unexplored waters, triggering the jitters among investors, hurting the rand and investment in the short term. More positively, if the ANC sees the writing on the wall it might get more serious about implementing much-needed, policies to get economic growth out of the doldrums. Otherwise, social unrest might grow, threatening the stability of Africa’s largest economy.
EIU analysts said:
“We expect the ANC to fall narrowly short of the 50% vote share needed for a majority in 2024, as an outright victory now seems improbable. The ANC will consequently try to co-opt some smaller parties (rather than the main opposition groups) to stay in power, leading to lengthy haggling but no major policy shifts.”
Economists at Fitch Solutions commented:
“The African National Congress’s dominance over the political landscape has been challenged since the party’s poor performance in the November 2021 municipal elections. We believe the party could lose its majority in the May 2024 general election, but this would be unlikely to result in major changes in economic policy.”