22 May 2024

5 min read

South Africa heads to the ballot box – Four burning questions answered for business stakeholders

Geopolitical analysis
South Africa heads to the ballot box – Four burning questions answered for business stakeholders placeholder thumbnail

As South Africa’s election day approaches on 29 May, for the first time since South Africa’s first democratic elections in 1994, the governing African National Congress (ANC) party’s prospects for securing an outright majority of the vote are at their lowest.

Growing criticism of the party over poor service delivery, continued allegations of corruption, and South Africa’s electricity challenges alongside a dampened economic growth forecast, have introduced significant uncertainty regarding the party’s performance in the upcoming ballot. These factors, in addition to ANC infighting and challenges from opposition players including the Democratic Alliance (DA), the Economic Freedom Fighters (EFF), and of course newcomer uMkhonto we Sizwe (MK), could see the ANC fall below 50 percent of the vote for the first time. Some South African watchers say this is a good thing, with a possible coalition government a sign of South Africa’s democracy maturing, bringing a much-needed wakeup call to the ANC. Others, however, caution that should less predictable and less palatable parties make up the missing numbers in government, the private sector could face negative consequences.

So it’s going to be a coalition government, then?

Not necessarily. The South African constitution does not set out specific details on the procedure for forming the government. Instead, it simply calls for the first sitting of parliament to be held no more than 14 days following an election. It is during this first sitting of parliament that the president is elected from among its members, and the president in turn appoints his or her government. Should no party win more than 50 percent of the vote, and there is a hung parliament, some form of cooperation between parties becomes a necessity to appoint the president, and thus form a government. This cooperation can either take the form of a formal coalition agreement, or a minority government that relies on ad hoc support from the National Assembly to pass laws. The ANC remains most likely to receive the lion’s share of the vote and thereby control proceedings, and it may be that it only needs minimal support from elsewhere in the chamber to get across the 50 percent mark. The possibility of a seat at the government’s table is a significant carrot, and Multi-Party Charter or not, several of the smaller parties may find an offer from the ANC too tempting to turn down. Arguably, agreeing to a legislative agenda and on power-sharing arrangements leads to a more stable and predictable policy environment than one where government policies rely on ad hoc support from the National Assembly. But it remains feasible that, rather than choosing to make wholesale concessions to bring another party into the fold, the ANC instead seeks out distinct areas in its legislative agenda to appeal to other parties and gain their support on votes as needed. Indeed, this may prove attractive to other parties too, who can remain untarnished by the government brush, while at the same time show their constituents that they furthered their interests where possible. While the business community might be quietly optimistic of an ANC/DA alliance that would guide the ANC to a more centrist and market-friendly direction, an ANC minority government might prove a suitably palatable alternative.

What happens if the ANC forms a coalition with far-left EFF?

This is arguably a nightmare scenario for business in South Africa. The EFF has an avowedly hostile position towards the private sector, calling in its election manifesto for nationalisation across several sectors including banking and mining, pushing for the forced expropriation of land, and leaning heavily on state-driven employment creation. Foreign investors and western partners would also baulk at the EFF’s calls for deeper alignment with Russia on the foreign policy front. But several obstacles stand in the way of an ANC/EFF coalition government, particularly one in which the EFF could push through an unadulterated legislative agenda in line with their manifesto. The EFF’s predicted 11.5 percent of the vote, combined with a largish ANC vote, could provide the necessary numbers for a government majority, however the EFF would still be left to play second fiddle. And, while the ANC may give up some key ministries as a sign of goodwill, it should still act as a brake on some of the EFF’s more radical policy initiatives. Policy differences aside, the ANC also would not necessarily look to the EFF as its most natural coalition partner, with the two parties needing to overcome a fractious history to form a working partnership, and the ‘dream team’, from a business perspective at least, of an ANC and more liberal DA marriage is not yet off the cards.

Will there be widespread rioting post-election?

The July 2021 scenes of widespread unrest in the urban centres of the KwaZulu-Natal and Gauteng provinces are a not-so-distant memory for most in South Africa. The three days of violence resulted in 350 fatalities and cost the economy over ZAR 50 billion (USD 2.75 billion). Many attribute the unrest to a fatal combination of orchestrated fearmongering and agitation among supporters of former President Jacob Zuma and genuine grievances among a population facing joblessness, poor government service delivery, and rising crime. With the latter challenges far from resolved, there is a real risk of further outbreaks of protests in South Africa. While protests tipping over into the scale of violence that unfolded three years ago cannot be completely discounted, many lessons have been learned since then. Intelligence sharing failures among the various security apparatuses have been addressed and, on the face of it, it is unclear if an electorate would be remotivated to take to the streets immediately after showing their dissatisfaction with the ANC at the ballot box. That aside, Zuma’s new MK party has repeatedly warned of violence should they not meet their misplaced target of a two-thirds majority after the vote, and South Africa’s security apparatus will do well to quell any attempts by MK members to stoke tensions and incite protests in Zuma’s strongholds.

All things said and done, are these elections really that big a deal?

Of course, any election that could usher in a sense of real change – for the better or worse – is a big deal. But it is clear that some of the hurdles in unlocking South Africa’s economic potential will take longer to resolve, and even longer if the parties that make up the government do not quite agree on the way forward. Reversing the recent deterioration of the business landscape – driven by persistent infrastructure woes and hesitant foreign investors concerned about corruption, crime, and the country’s economic prospects – is going to take decisive and constructive legislative reform. More than that, the government needs to demonstrate its genuine commitment to inducing change. The task is herculean: for example, unemployment for Q4 2023 stood at 33.1 percent, and youth unemployment (15 to 24 year olds) at 59.4 percent. Whether driven by private or public sector initiatives, turning this number around will take time. In the end, this election will matter less in terms of the winners and losers of the day, and more because it could serve as the clearest indicator that South Africans have finally lost patience with slow progress under the ANC, and now demand greater accountability and delivery from their government.

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