Trouble ahead if ANC stays dominant party – Oxford Economics

South Africa will continue down a troubling path if the ANC loses its majority but teams up with smaller parties to form a coalition in the upcoming elections.

This is according to Oxford Economics’ senior political analyst, Louw Nel, who recently published the organisation’s first of four scenarios for South Africa’s general election on 29 May 2024.

In the first scenario outcome, the ANC loses power but is close enough to the 50% threshold to have the upper hand in coalition negotiations. 

The IFP chooses to align with the ANC in exchange for influence and appointments in KwaZulu-Natal. 

The Patriotic Alliance, a party that hunts for votes in the coloured community, is part of the party, as are Al-Jama’ah, a party that plays on Muslim identity, and some minor parties with a leftist and Africanist inclination.

In this scenario, Nel said the government will not deviate from the ANC’s own policy stance.

He explained that the domestic economy’s problems are structural, exacerbated by a lack of investment and insufficient maintenance of critical infrastructure over the years. 

South Africa’s investment rate has been dropping since 2013 – for both the public and private sectors – limiting the economy’s capacity to generate sufficient employment growth and expand the supply of goods and services. 

“Low levels of private sector confidence, state capture and ineffective policies are among the key reasons for the decline,” he said.

In particular, state-owned entities, of which Eskom and Transnet are the largest and most important, have become hugely inefficient over the past 15 years.

Nel said this has severely curtailed the commercial prospects of businesses across the economy. 

The National Treasury has noted that over a third of the decline in economic growth after 2010 could be explained by the direct effects of reduced productivity from public utilities. 

“This means that South Africa forewent R2 trillion in economic activity between 2011 and 2019 as a result of underperforming SOEs, a figure that has since increased substantially,” Nel said.

No change expected

Some of South Africa’s most prominent business leaders have said South Africa’s national elections will not result in significant policy changes.

This is because they suspect the ruling ANC will remain the dominant political force, and its reform agenda will remain in place. 

Standard Bank Group CEO Sim Tshabalala said in the company’s annual report that its base case is that the country’s policies will remain largely unchanged. 

“Our base case is that policy continuity will be largely maintained after the election, including the current administration’s programme of structural reform, a path that will gradually improve South Africa’s economic performance,” he said in his CEO’s report. 

However, Tshabalala said that uncertainty in the build-up to the election will limit investment in South Africa and, thus, economic growth. 

The bank’s South Africa CEO, Lungisa Fuzile, echoed Tshabalala in saying that no fundamental changes are expected to come as a result of the election. 

“We do not anticipate that the election outcome will lead to a change in policy direction. Accordingly, the continued gradual policy reform should be growth-supportive over time,” Fuzile said. 

Outgoing Nedbank CEO Mike Brown said on the sidelines of the World Economic Forum earlier this year that the ANC will be central to any future government in South Africa. 

The collapse of state-owned enterprises and state-run institutions has led many to believe the country needs political change and that change will occur in this year’s elections. 

However, Brown does not believe the ANC can be dismissed as a political force, and its policies will continue to be those of the national government for some time. 

“If you stand back and look at it from a policy point of view, the polls may indicate the ANC is losing support, but central to any government going forward will be the ANC and the policies they currently have,” he said. 

The ANC’s policies are largely correct in addressing South Africa’s major challenges but have taken far too long to implement. 

“Certainly, as business, we would want accelerated delivery of government’s stated economic policies because that is what is hindering economic growth.”