South Africa

Dawie Roodt’s election predictions

Efficient Group chief economics Dawie Roodt said the most likely outcome of the upcoming elections is a coalition between the ANC and a smaller party as the ruling party is set to lose its majority.

Roodt told Daily Investor that this would be a relatively good outcome in the upcoming elections.

South Africans are set to head to the polls on 29 May, where the ANC stands to lose its majority for the first time since it took power 30 years ago.

Roodt said the best-case, realistic scenario outcome for the upcoming elections is the ANC losing its majority but not getting less than 45%.

This would likely force the ANC to form a coalition government, with them likely to choose a smaller opposition party to partner with.

Roodt said, ideally, this smaller party would be ideologically more to the right than the ANC, which would see a shift in the government to become slightly more right-leaning.

This scenario is the most likely, with markets already having priced in an ANC-small party coalition outcome.

Roodt said this can be seen in the rand’s exchange rate and the performance of local equities, as the markets are pricing in a relatively positive outcome.

He said the worst-case scenario for the upcoming elections is for the ANC to lose its majority and receive less than 40% of the vote.

This outcome would force the ANC to partner with a larger opposition party, with the most likely candidates being the EFF or MK Party.

Roodt said this would be the worst-case scenario outcome for the elections.

Dawie Roodt
Dawie Roodt

Oxford economics

Research from Oxford Economics has shown that 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.

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, Oxford Economics 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.

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

In its next election scenario, Oxford Economics said an ANC-EFF coalition could see the rand reaching R21.50, escalate inflation and fuel prices, and potentially lead to a debt crisis.

In this scenario, the EFF leaves most governance to the ANC but prioritises a few policies in alignment with the more statist faction within the liberation movement. 

In addition, the relationship with the private sector becomes more adversarial.

The report said the first economic effect of the news that the ANC and EFF are forming a coalition government will be felt through asset prices.  

As soon as the news comes out that the ANC and the EFF have agreed to combine in government, there is a selloff of the rand in currency markets.

The rand/dollar exchange rate will weaken in the second quarter of 2024 and briefly breach the R21.50/USD level in the third quarter. 

While the rand will recover slightly from the overselling, it will remain lower than in the baseline scenario over the forecast period.

This is because private sector business investment could drop, and private sector investment growth flatline over the forecast period in response to investors’ expectation that the policy environment will remain uncertain at best and hostile to business at worst


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