South Africa’s business community, which a few months ago was bracing for a major defeat for the ruling African National Congress (ANC), now seems confident of an election outcome that will see the ANC win less than 50 percent of the vote but avoid a coalition with a more radical party.
Opinion polls are unreliable, but they suggest support for the ANC may have risen to about 45 percent as party organisation works ahead of Wednesday’s general election. The same poll put support for the nearest opposition party, the Democratic Alliance, in the low 20s.
That would allow the ANC, which has ruled South Africa since 1994, to form a hastily organized coalition government without having to strike a pact with Julius Malema’s Economic Freedom Fighters, which are pushing for widespread nationalisation, or former President Jacob Zuma’s new left-wing party.
“The prevailing view is that the ANC will win around 45 percent of the seats and reach an agreement with the rest of the EFF, which would mean the status quo will be more or less maintained,” said political analyst Frans Cronje. “This will avoid a devastating outcome.”
The Johannesburg Stock Exchange rose on expectations of a smooth election outcome, with the All Share Index up 7.9% over the past three months, outpacing the S&P 500’s 4.4% gain.
JSE chief executive Leila Fourie told the Financial Times that an election result that shows policy certainty and a commitment to fiscal discipline would help markets.
“South African listed companies are significantly undervalued compared to other emerging markets.” [which creates] It’s an opportunity to generate profits for investors,” Fourie said.
Martin Kingston, chair of the steering committee of Business for South Africa, a coalition of business leaders who work with the government, agreed that continuity was best.
“The tide is starting to turn,” he said of private sector efforts to work with the government to address pressing issues such as power outages. “We’re seeing real progress and momentum is starting to build,” he added.
State-owned power utility Eskom has now been able to provide electricity for 50 days straight, and the government has opened up both the power and transport sectors to private investment. “If we maintain this approach, do I think we will see an upward trend? Yes, I do,” he said.
Kingston, the Rothschild chairman in South Africa, acknowledged “some disappointment” that President Cyril Ramaphosa had not achieved more during his time in office, but also acknowledged there were few other viable options.
While it might be a good thing in theory for the ANC to form a coalition government with a party that promotes more pro-business policies, “there are only a limited number of parties that fall into that category,” he said.
Mmusi Maimane, a former DA leader who now leads his own party, Build One South Africa, told the Financial Times that business had been too soft on the ANC. “I think business has become infatuated with the ANC because the ANC is in power,” he said.
Maimane, who is sceptical that Eskom will continue to supply electricity after the election, said a “better known devil” attitude was harmful. He said the ANC had got the policies wrong to attract foreign investment and encourage a private-sector led recovery.
Neil Froneman, chief executive of platinum company Sibanye-Stillwater and a board member of lobbying group Business Leadership SA, agreed a change of direction was needed. “We need new policies to stimulate growth and investment and address inequality,” he said. “The current leaders have shown they can’t do that and are too willing to compromise.”
Froneman said business had failed to hold Ramaphosa’s government to account. “If business had been more assertive, more demanding, more influential, they could have achieved a lot more,” he said. “Instead, we tried to be too politically correct, which made us appear weak.”
S&P Global Ratings said South Africa’s recent economic growth has averaged less than 1% per year during President Ramaphosa’s first term in office, “slower than expected.” However, it said the prospect of the ANC losing its majority was unlikely in itself to lead to a downgrade of South Africa’s credit rating.
S&P South Africa analyst Zahavier Gupta said a “baseline scenario” of the ANC winning 45-50% of the vote or just above 50% would lead to “policy continuity” and GDP growth would rise to 1.1% this year and average 1.3% over the next three years.
The problem, Gupta said, is that this is not enough to reduce unemployment: at least one in three South Africans of working age are unemployed.
