South Africa: Elections 2024 | ‘Moonshot’ election scenario

(J.VND)

Hi. I’m Jee-A van de Linde. This is Louw Nel.

And today, we’ll be looking at the final scenario in the series, which is the so-called moonshot government.

Louw, this outcome is probably the least likely out of all the scenarios, but I do feel it’s an interesting one. How should we look at it?

(L.NEL)

It’s indeed interesting, but also quite fanciful. You’ll recall that Moonshot Pact was first mooted by the leader of the official opposition, John Steenhuisen, when he was re-elected leader of the day and then later was formalised in a summit held in August last year.

At inception, there were seven parties that signed up to what was then renamed the Multi-Party Charter. That group has now grown to 11. But if you do look at the 11 constituent parties, currently only four of those have representation in Parliament and only one of those smaller
or debutante parties that are being Action SA, has any real prospect of getting representation in parliament. So you really are looking at a center, center right coalition of four significant parties with maybe a fifth, that being the ACDP making up the making up the call.

At last count, in terms of the polling, we were looking at them polling at the 33 at its height, 36%, which is a long way of forming a government. And if you look at how these parties did in the most recent election, that being the 2021 local government election, about a third of the vote. So in order for them to get over the line, there’s going to be a very significant shift in voter behavior in order for the NPC to succeed. But considering what an NPC government might look like is indeed interesting.

It would of course be dominated by the DA the DA we’ll get the lion’s share of the votes and therefore will dominate that coalition. But the core parties and the coalition will really only be negotiated after the election once it’s seen how the election is shaken out.

So the core parties, those five I mentioned earlier, are broadly aligned and in agreement on at least economic questions. So there’s an agreement that it’s small government and greater public sector participation. But there are other issues where they’re going to run into headwinds.

The Inkatha Freedom Party, for instance, has got a very, very different perspective on traditional leadership and the land reform question than the DA. For instance, the African Christian Democratic Party is extremely conservative and some of their more conservative positions will sit badly with them. The DA’s more liberal values. And then, of course, there’s the perhaps the biggest question of all is how does the D.A and Action SA, how do they work together? Those are two parties that fish for votes in the same waters. And Action SA, I think, has aspirations of taking over where the where the DA is left off. And so there’s a there’s a difficult relationship there. The Action SA’s leadership and its leadership core are also former DA public representatives and staffers.

There’s a certain amount of animus there as well. it is fanciful, but it is interesting. And despite being a long shot, how do we how do we see it shaking out on the economic front?

(J.VND)

Yeah, from an economic perspective, this would be a positive outcome. So essentially in a government gets out of the private sector’s way and private sector investment increases significantly.

In fact, one key aspect of the scenario is when you look at fixed investment as a percentage of GDP, that starts to increase over the forecast period, which, you know, hasn’t been the case over the last decade and a half. There’s a broad improvement in investor confidence. This is reflected in a stronger rand and favorable government bond yields, economic activity improves, and real GDP growth reaches around 3% in the near term, the unemployment does come down a bit, but not fast enough.

While the inflation outlook remains benign over the short to medium term, if we, you know, look at state finances that fit government investment that I spoke about does reflect on the budget balance and together with the continuation of social support, it means that your fiscal deficit narrows only gradually over the medium-term in terms of government debt that peaks at just over 80% of GDP.

Again, you know, this is better than what we currently see in our base case. So I guess, you know, through that lens, you can say things look better. But, you know, one sticking point with the scenario and you’ve alluded to this would be the government’s ability to continue to pull in the same direction. And so later on in the forecast period, know things start to unravel a bit and those initial economic gains are not sustained over the long run.

(L.NEL)

There is, of course, one other concern that being that the market is going to be slightly spooked by an outcome that it’s not anticipating at this point. But then, of course, there’s also the big question of how would this scenario play out?

The ANC has been in power since 1994, and this will be the first time they’ll be out of government in 30 years and translating into hundreds of people suddenly losing their jobs and having to vacate positions.
And it creates another element of uncertainty and risk. And so that’s that’s another factor that needs to be taken into account.

It would be a seismic shift and one that will test South Africa’s democracy. I think we’ll leave it there. This is, of course, our fourth and final scenario. I suspect we will reconvene then at the conclusion of the elections and discuss the final results.