South Africa: Elections2024 | ‘ANC & DA’ election scenario

(J.VND) Hi, my name is Jee-A Van Der Linde, and I’m joined by my colleague Louw Nel. We’ve been exploring a couple of scenarios ahead of the upcoming elections in South Africa. And today we’ll be looking at what the potential DA, ANC coalition might look like. Now, Louw, the Democratic Alliance is the official opposition to the ruling African National Congress. And I’m wondering, you know, how align are these two parties? Can they actually work together?

(L.NEL) Well, that’s the million dollar question. The DA of course, has been an opposition in one form or another to the ANC for 25 years. And so there’s significant animus between those two parties. And the two parties do like to emphasize just how very different they are. Sometimes those differences are not really as enormous as one might imagine.

And so there is a way for the two parties to work together. What we don’t have with the ANC, DA and that we had last week, we discussed the ANC, EFF scenario is we have no example of how such a such a collaboration would work. There’s been no instance where the two parties have worked together local government election, local government level.

And so one might imagine then, if the two parties as per our model, perform honestly speaking, as poorly as they do, but still manage 240 seats between the two of them, of the 400 in the National Assembly, they would be able to govern quite comfortably. They would be able to nominate a speaker and a president and put together a government quite easily, provided that they can come up with a compromise cobbling together a cabinet.

This is not going to be an easy exercise. There are some ANC ministers that may continue in their roles because their clashes with the DA in the past have been have been minimal. One can imagine finance minister in a court and one that might be able to continue. It’s good for continuity. He hasn’t really bumped heads with the DA too much, and they don’t really disagree with him too much.

But then there are other ministers, like perhaps incumbent Police Minister Bheki Cele and then ANC chairperson, current minister of Mineral Resources and Energy within Mantashe, which the DEO would find very difficult to work with. Of course, the idea wouldn’t enter into such an arrangement without having some really significant concessions. One of those would not just be related to Cabinet positions, but would also have to be a commitment from the ANC that is going to continue on a liberalisation path as it’s done with the energy sector in South Africa, move away from its statist impulses and start working closer with them with the private sector.

There have been some examples of this already, as we saw during the COVID 19 pandemic. Cyril Ramaphosa reached a hand out to the private sector, and then last year he established these priority workstreams with prominent CEOs. The DA would demand that that sort of initiative continues and is in fact accelerated. But there are going to be other areas where they’re going to find it very difficult to find common ground.

And these might be areas mid-table kind of just ignore the differences for now and muddle along. They’re going to be issues around black economic empowerment, for instance, the social grant infrastructure, public sector wages, land reform, issues like that, where the two parties are going to find each other at cross-purposes and find it very difficult to collaborate. But in the meantime, I think that they are this there’s more than enough there in order for them to work together.

And there’s plenty of pressure on both parties to to try and make it work. The private sector, for one, is putting a lot of pressure on the the Democratic Alliance to try and make it work because they see it as a as a best case scenario. I’m not so sure what to what would you say would that be a best case scenario for Africa?

(J.VND) Well, you know, from our perspective, we view this scenario as generally positive. So after everything is settled, so to speak, the rand should start to strengthen. And with that, inflation expectations come down and you end up with, you know, relatively low and stable inflation over the short to medium term. One key feature of this scenario is the notable uptick in private sector investment, especially in things like renewable energy.

And so, you know that that ends up being a salient driver of growth over the medium term. But, you know, the economic growth doesn’t accelerate fast enough to have a sustainable decrease in your overall unemployment rate. So that remains that lofty levels. And, you know, it’s important to stress that you can’t overlook the economic realities of South Africa.

You know, things like demand for social support. You know, it doesn’t just disappear overnight. And as a consequence, you end up with a budget deficit remaining fairly wide over the medium term and doesn’t prove, you know, relative to our baseline. And one reason for this is because of, you know, with the DA involved, you expect to see less, you know, more spending in general and that more gets done.

You know, ultimately those positive developments start to reflect at a later stage. So, for example, if you look at government debt as a proportion of GDP, it stabilizes at just over 80%, which again, is better than what we have in our baseline information. I’d say, you know, with this scenario we see a general improvement in investor confidence. There’s more certainty and, you know, the economic outlook just is better.

(L.NEL) And, you know, ultimately that is positive from a credit rating perspective. And it should probably be said that ANC DA government has got a better chance of going the distance than an ANC, EFF government, as we had discussed last week, which brings us to our fourth scenario, which we’ll touch on next week. We hope you can join us when we discuss the prospects of the so-called multiparty charter as led by the DA and their chances of succeeding.