For the past three decades, South African politics have been defined by the African National Congress. But with initial forecasts from the May 29 vote showing a marked decline in support for the ruling party, change looks likely.
So what do the various potential outcomes mean for South Africa’s growth and debt outlook? For investor interest in the country? Bloomberg Opinion columnist Adrian Wooldridge and Senior Executive Editor Jacqueline Simmons review the landscape with Bloomberg economist Yvonne Mhango.
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Welcome to voter Noomics, where politics and markets collide. The polls have opened in South Africa's general election, which could be the most consequential since the end of apartheid thirty years ago.
The ANC has been at the forefront of South African politics since Nelson Mandela's release from prison. He was elected president his party has been in power ever since, but the current President, Sarah Ramaposa, faces levels of discontent not seen by any of his predecessors.
The ANC Mandela's party potentially could risk losing their parliamentary majority. There are lots of other opposition parties fifty one buying for people's votes, and the people who've spoken to today are very aware of the power of their vote. They've seen the change it's brought in the past, and they're hoping it can help with soaring unemployment, high inequality, and the crime that has ridden their neighborhood and the country.
This year. Voters around the world have the ability to affect markets, countries and economies like never before, and we've created this series to help you make sense of it all. I'm Adream Woodbridge. My regular co hosts alegra Stratton and Severy Flanders are out this week, leaving me carrying the can. So we're going to do something a little different. We're going to focus this episode on the very significant, incredibly significant election taking place in South Africa. As you've heard at the top of the show on Wednesday, votes were cast. Over the weekend, we will get the results and then on Monday we'll have a full voter nomics with the whole crew examining election results and also featuring an interview with Dhalip Singh, former at Federal Reserve Economists now Deputy Nationals Curate Advisor at the White House, who, among other things, masterminded sanctions against Russia. But for this episode, I've invited Jacqueline Simmons, who is our regional editorial lead, to join me in the London studio.
Welcome Jackie, Hi, Adrian.
Jackie, give us a sense of what you're you're you're you're thinking about, Johanna, what's happening in Johannesburg at the moment.
I recently was in South Africa, first in Johannesburg and then Cape Town. But one of the things that stood as we convened a dinner with business leaders of various stripes in Johannesburg, and I was really struck by how sanguine most of them were about the election outcome and the idea of a left leaning eff party somehow coming into government with the an C if it drops below its majority, you know, a party that wants to nationalize assets like lands and mines. It didn't really fase them. They didn't seem to think it would become a reality, which, by the way, very much tracks with what we're seeing in the markets and some of the pulling leading into the vote. But at the same time, they expressed utter frustration with the status quo, so you know, frustration with blackouts or load shedding as they call it, their shoddy infrastructure, bad roads, crime, I mean, it's a really long list. So you have this dual sentiment with on the one hand, it's going to be okay, but on the other one, we're really fed up. So this kind of duality stood out to me most.
So is that basically is the basic sentiment there that things can't get any worse and they might get a bit better.
I think it depends on who you ask. I have a very good contact in Cape Town, someone who works in architectural modeling. White votes DA will vote DA, and he says he's going to do that because the DA has a proven track record running a province efficiently. But at the same time, you talk to his black staff, both at his house and in his business. Now they're not going to vote. And I did speak to one of them, and he was clear to me that he has zero interest in politics. He does not think that life is going to change marketly whether he votes or not. And furthermore, I think some of the staff, and I think this is reflective of our reporting, they don't feel that, yeah, anything is going to get better for them, that the conditions have just if anything worsened. They don't see the point.
Now, of course, Jackie, as you know, one of the abuses of Bloomberg is that we have brilliant people in all these places that we're reporting from. So let's actually go over to Johannesburg where Yvonne Mahanngo from our Bloomberg Economics team will join us. Yvonne, Hello, Hi, Now this is a watershed election for South Africa, Is that right?
It is?
Yes, It's the first time in three decades that the African National Congress may not get an outright majority, which implies that they may have to partner with a smaller political party in order to govern.
And why, I mean, why are they losing this majority. I can't think of South Africa without being run by the ANC.
It's a good point. I mean, there've been office for three decades. But if you follow the trajectory of the economy, particularly over the past two decades, and in particular an employment rate, you can understand why South Africans are frustrated. Unemployment has increased from around twenty three percent two decades ago to thirty two percent today. We have a power crisis that's been in place for sixteen years but in recent years has curiorated such that you only gets electricty four half of a day. South Africans are frustrated in terms of service delivery and are seeking alternatives from the ANC.
If I have a question just about turnout. So in nineteen ninety four, when Mandela was presenting it, turnout was eighty five percent. In twenty nineteen the year Ramoposa was voted, and turnout was forty seven percent. So we've written the ANC has two things working in its favor. Apathy, and a splintered opposition. Why so much apathy apathy, I guess.
Is the fact that there's historically been this link to this what we consider a liberation party, the party that took South Africa out of a party. So you've got that generation that struggles to think they could vote for anyone else. However, as we move away from nineteen ninety four, there's a young generation that doesn't have any link to the past, and as we side, we're actually expecting to see an increase in turnout at this particular election from reports and just hearing just listening to the radio, turnout seems to be pretty strong, suggesting that it's going to be quite different from twenty nineteen.
Interesting, and just to follow on that, how much of that turnout is dictated not so much by racial lines, but by the haves and they have not.
The indications just by listening to word of mouth feedback and those falling into radio stations is turnout has been pretty strong in urban areas, so I guess that would be where you'd see more of a mix of races. Apathy does still exist, particularly in the townships, which is a lower income area, but I'd imagine in rural areas where people find it important though a civic duty to vote, that turnout would still be pretty solid. And I highlight the rural areas because today that is where the ruling parties support is coming from. Those who are most frustrated are those in urban areas, and the polling that we've been seeing has actually been predominantly from urban areas. So if you do see a surprise in terms of the performance of the ANC, that will most likely be because of the turnout from the rural areas.
And Yvonne, can you give us a sense of what the rival parties are.
The second biggest party is a Democratic Alliance. They're considered the pro business Party. That's the party that investors would love the NC to form a coalition with if the NC lost to their majority vote. And that party is firm in terms of restoring fiscal health to the country. They look at tax reform in order to make it more friendly for business, and they will do away with affirmative action because they feel it's been taken advantage of if I can call it that, or corruption has gone into it.
So that's a democratic alliance.
It's also considered the White Party, so that's why in some cases they've struggled in order to get beyond the twenty percent of that they've peaked at. The other big party, the third biggest one is the Economic Freedom Fighters. That's a leftist party that that causes investors to get pretty nervous because of their.
Talk of nationalization. So that's led by Julius Malemma.
That's a party that could be considered for a coalition, particularly if the NC does really badly, like less than.
Forty percent of the vote. Those are the two main parties, those are the ones to watch for.
So that points to two very very different futures. One of the business oriented future and another is a populist sort of future.
See but let me also point out that if the ANC's less than majority vote is around forty five percent, they simply have to partner with a smaller party. In this case, then Cutter Freedom Party is considered to be the natural fit. It's a party that's dominant in Hota, which is Jacobsumer's.
Province, and if they partnered with the IFP, then.
You'd see policy continuity because of very similar in terms of policy trajectory.
So financial markets have been optimistic. We did a survey of twenty six emerging market investors, where most were overweight or neutral in South Africa, preferring it as an investment to Egypt or Nigeria. When investors are watching the projections that we'll get, at what point do you think they'll start to get either very nervous or very excited.
So the first thing.
Is whatever I wants to see is whether the answer will get an outdright majority or not.
So that's the first big question.
If they don't get the majority, I think you've got to see, well, the rand will show that displeasure or the uncertainty. Secondly, so I do you expect it to come off? If we see the ANCER get less than fifty percent, then everyone will be in a weight and see mode of regards to what sort.
Of coalition will be formed.
The authorities have two weeks fourteen days and which to form a government, so that period to be watched very closely to see what sort of horse trade is going on, which parties are most likely to partner the ANC, and the outcome of that, of course would also have its own impact on the market. But the first big question is will the ANC get an outright majority.
The two issues that investors are most concerned about. Again, according to our survey, it was curbing crime and easing debt. Which scenario or outcome do you think might best address those two pressing issues that investors are most concerned about.
So on the dead front, the Democratic Alliance are the party that seems to be more focused in terms of trying to ensure that phiscal consolidation is pursued and that debt is stabilized sooner rather than later. With regards to crime, I can't say there's a party out there that that comes to mind in terms of being more effectable to have a more effective approach. All parties and their manifestos have pointed out crime as a concern and something that they want to stamp out.
But other than that, I.
Think they all be relatively equal in terms of how they approach the issue of crime in the country.
Yeah, and one thing that confuses me a little bit is that the rand and bonds rebounded and the leader to the election on expectation that there won't be major changes to economic policy. So that kind of makes me wonder what does this realistically mean for reform?
The think too highlight is amongst the main political parties, the big parties, particularly ones ends you could pick us coalition partners. Their policies are broadly similar and that's why you're seeing investors be relatively comfortable with the South Africa story with regard to reforms.
If anything, what we're hoping.
Is that, and I'm speaking as a citizen, is that you get a coalition partner that will help expedite existing reforms. So the current policy and reform path I think generally South Africans are happy with, but the concern is that it's been slow and the economy are stagnated, and we want to see greater impetus going forward with regards to reforms.
How do you manage elections in such a big, diverse country, with a large number of people who are not particularly literate, and also with the threat of interference from disruptive forces in the election, or from deception or from false information. Is it a sort of a huge organizational challenge.
I must say the Independent Electoral Commission which runs the election, has been pretty efficient in terms of civic education, ensuring that the people that are running the voting stations are when informed, are able to explain what needs to be done to those that need assistant providing special votes to the elderly or those who are disabled. So we have a very strong machine in terms of the Independent Electoral Commission that's able to ensure that elections are well managed even in the deepest of rural areas.
Of the country.
Thank you so much. That's fascinating.
Thank you.
We're in the West. We're very myopic about these things. I mean, we're in Britain. We have an election, so we're focused on that. Everybody's always thinking about what's going on in the United States and the craziness is going on there. But I think it's fascinating to listen what's happening in South Africa, a huge and important emerging market. But it's fascinating but also a bit depressing, I think because I think in the nineteen nineties, this was the great hope of the world, this peaceful transition. The NC was this new party that wanted to take the country forward, and a lot of what you heard is quite depressing. It's about crime, it's about energy failures, it's about an uncertain it's about huge frustration in the population. This is not the happy future that we were hoping for.
I agree with that. I also though, see a little bit from the perspective of glass half full. I mean, this is a continent that is the fastest growing continent in the world, and I do think having been on the ground there, you know, several times, now, you do see of this drive for change, this hunger for change, this entrepreneurial spirit that very much exists there, not just in South Africa, but across the continent. I think that you're looking at a new air of sorts. You saw what happened last year with the enlarged bricks that place in South Africa. You also will see the G twenty be hosted for the first time in Africa. In South Africa specifically, you see what's happening, you know, with respect to sort of capital flows. You talked about everything being sort of myopically concentrated on the West and then global North. But I do think that the story is increasingly shifting toward the so called global South, and South Africa is very much part of that story. So I do think it's sort of in the interest of how we and investors and citizens you know, think about, you know, the change that could come. So yes, it's depressing, but on the other hand, I do think there is a great opportunity, and I think we have to look at it a little bit about, you know, what we can do baby steps wise, and what this election represents in that optic.
And of course we're seeing the ANC possibly losing its monopoly of power and that could go. I would have thought in two ways. It could be a good thing in which you get real competition for power. No particular party can take it for granted, and that's in some ways a good thing. But it could remove some of the guarantees of stability and you could get you knowarticularly if you get the far left party coming into some sort of power sharing arrangement, it could exacerbate some of South Africa's problems.
Yeah, and the interesting thing is you don't see a lot with respect to election interferre to at least you're not reading about that.
That was one of the things she said.
So this idea of a democratic process that still is an undercurrent of that structure, I think that's quite important. It's quite powerful.
I mean, I thought it was an incredibly optimistic thing that she said that she said that basically this massive democratic process in the country that's got a lot of unhappiness huge amount of inequality is going very well. It's well monitored, it's it's well administered, and everybody agrees that we have to have a democratic transition. That's incredibly important. I wish it was. It's true of the United States, is of South Africa. Thanks for listening to this week's voter Nomics from Bloomberg. This episode was hosted by me Adrian Woodridge, with lots of help from Jackie Simmons. It was produced by Samasadi, editorial direction from Victoria Wakely. Sound designed by Mosses and am Brendan Francis Newman is our executive producer. Sage Borman is Head of Podcasts. Special Thanks to Yvonne Mahango and please subscribe, rate, and review wherever you listen to podcasts.