Consider This: South African elections

On May 29, 2024, South Africans will vote in the country’s seventh general election. There are 42 million eligible citizens over the age of 18, but only 27 million, or 64%, have registered to vote, according to the Electoral Commission.¹ This year, the Commission has 4.5 million² registrations from the youth category, which Stats South Africa estimates at 17.8 million.³ A telling sign of the disenfranchisement of young people, it works in the African Nation Congress’s (ANC’s) favor, as their largely older and rural loyalists form a bigger proportion of the registered population and are not frequently polled. The ANC has won every election, only dropping below 60% of the votes in 2019, when it won 57.5%.⁴ This year, a potent mix of weak economic activity, high unemployment, stubborn inflation, and debilitating electricity cuts have led to indications in some polls of a collapse in support for the government. If the ANC fails to capture at least 50% of the vote, it will have to negotiate with other, smaller parties to stay in power.

The biggest parties in the National Assembly are the ANC, the Democratic Alliance (DA) and the Economic Freedom Fighters (EFF). The Inkatha Freedom Party (IFP) is the fourth-largest party, but it is limited to the province of KwaZulu-Natal. In a strange development, Jacob Zuma, the disgraced ex-president who was forced to resign in 2018 after a string of corruption scandals, is standing for a new party “uMkhonto weSizwe” (MK). This is the name of the defunct military wing of the old ANC, which fought the apartheid government. The name means “Spear of the Nation” in Zulu. The 81-year-old is a veteran of the original “uMkhonto weSizwe” in the bush war against Apartheid, and by claiming the name MK, he is claiming the ANC’s freedom fighter credentials, which is very damaging to them.

The latest Social Research Foundation poll completed on April 20, 2024, suggests that the ANC could fall to 41%, the Democratic Alliance could climb to 26%, and Zuma’s MK could achieve third place with 14%,⁵ cannibalizing the EFF and the IFP. However, it should be noted that polls typically under-represent rural voters where the ANC has a larger stronghold. Additionally, the polls include undecided voters or voters who may choose to vote for other parties, but then choose to not vote on election day. This leads to a reduced turnout, which on balance plays in the ANC’s favor. A potential weak ANC result would force it to negotiate with the DA or the EFF. A coalition with the DA would suggest a sharp turn toward orthodox policies and significant reforms, which we believe international investors would receive positively. It would also change the country’s favorable foreign policy stance on Russia and China, turning to the United States and European Union instead. On the other hand, investors would view a pact with the EFF negatively, as the party’s platform is Marxist-Leninist—pushing for compulsory expropriation of land and wealth from white South Africans.

Whoever wins will inherit an underperforming economy with continuing deterioration in the provision of basic public services, largely due to high levels of corruption and poor management, resulting in a restive electorate. Last year, Eskom, the state electricity company, had a record number of 282 days⁶ with “load shedding,” or electricity cuts. That’s 23 days per month, with cuts that lasted up to six hours. Meanwhile, stubborn inflation (5.3%⁷), interest rates (the prime lending rate is at a 15-year high of 11.75%⁸) and electricity prices (up 33.8% in the last two years) have been hitting consumers. Debt-to-gross domestic product is at 75% and the unemployment rate is one of the highest in the world at 32.1%.⁹ Additionally, government economic growth estimates have consistently been too optimistic and above the International Monetary Fund’s.¹⁰

Aside from boosting economic growth and addressing bottlenecks like Eskom, there remains the mammoth task of dismantling the webs of patronage and corruption that grew under Jacob Zuma, because these represent a structural economic and political risk for the country.