South Africa: Democracy Delivers by Markus Schneider
South Africa’s recent local elections proved remarkable in an emerging-market context. They show the country is embracing political change via the ballot box just as peaceful democracy faces fresh challenges in other EM countries.
Popular Support For The ANC Declines
The elections saw popular support for the ruling African National Congress (ANC) registering its sharpest decline since the end of apartheid in 1994, against a difficult macroeconomic backdrop and rising ANC infighting. The ANC won 54% of the national vote—down from over 60% in the 2014 general elections. And the party lost direct control of large urban centers such as Tshwane and Johannesburg.
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We regard the rising prominence of the opposition Democratic Alliance (DA) as a distinct positive. It will improve South Africa’s political plurality over time and the DA has much to contribute to the national policy debate. The party enjoys a good track record of responsible governance in the southern parts of the country where it’s dominated since 2014.
The DA’s major gains in the local polls suggest that the 2019 parliamentary and presidential elections will be a tightly fought contest and—if current dynamics continue—could result in meaningful change at the national level. A coalition government between the ANC and the DA is a distinct possibility.
The DA claims it could win outright. But this would require a truly extraordinary turnaround in its fortunes over the next three years.
Meanwhile, though, the local election results pose a number of near-term challenges with potentially important political and economic consequences. These could even impact on the country’s ability to avert an S&P credit rating downgrade that might drive the sovereign rating below the investment-grade threshold.
- First, instead of accelerating potentially painful structural reforms, the ANC may now opt for a more populist policy bias over the medium term. This would be intended to maintain the backing of its key support base in rural and urban areas and also to win back voters who have migrated towards the more radical Economic Freedom Fighters (EFF).
- Second, finance minister Pravin Gordhan may find it more difficult to implement a needed value-added tax (VAT) hike against a backdrop of sluggish economic growth and recent election losses. Without the hike, Gordhan’s budget assumptions for 2017/18 and 2018/19 would look significantly less credible—which could attract the opprobrium of ratings agencies.
- Third, the DA may have to go into coalition with the EFF in some urban areas. Aside from their shared animosity towards the ANC, the two parties’ ideological and policy platforms are diametrically opposed. This doesn’t bode well for stability or rapid structural reform at the grassroots level.
- Last but not least, the polls have increased the risk of changes at the helm of the ANC. So far, the party seems to be closing ranks around President Jacob Zuma instead of trying to oust him. The ANC will be keenly aware that efforts to dislodge Zuma could prove dangerously divisive—and might even split the party.
Notwithstanding these near-term challenges, the local elections have opened up a new—and broadly positive—chapter for South Africa. This should see the country’s democratic institutions strengthen over time.
And this is no mean feat given the significant new pressures facing these institutions in other larger emerging-market democracies—most notably, Turkey.
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