South Africa in for a rough two weeks: economists

 ·31 May 2024

As the results of the 2024 South African National Election trickle in, markets are volatile and jittery as the ANC looks set to lose its overall majority and will be forced to the negotiation table with other parties to form a government.

According to Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER), this volatility is expected to continue for the next two weeks at least as political parties start horsetrading and the rest of the country holds their breath to see what kind of administration comes out the other end.

“The ANC is on track to lose its majority in parliament but remains the biggest party at a national level. The rise of the MK party is remarkable—the number of votes outside of KwaZulu-Natal is particularly significant—and largely responsible for the loss in votes for the ANC as the established opposition parties failed to make significant inroads,” she said.

“In fact, at this stage, it is not inconceivable that MK will end up with more national votes than the EFF.”

IJssel de Schepper said there seems to be no clear single party that could form a coalition with the ANC without either party making significant concessions.

“The question is how the horsetrading will play out. As expected, KwaZulu-Natal and Gauteng provincial results are also tight, and this could play into national government negotiations.”

In financial markets, the rand started Thursday on a fairly firm footing but lost ground once the CSIR poll put the ANC national vote at about 41%. Yields rose and markets became more jittery.

A later estimate by eNCA for a 45% ANC outcome contributed to some renewed rand strength. The rand remained volatile throughout the day and closed around a one-month low against the dollar.

“To be sure, volatility was always expected, and yesterday’s ranges are not out of line given the levels of uncertainty around the election outcome,” IJssel de Schepper said.

“The rand is set to remain volatile over the next two weeks as parties negotiate a national coalition.”

On Friday (31 May) morning, the rand was trading weaker against the dollar and other major currencies, hitting R18.79/$.

The IEC’s public-facing vote count system was down, but official results from the commission showed that at 50% of the votes declared, the ANC had just over 42% of the vote, the DA at over 23% and the MK party at almost 11%.

Markets have been widely apprehensive of any potential tie-up between the ANC and EFF/MK post-election, as this is seen as a wildly anti-business and radically populist combination, which would deter investment in the country.

A coalition between the ANC and DA has been viewed as more market-friendly and favourable for businesses, but also comes with its own risks, particularly on the social front.

Read: 55% of voting districts counted – where parties stand

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