Forecasts for South Africa’s elections, according to economists

Investment Bank BNP Paribas has published a research note on South Africa’s municipal elections – set to be held on 1 November – with a particular focus on whether the ANC will slip at the polls.

The note, penned by economists, analysts and strategists at the bank, said that the local elections are difficult to predict because all major parties have experienced significant internal turmoil, the Covid-19 pandemic has made polling difficult, and citizens face severe economic hardship.

“In our view, lifting the country’s trend growth and socio-economic conditions will depend in part on local governments fulfilling their constitutional functions.”

“A poor performance by the ruling African National Congress (ANC) could lead to an internal backlash against the party leadership, making policy and succession less predictable, we believe,” it said.

If the ANC cannot form ruling coalitions in the major metropolitan areas of Johannesburg, Tshwane and Nelson Mandela Bay, and its share of the overall national vote slips below 50%, this might presage instability within the party, the group said.

It noted that the ANC’s contest over the candidate lists has already triggered significant internal conflicts, which would be harder to soothe if weak election results mean less patronage to dispense.

“The election can be seen as teeing up the ANC’s five-yearly national elective and policy conference in December 2022.

“A sufficiently poor performance would be likely, in our view, to provide a platform for a challenge to Ramaphosa’s leadership of the party and possibly a weakening of his ability to persuade or guide the party in accepting a more investment-friendly policy package.”

Base case

BNP Paribas said that its base case for the elections is as follows:

  • ANC secures 47–51% of the national vote in the local government elections;
  • Reforms continue;
  • Ramaphosa secures a second term as ANC leader.

“We think a vote share of 50% or above would provoke the least anxiety for financial markets and others who have attached importance to the policy programme and continued leadership of President Ramaphosa in terms of growing stability and improved governance,” BNP Paribas said.

“We think the logic would apply on a sliding scale of ‘severity of impact’ to the mid-40s and that the Ramaphosa reform programme and path to a second term of ANC office would withstand a point shift down to about 47%.”

Risk scenario 

BNP Paribas also outlined a ‘tail risk’ outcome which would see the ANC continue to lose votes across the country. This scenario sees:

  • Poor ANC performance in local government elections at around 40–45% of the national vote;
  • Ramaphosa weakened and succession uncertainty spikes;
  • Radical populists gain more momentum.

The assumption is that the worse the outcome for the ANC, the higher the chances of policy instability and succession uncertainty, and concerns would arise if the ANC’s share of the total national vote is in the low 40s, BNP Paribas said.

“The performance of the EFF will also likely be seen as an indicator of risk, generally through the fiscal channel and stemming from the radical populism of the EFF manifesto.

“The party has everything to win: its electoral support is growing, and it has not yet won any governance forum outright. With only a few councils to administer, the EFF would have the national resources to put high levels of effort into improving the conditions of the poor if it were to be successful in winning some (small) municipalities outright.”

This would put the party on a sound footing for the 2024 national/general election. Thus, BNP Paribas said that an ‘out of trend’ over-performance by the EFF – above 15% – might cause anxiety.

“The tail scenario of the ANC falling towards the low 40s in terms of total vote share would probably mean that larger fiscal slippage and additional spending initiatives derail the current positive budget performance to a certain extent. Therefore, we would expect the main impact to be on fiscal expectations.

“The impact on monetary policy should be more indirect, in that a fiscal slippage might spur the SARB to be more hawkish on balance.”

Record-low registration

One issue which is likely to play a key part in the elections is a poor voter turnout – with the numbers expected to be even worse than the last national elections.

BNP Paribas estimates that South Africa’s electorate currently stands at just 65% of its voting-age population, with 26.2 million registered voters out of a possible 40.2 million. This is the lower point in the democratic era, the group said.

“While voter registration had increased in absolute terms from 1999 through to 2019, the IEC’s latest voter registration statistics indicate about 500,000 fewer registered voters than just two years ago.

“Weak trends in voter registration have generally come with decreasing turnout and the typical reaction of the electorate to the dominance of one party, we believe.”

It added that voter turnout in South Africa’s municipal elections has tended, on average, to be significantly lower as a percentage of the voting-age population than in general elections.

Read: ANC’s majority in question as South Africa prepares for election day

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Forecasts for South Africa’s elections, according to economists