Rand takes a breather as election tensions ease
Market tensions have eased, though uncertainty remains high when it comes to feeling out the possible environment in South Africa after the 2024 national elections.
Like many currencies in an election year, the South African rand has been skating on relatively thin ice – however, polling showing the rise of new political parties (to the detriment of others) has seemingly calmed some nerves of economists who are on edge about certain outcomes.
The rand has been on a rollercoaster this year – but has recently been on the up.
Chief economist at Investec, Annabel Bishop, said that the expected impact of United States (US) interest rate cuts and some marked improvements in state business partnership to resolve load shedding, freight constraints at Transnet and crime and corruption have significantly boosted the standing of the rand over the past week.
The rand saw notable strengthening against the US dollar since the tail end of last week, reaching R18.49/USD (now R18.68) as opposed to R19.31 seen in February.
Above this, a massive event that has and will continue to impact the rand is the upcoming general elections.
“Markets will continue to be dragged down by uncertainty and political noise, with the latter escalating in the run-up to the election itself,” Bishop previously noted.
The outcomes of the elections have been of particular interest to economists who have been debating the impact different outcomes would have.
Election polls have been all over the place – with expectations notably differing from poll to poll, meaning that margins of error remain relatively massive. However, the consensus from polls is that a coalition is likely, as no party seems poised to garner an outright majority.
From this idea of coalitions, some economists have worries about possible partnerships after the May 29 polls.
Most recent polling
The Brenthurst Foundation conducted an election survey in February and March 2024, which was carried out by SABI Strategy. The survey was based on a 66% turnout.
The results show that the Democratic Alliance (DA) and Jacob Zuma’s uMkhonto we Sizwe (MK) party have gained ground since previous polling, while the African National Congress (ANC), Economic Freedom Fighters (EFF) and the Inkatha Freedom Party (IFP) have lost some.
Polling from the foundation predicts that at a 66% turnout, the results could be:
- ANC – 39%
- Multi-Party Charter – 33%
- DA – 27%
- MK – 13%
- EFF – 10%
- IFP – 2%
- Other – 5%
Given that coalitions are seen as inevitable given that no party is predicted to get an outright (50% + 1) majority, hypothetical partnerships with the polling results could see:
- ANC and DA – 66%
- ANC and EFF – 49%
- MK and EFF – 23%
- ANC, MK and EFF – 62%
Bishop previously noted that a potential coalition between the ANC and EFF could be the worst possible result for the economy and the rand, labelling it as the finance group’s “severe down case.”
Bishop said that this coalition could see an increased likelihood of debt default due to excessive state expenditure, leading to corporates leaving the country over the EFF regime, ultimately resulting in mass job layoffs.
However, the recent poll shows that the ANC may need more than just the EFF to get over the line.
“The rapid rise of the MK has seen the EFF the biggest loser, dropping to 10% from February’s Ipsos poll of 20%, which excluded MK,” said Bishop.
Bishop argued that the dip in EFF support, apart from the rise in MK, is because of “extreme left-wing policies… (which) are not a drawcard” for many South Africans.
Whether the EFF and ANC will enter into a marriage of convenience at a provincial or national level is still very much in the air – especially given the increase in friction (and physical altercations) between the two parties involved in coalitions in many municipal councils.
Discussions about the MK possibly entering into coalition with the ANC have not really entered public discourse among the senior leadership of the parties. However, public spats between Zuma and what he labels as the “ANC of Ramaphosa” indicate that sitting down at the table may prove contentious.
However, as South African politics has proven – nothing can be truly counted out.
According to the survey, when asked about which coalitions respondents favoured, 29% said the Multi- Party Charter coalition (DA, IFP, Action SA, FF+, ACDP and others), 25% said an ANC-DA coalition and 24% said an ANC-EFF coalition.
Read: Big shake-up ‘almost certain’ for South Africa, shows new poll
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