South Africa 2024 election ‘shock’ unlikely

The outcome of the 2024 election in South Africa is unlikely to shake up the status quo and lead to any shocks for the economy, says Oxford Economics Africa.

And panic over the ruling ANC getting into bed with the EFF or MK Party is also overstated.

In the scenario that the African National Congress (ANC) wins between 46% – 49% of the national vote in the upcoming general elections, it is likely to pull in smaller parties to get over the line – not shake up the status quo with ties to parties like MK or the EFF, the research group said.

This outcome is not expected to shock the rand, as the country is not likely to deviate significantly from current ANC policy positions—however, the party would still need to compromise a lot more than it has been used to.

If the ANC falls short of 50% at a national level, the small parties that it would pull in are likely the Inkatha Freedom Party (IFP), Patriotic Alliance (PA), African Independent Congress (AIC), Good, and Al-Jama’ah.

“Its national-level coalition agreement obliges the ANC to give a handful of ministerial positions to the smaller parties, but requires no drastic move away from the ANC’s policy direction as adopted at its last National Conference,” said Oxford Economics.

However, the ANC will find it more difficult to pass legislation without an outright majority.

“It would need to compromise more often with its coalition partners and risks being removed from government should its coalition partners defect,” said Oxford Economics.

Should the ANC go into a national coalition with minor political parties, South Africa’s political-economic risk profile will remain relatively unchanged from the current baseline or pre-election baseline.

Provincial coalitions

Looking at KwaZulu Natal, Oxford economics predicts that the IFP would choose to align with the ANC at this outcome, in exchange for influence and appointments in the province, where the ANC is also predicted to not get a majority.

As a result of this agreement between the ANC and IFP, Oxford Economics sees ex-President Jacob Zuma’s uMkhonto we Sizwe (MK) party reduced to a small caucus in the KZN provincial assembly, “soon disappearing from the national conversation.”

Looking at Gauteng, Oxford Economics predicts that the party would not be able to get over the line without the Economic Freedom Fighters (EFF), saying that this would make “for an unstable government in the country’s most populous province.”

Outlook for South Africa

The group said this national election result “will not shock the rand, but lofty international oil prices and El Niño will keep inflation high (forecast is 5.2% in 2024), and it will decline only slowly in the following years.”

Additionally, they believe that the South African Reserve Bank (SARB) will hold rates until Q3.

Supply-side limitations is expected to continue to limit real GDP growth to 0.7% in 2024 and 1.4% in 2025 due to logistical constraints, loadshedding, and weak consumer spending which is being constrained by high unemployment and elevated interest rates.

“Muted inflation, soft consumer demand, a diversified economy, and orthodox monetary policies [will] keep market risks relatively low compared to the rest of Africa,” said Oxford Economics.

Additionally, Oxford Economics “forecast government debt to continue to rise and peak closer to 88% of GDP over the long term.”

“South Africa’s business and operational environment compares favourably to the rest of the continent and should remain relatively similar should the ANC stay in power in a coalition government,” of this nature, it added.

Read: South Africa after the 2024 elections: what comes next?