NHI comes back to bite Ramaphosa

 ·31 May 2024

South Africa’s election results are closely mirroring polls taken after president Cyril Ramaphosa signed the National Health Insurance (NHI) Bill into law—which private healthcare and medical aid users in South Africa were not happy about.

Financial markets have moved into risk mode as investors and analysts watch the outcome of the 2024 election in South Africa. Hopes of the governing ANC finding an easy (read: more stable) path to maintain a majority are quickly dissipating.

With just over 60% of the votes counted, the ANC maintains a position as the biggest party in the country, but its support has dwindled to just under 42%.

The DA has improved its support base, currently sitting in second at 23%, while the MK party has overstepped the EFF to be the third biggest party in the country at current counts, with almost 12% (vs 9.5% for the EFF).

Notably, the election results are closely mirroring the SRF (Social Research Foundation) poll before the election, which polled ANC voter support at about 42%.

This was a significant drop from the previous poll, which showed ANC support at around 45%. The three percentage point drop came immediately after the NHI was signed into law on 15 May.

According to Investec chief economist Annabel Bishop, a possible explanation for this is that many civil service workers and some (now) previous ANC supporters are in private medical aid schemes. They have now been left in limbo, uncertain of what lies ahead for healthcare procurement in the country.

President Cyril Ramaphosa signed the controversial scheme into law just two weeks before the national election in what many commentators called a last-ditch election ploy to win over voters with a populist policy.

Ramaphosa denied that it was used as an election tool.

However, the laws were signed under a dark cloud, in the face of virtually all impacted parties in the private healthcare and medical aid sector feeling ignored by the consultation processes and the government having no plan to actually fund the system.

The president also ignored concerns about capacity, coverage, and corruption and shrugged off questions about constitutionality. He later said that the government was willing to discuss issues raised by businesses—but for many, this was too little, too late.

The laws have already been met with legal challenges, with more expected to come.

According to Bishop, the ANC’s spectacular loss in support and the meteoric rise of the Zuma-headed MK Party has put markets on edge as messy coalition politics starts looking more certain for South Africa.

“Financial markets (were) hoping for 45% or above for the ANC, and a better showing for the IFP—the expected coalition partner for the ANC. Concerns are centring around other coalition options for South Africa’s largest political party,” she said.

Bishop said that the ANC is now expected to consider the PA, the IFP, the ACDP, and a few other small parties as coalition partners.

The ANC has a path to a majority without the EFF, MK and the DA (and its purported coalition partners), but would entail working with a vast number of smaller parties.

Bishop said investors are adopting a “wait and see” approach as the final votes are expected to take a while to come in.

Citing research from BMI, she said that bond markets, and financial markets at large, have feared a severe fiscal deterioration under an ANC/EFF coalition, anticipating that the fiscal deficit and debt will rise significantly both as a percentage of GDP and as South Africa moves away from a primary surplus.

“BMI research notes an ANC/EFF coalition would be expected to result in severe obstructions to continued fiscal consolidation, as well as the government business collaboration that has severely reduced load shedding and freight congestion,” she said.

“In addition, South Africa’s chances of getting off the greylist in 2025 and substantially reducing crime and corruption are also seen as unlikely under an ANC/EFF coalition, which has all been instrumental in the political risk premium built into South Africa’s financial assets.”

The rand has weakened to R18.90/USD on Friday (31 May) from R18.03/USD earlier in the month when hopes were higher for a more positive ANC outcome than the votes have tallied so far.

“While the vote tally is still incomplete, and results from far-flung areas, which the ANC is hoping for greater support from, have not come into the counts yet, markets are reacting negatively to the loss of the ruling party’s majority so far,” Bishop said.

Read: South Africa in for a rough two weeks: economists

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