South Africa Elections: A Coalition Government is on the Horizon

The national and presidential elections in South Africa took place on May 29. As most opinion polls envisaged, an ANC-led coalition with the DA and/or other smaller parties would probably run the government in the next five years. (Note: South Africa does not directly elect the head of the state, but instead parties get assigned seats in Parliament according to their share of the ballot, and then lawmakers choose the president. If ANC would remain the first party, the task to form the coalition would likely be given by the lawmakers to ANC).

According to the preliminary results, ANC will be losing its majority dipping below 50% as it is currently at 42.6%. DA and MKP follow ANC with 23.8% and 9.9%, respectively, and EFF is the 4th biggest party receiving 9.4% of the votes. (Note: Despite South Africa’s highest court barred former President Zuma from becoming a member of parliament on May 20, it appears this did not have a negative impact on MKP’s share signalling that MKP will remain as a major political player in the future).

Under current circumstances, it is very likely that an ANC-led coalition be formed either with DA, EFF or with other smaller parties, taking into account that MK has already declared that it will not form a coalition with the ANC. The leading option remain an ANC-DA coalition, particularly if ANC will not be able to secure at least 46% or more. If ANC will be leading party receiving at least 46% of the votes, it is also probable that it will form a coalition with a number of smaller parties, but this seems a distant possibility for now as ANC will finish around 43%. We think the pending results from urban areas – traditional bastions of ANC support – could still improve the party’s prospects, but not significantly.

We are also of the view that the most likely coalition possibility is ANC-DA with the ANC-lead as there remain unbridgeable differences on various policy issues between ANC and EFF. We expect the coalition government would have to seek new policies around an ANC orientation. Taking into account that the DA promised to create two million new jobs, end the power cuts, accelerate privatization, especially in the energy sector, and halve violent crime in its party manifesto, a possible ANC and DA coalition could follow a more liberal framework, with a strong focus on private sector.

On this matter, DA will do its utmost to prevent a coalition between the ANC and the EFF or MKP, a DA figure Zille told Reuters on May 30. “We will do everything in our power to prevent an ANC, MK and EFF coalition. That would spook investors, and would tank the economy. It would be a disaster for South Africa. So we are very committed to prevent that outcome,” said Zille, a former DA leader who is chairperson of the party’s Federal Council. Zille added that “We are not in negotiations with anybody, and my expectations are that my party will take the least bad option.”

On another note, Solly Malatsi, a spokesperson for the Multi-Party Charter (MPC) opposition coalition underscored that “We are very satisfied with the picture that is starting to emerge with the results that are out now. It’s very encouraging for our prospects in this election.”

Under current circumstances, we think the coalition will be weaker than a one-party government at least for some time, and less able to undertake necessary fiscal reform policies and deal with power cuts (load shedding) in the near future. We think the immediate focus should be the domestic economy, as the unemployment, corruption, poverty, load shedding, financial bottleneck and inequality remain major hurdles, but handling these will take more time as the political decision making processes will be harder than in a one-party government setting. We foresee any forms of coalition with an uncertain fiscal and load shedding policy could exacerbate the domestic economic problems.

We anticipate tough and long coalition negotiations as the current constitution does not spell out how a coalition should be formed. Assuming the ANC is the largest party, smaller groupings could informally agree to support an ANC government on a vote-by-vote basis in return for some concessions. Or, at the other end of possibilities, the ANC could enter a formal coalition with some parties, including a written agreement outlining legislative plans and the distribution of cabinet posts.

We see some moderate and temporary political and economic volatility after the elections, as the new coalition will have to determine the new path for South Africa as soon as possible.