Post-election analysis: Just enough - May 2019

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Marie Antelme

Marie Antelme

Marie is an economist with 18 years of experience in financial markets.

THE QUICK TAKE

  • The economic implications of the election are, on balance, positive
  • The vote outcome should enable President Ramaphosa to streamline Cabinet, make key new appointments and improve policymaking
  • While the appeal of left-wing and right-wing parties gained ground, most voters still favour centrist parties (ANC and DA)
  • ANC concerns over possible vote loss in Gauteng largely allayed with 50.2% majority
  • For the DA, outcomes should call for a great deal of party introspection

South Africa’s sixth democratic election has, mercifully, played out broadly in line with analyst expectations. Despite some volatility in pre-election polled predictions, the African National Congress (ANC) gained 57.5% of the vote, the Democratic Alliance (DA) achieved 20.8%, while the Economic Freedom Fighters (EFF) increased its national share of the vote to 10.8%. This is not to say the results didn’t hold several surprises, but overall, should be ‘just enough’ to deliver several important outcomes. 

While the ANC win of 57.5% of the vote is lower than the 62.2% they garnered in 2014, it is well above their 53.9% provincial outcome in 2016. This is a successful outcome for President Cyril Ramaphosa and should provide him with enough internal momentum to shrink his Cabinet and make crucial appointments to key ministries. The provincial outcomes may also strengthen his internal party position: The ANC lost significant ground in the Free State, Mpumalanga and KwaZulu-Natal(KZN) – all provinces in which the integrity of the ANC’s leadership has been questioned. Better outcomes in these provinces would not only have gained the party a larger national majority - a point President Ramaphosa may be able to drive home internally - but could be just enough to enable him to implement leadership changes on the ground, ensuring a more sustainable outcome in the next election.

In the Western Cape, the DA held its majority with 55.5% of the provincial vote (and 52.4% of the national vote, which was well off the 57.3% gained in 2014), as the electorate made their displeasure known. Internal bickering, a lack of leadership vision and perhaps the poor management of the recent water crisis all played out in reduced support. The party received just enough support to keep the opposition anchored in the Western Cape, but the result clearly calls for a great deal of party introspection and a new vision.

The vote outcomes for the ANC in Gauteng and the DA in the Western Cape show an interesting trend in voter preferences. In Gauteng, the ANC won 53.2% of the national vote, but only 50.2% of the provincial vote, indicating that people clearly chose to support President Ramaphosa at the national level, but less so at ‘home’ (in Gauteng). To a lesser degree, the DA’s national support within the Western Cape was lower than its provincial support. 

INCREMENTS OF POPULISM

The EFF was the biggest gainer, raising its national vote from 6.4% in 2014 to 10.8%, strengthening support in every province. While a lesser success, the Vryheidsfront Plus (VF Plus) also gained ground, albeit off a low base, with votes totaling 2.4%, up from 0.9% previously. While the momentum behind the left-wing EFF is considerably larger than that of its right-wing counterpart VF Plus, the broader appeal of parties with more extreme mandates across the political spectrum has clearly increased, in line with increasing populist sentiment globally. That said, the overall result still confirms that most South African voters continue to favour centrist parties as represented by the ANC and DA.

The outcome for Gauteng was finely balanced, with the ANC at 50.2% of the vote, and the DA at 27.5%. The election here is strategically important for the ANC, not only as a traditional home base for the party, as well as for President Ramaphosa, but due to its size and economic importance. Concerns that a significant loss of vote here might require a national coalition agreement with the EFF seem for now to have been allayed with the ANC holding a slim majority.

TENDRILS OF HOPE? 

Voter turnout was disappointing at 65.6% - well below the circa 70% predicted by the run-up polls, and the previous election at 73%. However, the Independent Electoral Commission, despite some glitches and a series of complaints against electoral processes (for now not being challenged by the bigger parties), seems to have managed a reasonably smooth and peaceful process.

The economic implications of the election outcome are, on balance, positive. The ANC under President Ramaphosa has delivered an improved National Election result, which should be just enough to enable the appointment of a more streamlined and effective Cabinet. In turn, this should help improve and coordinate communication and policymaking and, hopefully, lead ultimately to better end-delivery.

Confidence, perhaps predicated on the forthcoming Cabinet appointments, should improve at the margin with the election uncertainty out of the way, although a meaningful and durable improvement will depend on realised delivery of policy certainty. For the DA, we expect the result to invigorate the party to deliver an improved economic performance in the Western Cape and broaden its national agenda.

Growth momentum at the start of the year has been poor, with mining and manufacturing contracting in the first quarter (Q1-19), retail sales weak and forward-looking indicators like the leading indicator of the South African Reserve Bank (SARB) and the ABSA Purchasing Managers Index (PMI) all pointing to a significant slowing in activity. The March load shedding exacerbated the weak operating environment, hit sentiment and, broadly, growth expectations have been revised lower. However, very recent data has been a little better than expected: March production data showed little impact from load shedding.

The SARB leading indicator rose sharply in February, and the April ABSA PMI ticked up to 47.2 (but remains below neutral). While growth probably contracted in sequential terms in Q1-19 relative to Q4- 18, the stronger-than-expected emerging data are an important base for improvement in Q2-19. In this light, post elections, the economy might just have enough momentum to grow more strongly in 2019 than the disappointing growth seen in 2018.

From here we look forward.