More of the same in ‘ANC+’ scenario
A post-election national coalition of the ANC with five small parties would require no drastic move away from the party’s policy direction and would not shock the rand, but economic growth would remain stuck below 2%, says leading advisory firm Oxford Economics.
There would be slow progress towards fixing problematic state-owned enterprises, power cuts would remain a problem, inflation would decline only slowly and supply-side constraints would limit the economic growth rate to 0.7% this year and 1.44% in 2025.
Oxford Economics said this in a report on the first of four election scenarios the firm has modelled, with their macroeconomic impacts.
It warned that even in this scenario, government debt would continue to rise, peaking over the long term at close to 88%. “Negative credit rating actions are considered more likely than positive revisions over the near term,” Oxford Economics political analyst Louw Nel and economist Jee-A van der Linde said in the report.
The report came as new surveys suggest the ANC’s share of the vote could fall as low as 40%, possibly forcing it to seek coalitions with larger opposition parties such as the DA or EFF.
But Nel said the firm’s baseline scenario — dubbed “ANC and friends” — was that the ANC would go below 50% but not so far that it could not govern with smaller parties.
“Our view is that no matter how unpopular it is, the ANC still has an unrivalled ability to mobilise support,” Nel said.
None of its scenarios contemplate the governing party going over 50%, given the trend of the past three election cycles, and a disillusioned electorate.
The baseline scenario would see the ANC gaining 46%-49% of the national vote, giving it about 184-185 seats in the National Assembly. That would leave a 15-16 seat deficit, which it would close by tying up with the IFP, Patriotic Alliance, African Independent Congress, GOOD and Al Jama-ah at national level.
At provincial level, the scenario sees the ANC forming a stable coalition with the IFP in KwaZulu-Natal but an unstable government in Gauteng, where it cannot obtain a majority without the assets of the EFF.
It sees the DA retaining the Western Cape.
“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 the report. Though growth would accelerate somewhat in the medium term as load-shedding eased, structural constraints would keep growth well below 2% a year, it said.
Oxford Economics would release its reports on the other scenarios, which include a “less likely” ANC-DA coalition government or ANC-EFF one, in coming weeks, said Nel.
The firm’s baseline scenario is similar to that expected by many in the market. Some analysts have speculated that such an outcome could prompt a “relief rally” in the rand and bond yields because SA would be seen to have avoided worstcase scenarios of coalitions with the EFF or MK party.
The Oxford Economics team expected SA’s business and operational environment to still compare favourably with the rest of Africa and remain stable should the ANC stay in power in a baseline scenario coalition government. But it warned that “political regime risk” would rise. “The ANC could 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.”
The Oxford scenario research was conducted before the release on Friday of the latest poll results from Ipsos, which is widely regarded as the most weighty of the polls because its sample size is large (more than 2,500 registered voters) and it surveys voters face to face rather than by telephone.
The Ipsos survey — the first to include Jacob Zuma’s new MK party — showed the ANC with 40%, down 19 percentage points from its 2019 election result. Next was the DA at 22%, the EFF at 11.5%, MK with 8.4% and the IFP with 4.4%. Ipsos did not specify what turnout it assumed or how many voters were undecided — both key variables.