The ANC faces a precarious future: Katzenellenbogen

In the countdown to the May 29th elections, South Africa’s ANC faces unprecedented challenges. Polling below fifty percent reflects deep-seated discontent, with Zulu support shifting to the uMkhonto we Sizwe party. Coalition permutations loom, with a radical populist alliance a distinct possibility. Such a government could spell economic turmoil, with radical policies threatening financial stability. As the nation braces for change, the ANC’s fate hangs in the balance, signalling a pivotal moment in South African politics.

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By Jonathan Katzenellenbogen*

So far, the ANC has almost consistently polled below fifty percent in the run-up to the elections on May 29th. In the past, support for the party tended to surge in the weeks ahead of an election. 

But times are very tough. High unemployment and the fuel price hikes have further pushed up transport and food prices, raising general dissatisfaction amongst voters. And the interviews by pollsters show massive distrust in the ANC. Much of the ANC’s Zulu support base in KwaZulu-Natal and Mpumalanga has defected to the uMkhonto we Sizwe party, endorsed by former President Jacob Zuma.

The most recent poll to be made public, which was conducted for news channel eNCA last month, found that the ANC would only get 41 percent of the vote, down from the 59 percent it received at the 2019 election. Because of its larger sample size, the poll done for eNCA has a lower margin of error, 1.8 percent, compared to the three percent error margin of most polls so far.

With the ANC likely to be pushed well below 50 percent, we are on the verge of fundamental change. The ANC will remain the largest party, but it is highly unlikely that it will be able to form a government on its own. The much-awaited split in the ANC has happened; the party has gone in three directions and is now much weaker.

There are three possible coalition permutations that we might see after May 29. One is a radical populist coalition of the ANC, the Economic Freedom Fighters (EFF), and perhaps the MK party. Another is the ANC and a few of the smaller parties, should it just need a few percentage points to form a majority. And then there is the Government of National Unity type of coalition arrangement in which the ANC would form a coalition with the DA and other parties.

The third permutation would not work. The Democratic Alliance, which only received a 20 percent share in the eNCA polls, and its Multiparty Charter partners would be foolhardy to enter such an arrangement. They would have little power to influence policy or the management of government departments controlled by deployed cadres. While such a coalition may fulfil the DA’s aim of preventing a radical populist coalition, its participation will end with frustration and future electoral damage for the Multiparty Charter parties.

What if there is a radical populist coalition?

The numbers in the eNCA poll make this a distinct possibility, particularly if the ANC can’t achieve a majority with support from a few of the micro-parties. In the eNCA poll, the EFF received 15.5 percent and MK 10.9 percent. So a coalition with either party alone would take such a coalition across the mark. Add one or two micro parties and the coalition could be in a fairly comfortable position.

There would be massive alarm in business and the financial markets from either of these coalitions. Both MK and the EFF have radical ideas about state spending, expropriation and nationalisation, Business and the markets might hope that these parties would be pragmatic once in power, but there is no guarantee of this.

Much would depend on whether the steady hands that run the National Treasury would prevail, and be able to persuade the politicians that a lurch to populism with big spending and giveaways would be dangerous and would wreck the economy. Both the Treasury and the Reserve Bank are bound to have battle plans ready for the coming to power of a radical populist coalition. They would be prepared for a run on the Rand and massive selling of government bonds by foreigners. That could mean sharply higher inflation and a rise in the interest rate on government debt. Without credible official assurances on policy, we could face a full-blown financial crisis under such a coalition. 

The discipline imposed by the financial markets is often thrown out the window by radical parties. 

What makes the prospect of this type of coalition so dire is that the radical populists will have some of the legislative tools they need to implement campaign promises. The bills to create a National Health Insurance scheme and to allow Expropriation without Compensation have been passed by both Houses of Parliament and await President Cyril Ramaphosa’s signature.

From its manifesto, MK appears to be somewhat cautious about land reform in advocating fast-track redistribution, ‘while maintaining food security and increasing food exports’. But the ANC and EFF regard land redistribution as core policies.

Ramaphosa might also sign the General Intelligence Laws Amendment Bill, which greatly expands the state’s power to conduct surveillance on its own citizens. This could significantly curb opposition to government policy. Under the legislation, anyone wanting to set up a non-governmental organisation or religious institution would have to pass a mandatory security assessment.

What will organised business do when the radical populist coalition is in place?

There might not be much that they really could do, apart from warn about the dangers of expropriation and increases in the government budget deficit. Business Unity South Africa and Business For South Africa, the two bodies that represent big companies in the country, will probably continue to help the government turn around Eskom, the railways and the ports. That is in the hope that the state enterprise stops dragging down the economy and that engagement will help moderate their policies.

Expropriation and big spending usually end up with a sharp slowdown in investment, the growth rate and a rise in the budget deficit and inflation. The markets would be very worried about whether the independence of the Reserve Bank could be maintained in these new circumstances.

There has been loud talk from the ANC and the EFF at various times about  nationalisation of the Reserve Bank and ending its independence. To achieve this, the coalition would need a two-thirds majority. If the eNCA poll is an accurate indication of the vote, an ANC coalition with both MK and the EFF would give them 65 percent. Add one or two micro parties into the coalition and it would have a two-thirds majority, allowing them to take the country deep into treacherous ground. 

We might be about to learn a great deal about the inherent instability of coalition politics at national level. If the ANC wants a stable coalition, it will have to pay heavily in both policy and positions to ensure none of its partners pulls out. The prospect that a radical populist coalition would fall apart and be unable to implement its full agenda of destructive policies might be its saving grace.

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Jonathan Katzenellenbogen* is a Johannesburg-based freelance financial journalist.

This article was first published by Daily Friend and is republished with permission

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