Sean McLaughlin Part 1: The battle for SA and why reason may prevail

In a thought-provoking analysis of South Africa’s political landscape, Sean McLaughlin highlights the imminent shift from ANC rule to a new era of governance. As the ANC loses its grip on power, key factors such as the military’s independence, responsible financial management, and vibrant local governance emerge as pillars of hope for a democratic transition. With a focus on grassroots activism, coalition building, and pragmatic governance, the narrative offers a glimpse into South Africa’s potential for a resilient and inclusive future beyond traditional party dominance.

Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.

By Sean McLaughlin

Time will soon judge if well-intentioned forces have done enough for SA to turn a corner for the better. My bet is that they will, albeit with a tough transition from the rule of the African National Congress (ANC).

From a structural perspective, the argument boils down to how and when the ‘liberation’ movement loses power.

Africa is littered with dynasty-run petro-states, the governments of which have kept themselves in power since the flag came down on white minority rule. Last month, the Gnassingbé family made moves to rule Togo into their seventh decade.

In societies such as SA, the closer the dominant party gets to losing power the more they start to misbehave through military takeovers, media shutdowns, and money printing. Here the trajectory of SA differs.

The ANC is about to permanently lose its majority, and the country’s democracy remains intact. As time goes on, the majorities needed for constitutional change to keep the ruling party at the helm slip away.    

This allows for the possibility of a transition to a new administration, stumbling over the line of the historic inflection point.

Society will have war wounds and scar tissue, but it is not defeated.  

I wonder if this is the same basis upon which many analysts say they are more optimistic now than they were a few years ago. 

In mid-2023, I made the claim that comparing SA to Zimbabwe was superficial. The FT carefully broke ranks in March 2024 with the ‘Bullish case for South Africa’.

In 2003, US diplomat Samantha Power wrote a 10-point essay on why Zimbabwe descended into a basket case – ‘How to kill a country’. This essay compares how SA has an answer to those forces which had Zimbabwe founder. It also creates awareness of actions that can be taken to ensure that that point is not reached in SA.    

It’s the military, stupid.   

A key reason why many African countries have been unable to transition to full democracies is the ruling party’s relationship with the military.

With control fading away, many ‘liberation’ movements have typically used the armed forces to cling on to power – that is not an option for the ANC.

Rather than the ANC turning the security services into its own partisan operators, those forces have been dilapidated. Instead, SA is home to the world’s largest private security industry, with up to 2.7m registered private security officers. These form pools of high performing firms whose role it is to protect private sector assets and neighbourhoods.

The time has thus long since passed in which the ruling party could have ‘pushed a button’.

Contrast that with Zimbabwe’s ruthless North Korea-trained fifth brigade police unit. 

Read more: SA urges ICJ to halt Israel’s ‘destruction of Gaza’ in genocide case

Soon after Zimbabwean independence in 1982, that fifth brigade unit launched a genocide on the Ndebele peoples of the south, to crush support for the opposition ZAPU and its armed wing ZIPRA, and to fill the apparatus of state with those loyal to the regime. Historian Stuart Doran writes,    

“… the atrocities were driven from the top by Zanu-PF … massacres were but one component of a sustained and strategic effort to remove all political opposition within five years of independence.”   

The city of Durban saw widespread riots in 2021; absent were government security forces. Private actors prevented the violence from spreading. 

Despite the clear downsides of failing to deliver policing, this represents a strangely positive augury. If the violence of that period is similar to what may come from the breakup of the ANC, it is surmountable. The military will not step in on the side of the government as the latter’s power dwindles.

This is the biggest buffer of all against a backslide into ruin. A military takeover would represent irreversible damage; the police would be sent to intimidate electoral officials and journalists.

The money

Various financial flows tell an interesting story.  

Another chapter of the dictator playbook is to overspend and pay off allies. In the 2000s, Zimbabwe’s currency hyper-inflated to worthlessness. Decades later, rulers play the game of creating new currencies – Zimbonomics.

In SA, the national budget of February 2024 was the ANC’s first with an electoral loss on the horizon. There are few signs of destructive spending at a national level. On the contrary, a small portion of prudently stockpiled gold and foreign currency reserves was used to pay off interest on government debt (USD 7.7bn from a total fund of USD 26bn).

This came at a time of immense pressure to open the taps.   

Rating agency Moody’s wrote that it was encouraging that the National Treasury, ‘held the line’ on spending, and that the deficit will narrow to 3.6% by 2026-2027.

Overall, the media did not give the finance minister the credit he deserved – the quiet disasters that were not in the South African story.   

Both the South African Reserve Bank (SARB) and the National Treasury will likely guard against overspending in the event of a populist administration coming to power. Battle plans are being readied. 

Laws prevent the SARB running negative equity. Negligible amounts of SA’s public debt is denominated in USD, shielding against spiralling government liabilities.

In the same vein, SA possess a very mature homegrown financial industry, with around 18 domestic banks. The same hold around ZAR 1.5trn in reserves (USD 78bn) – much of which is dollarised. This sits ready to be deployed.

Total Foreign Exchange Reserves held by monetary authorities. Source: Data housed by World Bank, provided by International Monetary Fund. Last update 28/3/2024   

Hunger for SA’s commodities explains a large part of the rise in its reserves from the mid-2000s. At that same time, the Zimbabwean dollar inflated to worthlessness. I wonder if a modest amount of the rise in SA’s reserves was an anti-fragile response to observing that.

SA’s total foreign exchange reserves sit at USD 62bn in March 2024, or 15.5% of the economy at USD 400bn. Of that, the government pot is around USD 26bn, or 41%.

The banks are followed by around 370 private equity outfits, with ZAR 150bn (USD 8bn) in Assets Under management (AUM).   

This historical turning point fortunately comes at a time when advances in technology make it easy to hold pots of foreign denominated currency, even from a mobile phone device. This was not as easy for Zimbabweans in the 2000s. That will be a key factor in the fight of the next five years. The more funds that are in foreign currency, the more people, businesses, and NGOs can ride it out, stay in the country, and fight on.    

Former activist Rob Hersov wrote in a speech in 2024, which he never gave,    

“I am proposing we urgently launch a South Africa Reconstruction Bond of USD 100bn…

The reconstruction bond will deploy USD 50bn almost immediately to fund infrastructure …    

And we would have an executive and trustee board of extraordinary South Africans and internationals …   

There are many skilled, competent, and above-board South Africans and friends of South Africa, most currently living abroad that would be perfect for this platform, as ‘custodians for the future of South Africa’.”

I hereby request Hersov’s return to SA’s army of activists in a more congenial manner.

Millions would in time be better off for it. Successful activist-politicians often find a productive happy medium – a pendulum at rest.

The essence of the above idea could see the light of day – contributions to the turnaround effort from SA’s industrious diaspora. 

With intense international interest in the country, other finance would flow south. 

Abundant foreign capital sits ready to flood into SA at the first sign of business-friendly central government. Goodwill will be aplenty towards SA in international trade and investment treaties. This would all dovetail at a time of economic stagnation in the western world, as latent opportunities are sought abroad.

The media   

The media is another bulwark exposing corruption and governance failures. 

In the free society that SA remains, the media has a crucial role to play: giving credit for innovations; encouraging togetherness; building networks and above all calling out false information.

It would be very hard to shut down SA’s 30 major urban newspapers, its litany of transparency NGOs and their unrelenting investigative journalists. It would be even harder to shut down SA’s plethora of radio stations, YouTube channels and online media – the latter two were not around at this equivalent period in Zimbabwe.    

Co-governance – SA’s formula for the 21st century.   

Political analyst Ongama Mtinka talks of the vibrancy of SA’s informal economy, where rural villages take matters into their own hands. He states,   

”SA is not a sum of its politics”.

This concept of ‘co-governance’ or ‘social innovation’ is worth inspection.

In a recent speech at BizNews Conference in Hermanus (BNC#6), OUTA CEO Wayne Duvenage gave a working example of the villagers who take it upon themselves to replace an electricity substation. They leverage the security companies of the area, with cameras and lights powered by local houses’ off grid solar panels. The municipality that failed to do the work is then invoiced.

SA could in time become a blueprint for bottom-up governance. Think the same engineer who fixed the substation, rose to become a local councillor, then mayor, then was voted into the national assembly in 2034.   

Whilst municipalities refuse to work with OUTA for an admission of incompetence, others are beginning to embrace the entity.

I am not aware of such social ingenuity anywhere else in the world. Active citizenry is becoming to SA what oil is to Saudi Arabia.

Local politics – The mighty municipality   

SA has three levels of government: municipal (257 local councils); provincial (9 legislatures), and national. These are all separate ballots and make for a harder system to manipulate by malevolent forces. It offers various ways into government for opposition parties. 

At a municipal level, the moment that more entities become receptive to the above-mentioned forces of co-governance, is a moment the dial moves. SA replumbed – new oversight can mean a new attitude. 

Rather than a new central government sweeping in to save the day, SA’s quiet crossroads may be municipalities which slowly choose parties that embrace this community engagement.   

Analyst Hermann Pretorius states on the Democratic Alliance (DA – the country’s main centre-right opposition party),   

“[successful mayors Geordin Hill-Lewis and Chris Pappas] are recalled to the lab of designing DA potency … because when the South African voter, when you ask them what the word government means, you’ll get answers like ‘potholes’, ‘pavements’, ‘taps’, ‘water’ … local government competencies.”   

With new politicians, the municipal and provincial governments may share information with community watch NGOs and policing to combat crime. That SA in time may see a ‘lean’ state, is a possibility floated by John Endres, CEO of SA’s Institute for Race Relations, 

A diagram of a state

Description automatically generated

IRR CEO John Endres’ depiction of the SA’s state.   

The 2026 municipal elections will likely produce more councils that fit the bill for this type of governance – fertile ground for political parties to harness such thrift. Voters reward delivery of the basics.

A first reading shows that the DA only has three municipal majorities outside of the Western Cape. A closer look reveals that the DA has 25%+ in a further 28 municipalities. The DA vote may rise markedly in these cases due to ANC voter abstention.

More blue may be coming to the grand municipalities.

The below case of DA-run Midvaal municipality, whilst not a national picture, may give a taster of future municipal trajectories: the DA’s share of the vote increases as service delivery improves; turnout remains above the national average and the ANC slowly disappears.   

Data prepared by the author.

For all the negative media on coalitions, there are some 40+ municipal coalitions that work well across the country – have you heard of the coalition in the Cederberg of FF+, DA and the Cederberg Local Residents’ Association?

Where ideologically aligned parties have a majority, coalitions are generally functional. 

Slowly, the country is shifting to non-ANC actors. 

The first turning point was Cape Town city council in 2006. The DA was the largest party and governed in a broad coalition with seven parties. Good governance increased its share of the vote, later winning a majority. The second point was the DA winning the Western Cape provincial ballot in 2009.

Read more: FT’s Big Read: Alec Russell on SA’s ‘lost leader’ Cyril Ramaphosa

Among opposition parties there now exists a wealth of institutional memory in unseating the ANC, and the tactics for handling the ‘things-it-will-do-to-make-your-life-hard’.

The DA is a well-structured machine, with an 11-stage process for candidates and a sound record in most places it governs. Now to broaden the net.

Politics is also maturing.

The DA has various agreements with its regional ally in KwaZulu-Natal – the Inkatha Freedom Party (IFP). These include service delivery and standing aside in wards at municipal elections to avoid vote splitting. The pro-market IFP also has a good governance record, with many of its municipalities climbing the rankings in the Good Governance Africa report of 2024. 

And so, SA is already quite far down the path of the opposition making its way into government.   

Much talked of is that following this year’s election, the three major provinces will be in opposition hands or coalitions (Western Cape, KwaZulu-Natal, and Gauteng). That is a third stepping stone.   

Data provided by the Social Research Foundation (SRF) and modelled for a 60% turnout. Current polling data is not a projection of election results.

A fourth and fifth are centre-right opposition parties making inroads in municipal elections in 2026, and nationally by 2029. By then, also, the DA may become the largest party in the Free State and the Northern Cape provinces, a sixth. 

It is then hard to see how the ANC will not become more than a small rural party at 20-30% by 2029, requiring a party of a comparable size as a coalition partner for national government.   

Stay tuned for Part 2.

Read also: