The people have spoken

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South Africa has just completed a very peaceful, non-violent local election process that was declared “free and fair” by the Independent Electoral Commission (IEC) without any fear of contradiction. This election proved to be the most competitive since the country became a democracy. Though the African National Congress (ANC) remains firmly in control of most municipalities, the party’s overall support dropped to a new low of 54%, its lowest in 22 years of governance. The party also lost its controlling majority in Johannesburg (where it gathered 45% of the vote) and Pretoria – Tshwane – (41% of the vote), as well as in the party strongholds of Ekurhuleni (49% of the vote) and the Nelson Mandela Bay metro (Port Elizabeth) where the ANC only got 41% of the vote. Ironically, the Nelson Mandela Bay metro is in the traditional ANC heartland of the Eastern Cape. With no party taking an outright majority in those municipalities, they will now be governed by coalitions, a practice that does not have much precedent in South Africa. The biggest winner of this election was the Democratic Alliance (DA), whose support increased to a two-thirds majority in the city of Cape Town and whose dominance elsewhere in the Western Cape Province was further consolidated. The party’s increased share of the vote among black and traditionally ANC-voting constituencies has also strengthened its claim to be a viable alternative to the ruling party, states the editorial in the weekend Sunday Times.

The editorial comment goes on to suggest that the results of the elections themselves indicate that our democracy is maturing and that voters are prepared to reward or punish public representatives and their parties depending on their performance in office. They serve as a wake-up call for politicians who believe that the electorate can be taken for granted – that voters will vote along certain political lines no matter how dissatisfied they may be. It is clear that voters in urban areas saw these local government elections as an opportunity to punish the ANC for sticking with party president Zuma despite a series of scandals involving him. Party secretary-general Gwede Mantashe admitted after the result that issues such as Nkandla (which the ANC lost to the Inkatha Freedom Party), the Gupta’s and e-tolling had cost the party support, especially among black middle-class voters. Deputy President Cyril Ramaphosa went further, promising that the party would be doing some “introspection” as to why so many voters had turned against it.

We must remember though that a similar promise was made late last year when Zuma’s firing of then finance minister Nhlanhla Nene cost the country billions of rands and left citizens up in arms. Introspection was also promised when the Constitutional Court made adverse findings against the president in the Nkandla case brought by the Economic Freedom Fighters (EFF) and the DA. In both cases the “introspection” did not result in any meaningful action, despite the vast majority of South Africans demanding accountability for the mess. Instead, up to this day, the president insists he was right to fire the finance minister. Now that voters have had their say, the ball is in the ANC’s court. The election result is particularly gratifying when we remember that earlier in the year much attention was focused on the IEC which, many feared, would be used to manipulate the results. Those fears seemed to be confirmed when President Zuma, despite objections from the majority of opposition parties, appointed his former advisor, Glen Mashinini, as the chairman of the electoral body. However, such fears have now been buried, with Mashinini and his colleagues delivering a credible election that further entrenched the IEC as truly independent electoral body.

There are now a number of issues that the ANC can no longer avoid if it wants to remain in office beyond 2019. These include a growing perception among voters that the party is too arrogant to act on their concerns, too compromised to act against corruption and too self-serving to be concerned with improving the lives of the poor. The Sunday Times editorial ends off by suggesting that whether Zuma stays or leaves before the end of his term, the once-powerful governing party faces a bleak future if it continues to act as if the views of the public on how the country is run do not matter. In an article written by Adam Habib, vice-chancellor of the University of the Witwatersrand, he says that even though this was a local government election, perhaps more significantly, it was a referendum on the president, and this referendum delivered a decisive answer. The question now for the ANC is where to go from here.

The election result elicited a quick response from ratings agency Fitch which warned on the day the results were verified that they were concerned about what they believed was an increased risk of more “populist government policies”. Fitch said that there was a risk that the ANC might turn to more populist policies to address rising voter dissatisfaction with perceived insufficient improvements in living conditions since the end of apartheid. “This could include costly spending measures that could require breaching expenditure ceilings,” it said. Fitch rates South Africa as one notch above sub-investment grade at BBB- with a stable outlook. In June, Fitch warned that the country needed to build a track record of improved growth performance to improve its rating. Meanwhile, Moody’s Investors Services said: “Increased political competition, as indicated by South Africa’s local election results so far, has the potential to boost reform momentum in the run-up to the 2019 national elections, but spending pressures are also likely to rise. Over the medium to longer term, this would indicate a shift from redistributive policies towards more growth-oriented economic management and effective service delivery.”

Peter Attard Mantalto, an Emerging Markets economist at Nomura, said:

“We need to watch policy very carefully. Indeed, it would be extraordinary to suggest that there will be no change in policy. It would be the only ruling party anywhere that would not attempt to secure future election victory through policy, in part at least.”

The response from National Treasury was firm and stated that South Africa’s government will stick to the fiscal targets and objectives set out in the budget even as the ruling African National Congress’s support fell in the election. “Government remains committed to implementing fiscal consolidation and returning public finances to a sustainable path,” the Treasury said in an e-mailed statement on the Monday after the elections. “Government’s track record of achieving fiscal targets lends weight to future fiscal plans, in particular that of maintaining the expenditure ceiling over the medium term.”

Shortly after the election results were announced, up popped 24-hour Finance Minister Des van Rooyen in his new capacity as Co-operative Governance Minister to urge parties to stop political bickering and form coalition governments in the hung municipalities. Van Rooyen warned over the weekend that he did not want to invoke section 139 of the constitution and dissolve dysfunctional municipalities if there was a stalemate beyond the prescribed period. There are 27 hung municipalities, including the three Gauteng metros of Johannesburg, Tshwane and Ekurhuleni. Van Rooyen said that there was a period of 14 days for the hung municipalities to establish functional councils. “The municipal managers of all municipalities have 14 days within which to call the first council meetings, and we envisage that this will happen sooner in most cases,” he said. “All municipal managers are aware of their responsibilities in this regard. This includes the preparation of handover reports and the development of staff establishments and ward committees,” he said. Van Rooyen said coalition governments were part of the constitutional democracy in the country. In the hung municipalities this had to happen. Van Rooyen went on to say that they would be failing democracy if they did not form coalition governments soon. “The gist of it is that there is a constitutional provision for us to intervene where a hung municipality is disagreed. Our legislation adequately provides for us to intervene,” the minister said.

According to a recent report in The Star newspaper, even as the ANC now mulls over coalitions, the daggers are again out for President Jacob Zuma in Gauteng following their dismal performance in South Africa’s economic hub. They believe he is the “elephant in the room” that cost them votes because of the corruption allegations and the many scandals associated with his administration. They also accused him of “messing up” their election campaign because of his racially divisive statements towards the DA. The calls for Zuma’s head, along with the possible permutations of coalition governments, are high on the agenda of ANC provincial council meetings this week. The Star’s sister newspaper, The Sunday Independent, reported over the weekend that there might be calls from within the ANC national executive committee (NEC) for an early or special conference where an “elegant exit” for Zuma could be arranged. The next two weeks will be very interesting as the ANC deals with its humbling defeat at the hands of the people.

The election outcome was best summed up by the headline in the Sunday Times for an article written by Barney Mthombothi: “The winner is democracy as ANC’s swagger becomes a limp.”

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Source – APS Monthly Economic Comment