Reform pressure seen easing after S Africa’s poll

The convincing nature of the African National Congress’ (ANC) victory in South Africa’s general election is likely to ease pressure for difficult yet necessary reforms to the country’s economy and labour markets, analysts said on Friday.

With 98 per cent of the vote counted, the ANC had garnered 62 per cent, while the Democratic Alliance took 22 per cent and a new radical party, the Economic Freedom Fighters (EFF), took 6 per cent.

Ahead of the poll, analysts had said that if the ANC’s share fell to below 60 per cent – down from the 66 per cent the party won during the last general election – it would have been interpreted as a call for key economic reforms.

“They performed better than expected,” says Shilan Shah, Africa Economist at Capital Economics. “This means that it will be more of the same as far as policy is concerned. Because they did not drop below they key threshold of 60 per cent, there will not be much impetus for the party to reform itself. There will be no push to make difficult economic reforms.”

“The result is not a crisis for the country, but it is difficult to see where any additional growth will come from,” he added. “Growth will continue to creep along at between 2 and 2.5 per cent, which won’t make much of a dent in unemployment levels.”

Pressure on the ANC to review its traditional alliance with trade unions and reform the labour market more widely appears to have abated following the ANC’s strong showing. This may mean, Shah said, that strikes affecting the platinum mines will “probably drag on”.

“A lot more needs to be done,” says Shah. “There will be more strikes which will drag down on growth in the mining sector and the wider economy.”

According to Shah, business leaders would be disappointed that the pro-business Democratic Alliance failed to win 25 per cent of the vote, which most polls suggested they would achieve. The party did, however, hold on to Western Cape province with almost 60 per cent of the vote.

The EFF, founded by controversial former ANC Youth League leader Julius Malema, became the third biggest party in the country with more than 6 per cent of the vote. That will be enough to ensure Malema takes up a seat in parliament. In addition, the EFF won 10 per cent of the vote in the industrial heartland of Gauteng.

“It’s quite an achievement,” says Shah “considering they were only formed recently and are contesting their first election. This is more than a fad or a protest vote. It gives disillusioned ANC voters an option on the left. Business will be keeping an eye on the party.”

The EFF has called for mines to be nationalised and land to be expropriated.

“Investors will be a bit concerned because they’ve done better than most people expected. But we have to put it into context. The EFF may propose plenty of controversial legislation in parliament but the ANC has such a big majority that any bills they don’t like will be rejected.”

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