Stanlib’s Lings: South African election results reflect challenges

South Africa’s National Election was held on Wednesday 7 May 2014, with an impressive voter turnout of 73.4% although this was down from 77.3% in the 2009 National Election.

Once-again the ANC comfortably won the election, although their majority was reduced to 62.2% from 65.9% in the 2009. In addition, the ANC won 8 of the 9 provinces, gaining more than 70% of the vote in 3 of the provinces, namely the Eastern Cape, Limpopo, and Mpumalanga.

As expected, the ANC lost the Western Cape to the Democratic Alliance (DA), with only 32.9% of the vote. The ANC’s majority in the Gauteng province was greatly reduced from 64.0% in 2009 to 53.6%.

The main opposition party, the Democratic Alliance (DA) won 22.2% of the vote, a significant improvement from 16.7% in the last election. The DA is now the main opposition party in 6 provinces and is the outright majority party in the Western Cape.

The Economic Freedom Fighters (EFF), which has been in existence for only a few months, received an impressive 6.4% of the vote and is the main opposition in Limpopo and North West. EFF has 25 parliamentary seats, compared with 89 for the DA and 249 for the ANC. South Africa’s parliament has a total of 400 seats.

In contrast, Agang, which is also a relatively new party received a mere 0.3% of the vote, and has 2 parliamentary seats, while COPE, which was formed ahead of the 2009 election, received 0.7% of the vote and has 3 seats in parliament.

Overall the outcome of the election was largely anticipated, with the ANC losing some support to both the left and the right while maintaining a firm grip on power. There was, however, a clear indication that the ANC lost support in the main urban areas, while maintaining support in the largely rural areas.

Support for the far left EFF, which advocates nationalisation of the mining sector and land redistribution without compensation, reflects growing frustration, particularly among the poor, over the lack of jobs and opportunities.

The DA likely picked up votes from people frustrated by weak service delivery and a perception of incompetence and cronyism within the ANC. However, with the election out of the way, the new ANC government has an opportunity to implement some of the economic reforms needed to increase growth that were highlighted in the National Development Plan (NDP).

On balance, however, the ANC is likely to continue pursuing a dual approach to economic policy that aims to avoid unsettling private business and foreign investment unduly by continuing to embrace market oriented policies, but which also continues to pursue populist social upliftment and increased government intervention.

The pro-longed strike in the platinum mining sector, which has now entered its fourth month, illustrates the damage to the economy that can be caused by labour market unrest. Although mining as a whole accounts for only 5.6% of real GDP, it is still a critically important industry in terms of employment, exports and linkages to the manufacturing sector.

The disruptions this year, and its knock-on effect on business and consumer confidence, suggests that economic growth in Q1 2014 will fall sharply. Our growth forecast for 2014 as a whole has already been revised down to a mere 2.2% from 2.7% at the start of the year.

Over the past twenty years, South Africa has made remarkable progress in transforming and developing key aspects of the economy after years of political segregation, under-investment in social infrastructure and isolation from the rest of the world.

This has included establishing monetary and fiscal discipline, internationalising the economy and improving social welfare and basic household services. Although income per person has improved meaningfully since 1994, income inequality remains extremely high, and the rate of unemployment has deteriorated.

Unfortunately, the economic infrastructure of the country has been neglected and is now in critical need of renewal, industrial policy has been confusing and complex, while business regulations including labour legislation, have stinted the development of small and medium sized business. In addition, access to technology remains expensive and is well below global standards, while skills development has lagged demand.

South Africa urgently needs to focus on encouraging the development of the business sector in an effort to support job creation as well as grow the tax base. This will require a dramatic improvement in South Africa’s basic economic infrastructure, more vocational skills development, a concerted effort to encourage small business, as well as easier and cheaper access to technology. Lastly, the Sub-Saharan African region has enormous potential, which South Africa should be actively helping develop.

Mona Dohle
Mona Dohle speaks German and Dutch, she is DACH & Benelux Correspondent for InvestmentEurope. Prior to that, she worked as a journalist in Egypt and Palestine. She started her career as a journalist working for a local German newspaper. Mona graduated with an MSc in Development Studies from SOAS and has completed the CISI Certificate in International Wealth and Investment Management.

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