South African business grows hopeful of smooth election outcome

South African business, which a few months ago was preparing for the possible heavy defeat of the ruling African National Congress, now appears more confident of an election result in which the ANC drops below 50 per cent but avoids a coalition with more radical parties.

Opinion polls, though unreliable, suggest that support for the ANC may have crept up to about 45 per cent as its party machinery cranks into action ahead of the general election on Wednesday. The same polls put the nearest opposition party, the Democratic Alliance, in the low 20s.

That would allow the ANC, which has run South Africa since 1994, to cobble together a coalition without doing a deal with Julius Malema’s Economic Freedom Fighters, which is pushing for widespread nationalisation, or the new leftist party headed by former president Jacob Zuma.

“The predominant view is that the ANC could get around 45 per cent, and would then strike a deal with a party other than the EFF, which means the status quo will largely remain,” said Frans Cronje, a political analyst. “This avoids a destructive outcome.”

The Johannesburg Stock Exchange has rallied on the prospects of a smooth election result, with the all-share index gaining 7.9 per cent in the past three months, better than the 4.4 per cent gain of the S&P 500.

Leila Fourie, JSE chief executive, told the Financial Times that an election outcome demonstrating a commitment to policy certainty and fiscal discipline would help markets.

“South African-listed companies are at a deep discount to other emerging markets [which creates] an opportunity for returns to investors,” Fourie said.

Martin Kingston, chair of the steering committee of Business for South Africa, an alliance of executives working with the government, agreed that continuity would be best.

“The tide is beginning to turn,” he said of efforts by the private sector to work with the government to address pressing problems, including electricity blackouts. “We’ve seen real progress and momentum is starting to be established,” he added.

Eskom, the state electricity provider, has now been able to keep the power on for 50 days and the government has opened up both the power and transport sectors to private investment. “If we maintain this approach, do I think there’ll be an uptick? Yes I do,” he said.

Kingston, who is chair of Rothschild in South Africa, acknowledged “some disappointment” that President Cyril Ramaphosa had not managed to achieve more during his time in office, but he also accepted there were few other viable options.

If the ANC formed a coalition with parties pushing a more pro-business agenda, that may be good in theory, he said, “but there is a limited universe of parties that fall into that category”.

Mmusi Maimane, a former DA leader who now heads his own party, Build One South Africa, told the FT that business had been too lenient with the ANC. “I think it’s enamoured with the ANC because the ANC is in power,” he said.

Maimane, who was sceptical that Eskom would keep the power on after the election, said that what he called a “better the devil you know” attitude was damaging. The ANC, he said, had the wrong policies to attract foreign investment and to spur a private sector-led recovery.

Neal Froneman, chief executive of platinum company Sibanye-Stillwater and a director of lobby group Business Leadership SA, agreed a change of direction was required. “We need new policies to stimulate growth and investment, to address inequality,” he said. “The leaders we have now have shown they just can’t do it, and are far too compromised.”

Froneman said the business sector had failed to hold the Ramaphosa administration to account. “Business could have achieved so much more by being more firm, making more demands, and using our leverage,” he said. “Instead, we’ve tried to be too politically correct, resulting in the perception that we’re weak.”

S&P Global Ratings said that South Africa’s recent economic growth, which averaged less than 1 per cent a year during Ramaphosa’s first term, had been “slower than expected”. But the prospect of the ANC losing its absolute majority was not likely to precipitate a downgrade in country’s credit rating in itself, it said.

Zahabia Gupta, S&P’s South Africa analyst, said that given its “base case” of the ANC winning 45-50 per cent or even creeping above 50 per cent she expected “policy continuity”, with GDP growth of 1.1 per cent this year, rising to an average of 1.3 per cent over the next three years.

The problem, Gupta said, was that this was not sufficient to reduce unemployment. At least one in three South Africans of working age is out of work.