New book explores election risks to the economy

South Africans face elections soon. Photographer: Leon Lestrade / Independent Newspapers.

South Africans face elections soon. Photographer: Leon Lestrade / Independent Newspapers.

Published Apr 7, 2024


Leading economists have warned that the upcoming general elections might not just result in a coalition government at a national level, but that South Africa’s three most important provinces could also be governed by a coalition of parties, cementing uncertainty.

The forthcoming book titled “Tipping Point: Turmoil or Reform? South Africa’s political economy after 2024” comprises pieces by some of South Africa’s prominent public intellectuals and thought-leaders, all of whom have now seriously assessed the country’s post-election future.

Edited by North-West University (NWU) Business School economist Professor Raymond Parsons, the book unpacks critical questions about South Africa’s political and socio-economic landscape in the light of the pending watershed 2024 elections.

The book is a collaborative effort of 14 chapters by imminent contributors unpacking issues such as the political party dynamics in a post-apartheid South Africa, coalition politics, the economy, business and reform, property rights, corruption, local government, geopolitics and trade clashes, central bank and monetary policy after 2024, strengthening the institutions of public accountability, and policy uncertainty and political uncertainty.

It highlights many of the key economic and business factors that will shape the national agenda after the May 29 elections and what is needed for successful outcomes.

In a webinar yesterday, Parsons said the issue, which was dealt with in some detail in the book was the possibility of a coalition government, not only at the national level but also at the provincial level.

Every week there’s another survey indicating that the majority that the governing ANC might get is 50%, presenting different implications both political and to some extent economic.

Sentiment has already been depressed by the unknown nature of the coalition government after May’s elections, with high levels of uncertainty also on election results, although an ANC appetite for a coalition with the EFF appears to be increasingly waning.

The NWU Business School Policy Uncertainty Index for the first quarter of 2024 edged further into negative territory, to 65.8 from 65.5 in the fourth quarter of 2023 as uncertainty around the election dynamics and outcomes next month weighed on investors and the markets.

Parsons said some of the pundits had indicated the prospect and the possibility that in at least three provinces there could also be a coalition government.

“I remind you that those three provinces, that is Gauteng, KwaZulu-Natal, and possibly the Western Cape, make up 63% of our gross domestic product,” Parsons said.

“It’s quite important what the outcomes might be there, what the economic and the business implications might be. So, the issue here is simply that if we have the emergence of a larger degree of coalition government, we will want to see more of that.

“There will be good politics that will guarantee the good economics that we need after the election.”

RMB chief economist Isaah Mhlanga wrote a chapter about the idea of imprudent fiscal policy choices, such as bailouts to state-owned enterprises and free higher education.

Mhlanga also made recommendations on how to fund the Covid-19 SRD grant, but said these were going to come with very difficult trade-offs and consequences.

“Let me just mention quickly the four problems that our debt brings about into our economy,” Mhlanga said yesterday.

“The first one is rising interest payments crowd out other capital spending, at a national level, and at an SOE level. The second problem is the increased bank holdings of South African government bonds which then implies less capital available from the banks to lend in other product sectors of the economy because they’re increasingly holding government bonds.

“The third one is a steeper yield curve which is not only steep but it has shifted upwards, which means the cost of capital across the whole economy is increased.

“The fourth one is the general deterioration to credit worthiness that has culminated in us losing investment grade and ultimately showing up in a weaker exchange rate, in itself also inflationary, but it increases the cost of capital goods across the economy.”