shutterstock_193247810_bw_1600x420.jpg

The ruling ANC’s grip on power has slackened following local government elections earlier this month. The public seems to have delivered a protest vote against poor service delivery and high unemployment. The outlook depends on ANC’s response.

Though the ANC is still in control of most municipalities, its popularity has eroded. Overall support dropped to 54%—the worst result since it took power in 1994. To the ANC’s right, the Democratic Alliance (DA), under the leadership of its first black leader Mmusi Maimane, won the most votes in the capital Pretoria, and industrial city Port Elizabeth. With pro-market roots, the DA campaigned on its record of clean government and better service delivery in the Western Cape. To the ANC’s left, the relatively new Economic Freedom Fighters (EFF) placed third with 8% of the vote. The EFF’s platform involves nationalising mines and banks, and aggressive land redistribution without compensation.

The municipal poll was bitterly contested as a referendum on the ANC. Many now see ANC as more interested in enriching itself than improving the lot of South Africans. After 22 years in power, the country remains among the world’s most unequal. With a Gini coefficient of 0.63—where 0 is perfect equality and 1 perfect inequality—South Africa ranks worse than Haiti, Brazil and the Philippines. A quarter of the potential workforce is unemployed, while more than half of young black people are jobless. Just 6 million people pay tax, while 16 million depend on state support. But the economy has stalled—meaning fewer resources to spread around an expanding population.

The upset has sparked mixed investor reactions. Optimists say a more competitive political landscape could usher in greater transparency, accountability and growth-oriented policies—particularly as parties hustle to build support ahead of 2019 national polls. Pessimists caution the ANC could descend into infighting and populism. South Africa’s economic outlook depends on the ANC’s response.

Figure