Our website use cookies to improve and personalize your experience and to display advertisements (if any). Our website may also include cookies from third parties like Google Adsense, Google Analytics, and Youtube. By using the website, you consent to the use of cookies.

What are the key issues for investors in South Africa’s 2024 election?

South Africans vote in a national election on May 29 and, for the first time since the end of apartheid 30 years ago, polls suggest the ruling African National Congress party (ANC) is at risk of losing its parliamentary majority. Investors are paying close attention.


If the ANC gets less than 50% support it would have to seek one or more coalition partners to govern Africa’s most industrialised economy. The new parliament will choose South Africa’s next president.

The new government will set fiscal and economic policy for the coming five years, and investors want to see if the next administration is likely to tack sharply left, head in a more business-friendly direction or prevail with the status quo of slow reforms.

Leader of South Africa’s biggest opposition party, the Democratic Alliance, John Steenhuisen addresses supporters in front of the Union Buildings as part of the political party’s manifesto launch in Pretoria, South Africa February 17, 2024. REUTERS/Ihsaan Haffejee


An April Ipsos poll put the ANC’s support at 40.2% and most surveys have estimated it will get below 45%, the level financial analysts say it needs to reach to enlist smaller, centrist coalition partners.

Otherwise, the ANC may have to seek a deal with the far-left Marxist Economic Freedom Fighters (EFF) or the economically liberal Democratic Alliance (DA).

“The market is watching very closely to see the degree to which the ANC… (is) forced to engage in coalitions with what are perceived to be extremely left-wing parties such as the MK (uMkhonto we Sizwe party) and EFF,” said Yvette Babb, a portfolio manager at U.S.-asset manager William Blair Investment Management.

READ:  South Africa condemns Israel over deaths of Palestinians awaiting aid

“The greyer zone of between 45%-50%, whereby they (ANC) may need to form a coalition with smaller parties that are more centrist, is not deemed to be a bad thing…perhaps that introduces more checks and balances into the governance process.”


Post-election coalition discussions between the ANC and the EFF or the recently-formed MK, led by former President Jacob Zuma, would lead to a “kneejerk” sell-off of South African assets, said Mpho Molopyane, chief economist at South African investment and insurance company Alexforbes.

“The concern is that… we could see government turning more populist, increasing social spending, implementing policies that are anti-business, the reform agenda slowing down,” she said.

Meanwhile, coalition discussions between the ANC and DA would likely lead to a “risk-on rally”, where prices rise, Molopyane said.

“A coalition with the DA is regarded as likely to be more business-friendly… an efficiently run state, fiscal prudence – all of which would bode well for South Africa’s growth prospects,” she said.

The leader of the South African opposition party, the Economic Freedom Fighters (EFF), Julius Malema, cuts his birthday cake at his birthday celebration at a community centre in Ivory Park, Johannesburg, South Africa, March 3, 2024. REUTERS/Alet Pretorius


The rand has reflected South Africa’s economic woes in recent years. The currency has weakened a touch year-to-date and marked annual losses of 5% or more in the previous four years.

“Fair value” for the rand-U.S. dollar exchange rate is about 18.10 rand per dollar, so with it currently trading just below 18.40 there is a relatively small election-linked risk premium, said Elna Moolman, Standard Bank’s head of South Africa macroeconomic, fixed income and currency research.

READ:  South Africa may get $1 billion loan from World Bank to tackle power crisis

“This is… consistent with the general sense that investors now generally expect a benign election outcome (which ensures policy continuity),” she said.

Citi’s Luis Costa noted that the election risk premium had already faded in recent days and weeks.

“The more fundamental factors in ZAR have been recently supportive of economic activity such as the terms of trade dynamics and the improved domestic load-shedding (which however may not last after the polls close),” Costa said in a note to clients.

Load-shedding refers to scheduled power cuts which have hobbled the economy in recent years.

A notice is seen on a shop window due to South Africa’s struggling power utility company Eskom implementing regular power cuts, called ‘load-shedding’, in Cape Town, South Africa, on September 9, 2023. REUTERS/Esa Alexander


South Africa’s economy has barely grown in the last decade, crippled by record power cuts and the degraded transport network. The economy grew just 0.6% in 2023.

“I don’t see any political party with a real plan to stimulate the economy, only promises for everyone to somehow have a job,” said independent risk consultant Marisa Lourenco, adding foreign direct investors were in wait-and-see mode.

“But as the dust settles after the election, South Africa will still remain attractive for certain industries, like gas, renewables, mining (like manganese).”

Net FDI inflows have generally been higher than pre-1994 when the ANC took power, World Bank data shows. Inflows stood at $9.19 billion in 2022 compared to some $374 million in 1994.

In contrast, foreign investors have cut holdings of stocks and bonds. Foreign ownership of domestic government bonds fell from a peak of 42.8% in 2018 to under 25% this year.

READ:  SA receives power generating equipment from China

Other issues for international businesses operating in South Africa include infrastructure challenges, skilled worker shortages, the ‘greylisting’ of the South African financial sector over transparency concerns and delays for foreign workers getting permits, said Simone Pohl, CEO of the Southern African-German Chamber of Commerce and Industry.

“Despite those challenges, South Africa’s highly diversified economy, overall market volume, free press and its independent justice system still make it the number one investment location in Southern Africa,” she added.