RAYMOND PARSONS: Not ‘if’ but ‘how’ SA will adjust to shifts after election

What difference might the 2024 elections make to current levels of policy and political uncertainty in SA? This has been a regular theme in economic debates in recent years. Now, looming over the usual calibration of policy uncertainty are the additional risks and concerns, both real and imagined, surrounding the elections scheduled for May 29.

Towards the end of 2023, SA Reserve Bank governor Lesetja Kganyago was already referring to the 2024 election as one of the key risks facing SA’s economy. “Politicians adopting a populist tone ahead of the presidential and legislative vote may create uncertainty among foreign investors, undermining the case for investing in SA,” he said in an interview with a weekend newspaper.

Now that all the major parties’ manifestos are available, what is the general view? Although there is now more political uncertainty in SA than before, at the outset it is important to maintain perspective. Global research demonstrates that policy and political uncertainty tend to increase in countries when national elections are pending. This year is seeing a record number of national elections (about 50) taking place in various parts of the world. It is therefore not surprising that SA should also be experiencing stronger waves of uncertainty.

Nevertheless, all the evidence now points to a distinct breaking of the mould (to a greater or lesser extent) in which SA politics has been cast since 1994. A large part of the prevailing uncertainty in this country stems from the fact that SA is facing a new situation that has had no precedent since 1994 — that the national majority enjoyed by the governing ANC may for the first time fall below 50%. Coalition arrangements would then need to be contemplated. It is not yet clear what kind of coalition government may emerge, as it will depend on the extent to which the ANC falls short of the 50% threshold in the election.

The fact that the political pundits are offering a wide range of 2024 election outcomes is clear testimony to the uncertainty that prevails in the face of a more competitive political playing field. As it is not a political outlook that SA has been used to contemplating over the past three decades, there is an understandable fear of the unknown at a time when critical socioeconomic challenges are in urgent need of clear and decisive economic policy and direction.

What we are seeing is a new political state of affairs, with both risks and opportunities. Yet the reality is that the ANC is still expected to be the biggest single party even after the election. If it does not secure an overall majority the ANC will need to decide with whom it wishes to collaborate to govern. With responsible political leadership and skilful negotiation to find the “right” partner(s), the election outcomes would remain manageable and sensible economic helmsmanship could still be assured. In that event there would still be a heavy dose of continuity in the policy stance in the post-election period. However, at this stage it is not clear how the coalition chips will fall.

The current support patterns indicating a governance shift to coalition territory have so far brought much unpredictability and instability to local government and metro politics. What may be even more significant, as many political soothsayers have suggested, is if coalition governments also emerge in Gauteng, KwaZulu-Natal and even the Western Cape. If that happened, it would mean that about 63% of SA’s GDP would hypothetically be under the control of provincial coalition governments: Gauteng (33%); KwaZulu-Natal (16%); and Western Cape (14%). The establishment of norms to induce stable and effective coalition governance would then need to be developed at great speed.

That said, by common consensus there remains a great deal of “unfinished business” on the national agenda. The key overarching challenges of unemployment, poverty and inequality must still be successfully tackled by a post-election government, for which it needs far higher job-rich economic growth. Three decades is a good period over which to judge the successes and failures of ANC governance, assess what policy and project management lessons should be learnt, and decide what reforms need urgent implementation.

The focus must remain on an action-orientated national agenda. Most of the remedies and reforms already lie hidden in plain sight. The serious and long-standing delivery failures across the country highlight how important it is to strengthen, in close collaboration with the private sector, the capacity of the government through the sound financing and better administration of the public sector, including failing state-owned enterprises. Procrastination remains the enemy of delivery for a post-election government.

The question is not whether the SA economy will adjust to possible shifts in its political economy after the 2024 elections, but rather how quickly and how well it will do so, helped by informed and flexible business decision-making. At the moment, dealing with SA’s economic headwinds is like navigating poorly charted waters and avoiding rocks of uncertain location. But although business confidence is brittle, private sector decisionmakers are seldom without offsetting or innovative strategies to deal with, or “price in”, unexpected circumstances.

Businesses need to have contingency plans in case their best forecasts turn out to be quite wrong as events unfold. The reality of economic uncertainty in SA this year therefore puts a premium on business flexibility. While several aspects of SA’s future may still be unknowable, they are not unimaginable. Firms should devise appropriate risk strategies to help them handle any new challenges that may appear on the political horizon. They should also implement strategies that will give them early warning of other factors that are potentially new sources of uncertainty.

Businesses should therefore organise their operations (as many firms have already successfully done in the face of Eskom load-shedding) to ensure flexibility and adaptability. Firms that are best able to anticipate and manage the relevant risks and opportunities will secure a competitive advantage. Above all, adaptation is really about survival; it entails not finding the best solution, but one that is good enough. Indeed, coping is an entirely rational business response in the face of the current reality that the SA economy is, for now, in uncertain territory.

Ultimately, the overarching post-election goal is (still) to facilitate a political and policy environment that is solid, steady and coherent and promotes investment-led growth.

• Parsons is a professor at the North West University Business School and editor/author of a forthcoming book, ‘Tipping Point: Turmoil or Reform — SA’s Political Economy After 2024’.