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Investors are uneasy about the results of the elections, say experts, but financial sector advisors are telling their clients not to panic.
Out of many possible scenarios, the one that seems most likely to market analysts is that the ANC will receive between 45% and 47% of the vote, ushering in a new era of heightened coalition politics and persisting investor uncertainty, Maarten Ackerman, chief economist at Citadel, said.
He also pointed out that the market already has consensus on the most likely election scenarios.
“The elections are expected to be free and fair. The market is expecting to see the ANC’s dominance decline further.
“If the ruling party manages to keep more than 50% of the vote, coalition politics become less important and this will mean more of the same, or in other words, not much upheaval or panic from the market.
“On the other hand, if the ANC gets below 50%, which is the market consensus, we are likely to see more coalitions and no matter which way these coalitions lean, it will most likely create more uncertainty over the short-term with investors.”
He said political analysts from the Paternoster Group predicted that the ANC will most likely receive between 45% and 47% of the national vote and this outcome would not be seen as an unexpected dramatic shift in the South African political landscape. It is therefore unlikely to cause the markets to panic or “overreact” to the election results.
“Investors are already leaning towards the coalition scenario and these risks have already been priced in, mostly by the currency, bond and equity markets.
“If anything, dramatic and unexpected happens on the day, such as violence, or extreme weather preventing optimal voter turnout, markets might react negatively but should normalise as soon as the political dust settles,” Ackerman said.
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Economist Dawie Roodt said if the ANC gets more than 50%, it would be business as usual and “business as usual is not good because the ANC has caused a lot of damage to this economy”.
“If they continue with incompetence and corruption, the effect on the economy will be the same as what we’ve experienced the past 15 years or more,” he said.
Roodt cited different possibilities, labelling a bad one as the ANC going into coalition with the Economic Freedom Fighters (EFF).
“The EFF will be disastrous for the South African economy.
“A good scenario will be for the ANC to form a coalition with the Democratic Alliance but it depends on who’s going to be in the ANC. Will it be the good ANC or the bad ANC?” he asked.
Economist from North-West University Thabang Motswaledi said investors were a bit shaky about the outcome of the elections. He said the rand did not wake up as strong as it was in the past couple of days.
“Our political ideology essentially is going to shape our economic policies, hence the uneasiness of investors,” he said.
The ANC would not make drastic changes to the economy.
“Because even during their manifesto, there was not much emphasis on the changing of their economic policies in as far as how they see SA’s economic outlook.
“Should the ANC retain power or be forced into a coalition, that might bring some stability towards investors as they’ve worked with the ANC and understand their position,” Motswaledi said.
Political economist Khaya Sithole said it was unlikely that the ANC would need the DA or EFF, which meant they were negotiating with smaller parties that don’t have the same bargaining power.
“These are not the type of parties that can demand the ANC to change its entire economic policy just to be able to get a few hands in parliament to secure the vote of a president,” he said.
But Ackerman said that any kind of coalition could lead to policy uncertainty. It could make it harder over the next few years to achieve policy certainty.
Smaller parties such as Rise Mzansi and Action SA could tilt policy direction, especially if they get more than 3% of the vote and end up in coalition with the ANC.
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