An Economy Holds Its Breath

As the nation prepares to go to the polls, an ANC victory is expected. But what will the post-election environment look like, for investors in particular?

- Lloyd Gedye

The South African economy could face numerous economic headwinds in 2019. Global economic growth is slowing, China is facing a credit crunch and the potential fallout from the US-China trade war looms large.

Closer to home, a national election in May is fast approaching. The expectation is that the outcome of this election will impact the local economy in the second half of 2019.

South African investors should be making sure their portfolios are diverse and balanced enough to ride out the impacts of these potential headwinds, while at the same time looking at opportunities that these risks may present.

An outright ANC victory

Political economists and fund managers that finweek spoke to during the first week of January, suggest that a clear outright victory for the ANC is expected, with most predicting the party will receive between 58% and 64% of the vote.

“No one is expecting the ANC not to win the election,” says Professor Vishnu Padayachee, from the Wits School of Economic&Business Sciences. “It’s a question of the degree of the win.”

Padayachee says it is important for the country to get the election concluded and emerge with a stable ANC and a stronger government that has a much clearer and implementable set of economic ideas than apparent to date.

“A stable, higher-growth path is essential,” he says.

“If [President Cyril] Ramaphosa’s political hand is strengthened, one hopes he will feel emboldened by that to embark on an economic programme appropriate for South African conditions.”

Commentators seem to agree that the only other possible outcome, although a long shot, is that SA could face a coalition government between Julius Malema’s EFF and the ANC. (See sidebar.)