A recent Nomura analysis predicts that the country will be in for a rough ride if the ruling African National Congress fails to maintain a majority vote in the election.
The talks about the forth coming local government elections and its role in reshaping the history of the country can not be over emphasized.
The new research Nomura analysis revealed that despite slow drop in party support from key municipalities, the ANC will maintain a majority vote in the election, winning 56.5% of support, nationally.
However, the group said should the ANC fail to retain majority control of the country, the country could be in for a tough ride.
“The ANC falling from majority control (ie getting below 50%) does not indicate a smooth ride, because we do not see the DA (or any other party) gaining outright majorities,” the Nomura said.
“Elsewhere in the country the DA has shown its ability to govern in coalitions, but running a metro is more complex.”
Recent polls showed that support for the ANC has dropped by 25% in most key municipalities like Tshwane municipality. The drop in ANC support happens to be at the advantage of the party’s strongest opposition – the DA which is said to have gained heavily at 39%.
The polls result proved that the ANC is facing a serious challenge to maintain control of the three municipalities which could possibly lead to their huge loss in the coming elections. This however opposes the Nomura analysis which predicts a good win for the party.
The group also said coalition between parties may take time to emerge and this would in turn lead to loss of confidence in the part of investors who may be forced to wait a little longer before venturing into business with the country.
“Such coalitions would also likely be unstable with the EFF as part of them, meaning changes in format could occur or even the need for early re-elections.”
There is also the possibility of ANC minority rule in metros where coalition agreement are not possible and confidence and supply agreements with the DA could be a possibility here.
“As such we should be clear that while the ANC loses support, it seems unlikely that we get a simple transition to opposition rule in metros without a big surprise leap in electoral support for the DA,” the group said.
Nomura Analysis On Economic Effects
The August 3, 2016 election is said to like never before, have huge impact on the country’s economy. This is because most key metropolitan areas that investors know well will be greatly contested and the ruling party may be faced with strong internal power tussle between the tenderpreneur and anti-tenderpreneur factions and the succession struggle that is also occurring within the organisation.
The election is also a step closer to the strong move to unseat President Jacob Zuma. The election outcome will in fact determine how ‘safe’ the President is in his seat of power.
The group also said that a very weak outcome for the ANC would likely be viewed as a market positive (increasing in the market’s mind the chances of Zuma’s early removal).
“What Ipsos is basically saying is we have lost the election,” Paul Mashatile, the chairman of the ANC in Gauteng, said in July 7 interview. “I’m not sure how they are doing their research. We are quite confident that in many of our municipalities” the ANC has 50% support or more.
It however stated noted that a moderate outcome of a 55-58% national vote share with one or two metros lost would be fairly neutral to slightly positive in terms of market reaction.
A 58%+ outcome (with no or one metro lost – not Johannesburg) would be market negative with a much faster realization that Zuma is secure in a position the group said.