On Friday, I met with Democratic Alliance (DA) parliamentarian, Geordin Hill-Lewis, the shadow minister of trade and industry and former chief of staff to DA leader Mmusi Maimane.
We discussed the state of the ANC, the Constitutional Court’s secret ballot vote potential outcome, dynamics of the 2019 election and, the DA’s election strategy.
Despite all the recent turbulence, the political landscape appears fairly clear. Here are the key issues from our meeting:
State of the ANC
The ANC is panicking and is in crisis. In-fighting and self-positioning are the order of the day.
Dlamini-Zuma is likely to be elected as the new leader at the end of the year, as she currently has approximately 65% to 70% support.
Under Dlamini-Zuma, it’s unlikely that there will be any meaningful change to current policy and, it’s likely that President Zuma will be protected from prosecution.
If Dlamini-Zuma is elected as the next ANC leader, there is a reasonable chance that there will be a split in the ANC with Ramaphosa forming a new political party.
The Constitutional Court Decision
A ruling should be given next week. There are three probable outcomes:
- A secret ballot is not prescribed
- A secret ballot is permissible but it is for the Speaker of the house to determine if necessary
- The Court instructs the speaker of the house to carry out a secret ballot
The likely outcome is uncertain. However, outcome #2 should result in no secret ballot and a vote of no-confidence failing. Outcome #3 should result in a secret ballot and it is highly likely a vote of no-confidence will succeed. There is a small chance that Zuma may resign before the vote to save the embarrassment of being ousted.
The vote of No Confidence
A successful no confidence vote results in the president and all cabinet ministers resigning. These cabinet ministers will likely be re-appointed and a new “care-taker” president elected, an ANC member.
There will be a short-term celebration and feeling of euphoria in the country, but nothing would have really changed in terms of future policy change. Zuma may still be head of the ANC and the ANC will be heading to elect a new leader at the end of the year.
The 2019 election
In the last municipal election in 2016, the ANC’s national support declined to 54% from 62% at the previous national election in 2014. According to the DA, a national poll carried out in March 2017 gave the ANC a national support of 54%. Their opinion is that this support has declined further to 52% subsequent to the cabinet reshuffle.
There are approximately 24m voters in SA of which 7m abstain from voting. This is largely due to not having an alternative to the ANC. Not voting for the ANC is mostly due to mistrust and non-delivery (largely jobs).
The ANC’s new policy of radical economic transformation is being viewed as simple political rhetoric and with no real substance, as opposed to meaningful change being seen in the newly DA-managed districts of Gauteng and PE.
It is possible for the ANC to lose the majority vote in the 2019 election, which will result in a coalition government between the DA, EFF and maybe an ANC break-away party. According to the DA, it is highly unlikely that the EFF will side with the ANC, given the EFF’s deep rift with the ANC.
The DA strategy
It is critical for the DA to reach and convert the 7m abstaining voters. The target is to convert 3m voters and the real issue is to convince the abstaining voters that the DA is a party for all South Africans. This can only be done successfully by door-to-door meetings, which will be done through the employment of 65 000 volunteers.
The DA will be doubling their election budget in 2019 to R750m. Fundraising, both locally and abroad, is taking place.
Conclusion
The country is at a cross road and a change in direction is necessary. A successful vote of no confidence will be pleasing but not the solution. Dlamini-Zuma is likely to be the next head of the ANC, which will not bring the necessary meaningful policy changes. So, it is likely that the country’s future hinges on the ANC not maintaining a majority in 2019.
We believe a lot of this scenario is priced into our market. This means that a positive outcome for the country is not lost. This is reflected in the Rand’s strength and the market’s stability. We believe there are many investment opportunities through our markets which will continue to provide good long-term returns. These investments need to be balanced out appropriately to ensure the best risk-adjusted returns are attained.