Business

How ANC losses may affect economy

2016-08-07 15:00

The likelihood of the ANC losing control over South Africa’s two major metropolitan municipalities – Johannesburg and Tshwane – could put a massive chunk of the public sector in opposition hands.

National Treasury transfers more than R100 billion to local governments every year.

The four metros in which the ANC might no longer dominate – namely, Johannesburg, Tshwane, Nelson Mandela Bay and Cape Town – were allocated about R20 billion altogether in operational and capital transfers this year.

And together they wield municipal budgets totalling R125 billion.

The governing party’s glaring loss of support in urban centres during this week’s municipal elections sparked speculation about how it would try to fight back.

Ratings agency Fitch responded by fretting over a possible rise in “populist policies” as the ANC tried to regain voters for the 2019 national elections.

“This could include costly spending measures that could require breaching expenditure ceilings, or redistributive regulatory policies that might undermine economic growth,” said the agency.

However, Fitch tempered its comments by predicting that policy – insofar as the rating of government debt was concerned – would continue as is.

“Municipalities have no role [to play] in macroeconomic policymaking, but such a blow to the ANC’s traditional predominance could have an impact ... depending on the conclusions that ANC leaders draw,” said the agency.

UK-based analyst Peter Attard Montalto of Japanese investment bank Nomura noted:

“If investors are concerned about the ANC’s loss of power, it would probably calm their nerves to see that most of the ANC’s losses are going to the DA, which has business-friendly policies, rather than the Economic Freedom Fighters with its redistributive agenda.”

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