Picture: BUSINESS DAY
Picture: BUSINESS DAY

THE government’s inability to address major economic problems will probably jeopardise the popularity of the African National Congress (ANC) in the upcoming local government elections.

This is according to a new report published this week by FocusEconomics, an international company that provides economic forecasts and analysis.

However, political analyst Daniel Silke says that in SA, other issues can crowd out economics in influencing voters’ decisions, and both the ANC and the Democratic Alliance (DA) are using the approaching municipal polls to air broader issues.

The FocusEconomics report notes that growing pessimism over the health of the economy has affected business confidence, which plummeted to a multiyear low in December, and that the rand’s downward trend took it to a new record low in early January amid concern over the Chinese economy and a downward slide in commodity prices.

These issues are likely to sway voters away from the ruling party, the report says.

The ANC is facing stiff competition from the DA, which aims to snatch some of the major metros including Johannesburg, Tshwane and Nelson Mandela Bay.

Earlier this month, the International Monetary Fund slashed SA’s economic growth forecast for 2016 to less than 1%. The government is projecting gross domestic product (GDP) growth of 1.7% this year.

According to FocusEconomics, SA’s outlook is dim. Electricity and water supply constraints will hamper growth by both interrupting production and discouraging investment. Slowing Chinese demand and low commodity prices will weigh further on growth.

The FocusEconomics panel expects the economy to expand 1.3% in 2016 and 2% in 2017.

Kenya and Nigeria are forecast to expand by 6% and 3.8% respectively this year.

Inflation inched up from 4.8% in November to 5.2% in December, the highest reading in over a year. Inflationary pressures are expected to intensify amid a depreciating currency and severe droughts.

"Our panel projects inflation to average 6% in 2016 before easing to 5.9% in 2017," the authors of the report said.

The South African economy avoided falling into technical recession in the third quarter although GDP barely grew on a sequential basis, and recent data point to another quarter of weak growth in the fourth quarter, the report noted.

"Severe droughts, coupled with a plunging currency and political turmoil, have hurt the economy badly … the government’s inability to address major economic problems will likely jeopardise the popularity of the ruling party in the upcoming regional elections," the report said.

Not just the economy

Political analyst Daniel Silke said on Wednesday that ordinarily economic conditions should be the key issue in any election. "However, our coming elections look set to be fought on issues that are much broader.

"These are local government elections and should be about the impact of governance at that level across SA. However, broader economic forces are having a profound impact on South Africans.

"But both the ANC and DA seemingly are trying to turn the election into more of a national poll on bigger issues — those surrounding racism (from the ANC’s side) and the DA on leadership and (President Jacob) Zuma," said Mr Silke.

"Bottom line: The poor economic position in the country will have some effect on the performance of the ANC but in the South African case, there are other issues at play that compete with economy for voter sentiment.

"Issues of racism and leadership will be as important as the economy. Seems like the local elections will be less about local issues (the functioning of municipalities) and more about bigger national issues."