In the noise following last week’s local government elections, the central reasons for the steep losses suffered by the African National Congress (ANC) have been too easily skipped over. The reasons have little to do with some sharp rise in Democratic Alliance (DA) support or the formation of the Government of National Unity (GNU), let alone that the ANC was not radical enough or that reincorporating its splinters will make everything OK again. Instead, the reasons attach almost entirely to what that party allowed to happen in the economy.

The chart below shows the basic relationship between economic growth and ANC support using local government election results. See how, as growth rates lifted between 1994 and about 2008, ANC support lifted too, and how, as growth slipped after about 2008, ANC support slipped too.

The growth rate, in turn, informs the rate of job creation. See on the chart below how the number of people in employment initially rose strongly after 1994, but how, from about 2008, the line begins to flatten. See also how ANC support lifted in line with the steep increase in jobs created but fell as job creation stalled.

It is important to understand what allowed growth to increase in the first place. South Africa’s rate of economic growth reflects the capital investors are prepared to commit to the economy. The chart below shows that rate, called the fixed investment rate, since 1994, compared to ANC electoral support. You will see that the investment rate broadly lifted between 1994 and 2008 but fell thereafter, and that ANC support therefore follows the investment rate as much as anything else.

To round out this analysis, why did the investment rate rise and fall? The answer is business confidence, and to a lesser extent the confidence of consumers to spend money (something informed by whether they have much of that). The business confidence index shown on the chart below measures the confidence that firms have to invest in South Africa, and alongside it the consumer confidence index. The chart shows that these broadly rose between 1994 and 2008 and then fell, again in line with ANC support.

There has been a lot of talk over recent days about why the ANC has suffered such losses. Some people have said it is because of the GNU, others the DA. That’s wrong. ANC voters strongly support the GNU, and DA support at local level is essentially flat over a decade. Others say the ANC was not radical enough, while yet others say it should never have allowed the Economic Freedom Fighters and uMkhonto weSizwe Party to splinter off, and if they’d stayed on board, the ANC would still be OK. That’s also wrong. They were simply homes to catch disaffected voters who were sure to leave the ANC.

The ANC’s losses arose from a much deeper problem. After 2008, investor confidence fell to the point where the fixed investment rate dropped steeply, leading to a steep decline in the growth rate and therefore the rate of job creation. That is the deep and chief underpinning of the ANC’s losses. And only by reversing that chain of events, starting with confidence, can the ANC hope to regain what it has lost.