South Africa stands at its most important political crossroads since the negotiations that brought apartheid to an end. The results of the 2026 local government elections have presented the country’s political leaders with a choice between two very different futures, one that could establish the foundations for decades of economic growth, political stability, and rising living standards, and another that could deepen the political fragmentation and economic stagnation that have characterised much of the past two decades. 

The first would see the African National Congress (ANC) and Democratic Alliance (DA) negotiate a national governing pact extending across most of South Africa's municipalities. The second would see the ANC enter into an alternative alliance with ActionSA, the uMkhonto weSizwe Party (MKP), the Economic Freedom Fighters (EFF), the Patriotic Alliance (PA), and smaller parties. The consequences of that choice could extend far beyond the formation of municipal governments to determine the survival of the Government of National Unity (GNU), the direction of economic policy, and ultimately whether South Africa can overcome the divisions of its past to secure a more prosperous future.

There is a remarkable historical precedent for the choice now confronting South Africa. In the mid-1980s, when the country was increasingly consumed by racial confrontation, political violence, economic stagnation, and international isolation, Clem Sunter and his colleagues at Anglo American developed the High Road and Low Road scenarios, which would become among the most influential exercises in South African history.

The High Road envisaged a negotiated political settlement that would end apartheid, establish an inclusive political order, and create the foundations for investment, economic growth, and rising prosperity.

The Low Road envisaged continued political confrontation, escalating racial conflict, deepening international isolation, declining investment, and the possibility of civil war.

Sunter’s central insight was that neither future was inevitable and that the political decisions made by South Africa’s leaders would determine which trajectory the country followed. His scenarios helped demonstrate that even in circumstances of seemingly irreconcilable political division, the opportunity existed to negotiate a settlement that would fundamentally change the country’s future.

South Africa ultimately took the political High Road, with the negotiations of the early 1990s culminating in the democratic settlement of 1994. But the country never fully secured the economic High Road that was supposed to follow. Although South Africa enjoyed a period of rising investment, stronger growth, and improving living standards during the first decade and a half of democracy, that progress subsequently faltered. Economic growth weakened after 2008 as fixed investment declined relative to the needs of the economy, unemployment remained extraordinarily high, and the deterioration of public services increasingly undermined the living standards of ordinary South Africans.

The political consequence has been a sustained erosion of support for the ANC, culminating first in its defeat in the 2024 national elections and now its steeper losses in last week’s local government elections. The country has therefore arrived at another crossroads, not over whether apartheid should end and democracy should be established, but over whether its democratic political system can produce the economic progress necessary to sustain the national settlement achieved more than three decades ago.

The Election That Created the Crossroads

The scale of the political change brought about by the 2026 local government elections is extraordinary. The ANC’s share of the proportional representation vote fell from 46.1% in 2021 to 31.0% in 2026, its lowest electoral result since the advent of democracy. The DA secured 24.7%, while the MKP won 9.7%, the EFF 6.3%, ActionSA 6.0%, the Inkatha Freedom Party 4.7%, the Freedom Front Plus 3.0%, and the South African Communist Party 2.3%.

For the first time since 1994, the ANC and the broader Charter movement, comprising political parties rooted in the tradition of the Freedom Charter, collectively fell below 50.0% of the vote. The result marks the end of an era in which the ANC and the parties that emerged from its political tradition could expect to command the support of a majority of South Africans. It also demonstrates that the ANC’s decline has not translated into equivalent gains for the DA, but has instead produced an increasingly fragmented political landscape in which several parties now compete for sections of the ANC’s former electoral constituency.

The ANC’s retreat has been particularly severe in South Africa’s major cities. Over the past two decades, the party has lost approximately 40 percentage points of support in Johannesburg, Tshwane, Ekurhuleni, and Nelson Mandela Bay. In eThekwini, its support has fallen by almost 50 percentage points since 2011, while in Mangaung and Buffalo City, it has declined from overwhelming majorities to levels at which the party can no longer govern alone. The DA emerged as the largest party in Johannesburg, Tshwane, Ekurhuleni, and Nelson Mandela Bay, in addition to winning Cape Town outright with 56.7% of the vote. The MKP became the largest party in eThekwini, while the ANC remained the largest in Buffalo City and Mangaung. Across the country, the number of hung municipal councils more than doubled from 66 in 2021 to 138 in 2026, leaving 64.8% of South Africa’s municipalities without a party commanding an outright majority. The political control of much of the country must therefore now be determined through negotiations between parties that have previously been electoral opponents.

The underlying explanation for this fragmentation is principally economic. The ANC benefited electorally during the years in which South Africa’s economy expanded, investment increased, and the material circumstances of millions of South Africans improved. Its decline accelerated as the economic conditions necessary for sustained improvements in living standards deteriorated.

There is a chain of cause and effect that explains this relationship. Business and consumer confidence influence the willingness of firms and households to make long-term economic commitments. Confidence thereby determines the rate of fixed investment, which measures the capital entrepreneurs and other investors actually commit to South Africa. Investment determines the economy’s productive capacity and the pace at which it can grow, while growth determines the opportunities for employment, income generation, and improving living standards. Over time, those changes in living standards shaped electoral outcomes. The ANC has not merely lost an election to its political opponents. It has lost millions of voters because South Africa has failed to generate the economic progress those voters expected from democracy.

That economic reality is central to understanding the High Road and Low Road choices now before the country. The ANC can respond to its electoral defeat by entering into governing arrangements designed primarily to provide the illusion of continued political control to secure the patronage that attaches to that for a while longer, even where doing so places it alongside parties that have taken large numbers of its voters. Alternatively, it can negotiate a much broader agreement with the DA that could secure political stability across most of the country and create the circumstances in which economic reform, higher investment, and stronger growth become possible.

The Low Road

The Low Road would see the ANC extend the political arrangements that have emerged in parts of Gauteng into a broader alliance with ActionSA, the MKP, the EFF, the PA, and similar smaller parties. Such an arrangement could command majorities across seven of South Africa’s eight metropolitan municipalities. One version of the deal under discussion would see ActionSA control Tshwane, the ANC retain Johannesburg and Ekurhuleni, and the MKP take eThekwini. From the perspective of sections of the ANC, particularly in Gauteng, the attraction of this arrangement is that it could preserve the party’s control over major metropolitan governments despite its substantial electoral losses. That control would extend to the allocation of mayoral and executive positions, influence over municipal budgets and appointments, and the maintenance of political patronage networks that have developed around municipal government.

The first major danger is that such an arrangement would place the ANC in direct conflict with the governing relationship it maintains with the DA nationally. The GNU rests on the understanding that the ANC and DA can cooperate in government despite their political and ideological differences. If the ANC were systematically to exclude the DA from municipal governments in favour of alliances with parties opposed to it, the political basis of that national relationship could come under severe strain. The consequences could include a breakdown in cooperation within the GNU, the removal of the DA from national government, or attempts to construct an alternative national governing arrangement. Such developments would introduce considerable uncertainty over South Africa’s economic policy direction, the durability of existing reforms in as far as there are any, and the ability of government to make the difficult decisions necessary to restore investment and growth.

The second danger is that the proposed alliance would bring together parties broadly united behind reckless policies that would come to threaten the fiscal prudence that is so deeply priced into South Africa’s bond market. Rather than establishing the certainty required for businesses to invest, such an arrangement could introduce new uncertainties about property rights, fiscal policy, the role of the state, and the direction of economic reform.

There is also a fundamental electoral contradiction for the ANC in pursuing this course. Analysis of the 2026 results in predominantly black metropolitan voting districts, defined as districts where more than 95.0% of voters are black, suggests that the ANC lost approximately 25 percentage points of support and the EFF nine. Over the same period, the MKP gained approximately 14 percentage points, ActionSA gained ten, but the DA only five. The ANC’s principal political competitor is therefore not the DA but rather the splintering of Charter-type parties that have much in common with the ANC’s own ideological grounding. Entering government with these parties could give them greater access to municipal power, public visibility, and political resources, thereby enabling them to compete ever more effectively for the ANC’s remaining support. Play that out and the Charter movement will splinter to a point where all its members become quite small parties in a coalition driving ever more populist policies, with the consequence of permanently stalling the economic turnround the ANC needs to regain the ground it has lost.

The economic implications could be severe even without an immediate political or financial crisis. A breakdown of the GNU or prolonged uncertainty about its survival or future make-up will weaken business confidence and cause investors to defer commitments to South Africa. Lower fixed investment would constrain the economy’s productive capacity, limiting economic growth and the creation of employment. Without sustained growth, government would struggle to improve public services or raise household living standards, while the pressure on public finances would continue. The resulting economic deterioration would reinforce the political dissatisfaction that produced the ANC’s electoral defeat and encourage further fragmentation of the country’s political system.

The Low Road could therefore become a self-reinforcing cycle in which political instability undermines investment, weak investment depresses growth, and weak growth produces further political instability, and the ANC vote share, which has now ticked down into the 30s, drops into the 20s and quite plausibly the teens.

The end game will be that South Africa ends up as poor and unstable country with high levels of poverty, albeit one in which the enclave phenomenon ensures a prosperous and successful future of the small, and well-hedged, middle class.

The High Road

The alternative is an agreement between the ANC and DA that extends their existing national governing partnership across South Africa’s municipalities. The electoral arithmetic makes the scale of that opportunity exceptional. Of South Africa’s 213 municipalities, the ANC won 53 outright and the DA won 12. In a further 93 hung councils, the two parties together command a majority, meaning that a common ANC-DA governing arrangement could extend across 158 municipalities, equivalent to 74.2% of the country’s total and covering nearly 75% of its population.

In the metropolitan municipalities, the DA has won Cape Town outright and is the largest party in another four metros where the two parties together could form a majority. The ANC is the largest party in two further metros where such a majority is possible. An agreement between the two parties could therefore extend to seven of South Africa’s eight metros, leaving eThekwini as the principal exception requiring additional coalition partners.

The significance of this arithmetic extends well beyond the immediate question of which party controls which municipality. Such an arrangement would establish a common governing relationship between the country’s two largest political parties across much of its national and municipal political system. This could create the stability necessary for coordinated reforms around municipal administration, electricity and water infrastructure, transport, public finances, and the regulatory environment facing businesses. It would also reduce dependence on smaller parties whose political leverage often exceeds their electoral support and whose demands can complicate coalition government.

The potential economic consequences are substantial. Greater political stability and a credible programme of reform could strengthen confidence among businesses and investors that South Africa is capable of maintaining a consistent and reform-minded economic policy direction. That confidence could encourage greater fixed investment, which would expand productive capacity, support employment creation, and place the economy on a stronger growth trajectory. Higher growth would, in turn, improve household incomes, expand the tax base, strengthen public finances, and provide government with greater resources to improve infrastructure and services. If maintained over a sufficiently long period, those improvements could begin to reverse the deterioration in living standards that has been responsible for so much of South Africa’s political fragmentation.

The political consequences will be equally important and to the advantage of both the DA and the ANC, particularly the latter. Unlike the ANC’s splinters and smaller rivals, the DA draws its electoral support from a substantially different political constituency to that of the ANC.

The DA draws its voters from the established middle classes and the ANC from the aspirant middle classes on the urban fringes and from relatively older and poorer voters in deep rural South Africa; voters whose hopes for a better life now exist chiefly vicariously through their children and grandchildren on the urban fringes. Coalitions do not work between parties who compete for essentially the same voters, they work best between parties who do not, but whose voters nonetheless share common interests and objectives. In the case of contemporary South Africa, the fortunate reality is that the policies necessary to secure a future for the established middle classes are in practice indistinguishable from those that will enable such a future for the aspirant middle classes. And in that, the DA and the ANC have the makings of a good and stable deal if they both come to understand all of this.

An agreement between the two is therefore perfectly consistent with both pursuing political gains through the success of a shared governing programme rather than through the weakening of the other’s position in government. The ANC could realistically shut the door on its Charter rivals and then recover its former voters by demonstrating that it can improve the material circumstances of the communities that historically supported it, while the DA could seek to lock in its position by demonstrating that the party’s approach to governance delivers prosperity and stability. Both would thereby have a strong incentive to make the governing arrangement succeed.

There is, however, a formidable political obstacle to such an agreement. The ANC would have to accept that the election result has fundamentally changed the distribution of political power in South Africa’s major cities, at least for the immediate period ahead. With the DA now the largest party in Johannesburg, Tshwane, Ekurhuleni, and Nelson Mandela Bay, a governing arrangement reflecting the parties’ electoral strength would require the ANC to accept a more modest position in several of the municipalities it has historically controlled. This would threaten established corruption networks and the political influence associated with control over municipal budgets and executive appointments. For sections of the ANC, this would be deeply uncomfortable, and resistance could generate significant internal conflict. Getting such an arrangement over the line would therefore require strong executive leadership from the top of the ANC. But it has been quite some time since long-term strategy trumped short-term expediency in the ANC camp.

The Markets and the Consequences of Getting the Choice Wrong

Financial markets have so far reacted favourably to South Africa’s election result, although this also reflects expectations about the political consequences that are not yet assured. South Africa’s 10-year government bond yield declined from 8.73% on 30 October to approximately 8.44% on 9 November, following a sharp decline associated with the United States (US) midterm elections. The differential between South African and equivalent US government bond yields has narrowed to approximately four percentage points, approaching levels last seen between 2004 and 2007, when South Africa was averaging economic growth of 5.0% and its public finances were considerably stronger; a mispricing on risk my firm has been warning its clients of for several months.

An Extraordinary Opportunity to Overcome the Past

There is a deeper significance to the High Road than the prospect of improved financial market performance or more effective municipal government. South Africa’s democratic settlement of 1994 succeeded in overcoming an immense political and racial divide, but the country has struggled to establish the sustained economic success necessary to consolidate that achievement. Its politics remain shaped by historical divisions, competing interpretations of the past, and disputes over the distribution of economic opportunity. Weak economic growth has made these divisions more difficult to overcome because large sections of the population have experienced too little improvement in their material circumstances.

A political settlement that creates the conditions for sustained economic expansion could therefore achieve something that more than three decades of democratic politics have struggled to deliver, by establishing a common national interest in rising prosperity across the country’s historical political and racial divides.

An agreement between the ANC and DA would be especially significant in this respect because it would bring together political traditions that have often defined themselves in opposition to one another. The ANC’s history is rooted in the struggle against apartheid and the establishment of majority rule, while the DA’s political tradition places particular emphasis on constitutional liberalism, institutional accountability, and economic opportunity. Their differences are substantial and would not disappear under a coalition agreement. But the lesson of South Africa’s first great political settlement is that lasting national progress does not require political opponents to abandon their histories or agree on every question. It requires them to recognise that they share a future and that cooperation on matters of fundamental national importance can achieve more than continued confrontation.

The opportunity now is to build a governing pact across those divisions with a central economic purpose. And the young Mr Geordin Hill-Lewis should meet with the elder Mr Cyril Ramaphosa, as the leaders to South Africa’s two serious political parties, to get this done as Mr Ramaphosa helped to do once before. That would be a fitting end to his long career and do much to pave the way for a pragmatic successor. The objective would be to restore the confidence necessary for investment, establish the conditions for stronger economic growth, and ensure that the resulting gains translate into employment, rising incomes, and improved living standards. Such a pact could also help establish new norms of political cooperation in which the major parties compete over their ability to deliver better outcomes rather than principally over their control of state institutions and resources. The futures of both the DA and the ANC are now irrevocably intertwined with the success of the economy, which is not true for their broader splintered rivals who will grow stronger should the economy falter further. If successful, the DA/ANC could create a more stable political foundation for economic development over several decades, allowing successive governments to build on a common commitment to growth, constitutional democracy, effective institutions, and expanding opportunity.

Forty years ago, Clem Sunter demonstrated that South Africa’s future could be transformed by political leaders willing to abandon confrontation in favour of a negotiated settlement. That lesson is directly relevant to the circumstances confronting the country in November 2026. The risks are considerable because an alternative coalition settlement could undermine the national government, weaken investor confidence, and leave South Africa trapped in the cycle of political fragmentation and economic stagnation that has characterised much of its recent history. But the opportunity is also extraordinary because the electoral result has created the possibility of an ANC-DA national pact covering almost 80% of the population and most of the country’s municipalities. Such a settlement could provide the political foundation for reforms that would set South Africa on a different economic trajectory for decades.