The Four Critical Forces Shaping the ANC’s Next Policy Decisions

South Africa finds itself at a significant crossroads following the loss by the African National Congress (ANC) of its parliamentary majority in the 2024 elections. With its support base falling to just 40% (it polled at 37% in November), the ANC is now navigating an altered political landscape, one that has forced a great measure of internal reflection.

The evolving situation presents an unprecedented opportunity for potential policy reforms in key areas, from empowerment to foreign policy, property rights, and healthcare.

In a note from advisory firm Frans Cronje Private Clients, four primary forces are identified as driving this opportunity for South Africa.

The first was the ANC’s electoral defeat last year. The ANC’s reduced electoral support has fundamentally altered its grip on power. With just 40% of the vote, the party found itself facing a binary choice: to form a government with the hard left or the centrist middle. While having to make this choice at all represented a significant setback for the ANC, it also forced a decision on policy orientation and thereby opened the door for new ideas and reformist policies.

The second is the state of the economy. South Africa’s struggling economy is directly tied to the ANC’s political challenges. This is well understood in the higher echelons of the party – specially with reference to the first decade after 1994, when rising investment and GDP growth drove the ANC vote share upwards. Rising unemployment after 2008 was, as much as anything, directly responsible for the ANC’s electoral loss and continues to plague the nation, underscoring the failure of past economic policies. It is therefore broadly understood that the ANC's economic agenda has failed to deliver to its own base, and the need for a recalibration of policies to stimulate growth and attract investment is needed if the ANC is to arrest its decline.

The third is the impact of the unity government on policy. The formation of the Government of National Unity following the ANC’s electoral loss marks a new chapter in South Africa’s political history. While the unity government represents a compromise between various political factions, its very nature forces concessions. This has allowed for an easier dialogue around policy holdouts, and this could reshape key national policies. The recently announced review of empowerment policy, for example, is a sincere effort to evaluate its impact on investment and economic growth. The review provides an opportunity for investors and other stakeholders to actively participate in these reforms, and their advice is likely to be taken more seriously than before. Similar opportunities have arisen around the proposed National Health Insurance scheme, property rights, ports and logistics, and foreign policy.

The fourth is a generational shift in leadership. The retirement of the ANC’s older generation of leaders, including President Cyril Ramaphosa, has created a space for younger leaders to rise within the party – people who are not yet established and require a successful and stable ANC around which to build their careers. Understanding this generational shift is crucial to understanding the window that has opened. The younger generation of ANC leaders is trying to bring new perspectives and ideas to the table, which could pave the way for the party to redefine its approach to governance and policy.

The current political climate bears some similarities to the 1970s, when South Africa’s Afrikaner community was faced with a choice between reform or stagnation and collapse. At that time, pragmatic figures within the Afrikaner establishment (not liberals, but establishment hardliners who understood where things were headed), known as “verligtes” (the enlightened), recognised that reform was necessary for survival in a changing world. The “verligtes” were pitted against a “verkrampte” (arch-conservative – to the point of being “cramped”) old guard that doggedly clung to the past. The verligte figures, with great external diplomatic and business support, helped guide the country through its transition from apartheid to democracy by embracing negotiated change. The ANC of today is in a not-dissimilar position.

The intersection of these four forces – the ANC’s electoral defeat, the weak state of the economy, the broader impact of the unity government, and the generational shift in leadership – has created a rare window of opportunity for South Africa to implement much-needed reforms. If the ANC can shed a degree of ideological rigidity and engage in meaningful dialogue with business leaders, civil society, and other stakeholders, it could lay the foundation for a more prosperous and inclusive future for all South Africans.