South Africa’s election results have begun to come in, and the results have confirmed that South Africa will be governed by a coalition, with highly significant implications for investors and business. That the ANC fell under 50% of the vote is not a surprise. The bigger shock is that with over 50% of the votes counted, the party is polling at 42.9%, falling short of the expectations that they would capture around 45% of the vote.
Given the scale of the party’s decline, they now likely face a far more complicated task in forming a government. If the results hold, they will be unable to rely on support from one of the small parties that hold less than 5% of the vote. That scenario would have allowed the ANC to govern without major concessions to a strong coalition partner. If the ANC ends up with closer to 40% of the vote, as seems likely, we are left with a few plausible coalition partners, all of whom would have a price for their support and who would mean major changes to the landscape for foreign companies operating in South Africa.
The coalition options offer diverging paths for South Africa:
- ANC/DA Coalition – The DA (23.4%) is open to free markets and economic liberalism. They would likely push the ANC to reduce its statist economic tendencies and increase the role of the private sector in strategic economic sectors (including power and transport). This scenario would be the most favourable for the private sector and foreign investors, but there is a little trust between the ANC and DA. They have widely diverging policy views and the DA would likely extract a heavy price, including possibly demanding the deputy president’s position. While there have been discussions, some ANC insiders feel this is the least likely coalition outcome, but it is also favoured by some ANC leaders
- ANC/EFF Coalition – The EFF (9.5%) would support radical policies, including expropriation and nationalisation of strategic businesses. Their participation in government would herald a significant deterioration of the business environment for foreign investment. The party is also supportive of strengthening relations with Russia, including developing nuclear power capacity with Russian support, bringing added risk for Western businesses.
- ANC/MK Coalition – MK (10.2%), a party founded only last year by former president Jacob Zuma, has championed similar policies to the EFF, including nationalising land and banks. They have also called for changes in South Africa’s political system, including a constitutional referendum and an unelected upper house. MK has broken the ANC’s hold on KwaZulu-Natal by winning over ANC supporters, but a partnership would be hindered by the animosity between the parties’ leaders. While some ANC leaders are open to working with MK, a coalition might signal that the ANC is moving to oust President Ramaphosa.
- ANC/Small Party Coalition – Until the elections, this was viewed as the most likely outcome, where the ANC was able to govern largely as normal, making minor concessions to gain the support of a small party. Given their worse than expected performance, a small party coalition, if possible, would require the support of multiple parties, increasing the risk of instability. If the final count brings the ANC close to 50%, a coalition with small parties will be their preference, and is the option that will bring the least change.
As things stand, the outcome of the election means that companies face the uncertainty of diverging paths for South Africa’s policy environment, ranging from a more pro-market approach, to radical policies of nationalisation. Another major question mark is now the future of President Ramaphosa. While his certainly not all one would have hoped in terms of his ability stamp out corruption, implement necessary structural economic reforms and reinvigorate the government, he did provide welcome stability at the centre of power, but rumours from within the ANC suggest the poor result may cost him his leadership.
With any outcome, South Africa is set to have a national coalition government for the first time in living memory and the private sector will need to be vigilant, nimble and engaged to adapt to the new reality.
Conclusion
This marks a historic turning point for South Africa. The coalition’s final makeup—whether pro-market or radical—will shape the business environment, investor confidence, and the country’s global standing. While President Ramaphosa’s future is uncertain, what’s clear is that political fragmentation will demand greater agility from companies. The private sector must stay closely engaged with evolving policies and power dynamics to navigate the challenges and opportunities ahead.
