South African Vote Puts $10 Billion of City Budgets in Play

Updated on
  • Ruling ANC lost outright control of Johannesburg, Pretoria
  • DA and EFF have said they won’t form coalitions with the ANC

South Africa’s governing African National Congress could lose control of more than 130 billion rand ($10 billion) in city budgets as political parties negotiate coalitions to govern four of the country’s biggest municipalities, including the capital, Pretoria, and the economic hub, Johannesburg.

The ANC’s support dropped to 54.5 percent in the Aug. 3 local government elections from 62.2 percent in a national vote two years ago, its worst performance yet and it was relegated to the second-biggest party in the Tshwane municipality, which includes Pretoria, and Nelson Mandela Bay, which includes the southern city of Port Elizabeth. The party also lost outright control of Johannesburg and its neighbor, the industrial hub of Ekurhuleni.

The Tshwane municipality oversees about 30 billion rand of spending and Nelson Mandela Bay manages about 11 billion rand, according to the cities’ budget documents. Johannesburg has estimated expenditure of more than 50 billion rand and Ekurhuleni has a budget of about 40 billion rand.

“It’s a massive amount of money and it has ramifications in a whole range of areas,” Ivor Sarakinsky, a senior lecturer at the Johannesburg-based University of the Witwatersrand’s School of Governance, said by phone Wednesday. “All of these metros procure significant goods and services from private-sector companies and the supply-chain management systems that manage that procurement are going to be shaken up dramatically.” 

Companies which previously won certain contracts might no longer have access to those public tenders, he said.

Disenchanted Voters

The ANC’s support fell as disenchanted voters fled to opposition parties amid increasing protests over a lack of services such as housing, water and sanitation, an unemployment rate of 27 percent and zero growth forecast by the central bank. This has opened the door for the Democratic Alliance to try form coalition governments in municipalities with smaller opposition parties, including the Economic Freedom Fighters.

“It’s clear in the province that the will of the people is such that we have hung councils,” David Makhura, the premier of Gauteng, the province that includes Johannesburg, Tshwane and Ekurhuleni, told reporters in Johannesburg Thursday. “There is no party that has been given a decisive mandate to govern the metros.”

The ANC won outright control in only three of the nation’s eight metropolitan municipalities, down from seven in 2011, while the DA increased its majority in Cape Town. While the DA and EFF have said they will work with other opposition parties to form coalition governments, both have said they won’t work with the ANC.

“The money and the potential influence that goes with it is going to be a very important factor in the coalition talks,” Gary van Staden, an analyst at NKC African Economics in Paarl, outside Cape Town, said by phone on Wednesday. “It’s big money. To get your finger into that pie is certainly going to play a role.”

The rand weakened on Thursday to end a three-day rally that took the currency to the best levels since mid-October, boosted partly by speculation that the ANC’s loss of support will pressure the party to introduce economic reforms that will spur growth and cut unemployment. The rand dropped 0.6 percent to 13.3604 per dollar by 2 p.m. in Johannesburg.

(Updates with comment from ANC official in seventh paragraph.)
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