After 30 years of enjoying their outright majority in South Africa’s political arena, the party of Oliver Tambo and Nelson Mandela relinquished their dominance with an almost 18-percentage point slide in last week’s elections!

Arrogance, ignorance, a lack of service delivery, and the ‘politics of the stomach’ have all been blamed for the ANC’s downfall, but a closer look at voting trends correlated with living standards and GDP per capita cannot be overlooked – and these have been declining steadily since the heydays of the Mbeki-era in lockstep with ANC support at the polls. The powerful words of James Carville, advisor to President Clinton, spring to mind too: “It’s the economy, stupid!”

Regardless of the reasons, there is a clear price being paid by the governing party, and 71 fewer MPs will be occupying the benches of parliament during the 7th administration! That is over 70 people who are largely unemployable outside of politics, and who will likely expect a call from their bank regarding their home loan, and calls from their children’s private schools asking similar questions too…

This is a bigger blow to the party than most imagine!

Whilst still the largest party with the single biggest mandate, the nature of our politics puts Cyril Ramaphosa’s ANC in the tenuous position of having to choose at least one partner to take this country forward.

Dr Frans Cronje, political scientist and Chairman of the Social Research Foundation (SRF), regards these three things as the principle factors that hurt the ANC in the run-up to last week:

•                     The signing into law of the NHI Bill

•                     The Constitutional Court’s ruling on Jacob Zuma’s ineligibility to stand as an MP, and

•                     The inefficiency of the IEC and delays experienced on voting day

(If you have not seen Dr Cronje’s interview with Alec Hogg of Biznews, click here to watch it).

As at the time of writing this, we wait anxiously for the dust to settle on the talks of coalitions or a ‘government of national unity’. President Ramaphosa is faced with some interesting choices, yet with one decision he could largely obliterate 3 opposition parties by making them irrelevant to the country’s political discourse for the next 5 years!

Additionally, with the sensible option that puts the well-being of the country first, the ANC could potentially deliver on their election promise of “A better life for all”.

Hopefully the future of our beloved country is one devoid of terms like ‘radical’, ‘revolutionary’, and fewer people calling one another ‘comrade’!

Whatever the outcome, capital markets are understandably nervous, and the longer the talks between parties linger on, uncertainty will undoubtedly prevail – for the good of the country, the first hurdle is a decisive move that will calm markets!

Beyond the headlines of the elections, the month of May provided a bumper month for investors across most asset classes as the world’s eyes remain transfixed on inflation and interest rates. As hopes once again rose that the US Fed could still drop rates this year, we saw a multi-week rally in shares, bonds, and emerging market currencies – our Rand even touched R18.05, buoyed by a supposed ‘Risk-On’ sentiment brewing.

Indications are that, although slower than expected, the inflation picture is improving and will likely continue to do so. In many economies where inflation persists it has shifted to being largely driven by input prices and not consumer demand – so further rate hikes would be ineffectual and misguided. And as we enter the 27th month since the Fed hiked rates at the beginning of this cycle, it has become increasingly evident just how much interest rates matter in markets…

With the country’s politics set to dominate our headlines for the next few weeks before the new government is formed, remember that the global outlook (barring the outbreak of a world war!) beyond our borders does look promising:

•                     Cash rates are at their peak

•                     Bond yields are at the highest they have been in almost a decade and a half

•                     Valuations on shares look enormously attractive

•                     And economic fundamentals would enjoy a significant tailwind from lower interest rates

And as we have always held, that 70% to 75% of how we do and how we feel in South Africa has very little to do with ourselves, the prospects for the future of the rest of the world do look promising.

We can only hope that the politicians who hold our futures in their very hands fully appreciate the opportunity in front of them!