The ANC's hybrid regime, civil rights and risks to business

During the more than five years of President Jacob Zuma's rule, South Africa has moved from a flawed democracy to a hybrid regime.

In this regime, the locus of politics is not in the legislature or elections, but has moved to a field of power where democratic and non-accountable actors and processes interact. This political order could remain in place for the next decade.

One non-accountable factor is the ANC as a ruling party after twenty years in a one-party-dominant state. It has a non-pluralist political culture. Through its policy of cadre deployment, it has captured most state institutions and watered down the separation of powers. State institutions are now largely politically partisan, reinforcing a hybrid regime.

The ANC has therefore become as important a gatekeeper to power as elections, if not more important. It has expanded its hold on key constituencies and the market, also through selective patronage and crony capitalism. Both the electoral and the economic playing fields have been made uneven.

In elections there has been a marked decline in the registration and participation of eligible voters since 1994. In 2014, the ANC only attracted an estimated 35% of eligible voters' support, compared to 54% in 1994. High levels of emigration reflect the lack of responsiveness to citizens by the existing institutions. A high number of protests constitute forms of political competition aimed at gaining access to power and wealth outside elections.

Another driver of the hybrid regime is an unaccountable presidentialism that has exceeded the constitutional bounds of the office. President Zuma has not been held accountable by his party or Parliament. The media and institutions like the Public Protector have been able to identify and admonish examples hereof. However, in the current regime, the democratic checks and balances have not been able to restrain the executive in this regard.

The securitization of politics has become another trend in the hybrid regime. A longstanding non-pluralist political culture in the ANC, combined with increased factional struggles over positions, access to resources and opportunities within the ANC and its allies, will reinforce this. Suspicion and fear will set the tone in the inner circles of power. To the thousands of tourists and businesspeople visiting South Africa, this will not necessarily be visible.

Politics in the hybrid regime has acquired a non-democratic tenor. Even Archbishop Emeritus Desmond Tutu has referred to ANC intimidation. Political protests and assassinations have become an institutionalised part of local political alternation.

Opaque decision-making, linked to patron-client relations now permeate the executive and bureaucracy. The judiciary and media remain spaces of freedom, but are under pressure.

The interaction of the above-mentioned forces has resulted in democratic decline and transformed the political rules of the game, institutions and incentive systems in South Africa.

Unfortunately, three drivers will reinforce the dynamics of this hybrid regime and democratic decline in the next five years, namely intensified factional competition in the run-up to elections and the presidential succession; the further politicization of the security forces and securitization of politics to prop up presidential rule; as well as the weak economy and more limited state resources.

Economic policy uncertainty, swings and delays due to the infighting between different factions seem likely. Policy uncertainty will be experienced most by companies in sectors exposed to the government's political priorities, regulatory and licensing power.

The ANC has proceeded with several regulations, policy initiatives, bills and laws regarding mining and energy, the security industry, affirmative action and empowerment issues, land, patents, and foreign investors in general. The common underlying policy in all of these is the same: they increase the ANC government's interventionist powers in the economy.

The planned and actual measures weaken property rights and reduce private-sector autonomy, which would strengthen the position of crony capitalists with links to ANC factions compared to other businesses.

High levels of state debt and the needs of the ANC's patronage networks will drive efforts to look for new sources of income, both domestically and internationally. This search will coincide with an increased effort at economic diplomacy, both formal and informal. Positive results would at least partially strengthen the presidential and partisan ANC networks in the hybrid regime, rather than the South African state, communities and citizens as a whole.

There are different business and legal codes of conduct in different jurisdictions. International business is advised to heed best practices regarding integrity risk and reputational risk.

The factional search for more resources in the hybrid regime could result in an increased dependency on foreign patrons like Russia, China or other political and business actors. The field of competitors and the importance of specific competitive advantages of business may change suddenly.

The levels of visible state mismanagement and operational risk are likely to remain high or sometimes even rise, having an effect in many areas of service delivery such as the security of citizens and farmers, electricity, water management, waste management, road maintenance, education and postal services. The impact will differ per province and locality, with pockets of adequate or good service delivery in provinces and local areas.

Based on the internal and external dynamics of the ANC government, if government interventions do not have the required effect, there is a risk that such a result would not trigger a reassessment of the intervention, but rather a stronger form of intervention.

Factions within trade unions and trade unions will compete intensely with each other for members, networks, power, status and resources. Therefore industrial unrest will be a major risk, with the potential politicization of disputes that could be fast and assume militant forms.

Business will be exposed to diverse forms of political risk in the next five years. Political risk will be high: unexpected major shifts and unforeseen high-impact events are possible.

Businesses with a high risk appetite will remain involved or become active in South Africa. However, due to the increased political risk of the hybrid regime, some will also consider the opportunity cost when comparing South Africa to other markets.