Business is advised that an important shift is occurring in South Africa, with significantly higher political risk in the short- and medium-term. The vulnerable socio-political trust on which South Africa’s 1994 political settlement was based is disintegrating across the northern part of the country, including its economic heartland centred around Johannesburg.

Inter-group tensions have increased significantly in recent weeks as a result of perceived incitements by the ruling African National Congress (ANC) to ‘shoot and kill’ members of the Afrikaner ethnic group.

In the past months, a new consensus has been forming among Afrikaners of all political persuasions that the ANC government is unable to protect its citizens and that it has adopted an agenda hostile towards minority groups. These views are increasingly shared by members of the English-speaking white community, Asians and Coloureds. It is highly unlikely that the government will be able to gain the trust of northern Afrikaners in the medium term.

Recent triggers

On 3 April 2010, the leader of the influential ANC Youth League, Julius Malema, expressed support for Zimbabwean president Robert Mugabe’s land nationalisation and redistribution policies and their application in South Africa. Whilst in Zimbabwe, Malema defiantly sang an anti-apartheid resistance anthem, Kill the Boer (Kill the Afrikaner / farmer), which was recently ruled unlawful by the High Court of South Africa because of its incitement to violence.

Also on 3 April, two black farm workers brutally murdered Eugene Terre’Blanche, a prominent figure on the right-wing fringes of Afrikaner politics, on his farm in Ventersdorp, some 150 km west of Johannesburg. Terre’Blanche’s murder is one of about 3,000 committed against predominantly Afrikaner farmers since South Africa’s political transition in 1994.

Growing inter-group tensions

More assertive forms of minority politics are possible. After enduring an explosive increase in murders – including that of more than 3,000 farmers – armed robberies and rapes since 1994, most Afrikaners in the country’s north are exasperated at their political marginalisation and growing physical vulnerability. Terre’Blanche’s murder has been a catalyst for the release of pent-up frustrations among Afrikaners, even though most rejected his particular political views.

A few isolated incidents of political violence by small groups or individuals are possible in the run-up to the 2010 FIFA World Cup in South Africa. Such violence is likely to be aimed at symbolic targets or ANC politicians and not directly at international business.

However, the risk of serious inter-group tensions and confrontations will be high in the next few years. Such tensions would tend to be localised and could periodically disrupt labour relations and business operations, for example in mining, manufacturing and agriculture.

During the past years, thousands of socio-economic protests against the ANC government’s lack of service delivery have occurred in black urban areas. Xenophobic violence by indigenous black communities against black immigrants has also occurred. Pressure on the ANC government from its poorer constituencies is likely to continue, fueling economic populism and the scapegoating of minorities by some ANC factions.

Increased political and reputational risk for business

Cases of self-enrichment by prominent decision-makers to compensate for increased political fluidity are likely to increase. Several cases have already occurred of serious favouritism or corruption by ANC decision-makers in the awarding of contracts, positions, loans and concessions.

Foreign business will encounter higher reputational risk in the next few years. Vigorous media oversight can be expected and business is advised to conduct due diligence of partners and transactions. Pressure groups may also act against businesses that are too close to the ANC for perceived infringements of corporate social responsibility to minority communities.

The ANC has nationalised mineral and water rights and a clear shift to economic populism and policies of land nationalisation is likely to occur in the next five years. Business is advised that a renegotiation of contracts, populist mobilisation and demonstrations, and threats of nationalisation as a bargaining strategy are possible during this time period.