With most of the votes counted, the ANC trailed its main rival, the Democratic Alliance, in some key cities and was in a close fight in Johannesburg and Pretoria.
South Africa's dominant political party, the African National Congress is facing what could be its biggest electoral setback since the end of apartheid.
While it still has an overall lead nationally, it trails the Democratic Alliance in Port Elizabeth and Cape Town and is struggling in Johannesburg and Pretoria.
Democratic Alliance leader Mmusi Maimane is calling the vote the change election.
He says he views it as a referendum on the leadership of President Jacob Zuma and a referendum about the future of the country.
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"We're feeling good, we're feeling strong, we're feeling confident. We believe, without doubt, the people of South Africa have come out to vote for change. And so, it's quite an exciting election now, and, at preliminary stages, we're still feeling good and feeling strong."
The ANC's image has been tarnished by corruption scandals, including one involving President Zuma.
He was ordered to repay taxpayers' money spent on his private home.
Thulani Madondo, who runs a youth centre, has told Al Jazeera that scandal has definitely angered some voters.
"Of course, people are very disappointed that some money was spent on the President's private home. We also don't condone the abuse of state resources."
There is also anger about unemployment, now at 27 per cent.
And protest rallies have been held across South Africa with people demanding improved delivery of basic services like water and electricity and better housing.
ANC secretary general Gwede Mantashe says the party has suffered losses but is still doing relatively well against the Democratic Alliance and the United Democratic Movement.
He cites the Nelson Mandela municipality as an example, but does admit concern over the overall party results -- or P-Rs, as he calls them.
"We are doing well in those metros. Take Nelson Mandela (municipality). We have regained five new wards there, three from the DA (Democratic Alliance), one from UDM (United Democratic Movement) and one from the Independents. The only worry we are having is the question of turnout, because it impacts on the PR (party results) performance of the ANC, because PR is the function of the size of the base and the turnout. So that's what we are worried about. In terms of wards, we are doing very well. In Tshwane, we have lost one, we've gained two. That's fine. So, we're doing relatively well."
