By Lehlohonolo Lehana.
The formation of the national Government of National Unity (GNU) has seemingly created a positive and optimistic mood among businesses and the investors.
For the first time in South Africa’s democratic government, the African National Congress (ANC) did not receive an outright majority to govern on its own (~40% of the vote), and thus needed to form a co-governing/coalition agreement with other political parties.
The ANC formed a broad-based coalition comprising 11 disparate political parties, who have signed a statement of intent which outlines that the signatories will cooperate “in both the Executive and the Legislature,” subject to agreement to certain principles.
Together, these parties make up 288 out of the 400 seats in the National Assembly (72%), which the ANC said “ensur[es] broad representativity and a strong mandate to govern.”
Now a month later, with the GNU set up and already getting down to business, there is hope that the new government can deliver.
Business Leadership South Africa (BLSA) CEO Busiswe Mavuso says the seventh administration’s priorities need to be continuing the economic reforms initiated in the sixth.
This includes the partnership between business and government on energy, logistics and law and order, as well as the promotion of a free-market economy.
Mavuso said a lot was riding on the outcome of the national elections, with the status quo being unsustainable.
She added that demand for local currency bonds had surged as a result of optimism over the coalition government. “We needed the GNU because markets have responded positively. If the markets had not ralied behind the current government, we would be in trouble as a country.”
Mavuso pointed out that foreign demand for local bonds was already more in the first half of the year than the whole of 2023 and that whether stakeholders liked it or not, the markets mattered.
She explained that because South Africa borrowed about R2-billion a day just to balance the books, additional investment was needed to actually grow the economy beyond current levels – for which international markets were crucial.
She highlighted the importance of South Africa having a good business case to present, particularly since more than half of the companies on the JSE were headquartered outside of South Africa.
“We are in a position where we can’t lift ourselves out of this economic rut. We need someone to do it for us. In real terms, South Africa has not been growing since population growth is outstripping GDP growth.”
Mavuso emphasised the country needed to appeal to markets and capital, to demonstrate South Africa’s “investment worthiness”.
She mentioned that these investors were looking for sustainable fiscal policy and policy certainty on certain matters, not inclusiveness of the market or whether a particular party with ideologies was appointed.
“I hope this new government will not follow a narrative of not wanting to be dictated by the markets. Only by accessing the debt markets at reasonable costs will the State be able to fulfil its purpose.”
Moreover, Mavuso believes that President Cyril Ramaphosa became too preoccupied with rescuing the ANC at the cost of the country, by overly accommodating people who were involved in State capture. The GNU government, on the other hand, will not be able to get away with these kinds of things so easily.
She hopes that the seventh administration will be ruthless in this opportunity to eradicate poverty, grow the economy and build a capable State.