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Thursday, 13 June 2024 20:26

S&P rating agency sceptical of government tie-up between ANC and DA.

By Ntando Thukwana.

A South African government comprising the African National Congress (ANC) and the Democratic Alliance (DA) may prove unstable because of a lack of agreement within the ANC for such a tie-up, S&P Global Ratings said.

"There's not complete consensus within the ANC to govern with the DA," Frank Gill, S&P's managing director and EMEA sector lead for sovereign ratings, said Thursday in a webinar. "If a GNU, a national unity government is formed, it may prove to not be particularly stable."

The ANC lost its parliamentary majority in the 29 May elections, the first time it's failed to secure more than half the seats in the legislature since it came to power in 1994. Last week, it invited all of the country's main parties to join a broad alliance to form the next administration in a so-called government of national unity.

ANC officials have resolved key obstacles with the centrist DA on an accord that will allow Cyril Ramaphosa to be reelected as president by lawmakers on Friday, according to people familiar with the ongoing talks.

Historically, the DA and ANC have held divergent views on key policy areas such as Black economic empowerment and state-health measures, prompting some in the ANC to oppose a tie-up. 

An unstable government may pose a risk to the country, which is struggling to rein in debt and increase revenue because of sluggish economic growth, high unemployment and rising demands on the fiscus.

South Africa's debt-to-gross domestic product ratio of 73.7% is well above the emerging-market average of 58.9%.

"There are a lot of challenges, particularly fiscal challenges for South African policymakers," Gill said. The agency rates South Africa's foreign-currency debt at BB-.