On 29 May, South Africans headed to the polls to cast their vote in the country’s seventh democratic national and provincial elections. In the weeks leading up to the event, markets strengthened as investors were confident the ruling ANC would get close to 45% of voter support that would ensure policy continuity and limit the risk of a coalition with some of the more populist parties.
Voter turnout on election day was at an all-time low at just over 57% – a sure indication of the nation’s disenchantment with the ANC’s performance over the past 30 years. In the final results, the ANC, which won 57.6% of votes in 2019, plummeted to just over 40% in 2024. This compelled the ruling party to partner with opposition parties across the political spectrum to form a government of national unity (GNU), which is expected to govern the country for the next five years. Ten political parties have now signed the so-called statement of intent to participate in the GNU.
The cooperation agreement saw President Cyril Ramaphosa being re-elected as head of state for another five years.
Markets initially received the news positively, causing what analysts call a “relief rally” in the rand and the Johannesburg Stock Exchange (JSE). It was especially the willingness of the Democratic Alliance (DA), the country’s biggest opposition party with its perceived market-friendly policies, to be part of the GNU that has appeased investors.
Prof Pieter Duvenage, an independent political analyst, says South Africa has now shifted from one-party dominance to a multi-party system which he believes will require compromises – especially from the ruling party which had a monopoly on policy making. “The ANC will now have to take the views of all parties into account. This will also work in favour of the mining sector where the ANC’s socialist stance of ‘disassembling the industry and building it up again’ will no longer go unchallenged.”
One of the pillars of the GNU is that participating political parties had to sign a so-called statement of intent that they would work together to pursue the GNU’s objectives. There will also be a consultative council where contentious policy will be ironed out.
Hermann Pretorius, an analyst at the SA Institute of Race Relations (IRR), is less enthusiastic about the GNU’s chances of success. He is especially disappointed at the DA’s decision to become part of the national government. “It was irresponsible. The DA’s political fate would now be interwoven with that of the ANC, and they will be painted with the same brush.”
Pretorius believes the DA should have entered into a so-called supply and confidence agreement, voting “with” the ANC on the election of the president and the national budget but remaining the official opposition responsible for oversight and ensuring accountability. George Cheveley, portfolio manager and metals and mining specialist at asset manager Ninety One, views the election results as generally positive as long as the different parties can work together. “There is good evidence though that these types of government can work.”
Ramaphosa’s new Cabinet saw the return of Enoch Godongwana as Finance Minister, Kgosientsho Ramokgopa as Minister of Electricity and Energy, and Gwede Mantashe as Minister of Mineral and Petroleum Resources. The reconfiguration of Ramokgopa’s department – to include energy – was welcomed by industry and investors, especially since he will now be responsible for policymaking and shareholding at South Africa’s state-owned energy company Eskom.
Under the previous administration, Eskom was “split” across three ministries – Public Enterprises, Mineral Resources and Energy, and Electricity; this has often led to policy paralysis. Mantashe’s reappointment to the Cabinet was hardly surprising given his influence in the ANC’s national executive council and the support he has given to Ramaphosa in the past five years, says Duvenage.
With the new Cabinet in place, the next hurdle for the GNU will be to agree on a policy agenda and action programme. Before the election, and during the negotiations to form a new government, there was widespread concern that the reform agenda started under Ramaphosa would derail.
Reform progress to date
In the first three months of 2023, South Africa’s economy was on the brink of collapse with load shedding an almost daily occurrence and the logistics network log jammed to such an extent that it cost the mining industry billions of rand in lost exports. This has led to the formation of the Joint Steering Oversight Committee, an initiative for which more than 150 CEOs from the private sector signed up, and which focuses on the most urgent areas plaguing the economy – energy, transport and logistics, and crime and corruption.
More than 300 specialists from the private sector have been deployed to power stations, Transnet and various crime-fighting initiatives. This heralded new collaboration between the government and the private sector and has helped to pull back the South African economy from the brink of collapse.
Mzila Mthenjane, CEO of the Minerals Council South Africa, says the business sector, including CEOs of mining companies, has participated “unconditionally” in helping to fix key elements of the economy. “This cooperation has led to the successes we’ve seen so far. And although it’s still early days, it’s encouraging.”
The early wins are already evident. At the beginning of July, South Africa had more than 100 days of no blackouts – a rare feat considering the severity of outages during 2022 and 2023. Although Eskom’s management has warned that blackouts are not entirely a thing of the past, it is unlikely to reach the same levels seen in the past two years.
“There is progress at Transnet too, and encouragingly, its current leadership is aligned with government policy to boost private-sector participation,” says Izak Odendaal, an investment strategist at Old Mutual Wealth.
It’s in the implementation
Ann Bernstein, executive director for the Centre for Development and Enterprise, says the new government, on paper, believes in constitutionalism, the rule of law and an increased role for the market in growing the economy and creating jobs. “This is a development with enormous potential.”
But leadership and political maturity are crucial to keeping the GNU intact, and “crucially, to agree on a set of urgent priorities that deal with the most pressing challenges”, she adds. The IRR’s Pretorius points out that political leadership change is but one aspect of reform. Many civil servants in government, which are the implementers of policy, are ANC cadres who have not been appointed on merit. “This means new policies determined at the Cabinet level could come down to nothing if the implementation mechanisms fall short.”
Casey Sprake and Marco de Matos, both analysts at Anchor Capital, write in a joint company note that it’s still too early to draw any feasible conclusions about how effective the new executive will be. “However, it is in a stronger position to guide South Africa’s reform course than in many years.”