More political drama
Out of nowhere, a dense fog has crept over South Africa’s political landscape. Not long after the 10-party government of national unity (GNU) reached the milestone of its first anniversary, its future looks shaky.
President Ramaphosa unexpectedly fired Andrew Whitfield, a DA deputy minister, for the seemingly minor transgression of not getting approval to travel overseas in February. This is unlikely to be the real reason, and it caused much unhappiness on the part of the DA. Although the party indicated that it would not leave the GNU as it is not in the best interest of South Africa, it will pull out of Ramaphosa’s planned National Dialogue. More importantly, the relationship between the ANC and the DA, the two largest members of the governing coalition, took another knock. The question of whether it will be a fatal blow is too soon to answer.
South Africa is far from the only country experiencing political turmoil from time to time, and it comes in different forms. At the extreme, there is violence on the streets as in Kenya in the past few days. Sometimes we see inconclusive elections and minority governments, where the largest party holds less than 50% of the seats in parliament, and hasn’t cobbled together a coalition. Minority governments must manage by getting votes from opposition parties on an issue by issue basis. Canada, France and Japan are current examples. And then there is the US, where long-established political norms are being upended by the day. However, the US is coming off a long period of strong growth and wealth creation. It can “afford” some political dysfunction and has much credibility to lose. South Africa does not. It is trying to escape years of economic stagnation and has to gain investor trust and cut government debt at the same time.
The GNU is a platform to do so, and for this reason its formation was cheered by the market. By including the two largest parties in parliament, the ANC and DA, the GNU is more stable than alternative coalition scenarios that can be undone by small single-seat parties – as we’ve seen at municipal level. The other benefit is that while the two largest parties disagree on much, there is an agreement on core issues such as respect for the constitution and broadly centrist economic policies. They are natural bedfellows from an ideas point of view, but clearly not when it comes to personalities or political style.
Opinion polls suggest that it is popular among the South African public too. This means that GNU members still have a strong incentive to hold their noses and continue to work together. However, with local government elections looming, each party must also present an independent identity to current and prospective voters. That’s the difficulty with coalitions. If it operates too smoothly, voters don’t necessarily know who to credit. Why not just merge the parties, they may ask. A degree of tension and competition is healthy in coalitions and parties can be expected to perform loudly for their constituencies. Too loudly, however, and with too much competition and tension, and relationships will fray to breaking point. South African politicians, voters and investors must all still get used to the nuances of coalition politics. And while it might lead to a weaker executive branch (a divided Cabinet), it can lead to a stronger legislative branch. Since no single party controls Parliament, there is more opportunity to hold the government accountable.
Before anyone makes hasty portfolio investments, here are five further points to remember.
Coalition scenarios
Firstly, the scenario that investors feared most before the 2024 election, namely that either the EFF or MKP would join the ANC in a coalition, still seems unlikely. Even if the DA was to pull out of the GNU, the remaining parties would have 50% of the seats in the National Assembly and can therefore survive a motion of no confidence.
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