Markets give the thumbs up to GNU in South Africa
Markets are optimistic about South Africa’s Government of National Unity (GNU).
Parliament will be sworn in later today, 14 June, where the Speaker, Deputy Speaker and President will be elected.
The President will then be able to appoint the Cabinet and deputy ministers and structure the government.
The seventh administration will mark the first time in the democratic era that the ANC has not held a majority in parliament, dropping to 40% of the national vote.
Thus, the party has called for a GNU that includes a wide range of political parties represented in the legislature.
So far, the ANC, DA and IFP look set to join the GNU, which accounts for roughly 65% of all seats in parliament.
The populist EFF and MK parties, which account for around 25% of the vote, have rejected the GNU.
The MK party, led by former ANC President Jacob Zuma, has had its urgent application to block the first sitting blocked by the Constitutional Court and will not attend the administration’s first sitting.
On a provincial level, agreements have also been reached in hung provinces.
In KwaZulu Natal, the ANC-DA-IFP partnership will be joined by the National Freedom Party (NFP), as the four parties have 41 out of 80 legislative seats combined.
“Uncertainty remains in Gauteng, the country’s economic hub,” said the Bureau for Economic Research (BER).
In the 80-seat provincial legislature, the ANC secured 28 seats, the DA 22, the EFF 11 and MK 8.
The IFP has one seat and has expressed willingness to work with the ANC and DA in Gauteng, with a team-up getting 51 of the 80 seats.
Good times for markets
The BER said that the rand has appreciated against the US dollar and the British pound over the last week.
“Market sentiment appears optimistic ahead of parliament’s first session, reflecting confidence in progress towards a GNU,” said the BER.
Like the US dollar, the rand also gained against the euro amidst political instability in the Eurozone (EZ).
Citadel Chief Economist Maarten Ackerman said that the next two weeks of “coalition” talks will be the biggest factor in determining the economic director of the next few years.
Ackerman said that if the GNU tilts pro-business or is business as usual, private-sector participation can address some of the economy’s most crucial structural issues, such as energy and logistics. This would see the economy get back to capacity growth.
The DA and IFP are far more market-friendly than the EFF and MK.
South Africa’s GDP dropped by 0.1% in Q1 2024 and is technically in a per capita recession as population growth exceeds economic growth. This can only be escaped if GDP grows by 1.5% over a sustained period.
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