South Africa riding high – but it all comes down to Ramaphosa’s next call

 ·21 Jun 2024

Markets have responded positively to the Government of National Unity (GNU), but further improvement will depend on who Ramaphosa appoints to Cabinet.

After losing its majority in parliament for the first time in the democratic era, the ANC announced a GNU.

The “coalition” has since been joined by the DA, IFP, PAC, Good, PA, and FF Plus, most of which are considered pro-business by markets.

These parties form a super majority (>66%) and hold 280 of the 400 seats in parliament.

Despite some hesitant gains ahead of the election and then struggling to find direction afterwards, investors have piled into South African assets this week.

The Bureau for Economic Research (BER) said that positive economic data played a role in the improvements, while global dynamics failed to detail the optimism for South Africa.

The rand dropped below R18/$ for the first time since August 2023, stocks surged, and bond yields declined (a positive) amid strong demand for local bonds.

JSE All Share Index

“Long may it last, but the keenly anticipated announcement of the cabinet will be pivotal in determining sentiment going forward, at least in the near term,” said the BER.

Although several parties have joined the GNU, and some of the guidelines have been made public, much still needs to be firmed up, with much agreeing and disagreeing as the GNU tackles tough policy choices and governs the country.

“The next hurdle will be the composition of the cabinet and, simply put, deciding who gets what,” said the BER.

“Markets will find comfort in a balanced cabinet with component ministerial appointments. On the flip side, any signs of public dissent within the GNU will be unsettling.”

“Some expect the announcement to be as soon as today, 21 June, but there is no constitutional requirement for the timeframe.”

Several ministers will need to be replaced, such as Labour’s Thulas Nxesi, Police’s Bheki Cele and International Relations’s Naledi Pandor, as they failed to crack the ANC’s list for parliament.

Others, including Pravin Gordhan of Public Enterprises and Ebrahim Patel of Trade and Industry, are set to retire. Sports, Arts, and Culture will also need a permanent minister following Zizi Kodwa’s resignation due to corruption charges.

Despite many of the parties keeping their cards close to their chest, the ANC looks set to keep control over the economic direction of the country.

According to several reports and interviews with ANC leaders, the party’s top brass have called for continuity with the ANC in the following ministry clusters:

  • Economic cluster (finance, labour and perhaps trade and industry);

  • Peace and Security cluster (Defence and Military Veterans, Home Affairs, International Relations and Cooperation, Justice and Correctional Services, Police and State Security).

The DA, comfortably the largest partner in the GNU with 87 seats, has called for a Ministry in the Presidency as they are not going for the president or the deputy president.

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