The formation of South Africa’s Government of National Unity (GNU) – a historic coalition uniting the ANC, Democratic Alliance (DA), and smaller parties after the pivotal May 2024 elections – has sent ripples through global markets, capturing the keen interest of international investors.
Beyond the noise of political punditry, seasoned investors are observing with measured optimism.
They see not only the fragility inherent in this unprecedented alliance, but also the rare opportunity it presents: a chance for South Africa to pivot toward stability, reform, and inclusive economic growth.
In the days following the GNU’s announcement, financial markets responded with conviction.
The Johannesburg Stock Exchange (JSE) surged, nearing record highs as waves of foreign capital flowed into equities and bonds.
The rand rallied to its strongest levels in months, while bond yields fell, clear indicators of renewed investor confidence and a recalibrated risk outlook.
Analysts attribute this momentum to the coalition’s early signals: a rejection of populist economic policies, including land expropriation without compensation, and a deliberate move to assemble a pragmatic, pro-growth cabinet focused on restoring fiscal discipline and policy certainty.
Weighing in, Professor Peter Baur from the School of Economics at the University of Johannesburg (UJ) told that it was hard to determine causality at the moment, given that the formation of the GNU is so recent.
But he said the real consequences of the GNU on economic growth will still take some time to determine.
Given the extent of global uncertainty, these will be challenging times going forward for the GNU.
Given the escalation in the Ukraine and conflict in the Middle East as well as the impact of global trade policies through the Trump administration, Baur said it was difficult to determine the real impact of the GNU on investor confidence.
He said credit rating agencies will most likely be influenced by Reserve Bank action on inflation and the extent of debt to GDP will still take time to mitigate.
The parties in the GNU have already shown thumps up to the unity, urging the business community to support them in their efforts to revive and improve the economy.
Deputy President Paul Mashatile pleaded with investors and business leaders to join hands with the government to help the economy recover and grow.
In his working visit to France last month, Mashatile said “Investors have an opportunity to collaborate with the South African Government by investing in infrastructure such as ports, and rail.”
“Moreover investors have an opportunity to collaborate with the South African Government by investing in infrastructure such as ports, rail, electricity, and manufacturing to improve local value-addition and boost trade under the African Continental Free Trade Area,” he said.
Earlier this year, the Fitch Ratings stated that it believes the South African government will face challenges in achieving the debt stabilisation targets outlined in this week’s revised budget.
“The budget has narrowed the gap between our projections for the fiscal deficit and those of the government,” it said.
The agency mentioned that they remained less optimistic that general government debt was being stabilised.
Last week, Marie Diron, Global Head of Sovereign and Sub-Sovereign Risk at Moody’s, emphasised the importance of African nations building robust and liquid local debt markets in their currencies.
She noted that this approach would help shield their economies from global financial turbulence and the unpredictability of foreign investment flows.
reported that Professor Waldo Krugell, an economist from the School of Economic Sciences at the North-West University, said whatever spending cuts the Minister comes up with will still need to protect frontline services and maintain the path of fiscal consolidation.
“The influence on the property sector is quite indirect, but if he can do that, it can increase business confidence and investment in general, and that is good for property.
“A more sustainable fiscal stance will also help to bring down interest rates on long-term government debt, which is good for other interest rates in the long run,” Krugell said.
Politics
