In a compelling keynote session at the BizNews Investment Conference BNIC#1, Dr Frans Cronje offered a deep dive into South Africa’s Government of National Unity (GNU), unravelling its strategic importance and potential pitfalls. Cronje emphasized that the GNU’s strength lies in its coalition between the ANC and DA, aligning the aspirant and established middle classes. He highlighted key challenges such as radicalization and energy policy, cautioning that the success of the GNU will depend on navigating these issues effectively. Cronje’s analysis provides a crucial perspective for investors and policymakers looking to understand South Africa’s evolving political landscape.
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Edited transcript of Frans Cronje’s keynote address at BNIC#1 in Hermanus
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All right, good morning. I said to Alec, it’s not about being negative or positive. A friend of mine recently told me something I wish I had learned 20 years ago: people see the world through two prisms. Most people see the world through the consensus prism. If they see consensus around an issue, that’s what they tend to believe. Then there’s a fraction of people who see the world through a true-or-false prism. The purpose of strategic analysis isn’t about being negative or positive; it’s about being correct and seeing through that true-or-false prism.
The things that appeared deeply negative 15 years ago were actually just accurate and clashed with a society that was out of touch with reality and what was going to happen. On the flip side, the things that seemed very positive happened to be so because they were based on the same methodology. That’s what I’m going to try to do for you today regarding what to expect from this Government of National Unity (GNU). A few comments about the GNU, and because you’re at an investment conference, some flags you need to watch out for to make informed decisions.
The first point to make about the GNU is that its structure is its strength. It’s a government of national unity, which is a coalition between the ANC and the DA. But beneath that, it’s something else—it’s a deal between the established and aspirant middle classes. That gives it strength because those two constituencies will dominate South African elections for the next generation, and their interests are aligned.
We know this because of the numbers. In this election, the ANC got 40% of its votes from township voters (the urban fringe, the aspirant middle class), another 40% from traditional rural areas, and 20% from other groups. The ANC’s strategic thinkers realized they couldn’t rely solely on their rural base to survive politically, as that market is shrinking due to mortality and emigration. If the ANC doubles down on that base, by 2029, it could lose another 10 percentage points, potentially dropping to around 30%. To remain relevant, the ANC must capture the hopes and imagination of the aspirant middle class in urban areas.
The DA’s vote share is largely from the established, multigenerational middle class. The ANC cannot recapture this market—it’s too disillusioned by issues like state capture, load-shedding, and crumbling infrastructure. My advice to the DA has long been not to try to grow its vote share significantly, as it’s constrained by the size of the established middle class. Instead, the DA should focus on forming alliances with those who command the aspirant middle class. By doing so, it will secure substantial political majorities in future elections.
This GNU deal isn’t accidental. There are deep, structural reasons why it works, and it’s the only deal that could work to see South Africa survive as a successful, unitary state. We’re fortunate to have come upon it.
The second point is that the deal is popular among South Africans. I chair one of the country’s polling groups, and we saw that more than 60% of Black voters were supportive or strongly supportive of the idea of the ANC forming a coalition with the DA. The same was true on the DA side, and even among White voters. So, contrary to what you might read in the media, this deal was not a sacrifice forced on either party—it has significant public support.
The third point is that both sides had strategic reasons for doing this. For the ANC, the alternative—doubling down on their rural populist base—could have been politically disastrous. On the opposition side, some strategists argued that forcing the ANC into a deal with the EFF and then crushing them in the 2029 elections could have worked. But the price the country would have paid would have been immense. To their credit, many of those involved, including John Steenhuisen, recognized this and abandoned that strategy for the good of the country.
On the DA side, the understanding was that if the ANC’s vote share fell too low—say from 40% to the 20s—the combined ANC-DA vote share would fall below 50%. If the ANC was destroyed, there wouldn’t be a viable partner to work with, and the unitary state couldn’t survive. The country could fragment into Balkanized enclaves, and while some might do well in such a scenario, the nation as a whole wouldn’t. So, this GNU was necessary and viable.
Now, because you’re at an investment conference, I’ll discuss the flags to watch for that could disrupt this GNU. There are dissidents who are not in favor of this deal for various reasons, and they may try to wreck it. By early 2027, we’ll see the first major stress test: the local government election, followed by the ANC’s effort to select a new leader. There’s no guarantee that the GNU will survive this contestation. The coalition partners will be campaigning against each other, and the ANC will need to elect a new leader afterward. That’s the first major bump in the road for the GNU.
Looking ahead, whether the GNU survives will hinge on two key issues: radicalization and energy. Despite our history and the current inequalities, South Africa remains an un-radicalized society in terms of public opinion. However, only six out of 100 children who enter Grade 1 will pass high school mathematics with a mark of 50% or higher. In an economy that’s shifted from primary and secondary industries to high-tech, high-skilled services, this is a problem. Our unemployment rate is 33%, while the global average is just over 5%. If you’re in opposition, you know that these structural weaknesses—like the unemployment rate—are your way back into power.
So, while the GNU has staved off catastrophe, we’re not in the clear. We’ll need to monitor whether public opinion becomes more radicalized, as that could destabilize the GNU. The second issue is energy. I first mentioned on Alec’s show two years ago that load-shedding would come to an end, while others were predicting stage 8 and beyond. The reason for my optimism was the strategies that Eskom and the ANC’s Energy Minister were implementing. Thank goodness the ANC is managing energy because, if the DA were in charge, we might be copying misguided policies from abroad and heading toward recession.
However, despite Eskom’s successes, there’s still a threat: the European and American push for decarbonization. If we want to reduce our 33% unemployment rate to something more reasonable, we will need to double or triple our carbon emissions. The West’s push for decarbonization could sabotage the GNU. Interestingly, Russia and China’s energy advice to South Africa is far more sensible than what we’re getting from the Europeans or Americans.
So, to sum up, the survival of the GNU depends on two things: defeating the threat of radicalization and resisting misguided Western energy policies. If we succeed in overcoming these challenges, South Africa could see substantial growth in the late 2020s and 2030s. We could once again become one of the world’s most competitive emerging markets, as we were during our first decade of democracy when we doubled employment and achieved numerous other successes.
Finally, a quick word on Eskom. Our firm’s assessment is that if the Energy Minister continues on his current path, we have enough defunct coal capacity and surplus grid capacity to remove the energy ceiling that has limited our growth. This would allow us to estimate more optimistic growth rates for the future. Thank you, Alec.
Read more: Frans Cronjé: GNU is the real deal, could be generational – if ’26, ’27 speed bumps are avoided
Edited transcript of the Q&A session with Frans Cronje at BNIC#1 in Hermanus
Alec Hogg:
Thank you, Frans. It’s always a privilege to get a rational perspective of what’s going on in our country, especially at this very important time. However, I’m sure there are people in the audience wondering about your comments on Russia and China—specifically, your point that they understand South Africa better than the West, particularly with regard to decarbonization.
Frans Cronje:
South Africa became a democracy in what was essentially a unipolar world. The Soviet Union had been defeated, and in the West, there was a belief that it was “the end of history”—the last serious challenge to the liberal democratic order had been overcome, and there would be no more significant threats.
Western national security and strategic thinkers, many of whom are now in their late 40s or early 50s, grew up in a world where they believed the key ideological and security threats had diminished. As a result, they lost the ability to think in terms of deterrence and the use of hard power. But their adversaries—Iran, China, and Russia—never bought into the idea that history had ended, and they continued to pursue their goals.
As a consequence, Western influence is declining globally, while the influence of these adversaries is on the rise. For South Africa, as an emerging market, this means we are no longer living in a unipolar world but rather a multipolar one. With South Africa accounting for less than 1% of global GDP, our foreign policy cannot be about choosing sides in global conflicts. Instead, we need to adopt a national interest-driven foreign policy. We could learn a great deal from India’s foreign policy approach.
One criticism I have of the DA’s foreign policy, as it enters the Government of National Unity (GNU), is its naivety in thinking that it can maintain a hostile stance towards Russia. The DA recently visited China and swiftly embraced the One-China policy, which I found impressive. However, it’s naïve to think you can apply a hostile, New York Times editorial page approach to Russia. Likewise, it has been counterproductive—although this is now being addressed—for some hotheads in the ANC to take a hostile stance towards the West.
When you consider BRICS and South Africa’s role, BRICS may be argued as either more or less important. However, the critical point is that we are no longer in a unipolar world, and as a small player in the global economy, our foreign policy should reflect that. This is also why it’s so important to view the world through a true-or-false prism rather than following the consensus.
Alec Hogg:
You mentioned energy earlier, and how Western diplomats’ approach to energy policy in South Africa is problematic. Could you expand on that, particularly in light of the global push for decarbonization?
Frans Cronje:
What Western diplomats are pushing for in terms of energy policy here is indeed criminal and poses a major risk to South Africa’s survival and stability as a democracy. The consensus is that we must decarbonize, and people go along with it without question. Whatever your views on climate change, South Africa’s contribution to global emissions is minimal. Meanwhile, Russia and China have given the South African government sound advice on energy policy—advice that, if followed, would help South Africa become a competitive emerging market.
However, this viewpoint is rarely heard in the media or business circles because it goes against the consensus. The hypocrisy is breathtaking. Western policies on energy could sabotage South Africa’s future, yet it’s difficult to find anyone willing to say this, despite it being the truth.
Alec Hogg:
You’ve mentioned Gayton McKenzie, who has been a regular participant at our conferences, but you didn’t mention Herman Mashaba, who seems to be a bit of a loose cannon at the moment. What are your thoughts on what’s happening with Action SA? Could this be the end of the party or a moment that makes them stronger?
Frans Cronje:
I tend to avoid getting caught up in the day-to-day political theatrics, but I will say this: Action SA had an enormous opportunity to position itself on the urban fringes, where it could have been competitive within formerly ANC-dominated constituencies. However, the party’s resources were directed elsewhere, such as competing in the Western Cape against the DA and destabilizing DA-led governments.
As a result, Action SA has seen its poll numbers fall to a fraction of what they could have been if the leadership had focused on the strategic objectives and markets that were wide open for them. The ANC is starting to close those doors, especially if it sticks it out in the GNU, and I fear Action SA has lost its chance to capitalize on those opportunities. In the future, Action SA could fade into a small party, and eventually, we might need to ask interns if it still exists.
Alec Hogg:
But you’ve spoken highly of Gayton McKenzie—would you take him to war with you?
Frans Cronje:
Absolutely. Gayton McKenzie is an exception when it comes to understanding strategy. Some people dismiss him because of his background, but those who grew up in white suburbia might struggle to relate to someone who has been to prison. Prejudices aside, McKenzie has a deep understanding of the country and the use of power—something that many Western politicians have lost due to their belief in the “end of history.”
He’s been strategic in his role as Minister of Sports, using it to build a political platform and inspire South Africans. Despite his background, McKenzie is one of the few politicians I’d feel comfortable recommending a book to because he’d appreciate it and read it. He’s smart, strategic, and understands the country’s challenges in ways that many other politicians simply cannot.
Alec Hogg:
You gave us an uplifting story about the future, but foreign investors and even local companies seem hesitant. There’s talk of about R1.5 trillion in cash sitting on South African corporate balance sheets. When do you think local businesses will realize this is an opportunity to invest? And when they do, might it encourage foreign investors to follow suit?
Frans Cronje:
There’s definitely frustration starting to build around the GNU, and people will eventually forget how well we did as a country to achieve this result. Despite the success with Eskom and the Energy Minister, other constraints—like national health insurance and labour market policies—are holding back growth.
South Africa is not yet competitive enough as an investment destination compared to alternatives around the world. International investors are surprised that we’ve pulled this off—they didn’t expect it. They acknowledge that it’s good, worth considering, but they’re waiting to see more.
The key question they ask is about our growth forecasts. The GNU’s first major challenge is to get the economy growing at 2%. As long as we’re stuck at these low growth rates, it’ll be hard to attract the capital flows we need to take South Africa from this initial success to becoming one of the world’s most competitive emerging markets.
Alec Hogg:
On the international front, how are you reading what’s happening in Europe? You’ve hinted that they seem to have lost their way.
Frans Cronje:
Europe and the broader West have made the mistake of turning off their most efficient energy sources while simultaneously flooding their economies with money, which has had an inflationary effect and stunted growth. They’ve adopted an ideology that sees Western power as inherently illegitimate due to historical exploitation, and this has led to a moral crisis where they are reluctant to project power globally.
The West is becoming less competitive as it imposes unrealistic energy policies and makes decisions based on ideology rather than merit. Meanwhile, countries like China and Russia, which do not have these ideological hang-ups, are gaining ground. Western societies are also deeply divided, further weakening their global position.
South Africa, on the other hand, possesses many of the values that made the West strong in the past. Our social cohesion is stronger than in places like the U.S., and our bipartisan political deals demonstrate a level of pragmatism that’s been lost in many Western democracies. If we play our cards right, South Africa could emerge as an influential global player through the 2030s.
Alec Hogg:
On to part three. And I did stop a little early on my questions because we have got many here. Koos De Wet wants to know, does the ANC have alternative untainted leaders? To Paul Mashatile or Ramaphosa?
Frans Cronje:
Look, I mean, in the political world, if you want to go and find untainted leaders, it’s very difficult to do that anywhere. I mean, Mr. Trump in America, who might be a very positive influence on South Africa’s evolution, has been running around with controversies. So if you’re searching for completely untainted leaders, that’s a hard thing to do.
I think it’s part of this Western “end of history” idea that to be successful, you could just be nice and find nice people. But if we look at great reformers of the post-Second World War era—Park in South Korea, Lee Kuan Yew in Singapore, Deng in China—these weren’t nice liberal democrats. These were hard, pragmatic leaders who made tough decisions.
If South Africa is to be successful, it would be nice if whoever leads was a liberal democrat, someone who studied sociology at UCT. But the reality is that’s unlikely. What we need to look for is a hard, ruthless individual with a streak of brilliance who can force unpopular decisions in the face of pressure. If you get someone who’s overly nice, they’re just going to fold under pressure, like European pressure on energy policy or similar issues. The GNU could fail because of that.
So, to answer the question, I don’t know who the next ANC leader will be. But I hope it’s someone ruthless enough to lead effectively. Mr. Ramaphosa doesn’t have that. Mr. Mandela had it. He was extremely ruthless and brilliant in his decision-making, which set up the country’s successes. The “Father Christmas” image of him was a Hollywood creation; that wasn’t the reality. But Mr. Ramaphosa lacks that ruthlessness, which is why the ANC is now polling at 40% after over a century in power. That’s catastrophic.
Alec Hogg:
Rob Hersov wants to know: How’s Gayton McKenzie doing as a minister, and why does the DA not embrace him?
Frans Cronje:
Well, Gayton McKenzie is doing well because he embodies many of the attributes I just mentioned—ruthlessness, brilliance, and the ability to make tough decisions. The DA doesn’t embrace him because it regards him as a rival, which he is in some respects. I can’t get into a detailed DA strategy discussion, but if you were the DA, there are two strategic options.
One is to grow by pulling in new constituencies beyond your established multi-generational middle class. Less than half of DA voters in the last election were white because the multi-generational middle class isn’t just white anymore. But trying to grow by bringing in new constituencies is risky because it creates internal conflicts. It’s safer, in my view, to hold on to your existing constituency—your 20%, maybe 25%, and bring in partners who command different constituencies. That way, you avoid internal conflict while expanding influence.
Alec Hogg:
Eden Gagiano wants to know: With 38% of agricultural exports going to Africa and 28% to Asia (that’s two-thirds combined), does it make sense to jump through the EU’s protectionist hoops?
Frans Cronje:
I’m not deeply familiar with the agricultural export data, but yes, if you can expand exports to other regions, that’s obviously better. However, it would be a lot easier without issues like foot-and-mouth disease or a lack of vaccines for horse sickness. Overall, improving infrastructure and export policies would be beneficial.
The bigger point is that foreign policy should serve national interests. The ANC, under previous foreign ministers, made the mistake of picking favourites. The DA sometimes falls into the same trap with certain Western adversaries. But we should abandon this approach and focus on what benefits South Africa.
Alec Hogg:
Gavin Rome wants to know: Is water scarcity and quality the same red flag now as energy and electricity were 10 years ago?
Frans Cronje:
It could be, to a certain extent. Water infrastructure is apparently harder to fix than energy infrastructure because pipes are buried underground. But running out of electricity is an absurd position for any country, and it’s something we’ve shown we can fix with smart strategy and professional management.
Water infrastructure is fixable too. The Romans had water systems over 2,000 years ago. There’s no reason we can’t fix our water problems with the right strategy and management.
Alec Hogg:
Jabu Ncube wants to know: Is there any chance of Gayton McKenzie joining the DA or ANC to enhance his prospects for the next election cycle?
Frans Cronje:
I don’t know. I think he’s probably better off staying independent. If you’re of a higher calibre than many of your rivals, it doesn’t make sense to join them. In the Western Cape, demographics are real: 50% of the population is coloured, 30% black, and 20% white. Coloured nationalist politics will eventually command the balance of power in the province. The DA cannot be a coloured nationalist party without alienating its core constituency. So Gayton McKenzie has an avenue here where he could become very powerful.
Alec Hogg:
Andrew Hume asks: Does MK (Umkhonto we Sizwe) die post-Zuma? And if so, where does that vote go—to the IFP or the ANC?
Frans Cronje:
Zuma is an exceptional strategist, trained in the former Eastern Bloc, and highly regarded. His persecution was the chief motivator for his voters, not his policies. His followers didn’t know what was in his manifesto. They voted for him because they felt their party had become distant and elitist, and he resonated with them.
The challenge for those trying to carry on after Zuma will be to find a new motive for the MK vote. I don’t know if they can do that, as public opinion remains moderate. Radical populism doesn’t work in South Africa. The EFF, for example, has a clear message, but they can’t break 10% of the vote because the society isn’t radicalized. After Zuma, it will be hard for his successors to mobilize that vote.
Alec Hogg:
Piet Louw asks: Can you comment on the distrust between business and government, including the GNU, in terms of capital allocation from their balance sheets into growing businesses?
Frans Cronje:
It’s not so much a question of trust. It’s this Western obsession with finding common ground and being nice. A more effective strategy would be to learn the use of hard power—force consequences.
If you want a better relationship with the government, you need to demonstrate the ability to draw a line and force deterrence. South African business leaders fell for the same delusion as the West after the Cold War—that if you’re nice and accommodating, you’ll get your way. But if you want a productive relationship with the ANC, you need to show you can enforce a balance of power. To their surprise, that often improves relationships.
Alec Hogg:
David Melvill asks: What can we as individuals or teams do to address or improve unemployment?
Frans Cronje:
For those still in the country, the first step is committing to staying. I don’t begrudge anyone who’s left; that’s ultimately the fault of policymakers who couldn’t make South Africa a competitive destination. But for those who remain, the competition is reduced. South Africa is cheap, and if you have a good idea, you’re likely one of the few people pursuing it here, unlike in North America where you’d be competing with many others.
So, being here presents great opportunities if you’re willing to embrace a bit of a frontier lifestyle. South Africa offers adventure and a cause worthy of devotion. You just have to be willing to ride out the instability and take advantage of the opportunities.
Alec Hogg:
Thank you, Frans. I see you’ve started reading the Howard Marks book I gave you. The key point in that book is “second-level thinking,” and I think we’ve had a masterclass in that today. Thanks again!
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