SA in political limbo: Will ANC rivals agree to unity government?

South Africa is in political uncertainty after the May 29 elections left the ruling African National Congress (ANC) without a majority. The ANC, in power since 1994, seeks to form a coalition government, but potential partners from across the political spectrum are reluctant to collaborate. This deadlock has spooked investors, leading to a selloff in bonds and stocks. Key policy issues include welfare grants, land reform, and national health insurance..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..By Mike Cohen.South Africa is in political limbo after May 29 elections failed to produce an outright majority. .___STEADY_PAYWALL___.The African National Congress, which has ruled unfettered since winning the nation's first multiracial elections in 1994, is now trying to cobble together what it says would be a government of "national unity" that would include several of its rivals. .The potential participants cover the entire political spectrum, from the business-friendly Democratic Alliance to the Economic Freedom Fighters, which wants mines and banks to be nationalized. Those parties have indicated they aren't willing to work together, so the ANC's proposal may already be dead in the water — although the horse trading has some way to go. Play Video .Even if a deal can be reached, there is no certainty it will hold. Whoever eventually gets to run the country will have to confront mass unemployment, endemic crime and a plethora of other problems that the ANC government has struggled to address on its own. .Uncertainty about the composition of the next administration and its approach toward economic policy has unnerved investors and spurred a selloff of the nation's bonds and stocks. .Here's what you need to know about the political shakeup: .The Key Players.Led by President Cyril Ramaphosa, the ANC won 40.2% of the vote. It has oscillated between seeking to appease its largely poor support base and investors. While it says it is committed to fiscal discipline, state spending and debt has steadily risen as it gave civil servants inflation-beating pay increases and broadened access to welfare grants, health care and education. It has pledged to expand the economy and attract foreign capital, but fallen short when it comes to addressing power outages and logistics snarl-ups that have hobbled output. .Read more: South Africa's complicated democratic legacy: Andrew Kenny.The centrist DA remains the biggest opposition party after securing 21.8% of the vote. It espouses free-market principles, including greater deregulation and curbing government spending. While its leader, John Steenhuisen, has said he is open to a deal with the ANC that ensures the rule of law is upheld and the constitution is respected, he's ruled out working with populist parties. .Third place in the election went to the uMkhonto weSizwe Party, or MKP, which was formed late last year and won 14.6% of the vote. It is led by former President Jacob Zuma, who fell out with the ANC. The new party wants to increase the power of unelected traditional leaders and nationalize mines and banks. It says it will only work with the ANC if Ramaphosa is replaced as president — a condition its larger rival says it won't accept..The EFF secured 9.5% backing. Founded in 2013 by former ANC youth leader Julius Malema, it wants to place all land under the custodianship of the state and nationalize mines. Its populist rhetoric and confrontational style have found resonance among many poor, Black township residents, whose living standards have improved little since apartheid ended. Malema said it shouldn't be difficult for the EFF and ANC to find common ground on policy, but his deputy, Floyd Shivambu, said it won't cooperate with the DA. .Julius Malema..Coalition Scenarios.Under South African law, the National Assembly must meet within 14 days of the June 2 announcement of the election results to appoint a new speaker and president, who will then name the cabinet. .The details and modalities of the broad governing coalition proposed by the ANC still have to be negotiated. One possible scenario would be for Ramaphosa to retain the presidency and allocate cabinet posts to parties in proportion to their share of the vote. Deals could also be struck to share out executive positions in those provinces where no party won an outright majority. .Read more: 🔒 FT: Young South Africans are rethinking Nelson Mandela's legacy.The country was ruled by a unity government led by apartheid resistance hero Nelson Mandela after the racist political and social system ended in 1994. It included the National Party, which ruled the country during apartheid, and the Inkatha Freedom Party. It lasted until 1997, when the NP pulled out. The difference then was that the ANC had an outright majority and could rule on its own, whereas now a walk-out by a larger party would collapse the government.Play Video.If all the ANC's main rivals refuse to collaborate, it could opt for either a coalition with one or more of them, or a cooperation agreement that would see it retain sole control of the government in exchange for ceding key positions in the legislature. .The ANC may struggle to sell a deal with the DA to its supporters, some of whom see the party as representing the interests of big business and the White minority. Steenhuisen rejects the accusation that his party is racially biased, pointing out that it garnered way more support among Black voters than several of those with Black leaders. .Key Policy Issues .Welfare grants: Almost half of the population of 62 million receive welfare grants. A monthly stipend was introduced for the unemployed during the coronavirus pandemic. The ANC has repeatedly extended the payment and has said it may introduce a permanent income grant if the country can afford it. The DA says that while the most vulnerable need support, the focus should be on creating the conditions for private enterprise to flourish and create jobs. The EFF wants all grants to be doubled, but hasn't specified where the money should come from.Land reform: The ANC has long promised to address racially skewed land ownership patterns, but progress has been limited. It tried to amend the constitution to make it easier for the state to take land without paying for it, but failed to secure the necessary support in parliament. The DA says property rights should be respected, while the EFF and MKP want land reform to be accelerated.National health insurance: Last year, parliament approved enabling legislation for a phased rollout of universal national health insurance, a plan that's aimed at providing quality treatment for the 85% of the population who have no medical cover and rely on a decrepit public system with too few doctors. Ramaphosa signed the measure into law earlier in May. The DA has said the plan is unaffordable, and a healthcare model is needed that improves the existing services and facilities and guarantees everyone a basic level of care. The EFF says the primary healthcare system needs to be strengthened and more hospitals and clinics must be built..Read more: 🔒 WSM: The ANC's foolish moves against Zuma, MK.The ANC's Legacy.The ANC is Africa's oldest political movement, with roots dating back to 1912. During its first 15 years in office, the party oversaw the longest period of economic growth on record and increased access to free housing, clean water and electricity. The biggest blot on its record in that period was foot dragging in providing AIDS drugs during President Thabo Mbeki's tenure. A study by the Harvard School of Public Health concluded that the delay probably caused the premature deaths of more than 330,000 people between 2000 and 2005. .The country went downhill during Zuma's almost nine-year tenure as president. He presided over an era of endemic corruption known as state capture, during which more than 500 billion rand of taxpayer funds was looted, according to government estimates. The ANC forced Zuma from office in 2018. His successor Ramaphosa replaced a number of key officials and sought to rebuild key state institutions, but has still struggled to turn the country around. .Jacob Zuma.The economy has expanded by less than 1% a year on average over the past decade — well below what was needed to maintain living standards for the growing population. The unemployment rate stood at 33% in March, and the income gap between rich and poor is wider than anywhere else in the world, according to available data compiled by the Thomas Piketty-backed World Inequality Lab..Years of rolling blackouts and dysfunction in the country's rail freight system and ports have frustrated citizens and disrupted the economy. Ramaphosa has tried to tackle these problems by increasing purchases of power from independent producers, making it easier for companies to generate their own electricity and enabling private train operators to use the state logistics company's tracks. .He's also increased the size of the police force to try to bring crime under control. There were just under 27,500 murders in South Africa last year, up about one-third from 2019, with the per-capita homicide rate more than five times the international average. .The Market View.Despite the ANC's poor record, the prospect of it being forced to share power in an unstable coalition that includes left-leaning parties has raised angst among investors and business leaders. The proportion of South African stocks held by foreigners dropped to an all-time low in the first quarter of 2024, according to the central bank. .While the rand and the nation's bonds gained in the lead-up to the election, with investors expecting the ANC would secure enough votes to continue governing with one or two small rivals who wouldn't insist on major changes to economic policy, they slumped anew as the extent of the ANC's losses became apparent. .The best-case scenario for investors appears to be for the ANC to tie up with the DA because it would boost the chances of a more business-friendly administration. .The biggest anxiety is that the EFF or the MKP joins the government and forces through policy changes including the expropriation of land without compensation and increased spending on welfare. There's also a risk that Ramaphosa — who remains popular among investors — will have to take the fall for his party's poor showing, and either quit or be replaced by the ANC. .Read also:.2024 Elections: Early indications of voter turn-out of at least 66%SA rides wave of investor cash ahead of crucial electionsMK hurts ANC's chances of national majority….© 2024 Bloomberg L.P.

SA in political limbo: Will ANC rivals agree to unity government?

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