South Africa’s recent elections saw the ruling African National Congress lose its majority for the first time since Apartheid’s end, raising concerns about governmental coherence and credit rating outlook. Scope warns of economic risks amidst potential coalition governments, while Moody’s highlights challenges in policy execution. Uncertainty looms over future governance.
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By Libby George; Editing by Amanda Cooper and Hugh Lawson
A “less coherent” South African government after elections that cost the ruling African National Congress its majority for the first time since the end of Apartheid could threaten the country’s credit rating outlook, rating agency Scope said on Monday.
The ANC won just over 40% of last week’s vote, its worst showing since it took power 30 years ago. The government of Cyril Ramaphosa will now have to share power, likely with a major political rival.
“A less coherent government and specifically any further impairment of economic and/or fiscal challenges might place at risk the stable outlook assigned to the ratings,” Scope said in a report.
Scope added that regardless of the final government formed, decision making and governance in South Africa are likely to get more complicated.
Scope is next scheduled to review South Africa’s credit ratings by Sept. 13. It has currently assigned a BB rating to South Africa, with a stable outlook.
The next government faces a slate of unenviable challenges, from crime, corruption and unemployment to record power shortages.
The focus is now on which party forms a coalition with the ANC; investors are worried about the ramifications of an alliance with the far-left Economic Freedom Fighters (EFF),or the uMkhonto we Sizwe (MK), while most would prefer the white-led, pro-business Democratic Alliance (DA).
Separately, Moody’s said a coalition government could complicate the execution of fiscal, economic and social policies that would help address the country’s structural credit weaknesses.
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SOURCE: REUTERS