Unstable coalitions impact on public policy, investments, warn investment experts

JOHANNESBURG - Investment experts have again warned that unstable coalition governments could have an impact on public policy and finances.

The African National Congress (ANC) has won an outright majority since 1994 but for the first time in 30 years, opinion polls believe the governing party faces the biggest threat of losing power at a national level and in some provinces.

This means the ANC could be pushed to band together with other parties, with dire implications forecast in some cases.

READ: It's time to consider a South Africa not ruled by ANC, suggests poll

Political, public policy and economic experts have all weighed in on the possible scenarios based on predictions of the election outcomes.

Commentary by Fitch international research company, BMI, said that if the ANC fell below the 50% mark, then it was likely to pair up with smaller parties.

But there were also other contrarian views, including an ANC-Economic Freedom Fighters (EFF) coalition or an ANC-Democratic Alliance (DA) coalition.

Either way, policy reforms would likely be on the cards.

Investec chief investment strategist, Chris Holdsworth: "Across emerging markets where there are coalitions, it typically results in higher deficits and the more coalition partners, the higher the deficit because coalition partners, as part of the broader coalition, have their own mandates that they need to extract finances for. As a result, we need to look at how many coalition partners there are and what do those coalition partners want."

While coalitions are likely to have some impact on fiscal policy, foreign relations and economic growth, experts have reiterated that these changes would be a combination of factors and not just coalitions on their own.