REBONE TAU: 100 days of GNU - The challenge is to sustain improved business confidence

For the first time since 1994, the African National Congress (ANC) lost its outright electoral majority in the 2024 elections. Following this setback, it decided to share power with nine other political parties in the form of a Government of National Unity (GNU), which recently marked 100 days in office.

Collectively, these parties have a supermajority in Parliament, bringing a measure of political stability at the national level that has sparked renewed optimism and hope among South Africans. 40% of South Africans who participated in a recent IPSOS poll believe that the country is headed in the right direction. This is the most optimistic they have been since May 2020.

Perhaps more importantly, the GNU appears to have increased business confidence. The latest RMB/BER Business Confidence Index – the first after the GNU’s formation – increased further as businesses expressed “cautious optimism” about improving business conditions.

100 days into the GNU, South Africans and businesses are right to feel optimistic. The break in load shedding has continued after the elections, stretching to 200 days recently. Partnerships between government, business and labour to address economic constraints, such as the logistics crisis, are continuing.

The rand has strengthened considerably in recent months, contributing to lower fuel prices and hence lower inflation. Consequently, the Reserve Bank finally cut the interest rate in September, bringing some relief to many indebted South Africans.

The GNU is also a collection of mostly centrist political parties. Leftist populist parties, such as the Economic Freedom Fighters (EFF) and uMkhonto weSizwe Party (MK), are not part of the arrangement. This has boosted optimism that the government will continue implementing far-reaching economic reforms under Operation Vulindlela to attract more investments and create more jobs.

These developments have already bolstered South Africa’s economic outlook, at least in the short term. The economy grew at an average of only 1% between 2019 and 2023. However, forecasts are now more optimistic. Investec, for example, expects growth to average 2.5% to 3% over the next five years. On the higher side, BER predicts 3.5% by the end of 2025 if the government accelerates Vulindlela reforms.

This improved outlook could herald even more positive outcomes for South Africa. For example, credit rating agencies could improve the country’s ratings, unlocking more access to capital markets and lowering borrowing costs. This could further boost government expenditure on the productive sectors of the economy as well as services such as health and education.

However, much depends on whether the GNU can live up to expectations and take concrete measures to grow the economy and create more jobs.

In July, President Cyril Ramaphosa outlined the GNU’s three strategic priorities in the Opening of Parliament Address. These are driving inclusive growth and job creation; reducing poverty and tackling the high cost of living, and building a capable, ethical, and developmental state.

South Africans and the business community now expect the GNU to develop more specific interventions to realise these priorities. It is therefore important for GNU parties, labour, business, civil society and other stakeholders to hold the proposed National Dialogue as soon as possible to develop a common vision and programme.

This will bring greater certainty about what the GNU hopes to achieve, and will in turn sustain business and investor confidence.

Another way to sustain confidence is to develop dispute-resolution mechanisms among the GNU parties. We have already seen sharp differences, particularly around the Basic Education Laws Amendment (BELA) Act and the National Health Insurance (NHI). If left unresolved, these and other disputes could derail this nascent governing arrangement.

It is encouraging to note that the GNU has established a Clearing House Mechanism, chaired by Deputy President Paul Mashatile, to flesh out contentious issues before they reach the Cabinet. The Mechanism has held its first meeting, which agreed to finalise the terms of reference at the next meeting. South Africans expect political certainty and stability, and the Mechanism could help strengthen this.

For now, the first 100 days of the GNU have mostly been positive. Its pro-business outlook signals to investors, including multinationals looking to invest or expand their businesses in South Africa, that now is probably the best time in many years to invest.

For millions of South Africans who are unemployed and struggle to make ends meet, the GNU must pay dividends – and must do so quickly.