The Government of National Unity is an unexpected chance to renew South Africa’s promise. Nothing less than a whole-of-government approach is needed to shift perceptions.
By some strange alchemy, South Africa is winning again in the eyes of the world. Not the all-conquering Springboks, arguably SA’s best-run organisation — of any kind — since before Covid. Rather, the “miracle democracy” that once captured the global imagination. The state reared on fear and hatred, plunging into the abyss, somehow finding a way through to the light.
This is not the 1990s, of course. There is no Nelson Mandela to beautify the political landscape. The new politics wrought by South Africa’s national election four months ago, which led to a Government of National Unity (GNU) comprising the African National Congress (ANC), Democratic Alliance (DA) and nine smaller parties, will not resurrect the halcyon days of Rainbow Nation-ism.
But they could restore South Africa’s battered reputation as a destination for foreign investment and inject life into its moribund economy.
This was the conclusion of a recent post-election survey of offshore fixed-income and equity investors conducted by one of SA’s Big Four banks. Its report highlighted major positive shifts in investor sentiment towards South Africa since the election but also nagging doubts about the durability of the GNU and whether this political moment will prove another false dawn.
Such findings should surprise no one. Before the election, there was a broad if unenthusiastic consensus on the outcome that markets preferred: a chastened ANC majority that still afforded President Cyril Ramaphosa another full term to advance his reforms, however plodding and timid.
Most dreaded was an anti-constitutionalist/populist/nationalist coalition that brought the Economic Freedom Fighters (EFF) and/or former president Jacob Zuma’s uMkhonto Wesizwe (MK) party into government.
A workable arrangement between a badly wounded ruling party and the “racist” opposition, the DA — the most market-friendly of all parties — seemed too improbable to put much store by.
Opinions on how this unlikeliest of pacts came to be sealed have swiftly given way to a graver question: with lurking perils aplenty, how long can it last?
Read more: GNU-phoria hasn’t infused South Africa’s market, but there’s hope
Early signs are good at Home Affairs
John Endres, the head of the Institute for Race Relations, suggests that the early signs from the GNU are promising. Though the “road ahead is arduous”, things are finally “pointing in the right direction” economically. Inflation is down, government bond yields are falling and the currency is strengthening. SA is “figuring out how to get things right”.
Answers vary when you ask foreign diplomats and businesspersons when SA started getting it so wrong. There is unanimity on one issue: the Department of Home Affairs was ground zero for state incompetence and corruption.
No foreigner seeking to work or invest in South Africa was unaffected by the department’s chronic dysfunction. Or immune to its prevailing culture, which might charitably be described as hostile.
The exact financial cost of not fixing Home Affairs — in jobs lost, skills gaps unfilled, businesses that didn’t grow and investments that couldn’t materialise — can never be known. Doubtless, it’s in the hundreds of billions.
Numbers tell only part of the story. SA’s soft power was constantly undermined by the department. Its leadership were not local ambassadors for “ubuntu diplomacy”, which centres our common humanity and dignity. They were saboteurs.
Read more: Hell Affairs
In the deal struck between the ANC and DA, the latter got the Department of Home Affairs. The impact has been immediate. The backlog of more than 300,000 visa applications has been more than halved.
The new minister, Leon Schreiber, acknowledged that Home Affairs had become a byword for a broken country. His commitment to change its ethos, turn the department into an economic enabler, fix the work permit system and open doors to skilled migrants was music to the ears of investors, current and prospective.
Even, perhaps, to SA’s wealthiest businesswoman, Magda Wierzycka. The outspoken asset manager recently described South Africa as “increasingly irrelevant” to international firms. It was not an investment environment they trusted. Too onerous to operate in and too difficult to move assets around.
The last government's reflexively antagonistic reaction to Australian mining company BHP's bid for Anglo American sent a clear signal to other highly capable multinationals wanting to invest in the country: SA might not be worth the trouble. To get big international firms in and stop others, like French banking giant BNP Paribas which exited SA earlier this year, from leaving, the GNU must revamp SA’s investment story and approach.
In 2023, the economy grew by just 0.6%, slightly down on the anaemic 1% average over the previous decade. With nine out of every 10 days affected by power cuts in 2023, combined with collapsing infrastructure, organised crime rising and SA greylisted by the global financial crime watchdog, Mzansi was a hard sell last year.
The electricity situation has improved dramatically in 2024, thanks in no small part to the dogged efforts of the ANC’s electricity minister, Kgosientsho Ramokgopa, whose Cabinet remit was wisely enlarged by Ramaphosa to include energy. However, the barriers to long-term, job-creating investments remain high.
Wierzycka echoed the concerns of many that South Africa also faced a backlash from some of its biggest investors, the US and Europe, on account of its refusal to condemn Russia’s invasion of Ukraine and for taking Israel to the International Court of Justice (ICJ) over Gaza.
Why SA needs to succeed
Yet the bank’s survey revealed what is broadly true of big investors everywhere: they are primarily concerned with policy certainty, sound governance and pro-growth reforms. They can handle geopolitical differences.
The same is true for governments. Western states hope that a less dogmatic GNU will stop Pretoria from slipping further into Vladimir Putin’s — or Xi Jinping’s — orbit. But they want South Africa’s messy democracy to succeed regardless.
This is not about the sentimental tug that the anti-apartheid struggle still exerts in the hearts of many. It’s about strategic interest. No one gains from Africa’s most powerful state performing badly.
The regional economic and security benefits of big states consistently performing well are clear. Unlike small states, their successes spill over to neighbours. So do their failures. Imagine Europe if France or Germany were habitual basket cases. Or indeed West Africa, if Nigeria was stable and prosperous.
It will be impossible to address this era’s defining challenges — climate change, forced migration and food security — without African leadership. Due to its relative economic and diplomatic might, its membership of BRICS and the G20 — of which it holds the presidency in 2025 — South Africa will have an outsized influence on how Africa’s global position evolves. Its success matters.
The dwindling band of nativists and Marxists in government would still have us believe that the West wants to collapse South Africa if it can’t put a toady in the Union Buildings.
The world has moved on. They must too.
If the contest breaking out between ministries over who is performing best in Ramaphosa’s new administration continues, perhaps they will.
More than a third of portfolios are now run by non-ANC members of the GNU. Whether the efficiency drive at Home Affairs and other ministries now under former opposition parties is making the ANC’s old guard “look bad”, as the party’s secretary-general recently denied, is beside the point. Competition of this kind can only be good.
Nothing less than a whole-of-government approach is needed to shift perceptions. The hardest brakes on major job-creating investments — from crime and corruption to labour market rigidity and tax disincentives — cannot be solved in silos.
Such is the scale of the turnaround required — SA has the highest unemployment rate in the world, with nearly half the population on some form of welfare — finding parallels for the task at hand is not easy.
The Greek miracle
If the GNU is searching for a lodestar, Greece’s hard-won recovery might suit. The time frame is especially useful: Greece started going downhill at around the same time that South Africa’s “nine lost years” under former president Jacob Zuma commenced.
When the global financial crisis struck in 2008, Greece’s economy was so hobbled by debt and mismanagement that it nearly broke Europe’s single currency. Athens received the largest debt restructuring package in history. The bitter austerity measures Greece had to swallow saw its economy shrink by a quarter, thousands of businesses close and unemployment rise to SA levels.
There is no EU bailout in prospect here. Unlike Greece, SA’s Treasury and Reserve Bank have maintained fiscal and monetary discipline through various economic crises.
Observing where Greece came from to where it is now — that is the point. Today, Greece is one of Europe’s fastest-growing economies. Unemployment has been cut by two-thirds, construction cranes are ubiquitous and huge multinational companies — Microsoft, Pfizer, Cisco — are pouring in.
Investor perceptions have changed substantially. Last year, Greece welcomed 33 million visitors, making it the 10th most visited country in the world. It also returned to investment grade, 13 years after it was downgraded to junk (SA was junked in 2017).
“Austerity measures were the Greek contribution to saving itself,” said Greece’s central bank governor, Yannis Stournaras. Red tape cut, debt reduced, taxes reformed and corruption tackled. “[We] had to take these tough steps,” avers Stournaras, “to survive.”
Risks and tough steps
It’s early days but, encouragingly, the GNU is not walking away from the tough steps necessary for South Africa to survive. Its formation is a testament to that.
Few predicted that the ANC would readily concede the (big) loss of its majority, which it held for 30 years. The ruling party had become too corrupt and entitled, seemingly, to accept that it could no longer be SA’s sole decision-maker.
What’s more, mutual loathing between the DA and ANC had become entrenched in Parliament and public discourse. Their record of coalition governance at local level was fractious, to say the least.
In reaching an agreement on sharing power at national level, with the DA as a junior partner, ANC leaders defied expectations and the wishes of a significant chunk of their party.
Read more: Evaluating what is new, positive and negative about the Government of National Unity (Part One)
The aggrieved include principled critics of the deal, fearful of white domination and/or the end of their Marxist-inspired National Democratic Revolution; and looters and opportunists, afraid their days are numbered.
Mindful of the chaos that unhappy comrades and their erstwhile colleagues in the EFF and MK can sow — from shenanigans in Parliament to mass riots on the streets — potential investors are naturally cautious about what lies ahead.
Nine-lives Zuma has called the GNU a “white-led unholy alliance” and its establishment “a return of apartheid and colonialism”. His message is landing. Increasing numbers of disgraced former officials are flooding MK’s ranks, which now include the EFF’s former deputy. The talk now is of a reverse takeover of the ANC by Zuma, working sub rosa with the EFF.
While that jittery prospect can’t be ignored, investors might find it oddly comforting having the rogues out in the open and clubbing together. Easier to gauge the risks.
Read more: Evaluating the achievements and problems since the establishment of the GNU (Part Two)
Grounds for optimism: exciting but vulnerable
They should also take comfort in knowing that Ramaphosa’s new Cabinet is stocked with ANC ministers who evince “country-first” approaches to their job, in numbers not seen since Thabo Mbeki’s administration.
The new minister of trade, industry and competition, Parks Tau, impressed his US hosts on his recent visit to plead for South Africa not to lose its duty-free access to the US market under the African Growth and Opportunity Act (Agoa), at a time when Pretoria is out of favour in Washington.
Senzo Mchunu, the new police minister, has dispensed with the bombast of his inept predecessor and is soberly confronting the criminal mafias ravaging the SA construction industry.
Perhaps the much-derided theory of a “good ANC and a bad ANC” might not be so risible after all.
Alas, one new ANC minister in the GNU, Thembi Simelane, is in hot water over allegedly receiving a dodgy loan. If found guilty, her fate will test the GNU’s commitment to rigorous accountability.
Disagreements over whether Simelane should leave now are of a piece with the main threats to the GNU’s durability: internal issues. Huge policy differences — on the National Health Insurance scheme, black economic empowerment (BEE), land expropriation without compensation, the mining charter, foreign policy and unions — will have to be carefully navigated. The risks of legislative gridlock, policy inconsistency and political infighting are high.
Although the smaller parties in the GNU will seek to assert their influence in different ways, what matters most is how the ANC and DA negotiate the concessions necessary to keep the show on the road. The latter will need to get fully behind what works, like Operation Vulindlela, which is making progress on key structural reforms; and the former will need to embrace new ways of achieving outcomes that it has long sought but failed to deliver, like job creation.
How the two parties talk to one another will have to evolve. A less tone-deaf DA might help ease the ANC’s transition into this new kind of governing.
Priorities
Investor perceptions are shaped by what gets done. That more SA ministers now speak their language is meaningless. Actions — big actions — are what counts.
Apart from decisive improvements in fighting crime and corruption, a successful infrastructure push is the most obvious pathway to growth and for strengthening the GNU’s hold on power. Much of the economy — mining, manufacturing, agriculture, tourism, etc — turns on whether the GNU can get key infrastructure built or repaired.
Not least in Johannesburg. The scandalous decay of the country’s economic hub, headquarters to nearly three in every four major South African companies and Africa’s top financial centre, should embarrass the GNU into urgent action.
Going over the heads of hapless provincial and municipal authorities is the only route to reviving Johannesburg’s urban hellscape.
How long the GNU will last is anyone’s guess. Incentives for the ANC and DA to strengthen their pact are currently well aligned. Tellingly, though, more than half of the respondents in the bank’s survey put the likely duration of the GNU at between one to three years. It needs to last longer for early wins to translate into sustainable victories.
The GNU is an unexpected chance to renew the nation’s promise. SA’s historic election could have hatched a very different kind of government, one less interested in growing the economy and less committed to democratic progress. GNU leaders mustn’t forget that in the bumpy patches to come. DM
Terence McNamee is a non-resident Global Fellow of the Wilson Center (Washington, DC) and adviser to various international clients and governments.