MICHAEL AVERY: Coalition calculus constrained by ‘amorphous markets’

Writing this column after watching Jacob Zuma channel Donald Trump’s January 6 insurrection energy stresses the existential importance of the choices facing the ANC and DA for SA’s future.

The question facing the ANC is whether it wants to be a party at the centre, preserving our constitutional values, or shifting to the extremes and rejecting the principles its founders fought and died for. Encouragingly, it appears the former option appears to be top of the list inside the ANC national executive committee via a government of national unity (GNU).

Thirty years ago, Estian Calitz, then director-general of finance, described the first GNU budget as heralding “a new era in SA’s public finances”, amid economic recovery and deliberate reconstruction efforts.

“SA’s economy, now in the early stages of recovery, is under intense scrutiny, domestically and internationally. A well-managed transition to a growing economy, complementing a successfully negotiated passage to democracy, should bring improved domestic confidence and increased foreign interest. Fiscal aspects of this transition are crucial as substantial social development challenges need to be met together with sustained improvement in the business environment.”

The early years were tense, marked by a prickly relationship between Calitz and Trevor Manuel, the first ANC-appointed minister of finance.

When Manuel took over from former banker Chris Liebenberg in 1996, the rand lost 2%, and an additional 9% the following month. Manuel, not a trained economist, faced scepticism and famously questioned the nature of the “amorphous market” that dictated economic realities. He soon learnt that these markets would constrain the government’s political aspirations.

As the dust starts to settle, the aftermath of the ANC’s thud back to earth is still reverberating around the country and indeed those amorphous markets continue to provide a gravitational force on our future expectations.

Roy Havemann of Krutham reminded me of Liebenberg’s reflection: “In the short run, you can only achieve economically doing what is politically possible. In the long run, you can only achieve politically doing what is economically possible.” As Havemann observed, the long run has arrived.

With speculation rife about the shape of the future government, the ANC’s coalition calculus will be grounded in the economic reality that confronts it (government debt is too high and unsustainable, with growth the only solution) and the amorphous markets’ gravitational effects.

A deal with the DA could strengthen the rand and improve market sentiment, allowing the government to reduce borrowings over the medium term and significantly improve the growth outlook and by implication provide voters with what they want: the prospect of a job and attaining a better quality of life. Conversely, a coalition with the populist MK and EFF could lead to unsustainable spending, capital flight and currency collapse.

Speaking to political analyst Frans Cronje over the weekend, his preferred option is for a coalition deal where the DA and the IFP have a role in cabinet with the ANC. It appears Cyril Ramaphosa supports this, while Gwede Mantashe remains unconvinced.

An intriguing alternative proposed by Cronje is the formation of a minority government.

For the opposition, this mitigates the risk of being implicated in governance failures, while gaining influence through parliamentary committees to push for transparency and reforms. Cronje’s proposal offers strategic flexibility, allowing either party to end the arrangement if it becomes untenable, fostering gradual co-operation and trust. This approach could evolve into a stable centrist coalition by 2029, aligning the middle class with urban peripheries, minimising strategic competition between the ANC and DA.

This pragmatic pathway avoids the pitfalls of hastily formed coalitions, which could collapse, leading to instability and loss of market confidence.

Ultimately the ANC, while being brutally punished by the electorate, remains the linchpin of any future government and its strategists will be well aware of these permutations. It’s why, while things appear so fraught and uncertain, I remain hopeful that pragmatic leadership will emerge to sell this vision to their respective constituencies about the inevitable trade-offs offset by attractive shared upside.

Given that the constitution provides precious little time to formalise all the details of national coalition agreements, I wouldn’t be surprised to see a minority government or GNU emerge within two weeks, with more formal agreements — working through the tortuous legal questions that now arise — down the line if the initial courtship isn’t as disastrous as we’ve witnessed at local government level.

Obviously much of that hinges on whether Ramaphosa resigns or is persuaded to stay on. Insiders say he is keen to continue fighting for renewal and the party is backing him, but he will have to find his spine in the process.

In the interim, the uncertainty and anxiety will keep business treading cautiously and constrain the markets’ animal spirits. 

Hopefully, the ANC will now realise that what South Africans want more than anything else is a job and the prospect of a better quality of life that only a growing economy can deliver.   

Perhaps Jan Smuts’ words first uttered 75 years ago about the beloved country that, “[s]till, the worst, like the best, never happens”, will prove wrong and for once we will pluck the best possible future from the jaws of potential coalition chaos.

• Avery, a financial journalist and broadcaster, produces BDTV’s ‘Business Watch’. Contact him at Badger@businesslive.co.za.