BRIAN KANTOR: Choosing the right partner has never been more important

That the government of national unity (GNU) includes the liberal DA and excludes the EFF (extreme left, or is it extreme right?) has been well received by investors. This became public knowledge late on Friday after the markets had closed; they reopened only the next Tuesday due to the public holiday.

The run-up to the election had seen SA-listed shares and bonds and the rand well up from their mid-April lows, on the presumption that the ANC would be able to govern with the assistance of one or two minor parties. A sense of better the devil you know seemed to characterise market sentiment.

When the ANC collected a surprisingly low 40% share of the votes cast, rather than the 45%-47% many expected, it raised more uncertainty about the future course of economic policy. The markets in SA assets reacted typically to the new dangers by falling back from pre-election valuations. 

It is early days, but the share and bond markets are ahead of their immediate pre-election highs, having both gained about 7% in dollar terms. The rand has gained ground against the dollar and other emerging-market currencies, the true measure of rand strength.

Of further encouragement is that the risks foreign investors attach to their SA assets have narrowed. These sovereign, or country, risks are best measured by the spread between the yields on dollar-denominated RSA bonds and those offered by US treasury bonds of the same duration.

The spread for a five-year RSA Yankee bond narrowed to 2.3% from 2.7% in the run-up to the election. Since the election the risk spread widened to 2.6% and is now helpfully lower at about 2.2%. A good first impression, but far more is called for to move the markets higher.

The DA will carry a heavy responsibility for realising faster growth. Will the party and its leaders and followers be up to the task? Will they be able to manage change in an environment in which there may not be support from senior officials? Time spent in parliamentary debates and on the hustings may not have been the best possible preparation for expertly and vigorously executing the tasks at hand.

Safe hands

What specific government departments will be allocated to the DA cabinet members remains to be revealed. The DA should not be shy in taking on responsibility for executing economic policy. There is apparently agreement on the initial economic policy reforms to be pursued — not surprisingly given the weaknesses of government departments, which is all too obvious to those who have sat on the opposition benches and in parliamentary committees.

The Treasury and budget office are in safe hands and can be supported by the DA in cabinet. It is the other economically vital ministries that offer scope for much improved governance, and in executing policy and delivering value for the sacrifices taxpayers make to fund their government.

The management role to be played by the ministers responsible for mining, industry, energy, transport, water and municipal services, in and out of parliament, will be all important in promoting economic development. That is the essential growth that must truly add value to SA capital, from which all South Africans — in and out of work — will benefit.

Will the new appointments be up to the task? Businesses in SA can surely be a source of managerial talent and technical and financial advice to help fashion public-private partnerships that might attract the necessary capital to revive infrastructure. 

The best and brightest will be needed, and will not be found wanting. A government that regards SA business as a partner in progress rather than a threat to its power and privileges will be a huge promoter of asset value and growth. 

• Kantor is head of the research institute at Investec Wealth & Investment. He writes in his personal capacity.