100 days of GNU: Is improved business confidence sustainable

By Rebone Tau

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 super majority in Parliament, bringing a measure of political stability at the national level that has sparked renewed optimism and hope among South Africans.

Almost half of South Africans have faith in GNU

Forty percent 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.

Load-shedding is almost seven months in the past

Hundred days into the GNU, South Africans and business are right to feel optimistic. The break in load shedding has continued well 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.

Optimism in the economy 

This has boosted optimism that the government will continue to implement far-reaching economic reforms under Operation Vulindlela to attract more investment 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 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 on services such as health and education.

Can GNU live up to heightened expectation though

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, in turn, sustain business and investor confidence.

Mashatile’s clearing house has huge role to play

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 resolve the 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.

GNU is an invitation to invest

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 a dividend – and must do so quickly.

Tau is a political commentator.

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