Market confidence confirms suspicions of a DA-ANC coalition

Markets rebounded after the recent IPSOS poll, amid rumours of a govt of national unity. The only way to stop this would be the DA losing their Cape majority to the secessionists

Robert Duigan


Robert Duigan


Apr 29, 2024

Market confidence confirms suspicions of a DA-ANC coalition

South African markets have witnessed a significant surge in optimism following a pivotal opinion poll, with the ruling African National Congress (ANC) experiencing a decline in support.

The rand saw a substantial increase, stocks reached their highest levels since January, and bonds recorded significant gains. Analysts anticipate that a potential coalition government could lead to pro-reform policies and increased private sector involvement, further boosting market confidence.

The Ipsos opinion poll, based on the views of 2,545 registered voters, showed the ANC's support dropping to 40.2%, down from 40.5% in February, largely due to the effect of the two radical ANC splinter parties, Malema’s EFF and Zuma’s MK.

Meanwhile, support for the DA strengthened to 21.9% from 20.5% in the same period. For anyone familiar with these sorts of opinion polls, this is not a significant change, and in the context of the South African electoral landscape, particularly not.

Nevertheless, the market's response to the poll was evident, with the South African currency posting its biggest increase since mid-December and the FTSE/JSE All Share Index rising by 1.7% to its highest level since January. Yields on benchmark rand-denominated bonds also fell significantly.

Commentators now consider a coalition between the ANC and DA to be likely, suggesting that such a coalition would be market-friendly, focusing on reform and increased private sector participation in the economy.

This characterisation, while not strictly untrue, disregards Ramaphosa’s aggressively anti-market and anti-white reforms during hi presidency so far, in which private sector opportunities have been limited to foreign acquisitions of local manufacturing, real estate purchases, and minority shares in state-owned infrastructure projects.

At the same time, local companies are being decimated. Several consecutive annual reports have seen increasing losses of local jobs and liquidations of South-African owned SMEs.

This means that state control is not diminishing, even as law- and regulation-enforcement capacity declines. Rather, the country is seeing an erosion of economic autonomy, while it divvies up the local private economy between foreign conglomerates and the instruments of the ruling party.

What the markets are getting excited for, is the greatly increased potential for tenders - Ramaphosa, while suffocating minorities’ work and business opportunities through increasingly strict racial quotas, is also opening up the operational side of major infrastructure bids almost exclusively to foreign operators.

The reason for the optimism, is not then so much that anything will change, but that a DA coalition will preserve the status quo, and allow foreign capital to suck the last drops of blood from the local economy as native minority producers are squeezed out.

But major traders would not be making such moves if the DA were not actively working towards such a solution, or if Ramaphosa were not considering the option.

Helen Zille’s private aspiration since 2014, as she alluded last year, has been to position the DA as the only alternative, not to the ANC, but to the EFF, lining themselves up as the only viable coalition partner.

While denying this heavily, the party has increasingly pushed a pro-ANC message the past few months, offering the coalition as the only way to save South Africa.

The downsides of such a deal are obvious - the DA will have no say on major policies, and can easily be circumvented in parliament, with the ANC using their more radical black-nationalist “opposition” to support leftward reform, while using the DA as the sales team for public-private partnerships.

The DA will have no leverage with which to challenge the ANC’s corruption or racism, and will be little more than an appendix - the ANC can always threaten to swap them out for the MK or EFF. And the will have to betray the Moonshot Pact, killing all faith in their good dealings, and destroying stability in Metro coalitions across the country.

But for the next five years, they will see foreign investors a good line of profit.

The only way to stop them is by killing them in the Western Cape. If the DA falls below 50% in the Cape, as is likely, they will have only three options in front of them - form a coalition with the PA, the ANC, or the secessionists (RP, VF+).

If they go for Gayton MacKenzie’s flagrantly corrupt Coloured-nationalist party, they may be able to salvage some of their reputation, but all their members hate Gayton’s guts, and stable power sharing is likely impossible.

If they form a coalition with the ANC, they will destroy their credibility overnight, and be eliminated forever in the province.

If they choose the RP/VF+, they will be unable to form a coalition with the ANC at a national level, but will preserve liberal governance in the Cape by delivering a referendum and breaking it away from South Africa.

The DA now has to choose between destroying the whole country, or saving just one part of it.

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