Brinkmanship in GNU devastating for SA

The Trump factor, plus the ANC and the DA playing to the brink, has cost the country R1 trillion

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The JSE took a hammering last week. The All-Share Index (ASI) dropped by roughly 4.5% on Thursday alone, wiping out nearly R1 trillion. Hundreds of thousands of South African employees' pensions are represented in the ASI.

In perspective, a trillion rand is just under half of South Africa's annual budget for the 2024-25 financial year — an appropriate comparator within which to locate the loss, given that the country's governing coalition failed to agree on the budget. This rendered the markets more sceptical of the country's future economic prospects and coincided with the Trump administration announcing a 30% import tariff on goods exported from South Africa.

The tariff imposition signals the likely end of our inclusion in the African Growth and Opportunity Act (Agoa), which had granted us preferential (duty-free) access to US markets. It has also tanked the rand, which has fallen below R19 to the US dollar.

These realities are interconnected and devastating. The government of national unity (GNU) — dominated by the ANC (majority with 40% of the total vote) and the DA (minority with 22% of the total vote) — failed to pass a national budget through its combined parliamentary majority. The DA refused to support it on both substantive and procedural grounds.

The ANC then collaborated with other smaller parties to pass the vote through the National Assembly.

This gave no confidence to investors already concerned about losing access to US markets, itself a partial function of how the US perceives South Africa's foreign policy — another fault line in the fractious governing coalition.