South Africa awaits new government

South Africa has entered a new phase of its democratic journey as the African National Congress (ANC) lost its outright majority in the national election for the first time in 30 years. The next two weeks are expected to be tense as major political parties engage in coalition talks to form a new National Assembly and elect a new President. Goolam Ballim, Chief Economist at Standard Bank, discussed the various scenarios that could unfold and the potential implications for the economy in an interview with CNBC Africa. Ballim noted that the results of the election were not a complete rejection of the ANC by South African citizens, despite the 40% result. He highlighted the factionalism within the ANC and the role it played in the election outcome, with disaffected individuals and constituencies orbiting around historical ANC personalities. The ANC now faces critical decisions in forming a government, with potential scenarios including alliances with parties like the Economic Freedom Fighters (EFF) or the Democratic Alliance (DA). Ballim emphasized the policy implications of different coalition outcomes, particularly in terms of fiscal, economic, and monetary policies. An alliance between the ANC and the DA would likely signal continuity in the reform agenda spearheaded by President Ramaphosa and supported by the private sector. Conversely, a partnership with the EFF, known for its agitation and disruptive tactics, could unsettle the markets and erode investor confidence. Ballim also discussed the potential involvement of the MK party, noting that a collaboration between the ANC and MK would represent a significant shift in personnel and policies, potentially leading to negative repercussions for the economy and financial markets. When asked about the probabilities of different outcomes, Ballim suggested that an ANC-EFF alliance was a more likely scenario compared to ANC-MK, with the ANC-DA partnership having a slight edge due to President Ramaphosa's preference. He highlighted the importance of negotiations and compromise in the coming weeks, emphasizing Ramaphosa's skills as a negotiator and the need for strategic decision-making in forming a new government. The uncertainty surrounding the coalition talks poses challenges for South Africa's political and economic landscape, with implications for investors, businesses, and the general population. As the country navigates this critical juncture in its history, the decisions made in the coming days will shape its trajectory for years to come.