Forecasting South Africa’s post-election economic policy

Following the recent South African elections, there has been a lot of speculation and discussions surrounding the possibility of coalition governments and their impact on economic policy. Peter Attard-Montalto, Managing Director at Krutham, shared his insights on the matter in a recent interview with CNBC Africa. The key theme that has emerged from the conversation is the uncertainty surrounding the formation of coalitions and the implications for the country's economic future. Here are the key points discussed in the interview: 1. Coalition Talks and Market Perceptions: Attard-Montalto emphasized that there is a lot of misinformation and confusion in the market regarding the potential coalition between the ANC and the left-leaning Economic Freedom Fighters (EFF). While some believe that such a coalition is likely, he pointed out that there is still significant division within parties on the preferred outcomes. He highlighted the conservative nature of the ANC's National Executive Committee (NEC) and the challenges in reaching a consensus on coalition formation. The market perception differs from the potential reality, and there is a need for clarity on the direction of coalition talks. 2. Minority Government vs. Confident Supply Agreement: The discussion also touched upon the possibility of a minority government versus a confidence and supply agreement. Attard-Montalto noted that the ANC is unlikely to opt for a minority government as it would lead to continuous negotiations and instability. A confidence and supply agreement with the Democratic Alliance (DA) is seen as a more feasible option, albeit with its own set of challenges. The complexities of policy negotiations and maintaining a balance between parties were highlighted as critical factors in determining the nature of the agreement. 3. Government of National Unity: The concept of a Government of National Unity was also debated, with Attard-Montalto dismissing it as a non-starter due to the unwillingness of key parties to participate in such a setup. He underscored the importance of clarifying the terms used to describe potential coalition scenarios and focusing on the practical implications of party involvement. The role of party leaders, including President Cyril Ramaphosa and DA leader John Steenhuisen, in post-election discussions was also addressed, with insights into the challenges of leadership changes amidst uncertainty. In conclusion, the interview delved into the implications of coalition formations on fiscal policy and economic stability. The reassurance from National Treasury regarding fiscal stance under different coalition scenarios provided some clarity on the government's commitment to financial prudence. Overall, the path forward for South Africa's economic policy post-election remains uncertain, with coalition talks playing a pivotal role in shaping the country's future direction.