South African assets gain on rising hopes of market-friendly coalition

AFRICAN STOCKS AND FINANCEJune 4, 2024 at 9:29 PM UTC

TLDR

South Africa's financial markets gain as ANC explores coalition with market-friendly DA after losing parliamentary majority.
Market rebounds from last week's slump amid speculation of ANC-DA coalition, viewed as pro-business and favorable by analysts.
ANC's 40.2% vote, coupled with DA's 21.8%, make an ANC-DA partnership more likely, easing fears of radical party influence.

South Africa's financial markets saw gains early this week as investors speculated on the likelihood of the African National Congress (ANC) forming a coalition with a market-friendly party after losing its parliamentary majority in last week's election.

Last week's market slump was driven by fears of a coalition with more radical parties like the far-left Economic Freedom Fighters (EFF) or former president Jacob Zuma's uMkhonto we Sizwe (MK).

However, the prospects of an ANC-DA (Democratic Alliance) coalition, which is considered pro-business, seem higher, per analysts. The ANC secured 40.2% of the vote, the DA 21.8%, MK 14.6%, and the EFF 9.5%, making an ANC-DA partnership more feasible and market-friendly.

Key Takeaways

Following the recent election, South African political parties have a two-week window to negotiate coalition agreements before the new parliament convenes to select a president. Despite the ANC losing its majority, Cyril Ramaphosa is still the likely candidate for president, as the ANC remains the largest party. Local media reports indicate that the Democratic Alliance (DA) might consider a cooperation pact with the ANC. This agreement would involve the DA supporting the ANC in crucial decisions in exchange for significant positions in parliament. This potential coalition could foster a more stable and market-friendly government, easing investor concerns and benefiting South Africa's economic outlook.

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