As parliament gears up for its first sitting on Friday, the South African economy faces uncertainty after the ANC’s proposal for a government of national unity, following its first loss of the majority vote since 1994. The announcement has sent mixed signals through the economy, impacting both the stock market and investor confidence. While the rand saw a modest gain against the dollar, trading at R18.48, the Top-40 index closed 0.6% lower, indicating the market’s cautious stance.
Sebastien Alexanderson, Head of National Debt Advisors, said the implications for policy and economic stability will affect consumer pockets directly.
“While the idea of a government of national unity brings hope for broader consensus, it also introduces significant policy uncertainty. Investors are wary of how diverse economic ideologies will coalesce, especially when it comes to critical issues like fiscal policy and economic reforms,” said Alexanderson.
For ordinary South Africans, the impact of a government of national unity could be profound as economic policies directly affect employment rates, inflation, and access to essential services. “Uncertainty in economic policy can lead to delayed business investments, which in turn affects job creation and economic growth,” Alexanderson explains. “Citizens might face higher costs of living and reduced access to services if the government struggles to implement cohesive economic strategies.”
With each party in the government of national unity (GNU) holding differing policy visions, deadlock on crucial issues such as budget allocations, economic reforms, and taxation policies could impede economic growth further, according to Alexanderson.
Evidently, during the election campaign, the Democratic Alliance (DA) labelled any potential ANC tie-up with the EFF or MK a “doomsday coalition” that would harm the economy. However, talks have since commenced between the parties. The Economic Freedom Fighters (EFF) have firmly stated their refusal to participate in a government involving the DA. The Inkatha Freedom Party (IFP) has taken a more cautious stance, emphasising the importance of scrutinising the details of potential agreements. Meanwhile, uMkhonto we Sizwe (MK) has engaged in discussions with the ANC but has raised objections regarding the election results, citing alleged voting irregularities.
“The lack of a clear and unified policy direction can dampen investor confidence, as businesses and financial markets thrive on predictability and stability,” said Alexanderson adding that the immediate market reaction to the proposal highlighted the delicate balance investors are maintaining with domestic and foreign investors both in a ‘wait and see’ mode.
Alexanderson offered the following tips for consumers to best prepare for potential economic instability:
Prepare for Potential Unemployment: With an unstable economy job losses are always a possibility. Build an emergency fund covering at least 3-6 months of living expenses and consider upskilling or reskilling to increase job market competitiveness.
Explore Alternative Income Sources: Look into freelancing, part-time work, or starting a small business to diversify income streams and reduce dependency on a single job.
Plan for Loadshedding: If loadshedding makes a comeback, let it find you prepared. Invest in energy-saving appliances and backup power sources like generators or solar panels to mitigate the impact of potential power outages on daily life and work.
Manage Inflation Impact: Monitor spending and budget strictly to combat rising prices; prioritise essential expenses and look for cost-effective alternatives.
Saving & Investing: Continue saving regularly and explore low-risk investment options to protect and grow your money during uncertain times.
Seek Professional Debt Help: Consult with a financial advisor or debt counsellor to create a personalised debt management plan and navigate financial challenges effectively.
