South Africa Cabinet Talks Stall After ANC Pulls Trade Offer

(Bloomberg) -- Talks between South Africa’s two biggest political parties on forming a cabinet stalled after the African National Congress withdrew an offer to appoint a member of the smaller Democratic Alliance as trade and industry minister, people familiar with the matter said.

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While the ANC offered to instead cede the tourism portfolio, the DA objected as the party sees it as a minor ministry, said the people who asked not to be identified as the negotiations are private.

The disagreement is delaying a deal over the appointment of ministers almost a month after the election cost the ANC its parliamentary majority for the first time. Still, negotiations on the cabinet were always expected to be difficult and it’s anticipated that an agreement may yet be reached, the people said.

DA national spokesman Solly Malatsi declined to comment. Calls to ANC spokeswoman Mahlengi Bhengu-Motsiri didn’t connect and she didn’t respond to a text message when Bloomberg sought comment late on Thursday.

The setback is the latest twist in talks that are being watched anxiously by financial market traders. Should the two parties come to an agreement, investors anticipate an acceleration of economic reforms needed to address the nation’s energy crisis, fix its collapsing ports and railways, and reduce crime and corruption.

The rand has whipsawed in recent days on speculation that talks between the ANC and the centrist DA have either moved closer to an agreement or further away. The currency fell as much as 1.8% and traded 1.6% weaker at 18.4628 by 9:41 p.m. in Johannesburg.

DA Requests

At the start of the talks on the cabinet, the DA had asked for about 10 ministerial posts, while the ANC offered three. The two parties, which have been bitter opponents for decades, later settled on about six, with the DA wanting to be represented in the so-called economic cluster, which includes the trade and industry portfolio.

The ANC has irked the DA by pushing back on the number of posts the smaller party says it’s entitled to after winning more than a fifth of the vote and by including smaller parties in the proposed government without consulting it, the people said.

The six positions, including trade and industry, had been offered to the DA in writing by President Cyril Ramaphosa and accepted by DA leader John Steenhuisen, one of the people said.

The decision-making body of the DA met on Thursday evening and mandated the party’s negotiators to go back to the ANC with the insistence that it honor the agreement to cede the trade and industry ministry, people familiar with the situation said. Still, the DA would consider a counter offer of another ministry that they consider important, such as transport, they said.

The ANC’s National Executive Committee is expected to meet in coming days and to respond, the people said.

The impasse has left the leadership of the DA less confident of a deal and it’s concerned about the potential instability of a government between themselves and the ANC if undertakings are made and then rescinded, they said.

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Prior to the offer of the trade and industry ministry being withdrawn, the ANC also proposed that the DA manage the ministries of home affairs, basic education, public works and infrastructure, communications and digital technologies as well as forestry, fisheries and the environment, according to a letter sent to Ramaphosa by Steenhuisen and seen by Bloomberg.

The DA were also offered four deputy positions in the finance, energy and electricity and small business development ministries and one other unspecified post, Steenhuisen said in the letter.

Still, the DA leader said the party would like two more ministerial and two more deputy ministerial posts.

‘Dear John’

In response, Ramaphosa wrote a letter to Steenhuisen saying he was “taken aback” by the additional demand and said the ANC was holding talks with other parties and intended to conclude all negotiations and consultations this week to end the “paralysis” in the process of setting up a government. He said he was open to further meetings with the DA.

The ANC has been under pressure from its labor-union allies not to cede trade and industry and instead push the DA toward tourism, public works and home affairs, another person said.

The unions would be willing to accept Ramaphosa appointing someone from outside politics — such as a business figure — to the post of trade and industry as they feel the DA may implement measures that could lead to job cuts, one of the people said.

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(Updates with DA decision-making body resolving to continue talks in fourth paragraph after DA Requests sub-headline)

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