South African Parties Complete Formation of Coalition Government

(Bloomberg) -- Ten South African political parties agreed to form a ruling alliance, completing the first phase of creating a so-called government of national unity.

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The Al Jama-ah party on Saturday joined nine others to create an administration that will run the country for the next five years. The government excludes the leftist Economic Freedom Fighters and former President Jacob Zuma’s uMkhonto weSizwe party, which together garnered almost a quarter of the vote in last month’s elections.

The addition of any further parties to the government will be subject to the agreement of the founding members, the African National Congress said in a statement on Saturday.

“The ANC remains in open communication with the parties that have not joined the GNU, exploring various ways in which there can be collaboration,” it said.

The ANC has been forced to form a coalition with rival parties after losing its parliamentary majority in the May 29 vote for the first time since it came to power three decades. With 40.2% of the vote, it’s the biggest party in the new government, followed by the centrist Democratic Alliance, which obtained 21.8%.

Combined, the coalition parties hold 287 of the 400 seats in parliament. The other members are the Inkatha Freedom Party, the Patriotic Alliance, the Freedom Front Plus, the United Democratic Movement, Rise Mzansi, the GOOD party, and the Pan Africanist Congress of Azania.

Political parties began talks on Thursday about forming the next cabinet and an announcement on its structure will be made “in the coming days,” the ANC said on Saturday.

The make-up of the executive is being closely watched by investors anticipating an acceleration of economic reforms under a more centrist-leaning government. The rand has strengthened 4.6% so far this month as bonds and stocks have rallied on optimism about pro-growth policy continuity.

South Africa’s National Treasury on Friday signaled it’s committed to maintaining the stance set out in the 2024 budget that seeks to stabilize public finances, reduce fiscal and economic risks, promote growth and support vulnerable citizens.

“While it is anticipated that the incoming administration will bring its own perspectives and policies, in the interim, it is crucial to maintain the current fiscal strategy,” the Treasury said in a statement on Friday. “Resources will be available only within the parameters required to meet the objectives of the medium-term fiscal strategy as outlined in the 2024 Budget Review.”

South Africa’s budget next year is expected to yield a “debt-stabilizing primary surplus” in the 2025-26 fiscal year, a reduction in the budget deficit to pre-Covid levels, and a stabilization of debt-service costs as a percentage of revenue, the Treasury said.

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