Rosy ANC-DA scenario ‘also has risks’

SA’s improved economic outlook could prompt credit ratings agencies to upgrade the country’s sovereign credit rating by late 2026, in a post-election scenario in which the ANC’s support falls to 40% and it opts to form a coalition with the DA.

An ANC/DA coalition is the third and “best case” of the four scenarios modelled by Oxford Economics Africa, which envisages that in this scenario the DA would partner with the ANC after being given assurances about economic liberalisation and prudent public spending and the promise of major cabinet appointments. The changes implemented by the new team would take a while to reflect, it says. “Then again, not much has to go right for the economy to grow faster.”

However, it cautions that “political regime” risk is high in this scenario, with the risk that DA support for the ANC could anger its own base and that the ANC’s defence of the coalition’s more liberal economic policies could trigger no-confidence votes and potential coalition collapses. Even though it projects that an ANC-DA coalition would be more stable than an ANC-EFF one, it warns that the risk of protest and unrest would be higher.

The report came in a week in which a DA election advert featuring the burning of SA’s flag has been widely condemned as offensive, including by President Cyril Ramaphosa, who called the advert despicable and treasonous. DA leaders remain unrepentant about the advert, which warns of the risks of an

ANC coalition with the EFF or MK, and which some political analysts see as an attempt to cement conservative white support for the DA even if the party drives away black voters.

The party’s federal leader, Helen Zille, said the party faced “blowback” every time it told the truth, and deputy campaign manager Ashor Sarupen told City Press at the weekend that the media controversy had helped get the DA’s message out: “The flag advert was a warning

to voters that an ANC-EFF-MK coalition will ruin SA, destroy our institutions, economy and even our flag,” he told City Press.

In Oxford Economics Africa’s ANC-EFF coalition scenario, released a week ago, the rand breaches R21.50/$, the economy grows by just 1.2% in 2024 and 1.3% in 2026, and government debt breaches 80% of GDP by 2027.

By contrast, an ANC-DA coalition scenario is positive for investor sentiment, strengthening the rand throughout the second half of this year while bond yields drop as investors’ opinion of the fiscal outlook improves, says senior political analyst Louw Nel in the report.

The economy grows by 1.9% in 2025 and averages 2% between 2026 and 2030. “Investors relish the policy certainty that the new businessfriendly government provides, and private sector investment increases sharply in the medium term, providing much needed impetus to economic growth,” the report reads.

It projects a rapid positive impact of visa reforms, while investment in renewable energy and water infrastructure drive the economy. The implementation of SA’s new mining cadastral system clears the huge backlog of mining and exploration licence applications, spurring foreign investment.

“Even though this is better than in the baseline scenario — it can sensibly be called our bestcase scenario — not everything is rosy,” says Nel. “Squabbles between ANC and DA members distract from policy-making, which ultimately means the economy does not grow fast enough to reduce unemployment adequately.”

In this scenario the DA gets 19.5% of the vote and the coalition has 238 of the National Assembly’s 400 seats, with DA leader John Steenhuisen likely eyeing the parliamentary speaker position and a tussle taking place over cabinet seats between the two parties, with the ANC declining to relinquish the finance minister post.

First-quarter GDP data is due out from Stats SA later this month, and the Reserve Bank will update its growth forecasts at its May monetary policy meeting, which will announce its decision the day after the election, on May 30.

At its March meeting the Bank forecast the economy would grow 1.2% this year, better than the 2023 outcome of 0.6% but below the long-run average of about 2%.

Ratings agency S&P Global is also expected to update its growth forecast at its scheduled ratings update on Friday.