Azra Hoosen | ah@radioislam.co.za
3 June 2024 | 18:00 CAT
2 min read

As South Africa navigates the aftermath of the recent elections, the potential emergence of coalition governments becomes a critical issue. This raises concerns about market stability, investor confidence, and the direction of economic policy.

According to Award-winning economist, Dawie Roodt, initially, the rand strengthened just before the elections as many analysts expected the ANC to secure between 45% and 50% of the vote, making a coalition with smaller political parties a possibility. However, the rand came under significant pressure when it became clear that the ANC would get less than 45%, raising the possibility of a coalition with far-left parties such as the MK Party and the EFF. More importantly, there was a notable weakness in the capital markets. Currently, the rand remains weak.

“The financial markets want a coalition more to the right, the DA is the obvious candidate for that. If the ANC goes into a coalition with the left, the EFF or the MK party – The rand will immediately take a further knock and the capital markets will see foreigners fleeing, the equity market, already under pressure will fall even further, and we could easily lose another 10%. Keep in mind all these markets are already undervalued. In the real economy, investors will pull away. Investment and the economy will not see growth for a long time,” says Roodt.

Roodt pointed out that even the potential involvement of the EFF has caused a very negative market reaction. If they genuinely intend to implement the policies they’ve been advocating, it will have a significant negative impact on the economy. “However, I’m not certain that even the far-left will actually implement the policies they stand for,” he added.

“We should be proud of the institutions of the Free Press, the Reserve Bank, civil society, and the churches, which are all keeping South Africa’s democracy alive,” he said.

Roodt believes we should not be proud of the current political parties, describing them as a mess. He is particularly concerned about the parties surrounding the ANC, such as the MK and EFF. These offshoot and far-left parties, including the ANC itself, are interventionists who believe in policies that do not align with South Africa’s economic reality.

“Politics and economics are not in sync, we need a more efficient state, a move slightly to the right and that is not what the political environment is telling me and that is concerning,” he said.

LISTEN to the full interview with Ml Sulaimaan Ravat and Dawie Roodt here.