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South Africa’s main opposition sees room for optimism about coalitions

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(Bloomberg) — The leader of the Democratic Alliance, South Africa’s largest opposition party, said optimism among investors about reaching a coalition deal with the ANC to form the next government is not misplaced and that the alliance is open to talks involving the interests of the country come first.

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The African National Congress surrendered its parliamentary majority in the May 29 elections for the first time since it took power under Nelson Mandela in 1994. It won only 40.2% of the votes cast, leaving the country in a political turmoil.

The binary choice is to ally with the business-friendly DA, its fiercest critic, or to work with rivals who have demanded widespread nationalization – which would jeopardize the financial stability of Africa’s largest economy. Most investors rely on the first option.

“I think the optimism is justified,” says the DA leader Johannes Steenhuisen said in an interview in Johannesburg on Tuesday. “I couldn’t put a percentage on it at the moment because I don’t know, the ANC could come to us in three or four days and say, sorry, there’s no deal.”

Investors are focused on the stability such a pact would bring to the country, he said. The rand and domestic bonds have strengthened this week on hopes that the DA will strike a deal with the ANC.

There are many obstacles to cooperation, even though the economic policies of both parties are largely centrist. They have significant differences over the creation of a national health insurance system and economic empowerment programs. The DA wants both policies reworked, although details could be ironed out later if an overarching agreement can be reached, Steenhuisen said.

The ANC could be fighting to sell a deal to its members, many of whom have rejected the idea of ​​working with a party opposed to the way the government has implemented its black economic empowerment programs. State health and empowerment measures are key policies aimed at redressing the economic inequality caused by apartheid.

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Both Steenhuisen and Helen Zille – the chair of the DA’s highest decision-making body – are white and some of the high-profile black members have resigned. Still, Steenhuisen said, the party increased its share of the black vote in last week’s election.

There is also some resistance within the DA to working with the ANC, which it has criticized for a series of corruption scandals and its inept service delivery. Yet support for the DA has remained stuck at just over 20% of the vote since 2014, reducing the likelihood that it can play a role in steering the country’s future as it moves forward on its own.

“We are not going to be petty and partisan, we are not going to be boorish, we are going to go into this in a mature way, putting the interests of the country first,” while the ANC has also indicated it is open to talks , Steenhuisen said. “I think if the DA had come out and said that’s it and the ANC is on its own, things would have been very different.”

The DA will draw the line against participating in a government that also includes the left-wing Economic Freedom Fighters, the uMkhonto weSizwe Party or MKP, led by former ANC and national president Jacob Zuma, or the Patriotic Alliance, a small party with extreme positions .

The EFF and MKP have demanded the nationalization of banks and mines and the expropriation of hinterlands, and could be potential partners for the ANC if there is no deal with the DA.

Earlier, Steenhuisen told Bloomberg TV’s Jennifer Zabasajja that his party was willing to help the ANC form a government if agreement could be reached on key principles, such as the need to uphold the constitution, and that it was open to reappointing president Cyril Ramaphosa.

“We know who he is, we know what he is, he is the president of the ANC. He would be the presidential candidate, there is no doubt about that,” he said. “We really want to talk because we want a stable government that will provide a bulwark against the anti-constitutionalists.”

Options that could be considered include the DA entering into a formal coalition with the ANC and taking on some cabinet posts.

Alternatively, a so-called offer-and-confidence arrangement could be agreed, whereby it would support the ANC in appointing a president and support it in crucial votes, and in return expect it to have positions within parliament to enable it to hold executive power. to hold government bodies accountable. Other parties, such as the Inkatha Freedom Party and the Freedom Front Plus, could also be involved in a possible settlement.

Fitch Ratings said it sees a greater likelihood that the DA will support the ANC from outside government than the two parties entering into a formal coalition due to the stark differences between their support bases. Support from the DA “would likely result in the least significant changes to key credit measures such as South Africa’s debt trajectory over the medium term, although fiscal tightening could be strengthened,” the report said in an emailed note.

“The prosecutor is not desperate to get into government for the sake of government,” Steenhuisen said. “We will do it if this is the best way to prevent an anti-constitutional state, but we feel very comfortable sitting on the opposition benches” and it is not off the table to continue doing this if there is an acceptable agreement is possible.’ impossible to reach, he said.

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–With help from Arijit Ghosh, Paul Richardson, Jennifer Zabasajja, Ana Monteiro, Julius Domoney, and Adelaide Changole.

(Updates with comments from Fitch Ratings in penultimate paragraph.)

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