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South African President Cyril Ramaphosa and Democratic Alliance leader John Steenhuisen have opened emergency talks to break a deadlock after the pro-business party threatened to quit the coalition government.
A tense dispute over the allocation of cabinet posts hurt investor sentiment, which had been buoyed after a government of national unity was agreed two weeks ago.
The rand, which had surged to R17.87 to the dollar, fell to R18.46 on Thursday, while the Johannesburg bourse fell 0.6 percent at one point before closing 0.1 percent lower.
The impasse came after Ramaphosa backed out of a deal to give the DA a powerful Department of Trade and Industry, part of a deal that would have given the DA six cabinet seats out of 30. Although fewer than the 12 it originally sought, the offer included significant posts as Deputy Minister of Finance.
But Ramaphosa’s willingness to let the DA run the Department of Trade and Industry has angered the trade union federation Cosatu, which is linked to the president’s African National Congress. Ramaphosa then withdrew the offer and proposed the far less important post of Tourism Minister instead.
“The ANC has not kept its word,” said one DA insider close to the meeting. “The president should go back on the offer he made on Tuesday, otherwise we won’t be part of it and he can form a government without us.”
After last month’s landmark election in which the ANC lost its majority for the first time since the end of apartheid, Ramaphosa’s re-election as president by parliament was only made possible by the DA’s support.
The ANC won 159 seats in the 400-seat chamber ahead of the second-placed DA, which won 87. Based on a so-called “statement of intent” to form a government of national unity, the DA was expected to get a proportional share of cabinet seats.
ANC secretary-general Fikile Mblalula called the DA’s original demand for 12 seats, including the deputy president, “strange and outrageous”.
One business executive, who spoke on condition of anonymity, said the spat between the ANC and DA even before the cabinet was formed showed how “difficult” it would be to maintain a stable coalition.
According to him, there was an old guard of the ANC, including Ramaphosa, who tried to “maintain the vision” of a non-racial, centrist South Africa that former president Nelson Mandela had championed. But “fewer and fewer people believe the story of post-apartheid reconciliation,” the executive added.
He said many former ANC members, particularly those who defected to radical separatist parties – the Economic Freedom Fighters and former president Jacob Zuma’s uMkhonto weSizwe – had little sympathy for the pro-market DA. It didn’t help matters that the DA acted like a “kingmaker” despite its 22 percent vote share barely improving on the previous election, he added.
The impasse has fueled fears that even if the row over cabinet positions is resolved, mechanisms for settling disputes within the coalition have still not been put in place, raising the risk of a political stalemate.
Azar Jammine, founder of South African consultancy Econometrix, said it would be disastrous for the economy if the DA withdrew from the unity government. The rand would “fall below R19, increasing inflationary pressures and delaying any pro-growth rate cuts”, he said.
“Markets have made it clear that the more the DA can participate in the new government, the better the chance for investor-friendly policies that will create jobs and higher economic growth.”