South Africa: Parliament to Open on July 18

After the formation of GNU, one of the first matters to be discussed by the National Assembly (NA) is the departmental budgets as limited fiscal space remains a core issue for South African economy. On July 9, members of both Houses of Parliament – the National Council of Provinces (NCOP) and the NA - elected office bearers of their respective houses, and started receiving departmental briefings on budget votes.

As of July 11, extended public committees of the NA portfolio committees will start to hold hybrid mini-plenaries to deal with budget votes for various departments, which will continue until July 12. The discussion will begin with health budget as Minister of Health Motsoaledi is expected to table the health budget vote for the financial year 2024/25 in the NA in parliament, and will outline the plans and health priorities for the next five years, continued with debates on science and innovation, statistics and mineral resources and energy. On July 12, budgetary debates will take place for national treasury, public service and administration, water and sanitation, among others. (Note: After all the budget votes are debated, each House (the NA and NCOP) must vote on the budget. If the budget is approved, the ministers can spend the money as budgeted).

On July 18, President is expected to outline the priorities of the 7th administration following the opening of the parliament. The South African government news agency reported on July 4 that the adopted programme of action called Medium Term Strategic Framework (MTSF) will also be announced by the president on July 18 and individual departments will then start developing their strategic plans accordingly. We foresee the coalition government backed by DA would likely push for some broader fiscal tightening in the budget for the current 2024/5 year late July given limited fiscal space. (Note: Compared to a year ago, the budget deficit for 2023/24 in South Africa is estimated to worsen from 4% to 4.9% of GDP).

Despite the coalition deal, there remains major differences between ANC and the DA in terms of foreign policy, land reform, ANC’s black economic empowerment policies, the National Health Insurance (NHI), which have to be addressed in the next months. It is worth noting that ANC’s opposition to Israel over the case of the Gaza conflict can be challenged by the DA’s alignment with Western perspectives and its backing of Israel. These can negatively affect coalition stability in the future.

The draft coalition deal puts rapid, inclusive and sustainable growth as a top priority item while other priorities include land reform, job creation, infrastructure development, structural reforms, transformational change, and fiscal sustainability. (Note: SA GDP grew by 0.6% in 2023 and was down 0.1% in Q1 2024). It appears mentioned issues will likely be top priority items for the GNU, while Ramaphosa’s speech on July 18 will be key in viewing the agenda of the new government.  

Despite the immediate focus of the new government should be the domestic economy, as the unemployment, corruption, poverty, load shedding, financial bottleneck and inequality remain major hurdles, we think handling these will likely take more time than expected as the political decision making processes will be harder than in a one-party government setting. We continue to envisage the coalition will be weaker at least for some time, and less able to undertake necessary fiscal reform policies abruptly and deal with power cuts (load shedding) in the near future. The delays in forming the coalition and announcing the cabinet already signals GNU’s decision making process will not be straightforward, at least in the first months.