One year into the government of national unity (GNU), the initial positive response by financial markets has not held, says Jason Swartz, portfolio manager at Old Mutual Investment Group.
Yet for all its tension and political discomfort, the coalition’s ability to endure and advance some reforms offers cautious encouragement to investors watching for signs of stability.
According to Swartz, the GNU’s survival to date is no small feat. Despite a “fractious year,” he said there was a pragmatic shift among coalition partners as they began adjusting to the realities of multiparty governance.
“These are early days and all parties are still getting to grips with the dynamics of coalition politics,” he noted.
Formed in June 2024, the GNU brought together an ideologically diverse group of 10 political parties, including the ANC, DA, IFP, PA, FF Plus and GOOD.
However, as Swartz pointed out, “that sentiment has not been sustained.”
“Given the line-up, perhaps our expectations were too high...Certainly, many overseas commentators regarded this as a coalition destined to collapse. What was simmering under the surface, however, was a fervent hope that the GNU partners would find a way to support business and create a more investor-friendly economy.”
At its outset, the market responded positively: the JSE Capped Swix index ticked higher, nominal bond yields fell, the rand strengthened and foreign investment flows picked up. But despite pockets of progress, “investment inflows and GDP continue to disappoint with growth of 1% expected for 2025, as per the SA Reserve Bank’s latest forecast.”
Still, dismissing the GNU as ineffective would be premature. Swartz argued that behind the scenes, the coalition had made headway in several structural reform areas.
“Even well-established democracies like Finland, Italy and Germany — all of whom have greater coalition experience — stumble at times,” he said, adding that all 10 parties had thrown their support behind Operation Vulindlela, which was driving changes across critical sectors including electricity, logistics, digital infrastructure and water.
But for investors, one ongoing challenge is the lack of consistency in policymaking. This was tested earlier this year during the national budget process, when the finance minister’s proposed VAT increase was blocked by coalition partners, Swartz said.
The SA Chamber of Commerce and Industry’s (Sacci’s) bimonthly business confidence index (BCI) and the North West University Business School’s policy uncertainty index (PUI) support Swartz’s statements.
The BCI had climbed steadily from 107.8 in May 2024 — the month of SA’s national election — to a peak of 125.8 in February 2025. Since then, however, the index has edged lower amid global trade tension, weak export performance and protracted uncertainty over fiscal policy, Sacci reported in May.
In March, SA’s policy uncertainty surged to an unprecedented level, setting a new record that signaled intensified risk for economic recovery, investor confidence and long-term growth, according to the PUI.
At the time, the PUI report stated: “Empirically, it shows that when economic policy uncertainty is strongly present in the environment, it indeed lowers investment, employment and output. High levels of such policy uncertainty inhibit meaningful investment and consumption.”
The public fallout between February and May rattled the political establishment, and April saw a brief period where markets began pricing in a potential coalition collapse.
“In addition, many still find the somewhat harsh and condescending tone of the second-largest party in the GNU, the DA, hard to stomach,” Swartz said.
“This approach may work well on the election campaign trail, but it doesn’t sit well in a partnership,” Swartz said.
Yet from an investment perspective, Swartz believes the multi-round budget process paradoxically signalled something more encouraging: institutional resilience.
“The recent announcement of budget process reforms by National Treasury, and a call for better co-ordination, wider consultation and increased focus on fiscal efficiencies, should be welcomed.”
Looking ahead to the 2026 municipal elections, Swartz says the longer the GNU endures and compromise prevails over public standoffs, the harder it becomes for individual parties to distinguish themselves — making clear coalition agreements and formal dispute mechanisms increasingly important.
For now, the investor lens remains focused on reform implementation. Swartz sees the work of Operation Vulindlela as a crucial lever to restore economic momentum.
“These reforms should unlock better investment opportunities and private sector participation in the economy,” he said.
“Only steady, positive progress that yields tangible results will help to restore confidence, encourage local investment and coalesce society around a common goal of driving jobs and increasing GDP growth.”
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