SA markets are trying, unsuccessfully, to digest two big shocks. Locally we have the threatened collapse of the government of national unity (GNU), which is threatening to fracture.
This is nominally because the ANC and the DA failed to agree and pass a budget, but I theorise that it is because the GNU is struggling to function under the weight of its inconsistencies.
The GNU was always an unwieldy construct. The two anchor parties have different histories and are made up of coalitions with sometimes disparate views on SA and what ails it.
The ANC is mostly black, the DA mostly white. Both parties are centrist, but the ANC leans left and some of its factions are far left, while the DA leans right, with some of its factions far to the right. That these parties are uncomfortable coalition partners is therefore no surprise.
In its nine months of existence the GNU partners have fought bitter battles over health policy, education policy and most recently land reform and the Expropriation Act.
Local assets have moved to reflect this increased political risk. About a third of the 6% depreciation of the rand relative to the dollar so far in April has been due to the GNU’s difficulties. The balance is due to global developments, and by that I mean US tariffs.
US President Donald Trump has decided to fundamentally change a global geopolitical and economic order that he believes benefits others at the expense of the US. Globalisation, which has greatly benefited emerging and developed economies, has led to material growth in inequality in the US. Gains have disproportionately accrued to the rich, and the economy is optimised for the educated and those the Make America Great Again (Maga) world refers to as “globalists”.
Trump’s answer to how to move the US past its tensions is to pull the country back from the rest of the world, in all spheres. Policies enacted so far will lead to a painful economic adjustment for the US and the rest of the world.
Even if the US withdraws some of the tariffs announced last week — estimated to be the highest since the early 1900s — the global economy has been dealt a serious blow. Every forecaster I follow now thinks the US economy will be smaller than would have otherwise been the case, and that globally demand will suffer this year and next.
The fallout in global markets has been spectacular. Markets like growth. Trump and company promise the opposite. Markets like stability. The Republican party’s assault on the settled consensus on how the global economy is organised, and how the largest economy in the world is governed, is delivering the opposite.
Locally the ANC’s historic electoral loss in 2024 opened a new front on SA politics and introduced new uncertainties. The demise of the GNU would take us back to the post-election period, and local assets have moved to reflect this risk. Local markets have been roiled by this.
The GNU news flow is likely to die down in the next few weeks, but even if the ANC and the DA stay together the recent fracas exposed the coalition’s fragility and warrants a permanent reset to the risk premium. However, the global story could still worsen.
The true cost to the global economy of US realignment is not yet clear. It took about two quarters for global trade to decline after the inception of the last US-China trade war in 2018. This time trade will suffer more and sooner.
The rest of 2025 will be grim from a global and local growth perspective. Standard Bank’s economics team has slashed its 2025 domestic growth forecast to 1.1% from 1.8%. The rand, which tends to be responsive to global economic conditions, is likely to have a challenging few months. Bonds and equities will not fare much better.
Assets will continue to suffer until the Reserve Bank starts easing, which we expected will not be too far off as the bank responds to lower growth.
• Lijane is global markets strategist at Standard Bank CIB.
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