South Africa Government Deal Still Elusive as Key Vote Looms

(Bloomberg) -- Talks between South African political parties on forming a new government extended late into the night on Thursday, hours before President Cyril Ramaphosa is scheduled to seek reelection as head of state.

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Alongside the centrist Democratic Alliance, the second-largest party after May 29 elections, the Inkatha Freedom Party and the smaller Patriot Alliance have opted to join a proposed government of national unity, ANC Secretary-General Fikile Mbalula said on Thursday. No further details can be provided about the ongoing discussions — including meetings Ramaphosa is having with other party leaders, he said.

The ANC has been forced to seek an alliance with rivals after losing its parliamentary majority last month for the first time since 1994, securing only 40.2% of the vote. While the 112-year-old organization is wooing all opposition parties, investors see a partnership with the business-friendly DA and the IFP as the best outcome for the moribund economy.

“The general sentiment is that the national unity government has effectively been formed,” said Simon Harvey, London-based head of forex analysis at Monex Europe Ltd. “Anything but this outcome will have serious repercussions in markets given foreign investors have largely re-engaged with South African assets since the mood music changed.”

The focus on Friday will be on the election by lawmakers of the president, as well as the speaker and deputy speaker of parliament.

“We have met with all 17 parties” in parliament, Mbalula told reporters in Cape Town. “We hope to work with most of them” on the key vote, he said.

The rand was little changed at 18.4563 per dollar by 8:09 a.m. in Johannesburg. It’s gained 2.3% this week, making it the best-performer among currencies tracked by Bloomberg, on optimism of a deal with centrist parties.

Ramaphosa on Thursday held talks with opposition officials including DA leader John Steenhuisen and may meet again with Julius Malema, the head of the leftist Economic Freedom Fighters, Mbalula said. Exploratory talks have been held with the uMkhonto weSizwe Party led by former President Jacob Zuma, and those talks will continue, he said.

Among sticking points in discussions about forming the next government is over who gets the position of speaker of parliament, according to people familiar with the matter. Both the DA and the EFF are angling for the powerful position as head of the assembly and have asked Ramaphosa to consider their members as candidates, the people said, asking not to be identified because the talks are private.

In return for the appointment of its candidate as speaker, the EFF offered to support Ramaphosa’s candidacy as president. The party reiterated its refusal to join a government that includes the DA.

For its part, the DA wants positions in cabinet and in the legislature proportional to its performance in the election, in which it garnered 21.8% of the vote. The DA’s federal executive is meeting on Thursday night and is unlikely to sign off on any agreement on a new government that’s not in writing and which includes the EFF.

Some of the demands being made by the DA are out of reach, Mbalula said, without providing details.

“If the DA gets some of these things that they want, then we as the ANC will be dead,” he said.

Still, the ANC remains committed to reaching an agreement on a broad alliance and there’s an acceptance among parties involved in the discussions that they “have to gravitate toward the center,” Mbalula said.

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--With assistance from Ntando Thukwana, Robert Brand, Arijit Ghosh and Mpho Hlakudi.

(Updates with analyst’s comment in fourth paragraph.)

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