South Africa Edges Closer to New Government Before Key Vote

(Bloomberg) -- South Africa’s biggest political rivals are close to clinching a deal to form a new government two weeks after a shock election result stripped the African National Congress of its parliamentary majority for the first time in three decades.

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The ANC and the Democratic Alliance have resolved key obstacles to an accord that will allow Cyril Ramaphosa to be reelected as president by lawmakers, according to people familiar with ongoing talks between the two parties who asked not to be identified as the discussions are private. Markets are likely to react positively to a tie-up involving the business-friendly DA, which would bolster Ramaphosa’s efforts to rein in state debt and tackle power cuts and logistics snarl-ups that have hobbled the economy.

Talks are likely to continue throughout Thursday, with the ANC’s leadership expected to hold a briefing after a meeting of its national executive, which is scheduled to end at 7 p.m. in Cape Town. The new parliament will vote for president a few hours after its first session begins at 10 a.m. on Friday.

The discussions are progressing even after the ANC’s negotiating team postponed a meeting with the DA on Wednesday, spooking some members of the main opposition party. The officials had to attend a meeting of the ANC’s top seven leaders, and shouldn’t be read as an indication that they would renege on any agreement, the people said. One issue that still needs to be addressed is the DA’s insistence that any deal be put in writing, they added.

The rand erased a loss to trade little changed at 18.3903 per dollar by 11:44 a.m. in Johannesburg, bringing its gain this week to 2.8%. Government bonds gained, with the yield on benchmark 2035 securities falling four basis points to 11.74%, the lowest on a closing basis in more than three months.

The ANC, which has held power since apartheid ended in 1994, invited all of the country’s main parties to join a broad alliance to form the next administration in a so-called “government of national unity.”

In addition to the DA, which espouses free-market principles, the business-friendly Inkatha Freedom Party has signaled it will join the government, as has the Patriotic Alliance, the sixth-largest party. Former President Jacob Zuma’s uMkhonto weSizwe Party and the leftist Economic Freedom Fighters have so far declined to join the next administration.

The DA and the ANC’s national executive structures will hold their final meetings on Thursday before Friday’s vote, where a speaker and deputy speaker of parliament will be elected before the vote for the president.

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If Ramaphosa is unopposed, he’ll be declared president. The EFF has threatened to field its own candidate, which would trigger a vote for the position by secret ballot, though Ramaphosa is still likely to be reelected because the ANC and DA jointly have a majority in the legislature, the people said.

How positions in the cabinet and parliament will be shared by the coalition partners is only expected to be addressed in detail after Friday’s vote. The DA, which came in second in the election, has proposed that positions be handed out in proportion to the parties electoral support.

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--With assistance from Robert Brand and Neil Munshi.

(Updates with market reaction in fifth paragraph.)

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