As the GNU turns one, where’s the growth?

2 June 2025 - What’s the verdict on the GNU as it celebrates its first birthday? Will the GNU last? What does the Auditor-General say about South Africa’s municipalities? What risks are there to South Africa’s sea and air transport? Will the Trump tariffs stay or go?

As the GNU turns one, where’s the growth?

Last Thursday marked one year since South Africans voted in the 2024 national and provincial elections that culminated in the formation of the Government of National Unity (GNU), a coalition of ten broadly constitutionalist parties anchored by the African National Congress (ANC) and Democratic Alliance (DA). The outcome reflected a moderate, conservative South African voter base, the priorities of which we see evidenced regularly in CRA polling surveys.

However, the GNU has not shifted the needle on growth or unemployment. Joblessness was recorded at 32.9% in the first quarter of 2025, the same as it was a year prior. Economists have downgraded their growth forecasts for 2025 from 1.8% initially to around 1% now. The rate in 2024 was 0.6%, while the average for the period from 2012 to 2023 was 0.8%.

On policy and legislation, the ANC has continued as if it still had a majority. President Cyril Ramaphosa signed the Expropriation Act into law early in 2025, and the government is proceeding with aggressive employment equity social engineering and enforcement. There has been no reversal of existing policies that have undermined investor confidence and economic growth. South Africa’s rate of fixed investment, a true measure of confidence in the economy, remains stuck at 15% of GDP, versus a global average of 26%.

Speaking in Parliament last week Mr Ramaphosa misdiagnosed the causes of South Africa’s anaemic growth, blaming it on racism and capital ownership concentration while vehemently defending race-based laws and the Expropriation Act. This will not help to boost the investment rate or economic growth.

The GNU will therefore fail to reach the 2025 growth target of 3% set by Mr Ramaphosa earlier in the year. Unless it changes the policies holding back growth, it has little prospect of achieving the target over the remaining four years of its term.

GNU survival

Our call last year was that the current GNU would last at least until after the next local government elections (to take place by early 2027 at the latest). Our assessment remains the same. The political incentives for GNU parties remain weighted towards continuing with the coalition. The national budget impasse in the first half of the year gave the ANC reason to explore coalition alternatives, but it found none of them preferable to the current constellation.

To date the junior GNU partners have effectively been relegated to the role of bystanders, with the notable exception of the opposition to the tax increase that came from the DA and the Freedom Front Plus. But at this stage it is not clear that the power balance in the GNU has been recalibrated towards giving the junior partners greater say because of that disagreement.

As matters progress towards the 2027 ANC elective conference, the biggest risk to the GNU’s continued existence will come from within the ANC itself. Those in the party who feel it “sold out” by forming a coalition with the DA are coalescing around the current deputy president, Paul Mashatile, with an opposing camp – which accepts the GNU as the party’s best chance at real renewal – forming around the ANC secretary general, Fikile Mbalula. Tensions within the GNU will rise as the local government elections and the ANC elective conference approach.

The best defence against the breakup of the GNU would be forward momentum on growth and jobs. This would imbue the GNU members with a sense of urgency and purpose, make them more attractive to voters who want to see improvements in their material circumstances, and give the parties a point of clear distinction versus rivals such as Julius Malema’s Economic Freedom Fighters and Jacob Zuma’s uMkhonto weSizwe Party.

SA’s faltering municipalities

South Africa’s eight metros account for 57% of the total national expenditure on local government and provide services to 46% of the country’s households. They are vital for economic growth and the country’s investment case. The performance of the three Gauteng metros – Johannesburg, Tshwane and Ekurhuleni – is especially important because this province alone contributes a third of South Africa’s entire GDP.

However, the latest report by the office of the Auditor-General found that the overall audit outcomes of metros had “continued to regress since 2020-21”. For the third consecutive year Cape Town received a clean audit. But Johannesburg, eThekwini and Ekurhuleni received unqualified audits with findings, and Buffalo City, Tshwane, Mangaung and Nelson Mandela Bay all received qualified audit opinions with findings. In the case of Mangaung and the capital city, Tshwane, the financial situation is so dire that there is doubt whether they can continue as going concerns.

For the 2023/24 financial year, just 41 of South Africa’s 257 municipalities received a clean audit; in the previous year the figure was 34. The AG concluded in its report “that little has changed and that local government continues to be in a dire state”. The portfolio committee chair, Dr Zweli Mkhize, said: “We cannot just throw our arms in the air and hope that somebody will fix the problem. We must do something ourselves.”

In the CRA March 2025 Macro Review, Brakes on growth, we recommended that turning around South Africa’s dysfunctional municipalities required “no-compromise financial management, the appointment of employees based on merit rather than party affiliation, demanding accountability for performance and the prudent use of public resources.” Clearly most municipalities are not doing these things and therefore continue to pose a business risk and further deterrent to investment.

SA’s maritime and airspace risks

South Africa’s defence force is unable to meet United Nations search and rescue obligations which the country is committed to under international treaties. Failing to meet treaty provisions means South Africa could be held liable for damages or loss of life if an adverse judgment was made by the International Court of Justice, which aggrieved parties could approach if they failed to obtain a remedy in South Africa.

Currently South Africa has no maritime reconnaissance or surveillance aircraft. The Dakota aircraft which are meant to act as stand-ins despite their limited range and basic equipment have not flown since 2022, according to defence expert Dean Wingrin. The Hercules aircraft which could be used instead of the Dakotas have been in service for 63 years and also have limited range. At most one of the aircraft is operational at any time and often none are.

At the same time, the department of transport has identified the risk that South African airplanes could be barred from entering the US and European Union airspace, while aircraft from those regions could also be banned from flying into the South African airspace. This is because South Africa has failed to establish an independent body to investigate aviation accidents and incidents. Currently the Civil Aviation Authority is responsible for this task, but it is not considered sufficiently independent of government. The department of transport has set 2027 as a target to set up an independent entity, but funds have not yet been made available for this purpose.

Tariff tango continues

Regardless of see-sawing court decisions, there is certainty regarding the overall thrust of the Trump administration’s tariff plans: to continue using tariffs as a tool for dealing with the ever-growing domestic debt of the United States (US), and to recalibrate the US trade relationships with allies and adversaries.

On Wednesday the US Court of International Trade, a little-known federal court, blocked most of US President Donald Trump’s tariffs. On Thursday, the US Court of Appeals for the Federal Circuit offered the administration a temporary reprieve in the form of a pause on the Wednesday judgment, saying the duties could remain in place while it considered the case. The Trump administration said it would appeal all the way up to and including the US Supreme Court to appeal and overturn adverse tariff judgments.

South African businesses should not focus exclusively on 9 July, the date on which US reciprocal tariffs, including the 31% tariff on imports from South Africa, could be reimposed. Focusing on a single day would risk losing sight of the larger readjustments to global trade as well as new opportunities that might arise therefrom. The Trump administration will continue using higher tariffs, and the threat thereof, in its foreign policy and geopolitical repositioning, and South African businesses should prepare for it. Last week Peter Navarro, counsellor to the US president, said: “There’s no Plan B. It’s Plan A. Plan A encompasses all strategic options.”