Ramaphosa holds talks with Democratic Alliance after its threat to quit coalition

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South African President Cyril Ramaphosa and Democratic Alliance leader John Steenhuisen have begun emergency talks to break a deadlock after the pro-business party threatened to withdraw from the coalition government.

A tense dispute over the allocation of cabinet posts has damaged investor sentiment, which had been buoyant after the government of national unity was agreed two weeks ago.

The rand, which had risen sharply to R17.87 to the dollar, slipped to R18.46 on Thursday, while the Johannesburg Stock Exchange fell 0.6 per cent at one point, before closing 0.1 per cent down.

The impasse arose after Ramaphosa reneged on an agreement to give the DA the powerful trade and industry ministry, part of a deal that would have allocated the DA six cabinet positions out of 30. Although that was fewer than the 12 it had originally sought, the offer included important posts such as deputy finance minister.

But Ramaphosa’s willingness to let the DA run the trade and industry ministry angered the Cosatu trade union federation, which is aligned to the president’s African National Congress. Ramaphosa then withdrew the offer and suggested instead the far less important post of tourism minister.

“The ANC did not keep its word,” said one DA insider close to the talks. “The president ought to revert to the offer he made on Tuesday, or we’re not going to be part of this, and he can form a government without us.”

After last month’s watershed election when the ANC lost its majority for the first time since the end of apartheid, Ramaphosa’s re-election as president by parliament was only made possible thanks to the DA’s support.

The ANC won 159 seats in the 400-seat chamber ahead of the second-placed DA, which won 87. Under a so-called “statement of intent” to form a national unity government, the DA expected to be given a proportional share of cabinet seats.

ANC secretary-general Fikile Mblalula had called the DA’s initial demand for 12 seats, including the deputy presidency, “outlandish and outrageous”.

One senior business leader, speaking on condition of anonymity, said the arguments between the ANC and DA even before the cabinet had been formed showed how “tough” it would be to maintain a stable coalition.

There was an old guard of the ANC, he said, including Ramaphosa, who were trying “to hold the vision” of a non-racial, centrist South Africa fostered by former president Nelson Mandela. But “fewer and fewer people believe that story of post-apartheid reconciliation”, the executive added.

He said many former ANC members, particularly those who had defected to radical breakaway parties — the Economic Freedom Fighters and uMkhonto weSizwe of former president Jacob Zuma — had little sympathy for the pro-market DA. It did not help matters that the DA was acting as “kingmaker” despite its vote share of 22 per cent hardly improving from the previous election, he added.

The deadlock has fuelled concerns that, even if the row over cabinet positions can be resolved, mechanisms to settle disputes within the coalition have still not been established, increasing the risk of policy gridlock.

Azar Jammine, founder of South African consultancy Econometrix, said it would be disastrous for the economy if the DA were to withdraw from the unity government. The rand would “tumble below R19, which would increase inflationary pressures and delay any pro-growth interest rate cuts”, he said.

“The markets have made it clear that the more the DA can participate in the new government, the greater the chance of investor-friendly policies which will create jobs and higher economic growth”.