NEDBANK has flagged an unstable coalition government that would undo the current framework on Public-Private Participation (PPP) post the May 29 election, as well as the possible election of Donald Trump as US president in November, as two major risk events to investor confidence.
This comes as surveys and analysts continue to forecast the ruling ANC’s loss of majority support at the polls, which would force the governing party to seek support from minority parties to form a government.
Nedbank Group senior economist Isaac Matshego yesterday said President Cyril Ramaphosa’s administration had done so much to restore investor confidence by shifting towards a partnership between the public and private sectors.
Among others, Matshego highlighted a strong investment in renewable energy by the private sector, new Transnet management, and the awarding of the Durban Pier 2 container terminal to a private company, as “policy shifters” that had moved the needle to unlock investment.
He said the government’s capacity to borrow more from the markets had been significantly decreased as a result of rising interest payment costs every year, and the government alone could not carry the cost of public infrastructure spend.
“So with this election, what I’m going to watch out for is whether the incoming government will be the one which will likely shift away from that policy stance. Because we face all these infrastructure development challenges, the backlogs, and government finances are tight,” Matshego said.
“So we need to mobilise private sector funds from the internal fund industry. We talked to these fund managers, and these guys are saying ‘we want to invest in infrastructure assets’.
“Number one, we need an appropriate, favourable legislative framework for private sector investments in public infrastructure. Number two is risk management. We need to take that Sanral model of roads and just replicate it in other sectors in electricity, in water, in the rail, and in the ports.”
Matshego said the election outcome was bringing a lot of uncertainty for investors, and there had been a slow implementation of structural reforms, while corruption and mismanagement continued to prevail.
Matshego was speaking at the Nedgroup’s Pre-election Treasurers’ Roundtable event in Johannesburg.
Independent political analyst JP Landman had painted a number of possible different May 29 election outcome scenarios, saying that a DA-ANC coalition government would be most preferable as an EFF-ANC coalition would hurt confidence.
“The ANC itself now is moving to what I would call a developmental state to development through the private sector. It's a little bit of a different mindset, but a very important shift that's taking place in our country,” Landman said.
Meanwhile, Matshego also shifted his gaze to international developments, saying that if Trump won the US election on November 3, “we could be in a different world again” as he was going to start another trade war.
He said that would drive further weakness in the rand and cause central banks to be hawkish and postpone their monetary policy easing cycles.
“[Trump] is talking about raising US tariffs by 10% across the board and imposing up to 60% on some Chinese goods. So, if that happens, it will be a major global risk event,” Matshego said.
“Trump could basically end a very strong growth pattern in the US right now. The US is benefiting from AI, higher labour productivity, and improving global demand right now. So if Trump disrupts all that, if we see a global risk event, emerging market currencies like the rand will come under pressure.
“If there is no major shock from offshore, we see rapid US interest rate cuts from September this year. That will weaken the US dollar and boost global sentiment as risk appetite will be higher. The rand could easily go back to $17-$17.50 by the first quarter of next year.“
BUSINESS REPORT