Tide is turning against Ramaphosa and South Africa

The past 18 months for South Africa have been packed with good news, which has sent asset prices soaring and bond yields falling. 

The formation of the Government of National Unity (GNU), a shift to a lower inflation target, positive signals from rating agencies, and debt stabilisation have supported a re-rating of local assets. 

However, this march towards faster economic growth and better government finances is at risk of being interrupted amid an impeachment inquiry into President Cyril Ramaphosa. 

The Centre for Risk Analysis (CRA) believes that the Constitutional Court’s ruling that reopened the impeachment process will disrupt the prevailing investment thesis. 

It also thinks the local market has not yet caught up, with investors and asset managers believing the reform agenda is irreversible. 

However, this reform was premised on the GNU and Ramaphosa being able to deliver enough policy continuity to support sustained improvement in South Africa. 

This is no longer the case, with the impeachment process against Ramaphosa seemingly going ahead in a year of local government elections and impacting a coalition government, showing strain. 

“The transmission into asset prices is not hypothetical. Presidential bandwidth for fiscal consolidation and structural reform is about to be materially constrained,” the CRA said. 

“Coalition leverage is shifting, and with it the policy posture on issues investors care most about: BEE reform, property rights, merit-based appointments, and credibility of anti-corruption efforts.” 

This threatens to undo the rerating of local assets, as much investment is based on the assumption that the GNU’s reform trajectory remains intact. 

That assumption is now an open question, not a base case, the CRA said. It referred to this as Ramaphosa’s “Nkandla moment” in its latest briefing. 

This suggests it believes the Phala Phala impeachment inquiry could mark the beginning of the end for the Ramaphosa era in South Africa. 

With that comes a fundamentally different investment case, marked by uncertainty about the reform agenda and the political cover it may receive. 

Time is running out

This disruption is coming at a time when South Africa can least afford it, with cyclical economic factors also turning against the country. 

The tailwind provided by lower inflation and falling interest rates throughout 2025 is set to reverse as rising fuel prices push inflation higher. 

Lower inflation and falling interest rates translate into more disposable income for consumers, pushing spending higher along with economic growth. 

However, rising inflation and interest rates have the opposite effect, eroding disposable income and slowing consumer spending. 

Another tailwind that is not expected to last forever is the surge in precious metals prices, which has boosted the JSE and government finances. 

The war in Iran has stalled the rise in precious metals prices and, as with any commodity cycle, prices are expected to fall sometime in the future. 

This gives South Africa a limited window from which it can benefit from elevated precious metals prices and highlights the structural weaknesses in its economy. 

The CRA said that the rest of 2026 will show whether the government’s reform agenda has been executed sufficiently to make a meaningful difference in the economy. 

This reform agenda was intended to boost fixed investment in equipment, machinery, and infrastructure, which is a longer-term driver of economic growth. 

In fast-growing economies, such as many emerging markets, fixed investment as a share of GDP is between 25% and 30% of GDP. 

South Africa’s fixed investment levels have fallen to around 15% over the past decade, resulting in its economy growing at 1% per annum over the period. The average emerging market grew by 4.5% annually. 

The lack of spending on infrastructure is particularly noticeable, with the country suffering from load-shedding, logistics bottlenecks, and sporadic water shortages. 

Reforms in the electricity and logistics sectors, coupled with reduced regulatory red tape, are expected to boost private companies’ fixed investment in South Africa. 

These reforms have been slow and steady, with the CRA saying the government lacks the urgency the situation requires.