South Africa's New Coalition Government Creates Opportunities and Risks for Canada

A new political era has dawned in South Africa, and its reverberations are being closely watched in Ottawa and on Bay Street. For the first time since the end of apartheid in 1994, the African National Congress (ANC) has lost its parliamentary majority, securing just over 40% of the vote in the May 29 election. This historic result forced the party of Nelson Mandela into a power-sharing agreement, leading to the formation of a Government of National Unity (GNU) with its long-time rival, the centrist, pro-business Democratic Alliance (DA), and several smaller parties.

This coalition marks a monumental shift in the political landscape of Africa's most industrialized economy. President Cyril Ramaphosa of the ANC has secured a second term, but he now governs with the DA's support, a party that draws its backing primarily from minority groups and the urban middle class and champions market-friendly policies. The coalition notably excludes the two most radical ANC offshoots: the far-left Economic Freedom Fighters (EFF) and the new uMkhonto we Sizwe (MK) party of former president Jacob Zuma, which came in a surprising third. This arrangement sets the stage for a potential clash of ideologies within government and a volatile opposition outside of it.

The Canadian Economic Stake

For Canada, the stakes in South Africa's stability are substantial. The bilateral economic relationship is significant, with two-way merchandise trade totalling $1.9 billion in 2023. More importantly, Canadian direct investment in South Africa was valued at $3.9 billion at the end of 2022, with a strong concentration in the mining and mineral processing sector, as well as financial services and transportation. Canadian pension funds are also major investors in the South African market.

The inclusion of the DA in government has been cautiously welcomed by the business community. The party has long advocated for policies aimed at stimulating economic growth, including deregulation, privatization of failing state-owned enterprises, and tackling the crippling electricity and logistics crises that have hampered industry. For Canadian mining companies operating in or exploring opportunities in South Africa—a country rich in platinum, gold, manganese, and coal—a government committed to stable property rights, predictable regulations, and efficient infrastructure is a significant potential upside. A more stable policy environment could de-risk long-term capital investments and improve operational efficiency.

Fragility and Diplomatic Realignment

However, the path forward is fraught with peril. The GNU is a coalition of necessity, not of natural alignment. The ANC and DA have profound ideological differences on key issues such as Black Economic Empowerment (BEE) affirmative action policies and land reform. Any attempt to significantly alter these cornerstone ANC policies could fracture the coalition, leading to political gridlock or a government collapse. The potential for social unrest, fanned by the populist EFF and MK parties now in opposition, remains a potent threat that could further destabilize the country and spook international investors.

Beyond the economy, the new government could trigger a realignment of South Africa's foreign policy. Under the ANC, Pretoria has pursued a non-aligned stance that has often tilted towards China and Russia, causing friction with Western nations. South Africa's abstention on UN votes condemning Russia's invasion of Ukraine and its case against Israel at the International Court of Justice have placed it at odds with partners like Canada. The DA, in contrast, holds a more traditionally pro-Western foreign policy outlook. Its influence within the coalition could temper the ANC's positions and steer South Africa towards closer alignment with Canada and other G7 nations on key geopolitical issues.

This complex political transition in a key African partner adds another layer of complexity for Canadian foreign policy, which is already stretched thin managing crises from the Americas to the Indo-Pacific. For instance, as Canada carefully calibrates its role in Haiti's security and political crisis, it must now engage with a fundamentally new political reality in Pretoria. Similarly, navigating the diplomatic fallout from Venezuela's contested election requires a different toolkit than building consensus within a fragile coalition government like South Africa's.

What Lies Ahead

The immediate focus for observers in Canada will be on the composition of President Ramaphosa's new cabinet and the policy priorities outlined in the GNU's first budget. The allocation of key ministries—particularly Finance, Trade and Industry, and Mineral Resources and Energy—will be a critical indicator of the DA's influence. For Canadian businesses, the new government's ability to deliver on promises of economic reform and maintain social stability will be the ultimate test. For Ottawa, the challenge will be to navigate the opportunities for closer partnership while remaining prepared for the risks of a volatile and uncertain political transition in a crucial global player.