Political Risk and Market Stability in South Africa: Navigating Investor Sentiment Amid Policy Uncertainty

The interplay between political risk and investor sentiment in South Africa has never been more complex. President Cyril Ramaphosa's recent controversial praise of the Democratic Alliance (DA) has reignited debates about governance, coalition stability, and the trajectory of economic reform. While such remarks have sparked internal ANC backlash and raised questions about policy continuity, they also underscore a broader tension between institutional credibility and populist uncertainty. For investors, the challenge lies in balancing these political dynamics with the country's enduring economic fundamentals and reform momentum.

The Immediate Fallout: Praise, Backlash, and Political Risk

Ramaphosa's acknowledgment that DA-governed municipalities outperform ANC-led ones during an ANC roll call on September 15, 2025, was met with swift criticism from within his own party. ANC officials accused him of undermining party authority and signaling an admission of failure Ramaphosa Tries to Defuse Backlash After Praising Rival Party^[1]. This incident, coupled with the high-profile Trump meeting where the U.S. president accused South Africa of “white genocide,” exposed the fragility of Ramaphosa's leadership amid polarized domestic and international narratives South Africa in 2025: 8 key factors that will shape the future and test the government^[4].

Political risk in South Africa is now described as “off the charts,” according to a report by Moneyweb, as the Government of National Unity (GNU) grapples with ideological divides and corruption allegations Ramaphosa key to dealing with ‘off-the-charts’ SA risk^[2]. The ANC's loss of parliamentary majority in 2024 has created a coalition government rife with competing priorities, from land expropriation to infrastructure spending. Such instability raises concerns about the durability of reforms, particularly in energy and public service delivery, which are critical to restoring investor confidence Ramaphosa key to dealing with ‘off-the-charts’ SA risk^[2].

Market Reactions: Optimism Amid Uncertainty

Despite these challenges, South African markets have shown resilience. The formation of the GNU in late September 2025, which included pro-business parties in key portfolios, triggered a 3.5% surge in the FTSE/JSE Africa All Share index. Investors interpreted the move as a signal of accelerated reforms and policy continuity, with the rand strengthening in response Ramaphosa Tries to Defuse Backlash After Praising Rival Party^[1]. This optimism is further supported by structural reforms in energy and infrastructure, which have drawn cautious optimism from analysts South Africa Sees Breakthrough as Ramaphosa Reforms Win S&P …^[5].

However, this optimism is tempered by short-term volatility. A Reuters report notes that the initial “sugar rush” of political optimism has given way to a more measured assessment, as investors weigh the GNU's ability to address systemic issues like crime and unemployment South Africa in 2025: 8 key factors that will shape the future and test the government^[4]. The Democratic Alliance's withdrawal from the “National Dialogue” initiative following Ramaphosa's dismissal of a DA-aligned minister has further complicated coalition dynamics, raising questions about the government's capacity to deliver on its agenda Ramaphosa Tries to Defuse Backlash After Praising Rival Party^[1].

Investor Sentiment: A Delicate Balance

For foreign investors, South Africa remains a paradox. On one hand, the country's strategic location, natural resources, and institutional depth offer long-term potential. On the other, political risk and public trust in governance remain significant hurdles. According to Bloomberg, political uncertainty has not deterred inflows into South Africa's domestic bond markets, with analysts attributing this to Ramaphosa's leadership in maintaining reform momentum amid global economic headwinds Politics home and after haven’t deterred investors …^[3].

Yet, the ANC's internal factionalism and corruption scandals continue to erode confidence. A Conversation analysis highlights that public dissatisfaction with service delivery and security remains a critical test for the GNU, with low trust in institutions posing a long-term risk to economic stability South Africa in 2025: 8 key factors that will shape the future and test the government^[4]. Investors must also contend with the possibility of policy reversals or populist shifts, particularly as the ANC competes for positions ahead of its 2027 conference Ramaphosa key to dealing with ‘off-the-charts’ SA risk^[2].

Looking Ahead: Strategic Considerations for Investors

The path forward for South Africa hinges on Ramaphosa's ability to navigate these dual pressures. While his measured response to Trump's accusations was praised for its composure, critics argue that stronger leadership is needed to address corruption and factionalism within the ANC South Africa’s president is praised for staying calm during Trump’s Oval Office ambush^[6]. For investors, the key will be to monitor policy execution, particularly in energy and infrastructure, which are pivotal to unlocking growth.

Conclusion

South Africa's investment landscape is a tapestry of risk and opportunity. Ramaphosa's controversial praise of the DA and the subsequent political turbulence have underscored the fragility of coalition governance. Yet, the market's resilience and reform-oriented policies suggest that South Africa remains a viable destination for capital—provided that political stability and institutional credibility are preserved. As the GNU's tenure unfolds, investors must remain vigilant, balancing short-term volatility with the potential for long-term structural gains.