In Joburg and Tshwane, a party with barely 1% of the vote can help decide who wears the mayoral chain and which budget wins approval. Its influence depends less on its size than on whether the larger parties can govern without it. For residents and businesses, the resulting bargains shape spending priorities, infrastructure investment and the reliability of basic services.
The bargaining is familiar in the metros, where the ANC’s losses in 2016 made coalition negotiations central to choosing mayors. Since 2024, it has also shaped national government. The coalition negotiations in the wake of the November 4 polls will test whether parties have become better at sharing power; legislation intended to stabilise councils is still before parliament.
Other democracies offer a longer record of coalition bargaining. Discontent over living costs, housing shortages and immigration has weakened established parties in several countries. Where no party commands a majority, smaller partners can negotiate commitments that reach well beyond their own supporters.
The Netherlands shows how smaller coalition partners can turn their voters’ demands into government commitments. The Farmer-Citizen Movement and the New Social Contract joined the coalition formed after the 2023 election, whose agreement emphasised tighter migration controls and concessions to farmers. That government collapsed in June 2025 when Geert Wilders withdrew his party, the PVV, the largest in the coalition. Smaller partners are not invariably the source of instability.
In Austria, a smaller party helped turn a precarious majority into a more workable one. The conservatives and Social Democrats held a narrow parliamentary majority after the 2024 election and brought the liberal NEOS party into government in March 2025 to strengthen it. NEOS gained a say in fiscal consolidation and pension reform, while its larger partners secured a more comfortable majority.
In Israel, ultra-Orthodox parties have used their pivotal seats to negotiate funding and military service arrangements for their constituencies. The 3.25% electoral threshold has not eliminated the bargaining power of smaller partners.
In France, securing parliamentary support has come at a cost to fiscal reform. The government survived no-confidence votes in October 2025 after offering to suspend pension reform. While the concession bought political support, it delayed efforts to curb long-term spending, exposing the tension between keeping a government in office and repairing its finances.
Representation or gridlock?
In South Africa, similar bargaining shapes municipal spending and national budget choices, as the withdrawal of the proposed VAT increase in 2025 showed. At national level, however, coalition bargaining has left the broad fiscal and reform agenda intact. The National Treasury has maintained fiscal discipline, pursuing debt stabilisation despite spending demands. Reforms in energy, logistics, water and digital infrastructure have also continued under the GNU. These form part of Operation Vulindlela, the joint presidency-Treasury initiative established before the coalition took office.
South Africa’s municipal experience shows why national policy commitments must be matched by workable governing arrangements. For the economy, three consequences of coalition bargaining deserve particular attention: budget choices, the ability to deliver and accountability.
First, budget choices. Coalition bargaining influences spending priorities and who bears the cost of fiscal adjustment. The VAT dispute showed that agreement on debt stabilisation does not settle which taxes and spending measures should achieve it. Negotiation can improve parliamentary scrutiny and give voice to overlooked constituencies, but it can also produce last-minute fiscal concessions paid for through higher taxes, cuts elsewhere or additional borrowing.
Second, the government’s ability to deliver. Electricity transmission reform, private freight rail access and better municipal water management require sustained backing and administrative continuity. Operation Vulindlela co-ordinates reforms, but ministers, departments and other public bodies remain responsible for implementation. Coalition partners can broaden support for these changes. Disputes over budgets, appointments and leadership can also interrupt delivery, particularly where technical capacity is weak. Agreement at national level offers limited reassurance to a business still waiting for a reliable connection or planning approval.
Third, accountability. Smaller parties can challenge dominant incumbents, expose poor decisions and represent neglected communities. Sharing power can also make responsibility harder to trace. One party holds the mayoralty, another controls a portfolio and several approve the budget, leaving each room to blame the others when services fail. Coalition agreements help only if voters can identify who promised what and assess whether it was delivered.
For investors, delivery matters as much as coalition survival. Credible agreements can support investment, but shifting priorities and leadership can delay expansion, raise operating costs and shorten investment horizons.
While South Africa’s central economic institutions are weathering the storm for now, the tail will increasingly try to wag the dog. As political fragmentation gives minor factions disproportionate sway over the governing agenda, South Africa’s economic prospects will depend on whether that wider representation produces better decisions or simply equips more people with the power to block them.
Packirisamy is group economist at Momentum Group
