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In last week’s analysis, this newspaper published a long-form economic analysis of what would happen to the rand, interest rates, inflation, debt, the deficit, investment, and economic growth in the event that Paul Mashatile, the Economic Freedom Fighters (EFF), and the uMkhonto weSizwe Party (MKP) took over the government, consolidated their position after the 2029 election, and followed through on their policy pledges. Below it does the opposite. It has modelled what would happen to South Africa’s key economic indicators if the Government of National Unity (GNU) holds together, adopts a reform programme that recasts empowerment policy as the Democratic Alliance (DA) has proposed, refits defunct coal-fired power stations, and places port and rail infrastructure under private management, while redrafting expropriation law to make clear that investor assets cannot be seized for less than market value.

Again, the analysis is cast in terms of phases.

The first phase would involve a credibility rebound. The second would involve an investment-led expansion. The third would involve a broader stabilisation of state finances, employment, and living standards.

Start with the currency.

In phase one, the rand would likely strengthen as investors priced in a lower political risk premium and the survival of the GNU reform coalition. The rand would break to under R16.00 to the United States (US) dollar as confidence improved around property rights, logistics reform, and electricity supply.

The key trigger here would not be rhetoric but implementation. Amendments clarifying that expropriation cannot occur without compensation, the abandonment of rigid race-based ownership rules in favour of a broader empowerment framework, and private operational control of ports and freight rail would materially alter how investors price South Africa.

In the secondary phase, as fixed investment accelerated and export logistics improved, the rand would strengthen in its own right against the dollar. This would be a break from the GNU pattern to date where the rand has generally mirrored the opposite trends in the dollar (under the Mashatile scenarios the rand also broke from that pattern but weakened extensively against the dollar). Demand for rands would lift as foreign capital inflows rose, domestic firms expanded investment plans, wealthier households slowed offshore diversification, and exporters benefited from improved rail and port turnaround times. As a consequence, the rand could easily move towards a 12.50 to 13.50 band against the dollar by the early 2030s.

Note that in the worst-case scenario the currency was trading at between R30 and R50 to the dollar through the secondary phase.

In the tertiary phase, South Africa would begin to recover some of the institutional credibility lost over the previous decade, and the rand would hold those levels, with the currency again moving in mirror opposition to the US dollar.

Now consider the implications for investment.

This is the central transmission mechanism in the entire model.

Gross fixed capital formation currently sits near 14.0% of GDP, well below the National Development Plan target of 25.0% and far below the levels associated with high-growth emerging markets.

In phase one of a credible reform path, the number would tick back above the 15.0% level towards nearer 17.0% by 2029. Through the secondary phase, it would rise above 20.0% to settle into a 23.0% to 25.0% band through the early 2030s.

In the tertiary phase, it would hold near the upper end of those levels.

In the worst case, the numbers were broadly half of these.

Private fixed investment would drive most of the increase, especially in mining, logistics, energy, agriculture, construction, warehousing, and export manufacturing. Public infrastructure spending would initially complement the process through coal refitting programmes, freight rail upgrades, and port modernisation partnerships.

It becomes easy from the investment number to model the effect on economic growth.

Through phase one, the rate of economic growth would tick up from the current 1.0% to nearer a 2.0% to 2.5% band. The secondary phase would see the number break above 3.0% and threaten 4.0%. Into the tertiary phase the number would break through 4.0% to hold short of 5.0%, depending on whether the fixed investment number was nearer 22.0% to 23.0% or 25.0%.

Growth would then stabilise in that 4.0% to 5.0% band through the 2030s. Compare that to a deep depression forecast in the worst case.

Mining and agriculture would likely outperform because both sectors have been constrained less by global demand than by the collapse of Transnet, electricity shortages, and regulatory uncertainty. Manufacturing would recover more slowly, but lower logistics costs and improved power reliability would restore some competitiveness. Construction, after nearly a decade of contraction, would likely return to sustained expansion.

Now consider the implications for debt and the budget deficit.

In phase one the fiscal arithmetic improves primarily through faster nominal GDP growth.

As growth rises and tax revenue improves, the debt-to-GDP ratio could peak near 80.0% before gradually declining toward 70.0% through the secondary phase and to just under that, with the model pointing to roughly 68.0%, through the tertiary phase over the following decade.

The consolidated budget deficit could narrow from approximately 4.5% of GDP toward 3.2%, and later toward 2.5%, as debt service costs moderated and revenue collection strengthened.

That would materially improve the sovereign risk profile.

Ratings agencies would likely respond positively to visibly stabilising debt dynamics, falling borrowing costs, and improved institutional credibility.

Now consider the implications for the bond market and government debt.

As demand rose, yields on South African bonds would come off through phases one and two before holding steady in the tertiary phase. The effect would in turn help flatten the debt curve and the deficit at the same time as freeing up fiscal resources for welfare and social support services expansion.

On all the above, tax, revenue, debt numbers, and the ratings outlook, the worst-case scenario had departed from anything you might find in an economics textbook to post some really startling numbers of fiscal and credibility collapse.

Now move to unemployment.

This would remain the slowest-moving variable in the system, but by the mid-2030s South Africa would be on track to bring the rate down to the global average by 2050.

Phase one would see the official unemployment rate decline from the current 32.7% toward roughly 30.0% by 2028, before falling toward the mid-20.0% range through the early 2030s. In the tertiary phase, as growth held to the 4.0% and 5.0% band, the rate would reduce to around 10.0% by the later 2040s.

Labour absorption would come from the full cross-section of collective industries. Construction, mining, and agriculture would likely become the largest labour absorbers in the early years of recovery, followed later by retail, logistics, services, warehousing, and export-linked sectors. Entrepreneurial and workerpreneur employment would escalate particularly fast through the 2030s as demand for labour rose in line with the expanding economy.

Now consider inflation and interest rates.

The data here would be very unexciting. Through phase one inflation would remain within around half a percentage point of the upper end of the 2.0% to 4.0% target band and remain there through the secondary and tertiary phases.

Interest rates would come off sharply.

That would support household balance sheets, property markets, and business borrowing conditions. It would also reinforce the investment cycle itself, creating a more durable expansion.

In the worst case, the rates and inflation data were again beyond any textbook.

Sum it all up. Real per capita GDP, which has fallen year after year for over a decade, would lift by between 25.0% and 30.0% by the early 2030s and by around 80.0% by the late 2040s.

How realistic is any of this?

It is entirely realistic if the GNU survives, if reform implementation becomes real rather than rhetorical, and if the ANC accepts that South Africa cannot grow under conditions of collapsing infrastructure, weak property rights, and low investment.

The risks are political rather than economic, and there are two to consider. A weak DA unwilling to use the leverage it now possesses to force the African National Congress (ANC) into reforms is one such risk. A second is GNU rupture and a move by the ANC to ally with the EFF or the MKP, which would likely reverse much of the confidence gain. That the one risk may prompt the other makes the calculus very sensitive.

What should investors do?

The extreme perspectives cast in The Common Sense’s two sets of projections might at first appear to make strategy complicated. What should you do in such a varied situation? In practice, that does not arise, as in an environment of very high uncertainty strategy becomes simpler, as there is only one option. A complete diversification of asset classes and currencies, and beyond that building a significant number of hedges into your career options, who you do business with, your global options, and the options of your children.