Markets took the recent Appropriations Bill fandango relatively well overall. The reasons for this were varied: in part they are distracted by an over-egged and one-sided view of how the eventual inflation target change will pan out (weirdly, playing down any particular role for the Treasury).

Still, the sense of lower inflation in the medium term — and so lower nominal yields across the curve — is having a positive impact, even if we end up getting there by a rather long and politically convoluted route. Ultimately, credibility is key — for the Reserve Bank and the National Treasury not only to maintain the existing credible macroeconomic policymaking (rising primary surpluses and well targeted inflation) but to strengthen it in the market’s eyes.

Ultimately, a lower and flatter yield curve comes from credibility as inflation risks are removed, which reflects lower expected inflation and less volatile inflation. Markets are fascinated because in their eyes two credible institutions are doing battle over important policy change.

Another issue is that markets are increasingly adopting an attitude of “DAACO” (DA always chickens out — a local play on the US acronym TACO)  with regard to leaving the government of national unity (GNU). That has never been fully tested though, so it’s a bit of an oversimplification. The DA did vote against the budget 2.0 fiscal framework report in committee and in parliament, but a settlement out of court meant there was no real test of dealing with the actual main budget legislation.

The situation was similar concerning the Basic Education Laws Amendment Act and the expropriation legislation. Both are now in the long grass while National Health Insurance is yet to come to a head. Threats of votes of no confidence have lacked credibility based on simple arithmetic and a reading of the rules of parliament.

The DA has been clear in its communications that it will not be leaving the GNU itself but will have to be kicked out. Instead, it is employing a strategy of “opposition within government”. Markets have been relaxed on the risks from that side and more focused on the ANC side of the equation.

However, with no national executive committee meeting having taken place, the threat by the ANC is also untested. The question of the credibility of the ties that bind the GNU remains up in the air. We have a “coalition” with no relationship between its leaders, no credible agreement between the parties and no credible co-decision-making or powersharing. Cabinet’s credibility as a collective decision-making entity is thus barely any better than before.

The most interesting credibility test in the past months was the president’s inability to act swiftly against (now former) higher education minister Nobuhle Nkabane. The SA way of doing these things is profoundly odd. In any other country the weight of a loss of trust and credibility on an individual would mean a tap on the shoulder and a swift resignation. The same could be said of police minister Senzo Mchunu — he should have resigned, despite protesting his innocence.

Credibility and trust must surely be a locus around which the prerogative of the president works. When it has ebbed away action should follow without delay. “But you don’t understand — here we have to ensure due and fair process is followed,” is the response. That attitude ignores that politics and the relationship between elected and electorate rests on credibility and trust.

That the ANC continues a long-term slide in the polls speaks to the party ignoring that reality. That decisions to act take so long (two years in the case of the suspension of South Gauteng National Prosecuting director Andrew Chauke) speaks to the lack of priority accorded to credibility over other factors.

Spin is ultimately flimsy communications that perhaps comes with a veneer of credibility but quickly disintegrates on closer inspection. We have a big test of spin involving the department of trade, industry & competition on trade negotiations with the US as the tariff deadline looms — supposedly constant and successful diplomacy is being waged. (The media hasn’t been particularly credible in its coverage of government comments on this without context or input from the other side).

One of the central issues I have returned to in the past few years is that there’s nothing to drive growth in SA while reforms are being implemented, because people doubt their credibility. The perplexing thing is that Operation Vulindlela is seen as a rare bright spot of credibility and trust in a complex system. Yet S&P Global Ratings’ recent downgrade of Transnet (which has necessitated the implementation of an almost blanket guarantee) shows that credible operators and credible reforms can still come up against deeper historic hangovers (of debt) and timing and speed problems.

This is all built on a GNU that is not a credible coalition in any normal or real sense, but is instead glued together by parties’ self-interest. The question is whether that is sufficient for it to survive a full term.

Recent market behaviours perhaps show how credibility can cut through in strange ways — its power to drive risk premiums and a reminder of its value when it is missing. As much as we get lost in the specific weeds of change, SA needs more credible institutions taking more credible action with more credible communication.

That means credible ministers, public servants, regulators of network industries, expectation management, communication about key risks and events, and credible politics.

High levels of trust and credibility is the secret sauce to produce growth and sustainably lower yields.

• Peter Attard Montalto leads on political economy, markets and the just energy transition at Krutham, a SA research-led consulting company.

This article first appeared in Business Day.

Image Credit: President Cyril Ramaphosa by GovernmentZA licensed under CC BY-ND 2.0.