The DA challenges race-based laws

27 October 2025 – What makes the DA’s non-racial Economic Inclusion For All Bill significant? How does being removed from the FATF greylist help South Africa’s investment chances? What do falling bond yields tell us about the country’s economic prospects?

The DA challenges race-based laws

The Democratic Alliance (DA) is introducing a Private Member’s Bill to amend the Public Procurement Act of 2024 and repeal race-based preferential procurement provisions. It has titled its proposal the Public Procurement Amendment Bill, alternatively the Economic Inclusion For All Bill.

Research by the Institute of Race Relations (IRR) found that placing public procurement on a value-for-money basis would generate savings sufficient to fund a cut in the rate of Value Added Tax from 15% to 11.5%, with money to spare. The IRR’s opinion polling finds high public support for placing public procurement on a non-racial, value-for-money basis.

The DA references a 2020 European Union report stating that the complexity of BEE deters investment in South Africa. The 2025 National Trade Estimate Report by the US Trade Representative labels current public procurement provisions a non-tariff barrier that prioritises contracts for “historically disadvantaged individuals” and which limits foreign companies’ competitiveness unless partnered with local firms.

South Africa’s rate of Gross Fixed Capital Formation, which tracks fixed investment levels, has been persistently low for decades. It registered at 13.9% of GDP in 2024, about half the global average of 26.5%.

The DA aims to reform procurement by replacing race-based compliance checklists with scorecards that make use of the United Nation’s 17 Sustainable Development Goals (SDGs) and value-for-money principles to guide public procurement.

The DA’s proposal is unlikely to pass, given that the party holds only 87 of 400 National Assembly seats. However, the proposal is highly significant.

First, it shows that a significant political player is formulating practical policy reforms that would help address some of the hard limits on South Africa’s economic growth, such as race-based laws and regulations that facilitate cronyism and corruption. Such reforms have so far been lacking from the GNU’s efforts to unshackle the economy. By making this proposal, the DA is positioning itself for an ongoing and increasingly influential role in government.

Second, the DA’s proposal was not met with outrage and outright rejection, as would have been the case just a few years ago. The ANC did not call on the DA to withdraw its racist and insolent proposal and did not threaten it with immediate dismissal from the GNU.

Instead, President Ramaphosa responded mildly that proposals like this should be discussed in Parliament. News24 on Sunday quoted unnamed senior ANC officials as saying that within the party there was a willingness to discuss changes to the current BEE systems as it had not achieved what it was meant to achieve, with unemployment among black South Africans now at almost 36%. They added that the discussion would first have to take place within the ANC as there were factions strongly opposed to such reforms and to the presence of the DA in the GNU.

These are early signs of potentially significant shifts in South Africa’s politics and policy frameworks over the medium term.

South Africa exits the greylist

The Financial Action Task Force (FATF) removed South Africa from its greylist last Friday, a positive development that helps restore the country’s global financial standing and reduces its risk premium.

South Africa was placed on the list in February 2023 because of shortcomings in its anti-money laundering and counter-terrorism financing (AML/CFT) capabilities. This was exacerbated by institutional weaknesses from the state capture era.

Greylisting damaged South Africa’s reputation as an investment destination. Among other things, it contributed to deterring foreign direct investment (FDI), which dropped from R152 billion in 2022 to R64 billion in 2023 and R45 billion in 2024. For businesses, it heightened compliance costs, complicated international trade and financial transactions, and limited access to global markets, with banks facing increased scrutiny and higher funding expenses.

Compared to peers, South Africa's exit was relatively swift. While some nations like Mauritius and Iceland delisted in 1-2 years, the average duration is 3-4 years; South Africa’s 2 years and 8 months reflects strong commitment amid complex challenges. Credit for the quick work belongs to departments such as the National Treasury, the South African Revenue Service and the South African Reserve Bank, which regularly outshine other government departments.

Being removed from the greylist benefits South African businesses by lowering transaction and compliance costs, boosting investor confidence, easing cross-border payments, and attracting more FDI. It can also help reduce borrowing rates and stimulate economic growth. It signals a robust financial integrity framework, which supports trade and tourism.

However, the revelations emerging from the Madlanga commission could be the fly in the ointment. They point to far-reaching links between organised crime, South African law enforcement and high-ranking members of the African National Congress. These disclosures align with FATF’s prior concerns over weak enforcement and institutional integrity in AML/CFT, as policing is central to disrupting illicit financial flows.

What SA’s falling bond yields are telling us

South Africa’s bond market has rallied hard. The 10-year government bond yield has dropped to around 8.9% in late October 2025, its lowest level since late 2024 and more than 150 basis points below levels seen a year ago. Yields move inversely to prices, so this means investors are buying South African debt more aggressively.

Several factors are contributing to this development. First, the South African Reserve Bank (SARB) has reasserted monetary credibility. In July 2025 the SARB signalled it wants inflation closer to 3%, down from the effective 4.5% midpoint that guided policy for years. Investors read that as a promise of structurally lower inflation. Lower expected inflation means lower demanded yields.

Second, fiscal risk looks slightly less explosive than in 2023-24. National Treasury says gross loan debt will stabilise in the mid-70s percent of GDP rather than spiral upward, helped by measures such as using foreign-currency buffers to pay down rand debt and containing Eskom’s calls on the fiscus. The strong rally on gold and platinum has also added some support to the current account, while a strengthening rand is a big selling point for external investors, according to economist Rowland Brown from Cirrus Capital, a Namibian financial services firm.

Third, operational improvements at Eskom and fewer blackouts have eased one of the biggest macro risks that used to make South African sovereign debt expensive. The gradual and excruciatingly slow involvement of the private sector in energy, rail and ports offers the prospect that infrastructure performance could improve over the medium term.

Finally, global conditions are having an impact: investors are worried about a weaker dollar, widening US fiscal deficits and rising government debt. This, and expectations of easier US and global monetary policy in 2025, have pushed investors back into higher-yielding emerging market debt, including South Africa.

Lower yields have clear advantages. They cut the state’s borrowing costs, slowing the growth of debt-service expenditure, which already absorbs more than 20 cents of every rand of revenue. That relieves pressure to raise taxes or slash spending in ways that would hit households and business demand. Cheaper sovereign funding should also feed through, over time, into cheaper credit for banks, SOEs and large corporates.

But there are risks. Growth in South Africa remains stuck near 1%, logistics and energy constraints persist for now, and the SARB is still running one of the highest real policy rates in the emerging world. That mix can limit domestic investment even as government funding costs improve.

The scale and speed of South Africa’s yield drop are unusual, and the driver is notable: the market is rewarding institutional credibility – such as that of the SARB and the Treasury – rather than economic growth. But the growth story is still weak.

Policymakers who conclude that complacency is an appropriate response to more favourable attention from the bond markets would be drawing the wrong conclusion. Structural reforms need to be accelerated, as the SARB urges in its October Monetary Policy Review – and they need to include initiatives along the lines of the DA’s proposal.