Welcome to this edition of the Weekly Political Compass from Teneo’s political risk advisory team.
This week, we are taking a closer look at the announcement of South Africa’s new cabinet. Meanwhile, Canada is considering tariffs on Chinese EVs, French voters will go to the polls in the first round of the National Assembly elections, Mexico’s president-elect will unveil the second part of her cabinet, and landmark “Gen Z protests” are expected to continue in Kenya. Our graph of the week zooms in on discontent with democracy.
Global Snapshot
South Africa’s President Cyril Ramaphosa needs to announce his new cabinet. Our Africa expert Anne Frühauf analyzes the situation.
How are the talks progressing?
The ANC’s historic election loss and the resultant “GNU” coalition, which now includes 10 parties, are complicating the negotiations. There is no specific constitutional deadline for the appointments.
What explains the political time pressure?
Ramaphosa is under immense pressure to finalize his lineup this week to settle concerns about the durability and workability of the “GNU” coalition and avoid delays in government business.
What to Watch
China/Canada
Canadian policymakers are considering imposing tariffs on Chinese-made electric vehicles, following the lead of the US and the European Union. Finance Minister Chrystia Freeland said the domestic auto sector faced unfair competition from China's "state-directed policy of overcapacity."
India
Finance Minister Nirmala Sitharaman conducted a pre-budget meeting with state finance ministers. He emphasized the Center's commitment to supporting states through timely tax devolution and GST compensation arrears to boost economic growth. Post the meeting, experts believe that the government will announce the Union Budget on 22 July. The budget is likely to include a USD 6bn consumer boost, with anticipated tax cuts for low-income earners for the first time in seven years, while maintaining a 5.1% deficit target this year. Clearing GST dues to states will likely enhance state spending and boost general purchasing power. Meanwhile, the Reserve Bank of India (RBI) cautioned elevated and volatile food prices could cause headline inflation numbers to potentially rise.
Korean Peninsula
Authorities in Seoul are conducting clean-ups and considering next steps after North Korea launched 350 more trash-laden balloons on 24 June, the fifth such incident since 28 May. Pyongyang’s latest launches came after South Korean NGOs sent their own balloons carrying leaflets and USB sticks into the north. Seoul may now conduct another round of loudspeaker broadcasts in border areas, which deeply irritate the Kim regime. The ongoing back-and-forth actions raise concerns that Pyongyang will find a pretext to escalate tensions militarily ahead of November’s US presidential election.
EUROPE
EU/Ukraine/Moldova
On 25 June, Ukraine and Moldova are set to launch formal EU accession talks. Although the process is expected to be long and challenging, the opening of talks is an important milestone. It could act as a long-term policy anchor unifying pro-Western political actors and strengthening public optimism at a time when both countries are experiencing multiple domestic and external challenges.
France
Ahead of the first round of National Assembly elections on 30 June, constituency-level dynamics represent an important source of uncertainty regarding the results. However, Marine Le Pen's National Rally (RN) is well-placed to win the election but might not obtain an absolute majority in the second round on 7 July. The elections are held under a two-round majoritarian system with single-member constituencies. A candidate is elected in the first round if they receive an absolute majority of votes and garner more than 25% of the registered electorate's support. If no candidate meets these thresholds, a runoff election is held, including the top two candidates and any other candidates who secured more than 12.5% of registered voters' support.
Hungary
On 1 July, Hungary will assume the rotating presidency of the Council of the European Union (EU) for six months. The role entails chairing meetings and shaping the agenda of the Council. Last week, Budapest presented seven priority areas for its presidency and pledged to act as “honest broker, loyally cooperating with every member state and institution.” However, given its track record of confrontational rhetoric towards Brussels and multiple attempts to withhold support for Ukraine and water down sanctions on Russia, other EU capitals are exploring legal pathways to circumvent Budapest’s obstructionism.
Serbia/Kosovo
On 26 June, EU High Representative Josep Borrell will host Serbian President Aleksandar Vucic and Kosovar Prime Minister Albin Kurti in Brussels. This will be the first face-to-face meeting between Vucic and Kurti since September 2023, signaling attempts by Brussels to spur the normalization of relations after a series of incidents and controversies between the two sides during the past several months. However, neither side is likely to make any major concessions. Kurti’s nationalist Self-determination Movement (LVV) is gearing up for a parliamentary election to be held by early 2025 and Belgrade is likely waiting for the new EU leadership and the outcome of the US presidential election before reassessing its approach.
Turkey
The government is finalizing a tax package that includes the imposition of minimum corporate taxes and will submit it to parliament before the summer recess. The package also includes changes to the VAT, special consumption tax and various other levies, with a projected annual revenue impact of USD 5.5bn. The drafting of the package has been marred by intense fighting within the ruling Justice and Development Party, leaks, and widespread criticisms. Some of the leaks have been reportedly aimed at weakening the standing of Treasury and Finance Minister Mehmet Simsek.
LATIN AMERICA
Brazil
A calmer week is ahead following renewed attacks by President Lula against central bank president Roberto Campos Neto. The president called Neto “a political enemy” last week in the lead-up to a monetary committee meeting that unanimously decided to stop lowering interest rates after months of a downward trend. Lula had interrupted his attempts to blame Neto for preventing economic growth but resumed them after the central banker intensified his support for a potential candidacy of São Paulo governor Tarcísio de Freitas, a strong Bolsonaro ally, to the presidency in 2026. In a week when House Speaker Arthur Lira is out of country, a temporary pause in skirmishes is expected as both sides review strategies. The president’s mix of economic policy with presidential politics two years ahead of elections should not work in his favor.
Mexico
President-elect Claudia Sheinbaum will unveil the second part of her cabinet on 27 June. The market reaction to the first group of names announced on 20 June was largely positive, especially the inclusion of Jose Ramon de la Fuente, Mexico’s former ambassador to the UN, as foreign minister, and Marcelo Ebrard as Economy Minister. The Economy Ministry – which is distinct from the Finance Ministry under Rogelio Ramirez de la O – handles trade relations and will therefore be Mexico’s direct interlocutor in the United States-Mexico-Canada Agreement (USMCA). The second group of cabinet picks may include more overtly left-wing and/or figures whose primary loyalty may lie with President Andres Manuel Lopez Obrador (AMLO).
MIDDLE EAST AND AFRICA
Ghana
The Executive Board of the International Monetary Fund (IMF) is expected to meet on Friday, 28 June, to consider a second review of its USD 3bn three-year loan package to Ghana. It is likely that the Board will approve the next tranche of funding i.e. USD 360mn for the West African country at this meeting. This follows news on 21 June of an agreement in principle between the government of Ghana and its Eurobond creditors – a key step that brings the country closer to concluding a comprehensive debt restructuring process that began in early 2022 under the G20 Common Framework. The IMF had already, in April, reached a staff-level agreement to release this tranche of funding, although final clearance for the release of the funds remained contingent upon the latest deal with private creditors.
Kenya
Landmark “Gen Z protests” against the 2024/25 finance bill are expected to continue this week. Protesters have called for a national strike on 25 June, when the bill’s third and final reading is due in parliament. They have also called for roadblocks in Nairobi on 27 June, when President William Ruto is expected to sign the finance bill. In response to nationwide protests, the Ruto administration has made some concessions, such as removing a planned bread tax, but this may come at the cost of higher fuel prices as the government seeks to square its IMF-backed revenue strategy. Protesters have called for the bill’s outright rejection, which will make it difficult to reach an acceptable compromise.
Discontent with democracy is on the rise across the globe since the Covid-19 pandemic. The trend is particularly pronounced in countries such as the US, the UK, Germany, France, and South Africa. Even the Netherlands, a traditionally stable, consensus-oriented democracy, appears to be experiencing a rising discontent, as evidenced by the electoral strength of radical parties. Conversely, two core Asian democracies – Japan and South Korea – are showing levels of discontent comparable to those observed in western democracies. In this context, electoral volatility and political fragmentation should be expected to continue shaping politics across the West and beyond.