The African National Congress and its largest rival, the pro-business Democratic Alliance, have agreed to work together in a government of national unity, senior DA negotiator Helen Zille told Reuters on Friday.

The deal between two sharply antagonistic parties marks the start of a new era in South African politics, which has been utterly dominated by the ANC since it swept to power in the 1994 elections that marked the end of apartheid.

The ANC lost its majority for the first time in a May 29 vote and has spent two weeks locked in intensive behind-the-scenes talks with other parties, which came down to the wire on Friday morning as the new parliament was convening.

Two smaller parties, the socially conservative Inkatha Freedom Party and the right-wing Patriotic Alliance, will also take part in the unity government, they said.

"Today marks the beginning of a new era where we put our differences aside and unite for the betterment of all South Africans," said Sihle Zikalala, a member of the ANC's governing body, in a post on X.

Asked to confirm that the ANC and DA had signed a deal on a unity government, Zille told Reuters in a text message: "yes we did".

Separately, a DA source said the party would get the post of deputy speaker of the National Assembly as part of the deal.

DA leader John Steenhuisen would give an address later on the outcome of negotiations, the party said.

Meeting in a Cape Town convention centre because its permanent home was damaged by fire in 2022, the newly elected National Assembly began proceedings with the swearing-in of lawmakers. The chamber was then due to elect its speaker and deputy speaker, and the country's president.

President Cyril Ramaphosa, the ANC leader, is expected to win a new term in office with support from the other parties in the unity government pact.

'HISTORIC JUNCTURE'

The ANC won 159 of 400 seats in the National Assembly, while the DA got 87. The populist uMkhonto we Sizwe (MK) party led by former President Jacob Zuma has 58, the hard-left Economic Freedom Fighters 39 and the Inkatha Freedom Party 17.

Long seen as unbeatable in national elections, the ANC lost support in recent years as voters wearied of persistently high levels of poverty, inequality and crime, rolling power cuts and corruption in party ranks.

The ANC's central dilemma since the election has been whether to work with the DA, which investors like because of its free-market policies but is unpopular with ANC voters who see it as a defender of the privileged white minority's interests.

The inclusion of the IFP, with its ethnic Zulu base, may help sweeten the DA pill for ANC voters. The Patriotic Alliance draws its support from the coloured (mixed-race) community.

The News24 website published details from a draft statement of intent it said had been circulated to party negotiators by ANC Secretary-General Fikile Mbalula. Reuters saw the document but could not immediately confirm its authenticity.

The document said the May 29 election had been highly contested and, at times, divisive, and that the results had the potential to foment further political and social fragmentation.

"At this historic juncture, we must act to ensure stability and peace, tackling the triple challenges of poverty, unemployment and inequality, entrench our Constitutional democracy and the rule of law, and to build a South Africa for all its people," the document said.

Among the "basic minimum programme of priorities" outlined in the document were rapid, inclusive and sustainable economic growth, the promotion of fixed capital investment and industrialisation, job creation, land reform, infrastructure development, structural reforms and fiscal sustainability.

London-based research firm Capital Economics said in a note that the prospect of a coalition involving the ANC and DA was being well received by investors because there was expected to be policy continuity or an acceleration of reforms.

Another reason was that the EFF and MK would be excluded from policymaking, it said.

"Both parties (the EFF and MK) had set out radical agendas, including rapid land redistribution, widespread nationalisations and increased welfare support," Capital Economics said.

Zuma's MK, new to the political scene, came a surprisingly strong third in the election but has alleged it was robbed of victory by vote-rigging, and is boycotting the new parliament.

The Constitutional Court rejected MK's application to stop parliament from sitting on grounds of fraud, saying it had no merit. The Independent Electoral Commission said the election was free and fair and other parties have accepted the results.