The latest Policy Uncertainty Index (PUI) from North West University (NWU), released on Friday, painted a grim picture of South Africa's economic landscape, with the index plummeting further into negative territory to a staggering 78.6 for the first quarter of 2025, up from 65.7 in the preceding quarter.

This increase marked the highest level of uncertainty recorded since the PUI's inception in early 2016, signalling alarming implications for business confidence and investment environments in the country.

NWU Business School economist, Professor Raymond Parsons, noted that the persistent negative factors outweighing positive ones were indicative of broader economic turbulence.

“Persistent negative factors again outweighed positive ones. This was the net outcome of the PUI’s calibration of both positive and negative factors influencing the level of policy uncertainty in South Africa in the first quarter of 2025,” he said.

“Externally, the global economic outlook in the first quarter of 2025 has been largely shaped by emerging tariff ‘wars’ and heightened geopolitical tensions, leading to various global growth forecasts now being trimmed.”

The Organisation for Economic Co-operation and Development (OECD), recently reduced its growth forecasts for most major economies, including the US economy. The US Federal Reserve also sharply cut its US growth projections for 2025. The World Bank projects GDP growth rate in Sub-Saharan Africa (SSA) being an average of 4.2% in 2025.

On the positive side, Parsons said South Africa’s high frequency domestic data such as consumer spending, retail sales, and new vehicle sales, indicated that an economic upturn has indeed been taking place.

He said when the PUI was launched in early 2016, the role of policy uncertainty has loomed large in much of the recent economic debate in South Africa.

“It is seen to have important implications for business confidence and the investment climate in the country. Hardly any recent economic assessment or media release from international or local financial institutions, business lobbies, economic analysts, financial journalists, or credit rating agencies appears without the inclusion of the words 'policy uncertainty' occurring in them,” he said.

The PUI's design is a response not only to internal economic conditions but also reflects an increasingly global academic focus on the measurement and implications of policy uncertainty. As noted, the International Monetary Fund and Stanford University have introduced the World Uncertainty Index (WUI) to gauge these rising levels globally.

Parsons said that understanding the dynamic uncertainty 'shocks' experienced in South Africa will help policymakers navigate future market fluctuations more adeptly.

He said it was shocking but unsurprising that the first quarter of 2025 PUI again strongly ticked up, inevitably reflecting a sharp rise in policy uncertainty for external and internal reasons, but which in time is reversible if the right policies are implemented.

“A cross-cutting number of external and internal developments therefore merged to shift the economic perceptions that calibrate the level of policy uncertainty. For SA, accelerated structural reforms remain the best pathway to the GNU’s overall 3% growth target,” Parsons said.

“Both government policy and business strategies will need to be adapted to a new range of risks, as well as exploiting new or alternative economic opportunities. It will also be a strong test of the further collaboration still needed between the GNU and the private sector to meet these policy challenges.”

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South Africa's policy uncertainty index plunges to record low as global and local tensions rise