The policy uncertainty index (PUI) improved slightly in the four quarter, reflecting easing inflationary pressures, which could pave the way for a cut in interest rates.
SA also successfully hosted the African Growth and Opportunity Act (Agoa) summit in Johannesburg, raising hopes the country will make a cut when the US reviews the current 10-year arrangement that expires in 2025.
The index declined to 65.5 in the three months to December, from 71.8 in the July-September quarter, the North West University Business School said on Monday in its latest survey.
However, the reading remains above the baseline of 50, reflecting heightened policy uncertainty, which carry potential implications for business confidence and investment climate.
Raymond Parsons, who compiled the report, said there is increasing evidence that, barring shocks, SA interest rates may have peaked and could begin to ease later in 2024.
The lower consumer inflation and producer inflation figures in November offer the real prospect that inflation in SA may now be beginning to unwind, he said.
“There is also the prospect of much lower fuel prices in the early months of 2024. The period of stability in borrowing costs since May last year has also been a reassuring factor in business and consumer confidence in present difficult economic circumstances.”
However, the prospect of the lower fuel prices depends largely on international oil prices, which remain volatile and sensitive to the Israel-Hamas war and its potential escalation across the Middle East.
Despite the improvement in the PUI, SA still faces many challenges in the year ahead, including uncertainty over how national elections will pan out.
Preliminary opinion polls suggest that the ANC’s share of the national vote could slip below 50% for the first time since 1994, meaning that policy continuity could be at risk should the ANC be forced into a coalition with other political parties.
“The prospect of political change or shifts after 30 years of dominance by the ANC governing party opens up several new areas of uncertainty not experienced in SA since the 1994 democratic elections,” Parsons said.
“The PUI has been highly elevated for some time and has been well in negative territory for an extended period, driven by other well-known domestic and global factors. It remains to be seen how the PUI will respond as SA moves into uncharted political waters in 2024.”
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