SA’s policy uncertainty has surged to an unprecedented level, setting a new record that signals intensified risk for economic recovery, investor confidence and long-term growth, according to the latest policy uncertainty index (PUI) released by the North-West University Business School.
In the first quarter of 2025, the PUI jumped from 65.7 to 78.6 — its highest reading since the index was launched in 2016.
With the baseline set at 50, a reading above that level indicates heightened policy uncertainty. This latest result suggests a severely unsettled business climate marked by intersecting global and domestic risks.
“Empirically, it shows that when economic policy uncertainty is strongly present in the environment, it indeed lowers investment, employment and output. High levels of such policy uncertainty inhibit meaningful investment and consumption,” the PUI report stated.
The rise in uncertainty has been fuelled in part by global dynamics. The report highlights a dramatic downturn in business sentiment tied to international trade tensions and erratic US policy shifts.
The foreign and tariff policies of US President Donald Trump “have injected a powerful and pervasive element of uncertainty and unpredictability into the world economy and also for SA,” the report warned.
It added that tariff uncertainty can be “as economically damaging as tariffs themselves”.
The Organisation for Economic Co-operation and Development, the Federal Reserve and IMF have all trimmed global growth projections, citing geopolitical instability and the risks of retaliatory trade measures.
Fears of US stagflation have rattled financial markets and put additional strain on emerging economies such as SA.
On the home front, a combination of political uncertainty, energy insecurity and wavering fiscal confidence have deepened investor unease.
Among the more alarming recent developments is the diplomatic falling-out between SA and the US, marked by the mid-March expulsion of ambassador Ebrahim Rasool, the report said, adding that the incident had cast new doubt over SA’s standing in global trade relations, with the future of the African Growth & Opportunity Act “now at greater risk”.
This was compounded by renewed load-shedding in the first quarter — four incidents plus one “near miss” — which once again called into question the reliability of the national grid as winter approaches.
“Although minimal, they are reminders of the continued vulnerability of the energy supply in the economy. The private sector has therefore again questioned whether Eskom’s otherwise recent prolonged phase of energy security is as assured as was previously thought, especially with SA now in an economic upturn phase and another winter coming,” the report said.
The national budget, tabled earlier this month, also drew criticism for lacking a “growth-friendly” posture and for assuming optimistic revenue projections. It has yet to secure a parliamentary majority.
High levels of such policy uncertainty inhibit meaningful investment and consumption.
— Policy Uncertainty Index, NWU Business School
The report refers to the FNB/BER consumer confidence index dropping to its lowest level since the second 2023 quarter.
Capital investment, a key driver of long-term growth, has also weakened. According to the 2024 Nedbank Capital Expenditure Project Listing survey, private sector investment declined 4.3% last year. The risks to better overall investment plans, said Nedbank, “are tilted to the downside”, with the public sector emerging as the primary driver of capital formation.
Still, the report acknowledged several areas of promise.
Inflation remained contained and anchored near the Reserve Bank’s midpoint of 4.5%. Though the Bank paused interest rate cuts at its March 20 meeting, further reductions remain on the table if inflation forecasts hold.
Agriculture and tourism are set for a strong year, supported by easing fuel costs, robust gold prices and a steady uptick in household consumption, buoyed in part by pension reform. “Although still unacceptably high, the overall unemployment level has eased slightly.”
Other encouraging trends in high-frequency data, such as consumer spending, retail sales and new-vehicle sales, also point to a slow and uneven economic recovery, the report said.
Ultimately, the report makes clear that turning the tide on policy uncertainty demands a co-ordinated push for structural reform and institutional credibility.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.