Policy uncertainty as measured by North West University’s (NWU) Business School eased in the second quarter of 2025 from its record high in the first quarter but still remains in negative territory.
Policy uncertainty has important implications for business confidence and the investment climate in the country.
The policy uncertainty index for the second quarter of 2025 eased to 75.9 compared to the first quarter’s 78.6 (baseline 50) as negative factors outweighed positive domestic developments.
The index is the net outcome of positive and negative factors influencing policy uncertainty over the relevant period.
In the first quarter of 2025, the index jumped from 65.7 to 78.6, its highest reading since the index was launched in 2016 due to, among other things, the uncertainty created by “Trumponomics”.
Positive domestic factors in the second quarter included slowing inflation and lower interest rates, which could be cut further later in the year.
SA’s removal from the Financial Action Task Force’s (FATF’s) greylist by the end of 2025 would also lower borrowing costs. The adoption by parliament of the 2025/26 budget in the second quarter also gave a boost to certainty.
Negative factors however were the disappointing 0.1% GDP growth in the first quarter, the scaling down of growth forecasts for 2025 by the National Treasury and the SA Reserve Bank and higher unemployment.
The NWU Business School’s GDP growth outlook for 2025 is about 1%, rising to about 1.5% next year.
“The incipient economic recovery in SA is struggling to gain momentum. A strategic pivot in growth policy is needed to create the extra economic buffers required to deal with external shocks. The GNU’s policy agenda for a 3% GDP growth target in the medium term therefore now urgently needs an impulse, a jolt, an acceleration, so that the tailwinds in the economy outweigh the headwinds in 2025 and beyond,” Prof Raymond Parsons noted.
“Although the second-quarter policy uncertainty index remains well in negative territory for now, these trends have shown themselves in the past to be reversible, if the right actions are taken through policies and actions that are under SA’s control,” Parsons said.
The global outlook was highly uncertain, the index report on the second quarter said, due to the US administration’s global tariff policies, among other factors.
The IMF and the Organisation for Economic Co-operation and Development had lowered their global growth forecasts. Geopolitical tensions had fractured trade alliances with additional uncertainties arising from the persistent Middle East conflict.
All this would have a negative impact on global growth, which the World Bank projects at 2.3% in 2025, said the report.
Positive developments in SA included an inflation rate that is expected to remain well anchored within the Bank’s inflation target range of 3%-6%. The strong gold price was also a favourable factor, with the World Gold Council indicating central banks expected their gold holdings as a proportion of their reserves to increase over the next five years, while expecting their dollar reserves to be lower.
The second quarter of 2025 was also free of Eskom load-shedding and there were signs of a sustained recovery in the rental market.
Keeping the policy uncertainty index in negative territory was the economy’s struggle to show strong momentum, Parsons said. Manufacturing performance fell while retail sales increased, sending mixed signals. Economic recovery had been slow and uneven.
“Although household spending remains strong enough to support economic activity, the first quarter 2025 GDP figures tell us that total fixed capital investment is presently negative. The poor performance of gross fixed capital raises a notable red flag, as capital investment is the kingpin of the growth rate.
“It highlights the importance of accelerating the large-scale infrastructural spending to which official policy is already committed, especially through public-private sector partnerships,” he said.
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