The North West University Business School’s Policy Uncertainty Index (PUI) for the fourth quarter of 2024 unexpectedly went much further into negative territory to 65.7, compared to 53.5 in the third quarter.
The business school says this elevation in the PUI is the outcome of the cumulative impact in the final quarter of 2024 of a number of negative factors that, on balance, outweighed positive ones over that period.
Though further in the negative territory, the PUI nonetheless identified the relevant data confirming South Africa’s slow but uneven economic recovery.
The school said when the PUI was launched in early 2016, the role of policy uncertainty had loomed large in much of the recent economic debate in South Africa. Policy uncertainty is seen to have important implications for business confidence and the investment climate in the country.
The NWU said business and consumer confidence had been boosted in recent months by factors such as much lower inflation, the easing of interest rates, heavy withdrawal of pension funds under the “two-pot” system, the cessation of Eskom load-shedding and the formation of the government of national unity.
The school said the cessation of Eskom load-shedding and the promise of greater energy security had in turn helped to significantly boost business and consumer confidence.
“So, together with the heavy withdrawals of pension money under the ‘two-pot system’, household spending is expected to continue to steadily improve.
“Retail sales are also now performing strongly. Indeed, the South African Reserve Bank recently pointed out that currently, household spending ‘is doing most of the heavy lifting’ in South Africa's improved growth prospects.”
The NWU said while the world economy remained broadly supportive of the domestic economy, geopolitical conflicts and trade tensions, such as might emerge from a new US administration, had the potential to generate persistent uncertainty and disrupt world trade and finance.
“Global concerns and uncertainties have now arisen about the wider impact of intended foreign and tariff policies by US President-elect Trump. There could subsequently be collateral damage to several other trading arrangements, such as the African Growth and Opportunity Act, in which South Africa has an important stake.”
It said a better business and market mood had also enveloped the formation of the GNU after South Africa’s historic elections in May.
“Though it remains early days, the creation of the GNU has meant reduced political risks and the promise of speedier economic reforms.”
The report said there had also been recent more positive outlooks on the credit rating front for South Arica by the major ratings agencies.
“And South Africa now also can also advance its economic agenda, as well as influence the key geopolitical environment, through its hosting of the G20 and B20 meetings in 2025.”
It said compared with 12 months ago, 2025 generally promised to be a relatively good economic year for the country, driven by the expectation that economic and political tailwinds would outweigh any headwinds.
The school said what the latest PUI was saying was that as South Africa enters 2025, the challenge is to build on the better short-term business confidence and convert it into long-term investor confidence.
“In a nutshell, short-run optimism must be transformed into long-run commitments to underpin sustained economic growth.”
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