SA policy uncertainty climbs to record high amid global and domestic pressures

South Africa’s Policy Uncertainty Index (PUI) surged to a record 81.0 points in the third quarter of 2025, up from 75.9 in the previous quarter, according to the North West University (NWU) Business School.

The baseline of the index is 50, with higher levels reflecting greater policy uncertainty.

NWU Business School economist Professor Raymond Parsons said the rise in uncertainty was driven by a mix of global and domestic headwinds.

“A combination of negative global and internal factors outweighed the positive ones in the PUI over this period,” he said.

Parsons added that the International Monetary Fund (IMF) will soon update its overall economic forecasts for its annual meeting in October.

On the global front, the IMF is set to update its economic outlook at its October annual meetings. Its last projections raised global growth to 3.0% for 2025 and 3.1% for 2026, citing a modest easing of trade tensions.

However, the OECD expects slower global growth, falling from 3.3% in 2024 to 2.9% in 2025 and 2026, with the slowdown most evident in the US, Canada, Mexico, and China. The US Federal Reserve cut rates by 25 basis points earlier this month as labour market weakness outweighed inflation fears.

Parsons said that on the domestic front the most positive recent news was the better-than-expected second quarter GDP growth figures of 0.8% quarter-on-quarter, after only 0.1% in the first quaretr.

“The incipient economic recovery had not only accelerated but also broadened across several more sectors of the economy. GDP growth in 2025 is now expected to be in the region of 1%-1.2%.”

Parsons said that several factors have contributed to strengthening SA’s GDP performance, including Eskom’s outlook for the next six months projecting no load shedding.

He added that negative factors strongly dominated the 3Q PUI, including an uncertain export outlook and the continued weakness in total fixed capital formation needed to promote higher sustained job-rich growth.

Parsons said that another serious vulnerability is that high-frequency data in 3Q 2025 has remained mixed and recent business sentiment indices have reflected persistent weakness, including a possible slowing consumer demand.

“Uncertainty has been created by factors such as SA’s failure so far to secure a new trade agreement with the US, the African Growth and Opportunity Act (Agoa) due to expire at the end-September 2025, continued crime and corruption challenges, and the negative impact of further increases in Eskom tariffs on business and the economy.”

Parsons said that the Agoa, which has been a centerpiece of US trade relations with Africa since it was enacted in 2000, is due to expire at the end of September 2025.

“The imminent expiry of this important economic legislation for Africa has created uncertainty, and the US Chamber of Commerce has urged Congressional leaders to swiftly reauthorize Agoa.”

Parsons added that the economic recovery still needs strong support.

“Although some progress has been made with growth-friendly structural reforms, to reduce policy uncertainty the implementation process requires more urgency, pace, and direction," Parsons said.

"Irreversibility of growth-oriented reforms means ensuring that the leadership, structures, capacity, and culture are in place that will guarantee the right trajectory of results for the foreseeable future.”

Parsons said that a greater sense of urgency therefore needs to be injected into the pace and implementation of SA’s growth-friendly economic reforms to demonstrate more tangible results.

He said these were the key drivers that will move the PUI closer to the positive territory required to boost investor confidence to the levels needed in SA for much higher investment and growth.

BUSINESS REPORT