Policy Uncertainty Deepens Amid Uneven Economic Recovery in South Africa

South Africa’s Policy Uncertainty Index (PUI) reached a concerning 65.7 in Q4 2024, up from 53.5 in Q3, according to the North West University (NWU) Business School. This negative shift highlights the country’s slow and uneven economic recovery, influenced by a combination of internal and external pressures.

Despite challenges, positive economic trends such as reduced inflation, lower interest rates, the easing of Eskom load-shedding, and the implementation of the Two-Pot pension system signal a cautious optimism for 2025.

Key Factors Driving Policy Uncertainty

1. External Challenges

• The foreign and tariff policies of U.S. President-elect Donald Trump are creating unpredictability for global and South African markets.
• Weak global demand and declining exports continue to undermine business competitiveness.

2. Domestic Pressures

• A disappointing 0.3% GDP contraction in Q3 2024.
• Persistently weak logistical networks, particularly in transport, are hampering economic efficiency.
• Water supply challenges remain unresolved, posing risks to sustainability.
• Eskom’s tariff applications for 2025 could raise the cost of doing business.

Economic Growth Prospects for 2025

While GDP growth for 2024 is now projected at just 0.6%, improvements in fixed capital formation are expected to emerge in 2025. Recent surveys by Stanlib and Nedbank indicate that delayed capital expenditure plans may materialize, driven by:

• Expanding market capacity to absorb existing resources.
• Efforts to attract new investment capital and enhance South Africa’s appeal as a preferred investment destination.

Prof. Raymond Parsons of NWU emphasized that policy uncertainty is reversible if South Africa implements growth-friendly reforms. The Government of National Unity (GNU) must deliver on its agenda to stabilize policy and encourage sustained investment.

Parsons believes that 2025 could see economic and political tailwinds outweighing headwinds. However, the challenge lies in transforming short-term optimism into long-term commitments to foster job-rich growth.

South Africa’s elevated policy uncertainty underscores the urgent need for economic reform and investment-friendly policies. As the country navigates internal and external pressures, 2025 offers a pivotal opportunity to build on improved business confidence and ensure sustained economic recovery.

Follow Joburg ETC on Facebook, Twitter and Instagram

For more News in Johannesburg, visit joburgetc.com