South Africa’s Policy Uncertainty Index (PUI) rose from 53.1 in the second quarter of 2017, to 53.6 in the third quarter of 2017, revealed North-West University School of Economics professors Raymond Parsons and Waldo Krugell.

They delivered the results for the third quarter of 2017 in Johnnesburg, where Parsons stated that policy uncertainty was the new normal for business in South Africa.

The PUI is the net outcome of positive and negative factors influencing perceptions around policy uncertainty over a period. An increase beyond 50 reflects heightened policy uncertainty.

Parsons said policy uncertainty loomed large in much of the recent economic debate in South Africa, as it seemed to have important implications for business confidence and the investment climate in the country.

“Hardly any recent economic assessment or media release from international or local financial institutions, business lobbies, economic analysts and even financial journalists or credit ratings appears without conclusions of the words ‘policy uncertainty’ occurring in them,” Parsons pointed out.

The design of a policy uncertainty index for South Africa was spurred not only by economic circumstances in the country, but also by the increasing academic and policy interest globally in the cause, effect, measurement and definition of the phenomenon. 

Parsons says the PUI results for the period from July to September were the average of news-based uncertainty, economists’ views on uncertainty and University of Stellenbosch’s Bureau of Economic Research’s view on policy and political constraints.

PUI OBSERVATIONS

The issue of State capture and corruption continued to have a toxic effect on the perceptions of South Africa, its governance and on obstacles to doing business in the country.

The World Economic Forum’s Global Competitiveness Index recently revealed that corruption was the major problematic factor when doing business in South Africa.

Unemployment, which currently stands at 27.7%, reflects weak economic growth and the extent to which policy uncertainty is inhibiting job creation and retention.

Krugell said it was interesting to note that while organised labour had disappeared, there was an increase in communities organising themselves.

Meanwhile, Parsons stated that Finance Minister Malusi Gigaba was facing his first major fiscal policy test in the upcoming Medium Term Budget Policy Statement (MTBPS) on October 25.

He believes that there is likely to be a significant residual shortfall in Gigaba’s MTBPS that can only be addressed in the main Budget in February 2018.

“Whatever the fiscal adjustments that will emerge from the pending MTBPS, there is the real prospect that individuals and business will face substantial uncertainty from a host of tax decisions in the main Budget later, some of which emanate from the ongoing work of the Davis Committee on tax reform,” Parsons said.          

He advised that business strategies must be adapted to accommodate and address the realities of the situation in South Africa and warned that the African National Congress’s (ANC’s) elective conference in December may not bring about the certainty that many stakeholders are hoping for.

The PUI for the fourth quarter of 2017 will seek to capture the immediate aftermath of the ANC conference.