SA’s uncertainty index edges up ahead of general elections

South Africa's economic landscape has been marred by policy uncertainty, a fact that has been reflected in the country's economic performance over the past several years. Raymond Parsons, a Professor at the NWU Business School, discussed the evolving nature of policy uncertainty in a recent CNBC Africa interview. The uncertainty index, which has been in existence for about six years, has typically been in negative territory. This negative trend has coincided with South Africa's lackluster economic performance. Parsons highlighted the impact of external events, such as the Ukraine wars, on the surge in policy uncertainty levels, which reached record highs last year. The upcoming elections in South Africa have added a new dimension of uncertainty, causing the index to edge further into negative territory. The uncertainty surrounding the election outcomes has implications for businesses and investors, as they await clarity on the future policy direction. The budget presented by the National Treasury earlier this year was seen as a step in the right direction to avoid falling into a debt trap. Measures included controlling government spending, debt management decisions, and tax adjustments aimed at balancing the books. However, the sustainability of these efforts depends on achieving higher growth rates. Parsons emphasized that economic growth is pivotal for addressing various challenges, including job creation and revenue generation. Without substantial growth, South Africa's economic prospects remain constrained. Parsons also discussed the link between policy uncertainty and market shocks, pointing out that global uncertainties, including various general elections, contribute to elevated levels of uncertainty indices. In the case of South Africa, the political landscape adds a layer of unpredictability, with potential coalition scenarios influencing future policy directions. This uncertainty poses challenges for investors and businesses in planning their strategies and investments post-election. The interview also touched upon the critical role of media in synthesizing complex economic data for investors. Parsons emphasized that while there may be diverse positions and forecasts from different sources, the common consensus is that elevated policy uncertainty hampers investment decisions. Achieving sustainable growth and attracting investments require minimizing uncertainty and providing a clear policy direction. With business confidence currently at a fragile state, a turnaround in the economic and political environment is essential to enhance investor confidence. Looking ahead, the hope is that the forthcoming elections will bring stability and continuity to South Africa's economic policies, fostering a conducive environment for growth and investment. Parsons stressed the importance of aligning political and economic goals to steer the country towards a path of sustainable development. As South Africa navigates the uncertain waters of its economic landscape, it becomes imperative for key stakeholders to support a policy framework that fosters confidence and propels the economy towards a brighter future.