South Africa enters 2026 with a cautious spring in its economic step, as the North-West University (NWU) Business School’s Policy Uncertainty Index (PUI) dropped sharply to 64.9 in the fourth quarter, from a record high of 81.0 the previous quarter. Policy certainty is among the fundamental structural reform items, the late finance minister Tito Mboweni once said. “Remember that you cannot force people to invest, but you can create an environment that makes it easier to invest, create jobs, and, hey presto, develop the country,” he said.
“The [fourth quarter] PUI calibration suggests the economy may have reached a turning point,” NWU Business School economist Prof Raymond Parsons said, pointing to the easing index as a signal that elevated uncertainty can be reversed with the right reforms and delivery. “The economy enters 2026 on a note of cautious optimism.” The PUI is a net balance — the net outcome of positive and negative factors influencing the calibration of policy uncertainty over the relevant period. A lower PUI reading indicates reduced uncertainty and improved investor confidence.
While still above the neutral 50-point baseline, the latest reading reflects improved sentiment, policy progress and stronger-than-expected resilience in both domestic and global markets. Global and domestic conditions have improved, contributing to the decline in policy uncertainty. Global growth forecast for 2026 is projected at 3.2% by the International Monetary Fund, despite geopolitical tension and tariff wars — with uncertainty dubbed the “new normal”.
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Sub-Saharan Africa is expected to grow at more than 4%, with the World Bank describing the region’s outlook as “resilient”, though weighed down by high debt and jobs deficits. South Africa’s GDP is forecast to expand by an average of 1.4% in 2026, following four consecutive quarters of positive growth. Unemployment, “although still unacceptably high”, improved slightly in the third quarter.
Several positive developments were identified as key drivers of the drop in policy uncertainty, including the removal of South Africa from the FATF greylist, the “well received” medium-term budget policy statement, the new 3% inflation target and a 25-basis point interest rate cut in November, S&P Global’s upgrade of South Africa’s investment status for the first time in nearly 20 years and a successful G20 summit hosted locally, which boosted geopolitical standing and sentiment. “Policy uncertainty is therefore being gradually reduced by building resilience, creating fiscal buffers and stabilising public indebtedness amid adverse global headwinds,” the PUI report states. “Political stability may also have been enhanced for now by the [government of national unity] leadership’s recent agreement to a formal dispute-resolution mechanism around ‘sufficient consensus’, to meet monthly, and to confirm its endorsement of the Medium-Term Development Plan.” Despite this progress, the report warns of downside risks that could stall momentum. High crime and weak investment:South Africa needs to shake off its reputation for high crime levels, the report states.
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