During the fourth Pitso for 2023, Prof Raymond Parsons shared the Policy Uncertainty Index of the NWU Business School for the second quarter, which sparked an insightful discussion on its implications for the economy. The experts delved into the current standing of the index and explored potential remedies for prevailing crises that hinder much-needed economic growth.
The Policy Uncertainty Index reflects the net outcome of positive and negative factors shaping policy uncertainty over a three-month period. Prof Parsons revealed that the baseline of the index stands at 50%, but the second quarter's outcome has escalated to a staggering 76,2%, surpassing the first quarter's 71,7%. Notably, this marks the highest level of uncertainty since the inception of the index in 2016. The negative factors outweigh the positives by far, hampering economic growth and investment prospects. While both global and domestic factors contribute to these rates, the present reality is that domestic factors play the dominant role in driving the Policy Uncertainty Index further into the negative.
Geopolitical conflicts and South Africa’s risk of being removed from AGOA and the persisting energy crisis leading to ongoing blackouts represent the two major negative factors exacerbating policy uncertainty. A third contributing factor is the anticipation of worse-than-projected economic performance in the latter part of the year.
Although positive developments such as additional electricity generation by the government and signs of potential collaboration between the public and private sectors to address major issues hampering economic growth can be noted, these are overshadowed by prevailing negatives. The good news is that high levels of policy uncertainty can be mitigated through the effective and sustainable implementation of appropriate policies and remedies.
Our experts agreed that implementation remains a key stumbling block for the public sector, leading to significant distrust and loss of confidence. Resolving this issue should be a top priority. A critical concern lies in the fact that a lack of capability of key government role players seems to be the cause of poor implementation. This is a challenge that cannot be resolved quickly.
Moving forward it is crucial for the public sector to admit that certain functions may be better executed through collaboration with the private sector. Until this recognition materialises, the current downward trajectory of vital economic pillars such as Eskom and Transnet is unlikely to change, let alone be reversed. The alignment of public and private sectors is necessary to alleviate uncertainty and implement solutions that instil confidence.
The NWU Business School extends its sincere gratitude to Prof Raymond Parsons, Mr Isaah Mhlanga, Mr Thina Nodada, Mr Ryk van Niekerk and Ms Mmamello Matink-Ngwenya for their expert insights and invaluable perspectives. Special thanks to Mr Van Niekerk for his professional facilitation of the discussion. These conversations are vital in navigating the complex landscape of policy uncertainty.
Watch the full Pitso here: https://www.youtube.com/watch?v=Hvrs5_yaofg.
