Policy Uncertainty Index still in ‘negative territory’ in Q1
South Africa’s Policy Uncertainty Index (PUI) improved marginally from 55.4 in the last quarter of 2015 to 53.6 in the first quarter. However, it remained in negative territory, with a PUI of 50 representing the baseline.
The index, created by the North-West University School of Business and Governance, was unveiled for the first time in February when the inaugural PUI was published and would be updated on a quarterly basis.
The small quarter-on-quarter decline in policy uncertainty was attributed partly to the fact that the previous PUI had been compiled in a quarter when President Jacob Zuma unexpectedly removed Nhlanhla Nene as Finance Minister. Nene was initially replaced by David van Rooyen, but, following an outcry, Pravin Gordhan was reappointed to a position he had occupied prior to Nene’s appointment.
“We should not underestimate the shock which those events gave to the economy in the fourth quarter of 2015. The PUI is still in negative territory and remains vulnerable to political factors. Policy uncertainty continues to be a threat to South Africa’s economic performance,” the index compilers said in statement.
The key developments affecting the index performance during the period were listed as: developments in the global economy; Zuma’s State of the Nation Address and Gordhan’s Budget; risks to South Africa’s credit rating; the South African Reserve Bank’s monetary policy interventions; rumours of a Cabinet reshuffle; and the landmark Constitutional Court judgment, which found that the President had failed to “uphold, defend and respect the Constitution” when he did not comply with the Public Protector’s remedial action relating to the payment for upgrades to his private Nkandla homestead.
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