According to the North-West University's latest policy uncertainty index (PUI), uncertainty in South Africa has begun to dissipate as business and consumer behavior adapts to a "new normal". The index eased to 61.3 in the third quarter of 2026 from 81.9 in the second quarter. A print above 50 reflects heightened policy uncertainty, while a number below means reduced uncertainty. This development suggests that the economy may be adjusting to the current global economic climate.
The global energy shock triggered by the US-Iran war has contributed to the uncertainty, with Brent crude recently hovering above $100 a barrel. The geoeconomic outlook in the Middle East remains highly unsettled, and concerns about refined fuel products have dominated supply chain anxieties. The volatile situation in the Middle East means that even small events can have a disproportionate impact on oil price levels and expectations, thereby elevating uncertainty.
The 0.2% GDP contraction recorded in the second quarter of 2026 confirmed the serious setback in the domestic economy due to the global energy crisis. The latest PUI suggests that South Africa's economic momentum earlier this year has been interrupted by global developments, but not definitively derailed. The economy is still recovering, and the effects of the global energy crisis are being closely monitored.
To move the index closer to positive territory, expedited and irreversible domestic growth-oriented structural reforms are necessary to help offset negative global headwinds. North-West University argues that businesses need more certainty in the operating environment, especially at the local level. The outcome of local government elections set for November 4 could play a role in shaping business and investor sentiment in the final quarter of 2026.
The latest Rand Merchant Bank/Bureau for Economic Research business confidence index published in early September showed that sentiment remained subdued in the third quarter of 2026. The outcome of the municipal elections is seen as crucial to boosting business confidence. The policy uncertainty report emphasizes that the changed economic circumstances since the beginning of 2026 will require a reset of the fiscal metrics in the medium-term budget.
Finance minister Enoch Godongwana will table the medium-term budget in parliament on October 21, which will require a credible fiscal framework that reflects realistic conditions rather than relying on over-optimistic economic forecasts. The report urges protecting the National Treasury's debt stabilisation strategy within a growth-friendly fiscal environment that strengthens investor confidence.
The report concludes that although structural reforms are pointing in the right direction, the economy is growing far too slowly, and stable foundations are not enough. Policy uncertainty can be further reduced if the right growth-friendly policies and projects are accelerated and implemented. The message of the medium-term budget and the outcome of the municipal elections could play a significant role in shaping business and investor sentiment in the final quarter of 2026.
Key points
- South Africa's policy uncertainty has eased but remains elevated due to global energy shock and Middle East tensions.
- Expedited and irreversible domestic growth-oriented structural reforms are necessary to help offset negative global headwinds.
- The outcome of local government elections and the medium-term budget could play a significant role in shaping business and investor sentiment.
