The North-West University (NWU) Business School’s Policy Uncertainty Index (PUI) has eased to a level of 64.9 in the fourth quarter, compared with a record high of 81 in the third quarter.

This suggests the economy may have reached a turning point and is set to enter 2026 on a note of cautious optimism.

South Africa’s economy showed a fourth consecutive rise in economic activity in the third quarter, albeit from a low base. GDP forecasts for 2026 are generally higher, ranging from 1.1% to 1.6%.

The NWU Business School points out that some of the positive developments locally have been lower interest rates, the well-received Medium Term Budget Policy Statement, South Africa being taken off the Financial Action Task Force grey list, a move to lower the inflation target of 3% and ratings agency S&P’s decision to raise the country’s investment status for the first time in nearly two decades.

Additionally, fixed capital formation increased by 1.6% in the fourth quarter.

The negative factors elevating economic uncertainty, on the other hand, remain high crime levels and the impact of US tariffs on South Africa’s export prospects.

Tariff uncertainty can be as economically damaging as the tariffs themselves, the business school emphasises. The South African Reserve Bank has estimated that US tariffs could shave 0.4% off of South Africa’s GDP, in the absence of a satisfactory new trade deal with the US.

“The challenge remains for South Africa to ensure the robust implementation of half-forged growth-friendly policies and projects that will further reduce policy uncertainty.

“South Africa’s economic steersmanship must continue to keep policy firmly on track so that next year the tailwinds will overcome any headwinds,” it explains.

The institution elaborates that policy uncertainty can be gradually reduced by building resilience, creating fiscal buffers and stabilising public indebtedness amid adverse global headwinds.

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 meeting monthly and pursuing “sufficient consensus”.

Although remaining in negative territory, the recent surge of better economic news for South Africa led to the welcome easing in the PUI to 64.9. The NWU Business School says there were enough positive factors in the past quarter to outweigh the negatives.

Globally, economic growth forecasts are modest yet positive overall. The International Monetary Fund (IMF) expects global growth of 3.2% next year, but elevated global uncertainty is now seen as the ‘new normal’.

“The universal global challenge is how countries can turn uncertainty into opportunity by strengthening resilience, restoring stability and laying the groundwork for durable growth,” the business school states.  

The US economy, however, appears to be facing the new year with a mix of strength and vulnerabilities. Experts foresee growth in this region’s economy of 2% next year, with some downside risks.

The IMF and World Bank both expect the sub-Saharan African economy to grow by more than 4% next year, describing the region’s economy as resilient. However, there may be downside risks from global trade uncertainty, high external debt and major job deficits.

The business school says the South African economy may have reached a turning point and that, if the right decisions continue to be taken and implemented, elevated policy uncertainty is reversible.