The North West University’s Policy Uncertainty Index (PUI) for the first quarter increased sharply to 59.8 from 53.6 in the previous quarter, the highest and deepest into negative territory since the PUI’s launch five years ago.
The big exogenous shock of Covid-19, together with ratings agency Moody’s decision to downgrade the country’s rating to ‘junk’ status, contributed to the strong spike in the quarter's PUI, NWU Business School professor Raymond Parsons says.
The policy uncertainty and related factors which contributed to Moody’s decision on the country's investment would nevertheless have kept the quarter well in negative territory, now aggravated by the global impact of Covid-19 on the country’s economy, he points out.
He posits that the PUI, along with other recent high-frequency data, confirms that the economy is now in for a tough time, with the major economic impact to be experienced in the second quarter; and further, negative growth likely for the full year.
To help sustain business and consumer confidence, Parsons suggests that government must ensure households, firms and vulnerable groups benefit from policies and measures that are rapid, efficient and flexible.
Moreover, he notes that regulations that are found to be unworkable or counterproductive should be reviewed or amended.
Parsons emphasises that only urgent action will enable many firms, especially small, medium-sized and microenterprises to survive the next few weeks.
He notes one positive as the commitment by Finance Minister Tito Mboweni to establish a unit to move forward with structural pro-growth reforms.