Since the Policy Uncertainty Index (PUI) was successfully launched at a media conference in Johannesburg in February this year, three quarterly index reports have already been published.

 

The aim of the PUI is to give South African decision-makers guidance to better understand and manage the effects of policy uncertainty on the economy. A healthy, prospering economy benefits everyone in the country and the PUI will give decision-makers insight into the impact their policies have on the welfare of South Africa.

 

The PUI is the first of its kind for South Africa says Prof Raymond Parsons of the School of Business and Governance and leader of the PUI team. It is in line with a global trend that has already taken off in the United States, United Kingdom, Germany, France, India and China.

 

The birth of the PUI

 

“Hardly any economic assessment in recent years mentions the South African economy without referring to policy uncertainty,” says Raymond. “So, I asked myself the question whether it was possible to capture this in a credible index that is adapted for South African circumstances.”

 

He says he started doing research and found almost a dozen indexes internationally. “We then set up a task team together with the School of Economics to craft an index specifically for South Africa.”

 

 

​The Policy Uncertainty Index (PUI) was successfully launched at a media conference in Johannesburg in February this year.

 

Three components to the index

 

The South African PUI has three underlying components: news coverage of uncertainty, the views of a group of leading economists on levels of policy uncertainty, and input from the Bureau for Economic Research at the University of Stellenbosch on policy constraints to doing business among manufacturers. A preliminary threshold of 50 was set. Any increase above 50 reflects greater policy uncertainty while a decrease below 49 reflects less policy uncertainty.

 

The value of PUI

 

The real value of the PUI lies in its ability to reflect people’s collective sentiment about the policy environment over a period of time.

South Africa has enormous economic growth and development challenges and nothing less than a responsive and coherent policy framework will do. The PUI is well placed to reinforce this urgent imperative.