Policy uncertainty hits new high

6 October 2025 — Why is policy uncertainty at a new high point? Why is political survival becoming the most important issue for the ANC? Is BEE policy on the verge of a fundamental change? Can the EFF survive Malema’s guilty verdict? How have markets reacted to the US government shutdown?

Policy uncertainty hits new high

The Northwest University’s Policy Uncertainty Index for the third quarter of 2025 marked a record high of 81 in data released last week. It was measured at 75.9 in the second quarter. On this index, 50 marks the neutral level, with readings above that number signalling greater uncertainty.

The increase in uncertainty was blamed on a combination of international and domestic factors, including trade uncertainty under the impact of United States (US) tariffs and low fixed investment in South Africa, which contributes to the country’s slow economic growth.

Political uncertainty resulting from the rapidly shifting electoral fortunes of the African National Congress (ANC) as well as the Madlanga Commission revelations means that the index is likely to remain elevated at least into the medium term.

The US State Department’s recently released Investment Climate Statement on South Africa mentions policy uncertainty first in a list of “challenges” contributing to low growth. Others include corruption, violent crime, economic mismanagement, endemic energy and logistics crises, a lack of regulatory oversight and enforcement, a lack of service delivery, and shortages of skilled labour.

The World Uncertainty Index for South Africa, published by the Federal Reserve Bank of St Louis, also tracks rising levels of uncertainty for South Africa, with its latest Q2 2025 reading of 1.13 marking a post-Covid high.

At the same time, it is worth bearing in mind that it is not just uncertainty about policies that matters for economic growth, but also the quality of the policies themselves. Anti-growth policies about which there is a high degree of certainty can be equally harmful economically.

Madlanga Commission an ANC headache

The pressure bearing down on the ANC – distilled most recently in the form of the Madlanga Commission – means issues of national governance, policy reform, and service delivery, are unlikely to receive adequate attention and resources over the next two years. Fikile Mbalula, the secretary-general of the ANC, said at a recent press briefing: “We know that our oganisation is infiltrated by criminal elements, and it extends to cartels, sometimes not in the knowledge of comrades who are in positions of leadership.”

For President Cyril Ramaphosa, Mr Mbalula, and their leadership colleagues, political survival and protecting their respective support networks are going to occupy much of their time. The implication for the Government of National Unity (GNU) is that the ANC in that forum will be less likely to support pro-growth policy reforms. Such proposals will be resisted where they threaten vested interests.

Nathi Mthethwa, South Africa’s ambassador to France and a former police minister, was found dead in Paris last week, having apparently taken his own life. Mr Mthethwa had been named at the Madlanga Commission for having politically interfered in the police to halt the prosecution of Richard Mdluli, a former head of crime intelligence who has been implicated in corruption, fraud and theft.

The current head of crime intelligence, Lieutenant-General Dumisani Khumalo, said at the Madlanga Commission that a large crime syndicate he called the “Big Five” – involved in drug smuggling, contract killings, kidnappings, tender fraud, extortion and vehicle hijackings – had infiltrated the police, the judiciary, and the business and political class.

He said: “The Big Five have already penetrated the political sphere and there are documented cases of high-profile political connections. Senior politicians are alleged to be complicit and/or wilfully blind to the syndicate operations. It is one of their hallmark features, that they have penetrated the political sphere.”

The implication is that revelations made at the commission hearings will increase instability within the ANC as embarrassing relationships are exposed and the pressure on law enforcement agencies to act increases.

Commodification of BEE proposed

The government has floated the idea of offering unlisted companies the option to pay 3% of their gross revenue as a “voluntary levy” into a Transformation Fund and receive automatic broad-based BEE Level 3 recognition in return.

A higher BEE status gives companies preferential access to government tenders as well as higher standing with other private companies that sell goods and services to the government. The proposal would significantly ease the compliance burden on companies that seek a higher BEE level, allowing them to achieve it by simply making a payment to the state.

However, business should be wary about endorsing this proposal despite its superficial attractiveness. While the contribution was set at 3% of revenue in the proposal, the government could ratchet this up as it seeks to squeeze more money out of the private sector.

Furthermore, while presented as a voluntary contribution at the outset, the levy could be made compulsory in time, pushing businesses operating with low profitability margins over the edge into failure. This is a significant risk in an economic environment where many businesses are already contending with challenges that depress their margins, ranging from crime to logistics, water and electricity problems.

The proposal also retains the race-based features of South Africa’s public economic policy, which have resulted in severe market distortions and low growth. The Transformation Fund would be a prime target for corruption in a context where the leading party in the GNU, the ANC, is already facing scrutiny over its links to criminal networks.

Our assessment is therefore that the proposal is fatally flawed despite looking superficially attractive. It does not represent the kind of pro-growth, investment-generating reforms that the economy needs, and will result in more economic drag if implemented.

EFF headwinds continue

Last week the East London magistrate's court found Economic Freedom Fighters (EFF) leader Julius Malema guilty of discharging a rifle during a 2018 rally. Commenting on the ruling, Mr Malema said he would fight it all the way up to the Constitutional Court. The matter has been postponed to 23 January 2026 for sentencing. The maximum sentence that could be imposed is 15 years’ imprisonment.

Mr Malema will aim to generate maximum political mileage out of these developments by using the media attention they attract to present himself as an unfairly persecuted martyr. Against a backdrop of dwindling political relevance, this represents a welcome opportunity.

The EFF faces considerable headwinds at present. It lost over 350,000 votes from the 2019 elections to the 2024 elections and was relegated from third to fourth place. Since then, Mr Malema has lost many of his top party leadership, mostly to the uMkhonto weSizwe Party, a political rival.

In June, Mr Malema was refused entry to the United Kingdom for his incendiary rhetoric. In August, he was convicted of hate speech for remarks he made at a 2022 rally. In September, a new book was published that describes how Mr Malema leveraged his clout to enrich himself and fund his party. Now he faces a long legal process, with the possibility of prison time at the end.

Whether he and his party can successfully parlay the legal case into a martyr image could decide the future of Mr Malema’s political career – and that of the EFF.

US government shutdown

After the US Senate failed to vote for a stopgap government funding bill, the country entered a government shutdown on 1 October. This followed the expiry of a full-year continuing resolution passed in March. With neither party willing to separate budget mechanics from policy demands, appropriations authority has lapsed.

In the Senate Republicans hold 53 seats, Democrats 45, and Independents 2, but the 60-vote filibuster threshold means neither proposal offered by the parties on 30 September could secure enough cross-party support. Hundreds of thousands of essential employees must work without pay while non-essential staff are barred from working, slowing government services.

As the US Embassy in Pretoria confirmed, South Africans engaging the US, as well as American citizens residing in South Africa, will not be directly impacted by the shutdown as visa and consular services continue to operate.

However, the shutdown has US legislators focused on domestic issues. The continuing resolution could have been used to attach a possible African Growth and Opportunity Act renewal bill, but that window has now closed. The Senate hearing of the nomination of Brent Bozell for US ambassador to South Africa will also be further delayed.

The last shutdown in 2018-19 lasted 35 days, the longest in history, and with positions hardening, this one could rival it. Initial market reactions, however, have brushed off the shutdown, suggesting investors expect the impasse will be resolved sooner rather than later.