Economist warns S.A Q2 GDP could also see a contraction - CNBC Africa

Economist warns S.A Q2 GDP could also see a contraction


by Trust Matsilele 0

Economists says S.Africa has hard work ahead despite ‘positive ratings’.PHOTO: Wikipedia

For the first time in six years South Africa’s economy has shrunk on a year ago basis, according to Mike Schussler, Chief Economist at

He added that this was more negative than what most people thought.

Africa’s third largest economy saw the economy shrinking by 1.2 per cent in the first quarter of 2016 with some economists mentioning the possibility of recession.

“The first quarter of this year is smaller in comparison to the first quarter of 2015. May registered a train smash fall of three per cent. If Fitch did the ratings two weeks ago they would have given South Africa a negative rating,” he warned.

“The worst thing is that it does not look like the second quarter will be any better. We have met three rating agencies without making any significant change in the last two months; this is a significant public relations victory,” added Schussler.

“The hard work is coming and there are tough political decisions to be made, challenges to do with the labour markets and policy changes.”

He also called for a re-look into the red tape challenges.

“We have a lot of red tape and this needs to be addressed, this also includes changing individuals who are entrenched in certain systems,” said Schussler.

“For the first time in the history of the country, we have seen so much collaboration from labour, business and government

George Sebulela, Chairman of the Black Business Council said the outlook was positive due to government and private sector partnerships.

“Private sector has committed to put their money where their mouth is, with about 10 billion rand target with 10 per cent of that having being raised,” said Sebulela. The fund will assist to assist struggling SMEs.

“We have no doubt that confidence expressed by ratings agencies; the challenges raised are controllable such as political decisions and labour issues.”