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South Africa’s economy may be nearing the end of its slump: economist

South Africa’s economy may be nearing the end of its slump: economist

After years of slow grow South Africa may be over the worst, and could start seeing growth by 2021/22 according to leading economist Mike Schüssler.

Schüssler, owner of economic consultancy economists.co.za, said the first quarter will likely be a disaster with corruption and SOEs taking some time longer to sort out.

In industries such as mining, Schüssler expected a continuing drop in employment figures for the next two years– partly due to automation, but mainly due to the fact that commodities markets had changed and Eskom was not performing well at all.

Reports suggested that South Africa’s economy may have contracted in the first quarter of the year, however, Bloomberg reported that it is unlikely to be enough to sway the Reserve Bank into reversing its November rate increase because inflation forecasts still hover close to 5%.

Recession?

There is a probability that South Africa will enter another recession given the weak performance in the first quarter of 2019,

Old Mutual Group chief economist Johann Els said at roundtable event on Tuesday that South Africa could enter another technical recession, having done so in 2018.

“I’d say there’s a 50-50 chance SA will see another technical recession this year,” Els said, as reported by BusinessDay.

Els said that he expects the first-quarter GDP to contract 1.5%-2%, however, he added that the next five years will be better than the last five.

In January the World Bank lowered South Africa’s GDP growth rate to 1.3% from 1.8%., while last month the International Monetary Fund slashed its estimate from 1.4% to 1.2%.

Schüssler said he was cautiously optimistic about South Africa’s growth prospects: “I think we can expect to start seeing growth after a few quarters. We’re probably over the worst, and by 2021/22 we could be back at 3% GDP growth,” he said.

To help spur this growth, the country needed to be tougher on crime and labour protests, and ease tax and legislation that hampered small business growth.

“A profit motive is what enables businesses to grow – if a business doesn’t make a profit it simply can’t create jobs. So the government needs to reduce the risks of business investment and reduce the red tape in the way of small business growth,”he said.