South Africa is expecting a 6% budget deficit in the 2009/10 financial year, as the global economic slowdown hits the local economy, Monitoring and Evaluation chief director Ronette Engela said on Friday at the release of the ‘Development Indicators'.

She also said that the gross fixed capital formation (GFCF), which increased from 20,6% of the gross domestic product (GDP) in 2007, to 23,2% of the GDP in 2008, had slowed "markedly" in the final quarter of last year and in early 2009.

Annualised quarter-on-quarter growth in the GFCF slowed to 3% in the fourth quarter of 2008, and to 2,6% in the first quarter of 2009, following three years of double digit growth.

"This is broadly in line with the decline in economic activity in the South African economy" Engela added.

GFCF refers to the addition to a country's fixed capital stock. South Africa's GFCF target is 25% by 2014.

The deterioration in global economic conditions "adversely" impacted on South Africa's economy, which is in its first recession in 17 years.

The GDP growth for the whole of 2008 slowed to 3,1%, compared with an average growth of over 5% during the previous three years.

Economic growth was down by 6,4% and 3%, respectively, in the first and second quarters of the year.

Engela also said that the economic slowdown and a shortage of skills were impacting on the country reaching its research and development (R&D) expenditure target.

Since 2004, government's R&D expenditure has increased significantly to reach R16,5-billion, or 0,95% of the GDP by 2006/7.

She said that while the target of 1% is attainable, the biggest risk to South Africa achieving its R&D objectives was the low proportion of high school science and maths passes and graduates from Science Engineering and Technology disciplines.

Despite the increase in the percentage of graduating students qualifying in science, engineering and technology, from 25,5% in 1995, to 28,8% in 2007, the number of students remained "very low", when compared with the scientific skills shortage.

During 2008, the distinction between higher grade and standard grade mathematics was phased out, and mathematics literacy and mathematics were introduced. Engela noted that as a baseline, 136 184 mathematics passes and 210 134 mathematics literacy passes were recorded in 2008.
reiterated that South Africa was falling behind in the development of skills, and said that the

"Generally, the country is doing well in global economic rankings, although it is clear that in some sub-indices, especially labour force skills, other countries are advancing faster than South Africa."

Meanwhile, the positive gains attained during an increase in employment, from 11,3-million in March 2003, to 13,6-million in March 2009, and the attendant decline in the unemployment rate from 31,2% to 23,5% over the same period, was now beginning to be eroded by the current economic slowdown.

"The country has witnessed massive job losses in the recent months. About 267 000 jobs were lost in the second quarter of 2009," Engela stated.

She added, however, that the massive public-sector led construction package, and the expansion of public works projects were assisting in what would have been an even greater unemployment challenge.

"Over a five-year period up to March 2009, the expanded public works programme exceeded its target by creating a cumulative total of 1,65-million work opportunities, and its second phase is planned to create a cumulative total of four-million work opportunities."

Speaking at the launch of the ‘Development Indicators', Minister in the Presidency for National Planning, Trevor Manuel stated that in compiling the report, the Policy Unit in the Presidency had taken about 76 indicators into account. He noted that by drawing from a diverse base of resources, a more accurate picture could be drawn about the conditions surrounding South Africa's economy, and its citizens.

Manuel noted that this edition of the report would also find more resonance within the decision-making process, as government had agreed that the report would be used in a series of discussions around the outcome of policies.

"We are saying that this document should help a more informed discussions around ourselves as South Africans. It is unusual for government to present in this way, but we are doing it with the confidence that we will raise the level of discussion," Manuel added.