South Africa ended its financial year with a smaller than expected budget deficit as its firms weathered the recession surprisingly well, though manufacturing activity stumbled in March, data showed on Thursday. The country's revenue agency (Sars) collected 598.5 billion rand ($82.12 billion) in tax in the 2009/10 financial year ended March 31, compared with 590.4 billion rand forecast in February's budget.
That helped trim the deficit to 6.8 percent of GDP from an expected 7.3 percent. Finance Minister Pravin Gordhan told a news conference Sars expected to collect 648 billion rand in taxes in the 2010/11 financial year. The budget moved back into deficit in 2008/09 after a few years of small surpluses, as South Africa ramped up spending to counter the effects of its first recession in almost two decades after depressed domestic and global demand hit the key mining and manufacturing sectors.
The country's purchasing managers index, a key measure of output, dipped in March, retreating to a seasonally-adjusted 55.6 from a near-three-year high of 60.4 the previous month in its first monthly fall since last July. The March reading was nevertheless the second highest in three years, and index sponsors Kagiso said the fall did not contradict signs that the recovery of Africa's biggest economy remained on track.
Gordhan said the economy had not been damaged as much as previously thought by the recession, which slashed nearly 500,000 jobs. "What we thought was going to be a weak performance on the part of corporates turned out much better," he said.
"Although we've had difficulties, infrastructure investments on the part of government have kept the economy going better than we thought." But Gordhan stressed the need for growth "that is more labour-absorbing", pointing out that only 18,000 new jobs had been created in the last quarter. Economic recovery has been led by a recovery in manufacturing, the second largest contributor to GDP which grew by 10.1 percent in the fourth quarter of 2009.