Study Unit 1

The South African economy

1.1 The economic reality
W hy should primary school learners know w hat is happening in the South African economy?
o to educate learners economically
o to protect them against the economic problems they may encounter.
o be informed about the w orld of w ork, and be prepared to survive in it.
1.1.1 Defining economics
- E conomics = social science that studies the follow ing processes:
o Producing goods and services from limited or scarce production means available to man;
o dividing the goods and services among the people
o eventually using them to optimally satisfy man' s needs
o w hich are unlimited, in order to achieve the max imum possible prosperity.
- unlimited needs must be satisfied w ith limited (scarce) resources is central to this definition.
- Resources used to produce goods and services = production factors.
- 4 production factors
o Natural resources: ex ample w ater, gold and diamonds.
o Labour: all physical and mental talents of the country' s inhabitants
o Capital: equipment and machinery
o Entrepreneurship: ability to combine the other three production factors to deliver products
1.1.2 Economic literacy
involves a know ledge of the economy
know enough to be able to hold his or her ow n in the economic w orld and in the world of work.
important that the learner be introduced to certain basic economic concepts.
1.1.3 Participants in the economy
households (individual members of the community)
the government or the authority
business enterprises (manufacturers and providers of goods and services)
1.1.4 The Eonomic Process
people need certain goods & services , a process of production, ex change of goods and consumption was started.
h u m a n need s
(give rise to)

p r od u ction of g ood s
(gives rise to)

ex ch a ng e of g ood s
(after w hich)

consumption takes place

(needs are satisfied)

consumer and producer forced to make choices about what to consume and what to produce
1.1.4.1 Production
What needs to be produced - the consumer wants the specific producer's product and is prepared to pay for it.
How to produce - materials limited, careful choices to production techniques, production process be efficient, economical
For whom to produce - usually directed at a specific area of the consumer market
1.1.4.2 Demand and supply
price of a product determines how much of the product is sold
Demand is not the same as need
willing to pay money in ex change for their needs, their needs become demands.
consumer influenced by prices and person who wants to produce a product
1.2 The South African economic system
South Africa has a mixed economic system = system in which traditional mechanisms, command mechanisms and market mechanisms
all play a role.
Three coordinating mechanisms in economic systems:
Traditional mechanism oldest, commonest, traditional society members of the community produce the same products, use the
same inputs and production techniques and they divide the yield amongst each other.
Command mechanism: economic actions determined by a central authority - makes decisions what is produced, how it is produced
and how it is divided. (was characteristic of the Soviet Union and China.)
Market mechanism: people are free to own their own property, may trade in anyway they choose, spend their money anyway they
want, and w here the government does not control the price.
-

SA economic system has elements of command economy: enterprises directly or indirectly owned by state (Iscor, Telkom,
SABC), certain prices are fixed, government interfere in free movement of production factors through influx control and job
reservation
SA = market-oriented mixed economic syste: people free to decide what they want to do, obey certain rules and laws, private
ownership and initiative important, state plays an important role

State inteference: combating production of harmful goods, control monopolistic tendecies, ensure health and safety

1.2.1.1 Facts about a market economy

(1) have individual property rights and price system functions properly
(2) prices tell people w hat to produce, how much to produce, what skills to acquire, etc
(3) act in someone else' s interest. This phenomenon is called the invisible hand.
(4) people try to make money for themselves
(5) Competition is very important in a market economy.
(6) price system plays important role in any modern society. Consumers really determine the prices of products or services
(7) In a market economy, the society allow s individual property rights
1.3 Economic Growth, inflation and unemployment
1.3.1 Economic Growth
determined by total production over a period of time = GNP (total good and services produces in specific year in country)
E conomic grow th = GNP increases
no grow takes place from year to year, stagnation sets in.
grow decreases experiences an economic decline / slump / recession.
1.3.2 Inflation
indicate a drop in the buying pow er of money as a result of a general rise in prices of goods and services.
In simple terms, inflation is an increase in prices over a period of time
1.3.3 Unemployment and the world of work
May be classified as unemployed if:
between ages 15 65
is unemployed
is available to do paid work
actively seeks paid work
H ere are a few facts regarding the present and future w orld of w ork in South Africa:
enormously oversupplied basic labour market
serious shortage at the upper end of the labour market.
Unemployment is one of the w orst problems
1.3.3.1 Results of unemployment
(1) their pride and human dignity are affected and their standard of living drops
(2) Society suffers - increase in crime, then an increase in frustration, often expressed in violence
(3) leads to the loss of valuable and potential
(4) The effect on stability in society has already had a negative impact on general confidence, mutual respect, tolerance and peace.
(5) negative effect on people' s perception of the success of the market economy
(6) Macroeconomic conseq uence: country cannot achieve its full potential in the production of goods and services
(7) microeconomic conseq uences: someone w ithout w ork and w ithout an income is dependent on someone else, production
underutilised.
(8) Research in the USA has show n that if the unemployment figure increases by
1.3.3.2 Causes of unemployment
SA is developing country and has lowest productivity figures
Population growth is among the highest
Mechanisation of economy is proceeding to rapidly dramatic wage increase, labour unrest and stirkes, shortage of skilled
workers)
General population entering job market without career ualifications / skills owing to a serious lack of schooling and training
Learners still choose learning programmes that do not provide access to careers on offer
Small percentage of grad 12 learners engage in further studies
1.3.3.3 Solutions to the unemployment problem
be informed about what is going on in the world of work
future world of work will be characterised by shrinking formal employment opportunities, great competitiveness and
optimisation need strong sense of personal commitment and value creating competencies
identify the needs of your community
start telling young learners bout job strategies
o teaching learners to turn their abilities into skills; cope witn unemployment, cope with underemployment
show learners trend in new world of work are towards more:
o skilled workers, part-time work, self-employment, entrepreneurial skills
1.4 The government sector
government important participant in mixed economy.
The government sector in South Africa consists of
tcentral government, involved in national matters such as water supply, defence and the country' s foreign affairs
regional (or provincial) government, concerned with regional matters such as housing, health services and edu
local authorities, concerned local matters such as the supply of water, electricity, roads and sewerage systems
public corporations & other government business enterprises eg. Eskom, Telkom, Transnet and Rand Water

1.4.1 Tax
Compulsory payments to the government and most important source of government income
Classified into tw o main categories:
Direct taxation: Personal taxation is the most important form of direct tax ation. Personal taxes paid on the taxable.
Progressive personal tax system in SA - higher incomes contribute higher percentages
Indirect taxation: Value-added tax (V AT) , customs and ex cise duties are the most important forms of indirect tax ation. After
personal taxation, V AT is the government' s largest source of income.
1.4.2 Fiscal policy and the budget
a policy regarding the level and composition of government spending and tax ation, w hich is know n as the fiscal policy. Fiscal
refers to the government' s financial activities.
government' s financial policy is called fiscal policy
Most important fiscal policy instrument is the budget.
fiscal policy is government attempt to influence the economy by changing the expenditure and/or the taxation in order to limit
unemployment or inflation to a minimum and to promote economic grow th.
1.4.3 The Reconstruction and Development Programme ( R D P )
The most important issues addressed by the RD P are:
the promotion of j ob opportunities
development of infrastructure (housing, w ater and electricity)
eq ual rights in the w orkplace
eq ual education opportunities
free medical services for deserving recipients
1.4.4 The government and politics
accepted economic grow th is closely linked to the political climate:
South Africa' s economy (a mix ed economy) consists of different economic pressure groups
important pressure groups in South Africa can be divided into three categories:
private business enterprises, represented by organisations like the South African Business Chamber (SABEC) and the
Afrikaanse Handelsinstituut (AH I)
labour organisations, the largest of which is the Congress of South African Trade Unions (COSATU) + all its affiliates
civic associations, like SANCO (the South African National Civics O rganisation) , consumer organisations, etc

1.4.5 The government and the employee

government believes free-market system has greatest economic and personal adv.
Leads to economic developmetn and growth higher standard of living
Government contributes to healthy labour relaions by instituting the following collective bargaining bodies
o Industrial councils permanent statutory institution that aim at maintaining healthy labour relations between employers and
employees
o Industrial court settlement of labour disputes with the aim of preserving industrial peace
1.4.5.1 The role of the government in career development
most important recognised rights of South African employees are the follow ing:
. the right to be allowed to work
. the right to reasonable remuneration and service conditions
. the right to access to training and retraining
. the right to organise and to belong to a labour organisation
. the right to negotiate and to bargain collectively
. the right to protection of safety and health
. the right to certainty of ex istence
. the right to security of labour and protection against unfair labour practices
1.4.5.2 The level of skills training
following levels of skills are distinguished in South Africa:
o An unskilled occupation = no training:cleaners, labourers, bus conductors and hospital porters. Training done on the job
o A semi skilled occupation = certain amount of basic training: factory machine operators, typists or waiters. Refresher courses
are given so that employees can improve their skills when necessary.
o A skilled occupation = several years of training is necessary. Jewellers, electricians, carpenters, secretaries and building
supervisors. During training people become aware of the commitment expected if they are to maintain the ex pected standard
of service.
o A professional and managerial occupation = high q ualifications. Specialisation in certain direction. lawyers, social workers,
teachers, doctors, engineers, opticians and chemists. SA lack of skilled labour, huge numbers of people in the country who do
not have the necessary skills to make a productive contribution to society.

1.5 The monetary sector and other important financial institutions that play a role in the economy
1.5.1 Monetary policy
fiscal policy = use of government spending and taxation to influence economic activities, monetary policy involves the manipulation of
the amount of money and interest rates.
Monetary policy = measures used by the monetary authority to influence the supply of money or the interest rate in the economy in an
attempt to bring about price stability, full employment and economic growth. Implemented by the central bank.
Reserve Bank exercises the follow ing five main functions:
o controls the issue of bank notes and coins.
o acts as banker to other banks.
o acts as banker to the government.
o stores the country' s gold and other foreign reserves.
o is responsible for formulating and implementing the monetary policy.
1.5.2 Important financial institutions / mediators
1.6 The foreign sector
all the countries in the rest of the w orld and all the
SA economy has always had strong foreign links with the rest of the world
SA has open economy - goods produced in SA sold to foreign countries & goods available in SA are manufactured abroad.
1.6.1 International economic organisations
1.6.2 Foreign exchange and the exchange rate
o foreign monetary units callec foreiggn exchange
o foreign exchange canb e obtained by exporting goods and services
o imports and exports important role in SA economy
o SA exports mainly minerals (gold, platinum, coal, diamonds)
o Exports less than impots = shortage in balance of payments
o Inclined to casue drop in value of rand in compairson with other monetary units
o Reand depreciates against other monetary units

Study Unit 2
The individual and the economy
2.1 People and the economy
economists study economic behaviour of people
People (individuals) are central to economic science
2.2 Human needs
Divide human needs into the follow ing groups:
o Natural needs: light, air, water, etc.
o Essential needs: food, clothes, housing and recreation.
o Conventional , essential needs: not essential for human survival and contribute to personal comfort and welfare, for example
cellphones.
o Luxury needs: cars, radios, etc.
o Cultural needs: education, music, etc.
o Collective needs: maintenance of law and order, education, etc.
2.3 People as consumers
2.3.1
o
o
o
o
o

The rights of the consumer

The right to correct info
The right to safety
The right tot free choice
The right to obtain products or services at realistic prices
The right to make their need known

2.3.2 Buying and selling

Before a sales agreement is binding on the seller and the buyer, they have to agree on the follow ing:
o The article ( item )
o The price to be paid.
goods bought to be transported and a freight rate is charged. buyer and seller should agree if freight rate should be included in the
price. Following quotations of prices in sales contracts:
o . Local price. This price does not include transport costs. The buyer has to pay the transport costs.
o . Free on rail ( F O R ) . The seller pays the transport costs to the seller' s station.
o . Rail charges paid. The price includes the rail charges, w hich the seller pays.
2.3.3 The quality of good s
Sellers can indicate the q uality of their goods as follow s:
o A description. The seller describes the q uality of the article.
o A sample. The seller sends an ex ample or a small part of the goods to the buyer, for ex ample soap, material, toothpaste, w
ood or w ool. This part or sample has the same q uality as the goods that w ill be bought.
o A trademark: special mark or sign on the product. mark must be registered and may not be used by other sellers. The use of
the trademark allow s the seller to show that all his products are of the same standard.
2.3.4 Production of good sand services
` things' or means are needed to produce goods called production factors
Production factors combined to produce completed articles bought by people to supply their needs
four production factors are needed to produce goods:
o natural resources or raw materials: most cases limited or scarce
o w ork or labour: physical and mental talens of man. Populations level of skills and productivity play important role in ability to
supply the needs
o money or capital: equipment and machinery. Capital included all the articles that have been manufactured and used in
producing goods and services
o entrepreneurship: someone in charge to plan, organise and advise in production process. Must see that necessary ra
materials are available, worker knows exactly what to do, necessary capital is provided
2.3.5 The consumer and the retailer
Wholesalers:
purchase large quantities at a time
only sell certain goods
consumers will have to visit a number of different wholesalers to satisfy their daily needs.
Wholesalers are not easy to reach because not situated near residential areas
consumers will have to pay cash for all the goods they buy.

Retailers
fulfil a very important function in satisfying human needs because they handle the collecting, storage and distribution of the articles that
consumers need.
Deliver other important services to consumers:
o bring the goods within easy reach of the consumers.
o sell goods according to the quantity required by consumers.
o grant credit to clients until they receive their salaries or wages.
o provide in the daily needs of their clients
o advertisements and exhibitions, notify consumers of new products, changes in fashion and even price changes
o deliver goods with well-known trade marks to the homes of clients.
2.3.5.1 Profit
entitled to compensation when he or she delivers a service.
an article sold at a higher price than what it was bought for, the difference is the profit.
Retailer is entitled to a profit because he or she renders a service.
(a) Is the retailer's profit too high?
clients will go and buy from other businesses in the vicinity
(b) Factors which influence profit
o Kind of business
o The element of risk
o The competence of the entrepreneur
o Turnover and market size

o
o
o
o

New production techniques

Business cycles
A rise in unfore seen costs
Competition and price wars

2.3.5.2 Retailers
(a) T he general d ealer
o in every town or suburb
o order a large variety of goods from wholesalers and sell them to consumers.
Serv ices offered by general d ealers to consum ers
o usually do not have a very large clientele, they offer a large variety of articles to make a profit.
o They do not specialise in specific types of articles
o stock many kinds of goods, for ex ample clothing, groceries, hardware and building materials.
o variety or choice not large.
o If a consumer w ants to buy on credit, he or she only has to open one account.
(b) The self-service shop
o very common and important kind of modern retailer is a self-service shop.
o called a supermarket.
Serv ices offered by superm ark ets to consum ers
o large variety of goods are provided
o Consumers can move around freely and compare different goods before buying anything
o consumers serve themselves
o supermarkets do not need as many sales personnel and their prices are usually lower.
o Consumers can make all their purchases at one shop and they have fewer parking problems.
(c) The speciality shop
commonest kind of retailer specialises in selling one kind of article. (eg butchery, green grocer)
Serv ices offered by speciality shops to consum ers
o very large variety of one kind of item is offered to the
consumer
o has a large choice

o
o

dealers know their products very w ell and can offer

sound advice.
prices are also not too high

2.4 Productivity
o relation between real output (volume of goods and services produced) and amount of input used to produce output
o also described: average amount or number of products that every labourer produces per hour.
o If the output increases while the input remains unchanged, it leads to increased productivity.
2.4.1 The importance of productivity
rise in productivity, and especially in productivity of labour, is important for at least three reasons:
o most basic means of improving real w ages and therefore also living standards
o maintaining a higher economic grow th rate.
o is an anti-inflationary force because it compensates for increases in monetary wages, or helps to absorb them.
2.4.2 Personal productivity
defined as a person's own level of efficiency.
E fficiency: completes a task with the minimum wastage of time, materials and money
one' s ability to achieve important results w hile maintaining high standards
Hints on achieving efficiency:

o
o
o

Set your self goals

Evaluate how you spend your available tim e
Work more efficiently.

o
o

Learn to say no
Strive towards quality and quantity

2.5 Personal financial management and planning

2.5.1 Money
means w hereby human needs are satisfied / known as a means of payment
A good currency (medium of ex change) should comply w ith a number of requirements. A currency should be:
o Generally accepted
o Easy to recognise
o Durable
o Stable
o Easy to handle
o Scarcity
o Homogenous, easy to handle, easy to divide up
Money is used not only as a means of payment but also as:
. A measure of worth: value of an article is determined in rands and cents.
. A bearer of worth: in the form of coins and notes represents value w hich remains the same over relatively long periods
. A standard of postponed payment: bought on credit
transaction: agreed on transfer of value from one party to another
Source documents: original records of individual transactions. serve as permanent records of transactions and should always be filed
systematically, according to type, for later reference
Money management and personal financial planning are among the most important skills needed in today' s world
2.5.2 Instruments associated with money
2.5.2.1 Cheques
o Written instruction by cheque account holder, ordering bank to pay money to specified person / bearer of cheque
2.5.2.2 Postal orders
written instructions from one post office to any other p/office to pay the stipulated amount to the person named on the order.
2.5.2.3 Credit cards
issued by financial institutions
Credit cards have the follow ing advantages:
o need not carry large amounts of money
o importatn way of obtaining credit
o easier tha paying by cheque
o receives a singele account for all the purchased done by credit card
2.5.3 A budget
makes you aw are of how much money you have and w here it goes.
It can help you save and make your money grow to achieve your goals.
2.5.4 Savings
ways to fight inflation:
The simplest w ay (though not the best
savings account w ith a bank or building society. Earns interest and grows.
The amount of interest that your money earns depends on a number of factors:
o The amount of money that you save
o Length of time you save your money.
o Bank or building society you choose
o Interest is taxable
Interest is what makes your money grow
the money that banks pays us for saving with them is called interest
2.5.4.1 The power of savings
help us to reach our future goals
put us in a powerful financial position
when we buy something cash we often pay less than if w e had to borrow money or use credit.
2.5.5 Bank overdrafts
is not a loan
used to improve or supplement your cash-flow over a short period.
2.5.6 Credit
Open an account, given certain amount of credit - you can buy up to this limit.
buy something w ithout paying the full price all at once.
agrees to pay off a certain amount every month over a period of time
2.5.7 Investment
People invest their money by buying shares in businesses and, in return, they ex pect to receive part of the profits made by those
businesses.
Money invested in shares grows in two ways:

o
o

pays out a part of its profits to people w ho ow n shares in the business its shareholders
If business is grow ing and making good profits more and more people w ill w ant to buy its shares. This increases the value of
the shares.

Study Unit 3
Entrepreneurship
3.1 What is entrepreneurship?
entrepreneur: owner of a business enterprise who, by risk and initiative, attempts to make profits.
Is someone w ho
o . recognises opportunities
o . dares to grasp the opportunities
o . is able to handle the opportunities
Bow ler (1996:5): business owner can be called an entrepreneur only when at least one of the follow ing five innovations is evident in
his or her business:
o new or improved product/service is introduced.
o new production or marketing method is used.
o An existing product/service is introduced to a group of customers w ho have never used the product before.
o new source of supply of raw materials or other components is used.
o new type of business is created.
3.2 Entrepreneurship and the economy
One of South Africa' s greatest limitations to economic development is the shortage of entrepreneurs
3.2.1 Reasons why entrepreneurs are important to the economy
o . E ntr ep r eneur s c r eate j o b o p p o r tunities .
o . E ntr ep r eneur s initiate th e p r o duc tio n p r o c es s .
o . W ith o ut entr ep r eneur s natur al r es o ur c es r em ain under gr o und and undev el o p ed.
o . E ntr ep r eneur s ar e c atal ys ts to gener ate w eal th and a h igh er s tandar d o f l iv ing.
3.3 Establishing a culture of entrepreneurship in South Africa
School leavers and people entering the job market faced w ith challenge of creating their own employment opportunities
3.4 Promoti on of entrepreneurship
establish mechanisms whereby children can actively become involved in entrepreneurial activities, and which can nurture their
entrepreneurial spirit.
3.4.1 The national Department of Education
Natioanl Department of Education has decided to introduce entrepreneurship education into government schools.
Department of Education aware: learners are able to contribute to the creation of wealth by acquiring an entrepreneurial spirit
E ntrepreneurship is therefore included in Curriculum 2005.
Curriculum 2005 is the new schooling curriculum in South Africa. Focus is to help learners to achieve outcomes
new approach to teaching and learning concentrates:
o understanding know ledge
o skills
o values, norms and attitude
New approach = O utcomes Based Education (OBE)
Intends to enable learners to ex perience learning in a holistic w ay
E ntrepreneurship falls w ithin the learning area of Economic and Management Sciences
The unique characteristics and scope of Economic and Mngt Sc
o the economic problem
o economic cycle
o reconstruction, sustainable growth and development
o the economic environment
o leadership and management (basic aspects of leardership, negotioant motivation delegation and conflict mngt, basic aspect of
mngt, marketing purchasing public relations and the development of human resources, right and responsibilities of mngt)
o entrepreneurship
o financial and consumer knowledge and skills
o learning area economic and mngt science
o learning outcome1: the economic cycle
o learning outcome 2: sustanibalbe growth and development
o learning outcome 3: mngt, consumer and financial knowledge and skills
o learning outcome 4: entrepreneurial knowledge and skills
3.4.2 Community involvement in entrepreneurship education
few examples of community involvement in entrepreneurship education:
o NTSIKA (enterprise promotion agency)
o Business Cinic at technikon Natal
o Richards Bay Minerals (RBM) Business Advice Centre (BAC) in Empangeni
o Entrepreneurship programmes on TV

Valuable info in printed media

3.4.3 Entrepreneurship at school level

Include learners who sell items or services
3.5 Factors which hamper the promotion of an entrepreneurial culture
youth is not venturesome and this leads to a lack of entrepreneurs
Our traditional and inherited systems of education and training have failed to create ` ` learning societies'
Research: 30 percent of learners are natural entrepreneurs at the start of their school careers, by the time they leave school
the figure has dropped to six percent
o schools focussed on preparing learners for jobs; concentrated on providing paper qualifications rather than useful skills
o syllabi are drawn up in such a way that learners are programmed to think like employees. They are not encouraged to take the
initiative.
o Teachers and parents are very set on academic performance and high marks. Learners are taught from an early age to give
correct answers, and different or innovative thinking is often discredited.
. Perseverance is hardly emphasised
Good reasons which motivate or force people to become self-employed (Possible motivating factors are)
that they
o . w ant to do their ow n thing
o . w ant to be in charge of themselves
o . w ant to make their ow n money
o . identify business opportunities
o . cannot find j obs or are unemployed
o . are retrenched and cannot find j obs
o . w ant to break aw ay from boring j obs
o
o
o