CHAPTER 1: ECONOMIC SYSTEMS

1.1.Definitions:
TERM DEFINITION
The way decisions are made about:
Economic System a. Organisation of factors of production.
b. Production and distribution of goods and services.
An economic system where people are free to trade their goods
Capitalism and services at the highest value and where the government
interferes as little as possible.
Communism All economic activities are controlled by the government.
A single seller of goods and services for which there is no
Monopolies
substitute.
Exploitation When people are used or abused.
A model of industrial structure where businesses compete to offer
Competitive market
the same product, and consumers have a demand for the product.
Property right The right to own property.
If the Government sells more than 50% of their shares in the
Privatisation
company to the private sector.
The global exposure and interaction of economies with trade as a
Globalisation key element.
International trade takes place.

1.2.Three types of Economic Systems:

An economic system is considered a mechanism by which the problem of scarcity and choice is
tackled. The THREE Economic Systems are:
1. Centrally planned system (also known as socialism)
2. Market system (also known as capitalism)
3. Mixed system

The differences between the economic systems revolve around the following issues:

WHAT is produced?

HOW (how much and by whom) does production take place?

FOR WHOM is it produced?

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 Economic Centrally planned
Market system Mixed system
System system

 Only what the  That for which there is a  Combination of what

government demand. people are willing to
WHAT is
approves. pay for and what the
produced?
government considers
important.

 The government  Businesses that compete  Both the government

decides how much make as many products and entrepreneurs
of each as they can sell to make decide on this
HOW does product/service is a profit. (depending on the
production take produced and who product/service in
place? should make it. question).
 Often no freedom of
choice.

 The government  For the group that can  Both the government
decides who receives afford to buy it. and the private
WHO is it the goods and consumer's needs are
produced for? services (after they taken into account.
have taken what they
need).

1.3.Characteristics of economic systems:

Economic Centrally planned

Market system Mixed system
System system

 Factors of production  Factors of production are  Factors of production

other than labour owned by the consumers. are owned by the
belong to the state. consumers,
Ownership
organisations,
 There is no private government, and
property. producers.

 Consumers and  Self-interest is the driving  Both consumers and

businesses as well as force in the system. producers are driven
Motivating the state work Consumers strive for by self-interest.
together for common prosperity and producers
benefit. strive for profits.

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1.4.Advantages and Disadvantages of economic systems:
Advantages
 Basic needs are met.
Centrally planned
 Waste is limited.
 Mass production is maintained due to
system
the use of monopoly enterprises.
 Full employment (workers are
employed so that their labour can be
used, if it is not profitable).
 Consumers have a wide range of
products and services to choose from.
 Flexible and adapt quickly to change
as they do not have to wait for the
government to issue directives.
Market system
 Businesses and individuals can choose
what they want to produce and how
much they want to produce.
 Market economic growth contributes
positively to economic growth because
capital naturally flows to places where  Duplication of goods and services always
the highest returns are achieved.
 Economic freedom that is achieved
when people work hard, they are
rewarded and can improve their
standard of living.
 The government is combined with
businesses for good economic growth.
 Mixed economies encourage private
businesses to make contributions to
citizens' welfare.
Mixed system
 Competition is promoted and citizens
are also protected at the same time.
 There is a balanced economic growth
that will lead to less unemployment and
more equal distribution of wealth.
 Freedom of choice creates competition
between firms, leading to better quality
products at lower prices.
 Government regulation can prevent
waste or pollution of scarce resources.
Disadvantages
 Choices of consumers are few, the variety
and quantity of goods and services offered is
limited.
 It is difficult to motivate workers as the
production targets are very high.
 Distribution of income, the state can decide
on distribution of income.
 Prices are controlled by the state.
 The government controls the economy as
little as possible, and it gives big businesses
too much control.
 There is a large gap between those with high
incomes and those with low incomes which is
causing economic and social inequality to
grow.
 Businesses are only interested in making a
profit rather than looking at the damage their
goods and services can cause to society.
leads to a waste of natural resources.
 Workers are likely to be exploited with low
wages just for the sake of more profit.
 Economic growth can be limited as the
government allocates many resources to
citizens' welfare.
 Too much government involvement in the
economy can encourage corruption.
 Income distribution is not fair and there can
be a large gap between rich and poor.
 Too much money spent on social grants
creates a huge burden on taxpayers’ money.
 Economic growth can be hindered by too
much government interference.
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1.5.Global Economy:
 Globalisation refers to the world becoming smaller, in other words communication and
transport bring people closer together.
 The term global economy refers to the way in which the economies of most countries in the
world have become interconnected.
 Countries become dependent on each other, and trade restrictions are lifted.
 The world has practically become one big market where all countries trade.
 Transport and communication constantly make trade between countries easier.
 It also gives domestic consumers a large amount of imported goods to choose from.
 Some people are critical of these new developments. They believe that they are a means to
strengthen capitalism. They feel that the economies of those countries that choose to have
more state control over production will be negatively affected because capitalist countries do
not trade with them.

First World Third World

Countries Countries

Developing
Developed Countries
Countries

 A developed and industrialised country characterised by political and economic stability,

democracy, the rule of law, a capitalist economy, and a high standard of living.

 A developing nation characterised by a population with low and middle incomes, and other
socio-economic indicators.

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 Activity 1.1
1. Name FOUR factors of production.
2. Define the term economic system.
3. Name the THREE Economic systems and briefly describe each.
4. Distinguish between capitalism and communism.
5. Which THREE questions can we use to distinguish between the economic systems?

Activity 1.2
Indicate whether the following statements are TRUE or FALSE:

1. An economic system is the way people decide the production, distribution and consumption
of goods and services.
2. All systems answer the three basic questions in the same way.
3. A planned system, a central government makes the decisions regarding what, how and for
whom to produce.
4. The THREE basic economic questions are: What to produce? How to divide labour in
production? And who owns the productive resources?
5. In a market system, only the government decides which goods and services are produced.
6. In a mixed system, consumer purchasing decisions determine what will be produced.
7. In a planned, the government decides how the goods and services produced will be
distributed.

Activity 1.3
Copy the table below into your workbook. On the left side of the table are several statements
about the types of economies. Identify which economy each point describes by ticking one of the
boxes. The first question has been done for you.
Centrally Market Mixed
planned system system system
Also known as the capitalist system. √
All businesses are owned by the government.
All businesses are privately owned.
Some businesses are privately owned, and some are
government owned.
The main purpose of business is to make profit.
The government provides certain services, but there are
also private service providers.
South Africa has this type of economy.
Also known as the socialist system.

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Activity 1.4
Read through the case study carefully and answer the questions that follow:

Walmart's arrival in South Africa

Walmart is a giant American retailer with stores in countries around the world. They recently
decided to open stores in South Africa - but soon encountered a lot of opposition from various
sectors of the South African economy.
Unions have opposed Walmart's arrival, claiming that most of the products they sell are made in
China. They said local manufacturers would not be able to compete with cheap Chinese imports,
and manufacturing jobs in South Africa would be lost. Other South African retailers feared
Walmart's arrival, saying that because of their enormous global purchasing power, they could buy
products for much less than South African stores. This will mean that these stores will not be able
to compete and will have to close, which means more job losses.
South African consumers, on the other hand, were mostly happy to hear about Walmart's arrival.
They said it would bring lower prices and a wider range of products.

1. Define the term global economy.

2. Explain how improvements in transport and communication have affected globalisation.
3. Discuss the TWO advantages and TWO disadvantages of globalisation in the form of a table.
4. Give your opinion on whether globalisation: Is Walmart's arrival in South Africa good or bad?

Activity 1.5
Make a mind map of the Economic Systems chapter in your book. Use different colours and be
creative.

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 CHAPTER 2: THE ECONOMIC CYCLE

2.1. Definition:
Factor market The market where factors of production are traded.
Goods market The market where goods and services are traded.
Households Households own the factors of production.
Consumers of goods and services.
Financial market The market where both short- and long-term financial assets are
traded.
Open Economy An economy that trades with the foreign sector.
Closed Economy An economy that does not trade with the foreign sector.
Flow of money The flow of income and expenditure between the participants in the
economic cycle.
Economic cycle The uninterrupted flow of spending, production, and income between
different sectors.
The Economic Cycle is a continuous two-way movement where goods
and services are exchanged for money so that needs and desires can
be satisfied.
Economic Problem People have unlimited needs and wants, but the resources to fill those
needs and wants (money) are limited.

2.2. Die Economic Cycle:

The Economic Cycle is also known as the Circular Flow of Money. The Economic problem in
terms of money is addressed by the Economic Cycle. Goods and services, money, and the factors
of production all form part of the circular flow of a closed economy. Goods and services are the
things we use to satisfy our needs and wants. There are two types of goods namely:

FREE GOODS ECONOMIC GOODS

 Satisfy needs.  Satisfy needs and wants.
 Do not have to pay for it.  People are willing to pay for it.
 Available in unlimited quantities.  Limited supply.
 No one can own or control it.  It belongs to someone who is willing to sell it.
 Is not considered a measure of wealth.  Is considered a measure of prosperity.
 For example: oxygen in nature,  For example: oxygen in a cylinder,
sunshine. manufactured products.

The Economic Cycle is a continuous two-way movement where goods and services are
exchanged for money so that needs and desires can be satisfied. Goods and services flow in one
direction and cash (money) flows in the opposite direction.

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2.3. Participants in the Economy:

The participants in the Open Economy include the following namely:

 Households.

 Businesses / Private Sector.

 Government.

 Foreign sector.

The participants in the Closed Economy include the following namely:

 Households.

 Businesses / Private Sector.

 Government.

Households

Businessess

Government

Foreign Sector

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2.3.1. Households:

Households are the largest consumer of economic goods and services; they use their income to
buy from businesses. Households are also the primary economic participants because they own
the factors of production namely:

 Natural Resources (compensation is rent)

 Entrepreneurship (compensation is profit)

 Capital (remuneration is interest)

 Labour (Remuneration is wages/salary)

Households sell production factors on the factor market to businesses and receive compensation
for this. The money that households earn when selling the factors of production is used to satisfy
their needs and wants.

Characteristics of needs are:

 Needs are unlimited.

 Different people have unique needs.

 Is determined by geographical location.

 Change over time.

 Needs are sometimes complimentary.

 Some needs turn into habits.

2.3.2. Businesses:

Businesses buy factors of production from households on the factor market and then produce
goods and services. Businesses sell/provide goods and services on the goods market to
households, government, and the foreign sector. Businesses then receive an income from the
state, households, and the foreign sector.

Different types of products that businesses sold:

 Convenience goods

Consumers do not really care which brand they buy. Purchases are quick and effortless.
For example: bread and milk.

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  Choice goods

Only bought after the consumer has considered the price, quality, and brand against those
of the competitors. For example: clothes and shoes.

 Speciality goods

Consumers spend a lot of time on this before purchasing. Consumers make sure it is
exactly what they are looking for before purchasing and tend to be brand loyal. For
example: cars and houses.

 Services

Services are intangible. For example: education, garden services and hairdressers.

2.3.3. Government:

Refer to National, Provincial and Local Governments. The Government provides households and
businesses with public goods and services. The Government receives taxes (direct and indirect
taxes) from households and businesses and uses them to promote the infrastructure and
economy of the country.

2.3.4. Foreign Sector:

The foreign sector is only involved in an open economy where goods and services are imported
from other countries (bought) and exported to other countries (sold). Reasons why international
trade takes place:

 Improved transport and communication make it easier for people to import or export
products and services.

 If a country does not have specialized skills to make products, it must be imported.

 Different countries have different natural resources.

 Climate that causes certain resources not to occur everywhere.

 International tourism.

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2.4. Economic cycle in an Open Economy:

Factors of production Goods and Services

Businesses

Tax
Public goods
and services
Government Government spending
spending
Government Factor market
Goods Goods
market Labour, Capital,
Rent, Wages
services
Public goods and

Tax

Factors of production Households Goods and Services

Payment of imports
Foreign Sector
Receipts from exports

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2.4. Economic cycle in a Closed Economy:

Factors of production Goods and Services

Businesses

Tax
services
goods and
Public
Government Government spending
spending Government Factor market
Goods market Goods

Labour, Capital,
Rent, Wages
Tax
and services
Public goods

Households
Factors of production Goods and Services

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2.6. Interaction between the participants of the economy:
The participants of the economy are related to each other and are dependent on each other. The
interaction between the participants can be seen as follows:

 Households provide factors of production to the businesses.

 Households receive compensation from businesses for the factors of production.

 Households buy goods and services from the businesses.

 Households and businesses pay taxes to the government.

 The Government provides public goods and services to the households and businesses.

2.6. BRICS-countries

The BRICS countries consist of Brazil, Russia, India, China, and South Africa. The BRICS
mechanism aims to promote peace, security, development, and cooperation.

Objectives of the BRICS countries are:

 Promote international trade.

 Monitor political developments.

 Monitor international terrorism.

 Monitor climate change.

 Improve food and energy security.

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Activity 2.1
1. Define the term economic cycle.

2. Distinguish between a closed economy and an open economy. Use a table to provide your
answer.

3. Define the term economic problem.

4. Define the term factor market.

5. Define the term goods market.

6. Name TWO types of goods.

7. Explain the difference between the TWO types of goods as mentioned in question 6.

8. Differentiate between the needs and wants.

9. Give THREE examples of goods and services.

Activity 2.2
1. Identify the ALL participants in the economy.

2. Name the main participants in a closed economy?

3. Name the main participants in an open economy?

4. Briefly discuss who the household sector consists of.

5. Distinguish between a goods market and a factor market.

6. Name at least TWO examples of a factor market.

7. Name TWO examples of a goods market.

Activity 2.3
1. Name THREE characteristics of needs.

2. Name and describe ALL the different types of products that businesses sell.

3. Why does international trade take place?

4. Draw the economic cycle in an open economy.

5. Draw the economic cycle in a closed economy.

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Activity 2.4
1. Copy the table below into your workbook. For each point in the left-hand column, decide
under which participant it fits. Place a tick in the appropriate box to indicate your choice. The
first point is already done for you:

Foreign
Flow of income Households Businesses Government
sector

Receive taxes from the

✓
other participants.

Pay company tax.

Earn wages from the

other participants.

Sell goods and services

to the other participants.

Provides labour to the

government and
businesses.

Pay personal income

tax.

2. Study the picture below and answer the questions that follow:

2.1. Name the BRICS countries.

2.2. What is the purpose of the BRICS countries?

2.3. List THREE goals of the BRICS countries.

Activity 2.5
Make a mind map of the Economic Cycle chapter in your writing. Use different colours and be
creative.

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 CHAPTER 3: PRICE THEORY

3.1. Definitions:
Demand If someone:
• have a need for a product,
• if the consumer can afford the product,
• and are willing to pay the price for the product.
Supply The amount of a specific product that consumers are willing to
offer at a specific time and at a specific price.
Price The monetary value that the consumers are willing to pay and
that the supplier is willing to accept.
Equilibrium point / The point where supply and demand intersect.
Equilibrium
The point where both the consumer and supplier are satisfied
with the quantity and price.
Cateris-Paribus All other things remain the same (Latin term).

The Price Theory deals with the interdependence that exists between demand, supply and price.
Consumers want as little as possible, but the supplier wants to make maximum profits. The
economic problem of scarcity leads to the forces of demand (arising from consumers' needs) and
supply (producers' response). Supply and demand are market forces that determine prices. Prices
are determined at the consumer market and the factor market.

The interaction between demand, supply and price:

 If demand for a product increases, but supply remains constant, the price will increase.

 If supply of a product increases, but demand remains the same, the price of the product
will fall.

3.2. Supply:
Demand is defined as the quantities of a product that consumers/buyers are willing and able to
buy at specific prices at a specific time. Demand for a product is not the same as a need or desire.
Most people want things they cannot afford to buy, these wants do not represent a demand for
the product as we cannot afford to pay for it.

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Demand is defined when someone:

 has a need for a product

 if the consumer can afford the product

 and are willing to pay the price for the product

3.2.1. Law of Demand:

The law of demand states that when the price of a product increases, the demand for that product
will decrease. When the price of a product decreases, the demand for that product will increase.
This means that there is an inverse relationship between the price and the quantity demanded.
There are TWO types of demand namely:

 Individual demand- The amount of goods and services a person is willing to buy at a
given price.

 Market demand- The amount of goods and services a market is willing to buy at a
given price.

Factors affecting demand:

 Change in income.

 Changes in trends.

 Advertisements.

 Complimentary products.

 Substitute products.

 Change in standard of living.

 Demographic changes.

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3.2.2. Demand Curve:

A demand curve is a graph that shows the quantity demanded of a product at different prices and
therefore illustrates the relationship between demand and price.

Use the following information and indicate the demand for pizzas.

Price (R) of Pizza in Rands Quantity Demand (D)

R 500 100
R400 150
R300 200
R200 300
R100 400

Demand for Pizza

600

500

400
Price (R)

300

200

100

Quantity (Q)

***Note that the demand curve has a negative slope.

***Demand curves slope downward from left to right.

***Demand is indicated by a D along the given curve.

***Future price expectation: An expectation that future prices will rise can lead to an increase in
current demand or an expectation that future prices will fall can lead to a decrease in demand
today, as consumers' consumption until later postpone.

3.3. Supply:

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The amount of a specific product that consumers are willing to offer at a specific time and at a
specific price.

3.3.1. Law of Supply:

The law of supply states that if the price of goods and services increases, the quantity supplied
by the supplier also increases. There are TWO types of supply namely:

 Individual supply- The amount of goods and services offered by producers at a given
price.

 Market supply- The amount of goods and services offered by the market at a
given price.

Factors affecting supply:

 Higher costs will decrease profits.

 Reduction in number of manufacturers.

 Labour strikes.

 Climate changes.

 Technological advances.

3.3.2. Supply Curve

Supply curve is a graph that shows the quantity offered of a product at different prices and
therefore illustrates the relationship between supply and price.

Use the following information and indicate the supply of pizzas.

Price (R) of Pizza in Rands Quantity Supply (S)

R 500 400
R400 300
R300 200
R200 150
R100 100

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 Supply for Pizza
600

500

400
Price (R)

300

200

100

Quantity

***Note that the supply curve has a positive slope.

***Supply curves run upward from left to right.

***Offer is indicated with an S along the given curve.

3.4. Equilibrium of Supply and Demand:

Equilibrium is the point where supply and demand intersect. The point where both the consumer
and supplier are satisfied with the quantity and price.

Use the following information and indicate the supply and demand of pizzas. Also indicate the
equilibrium point.
Price (R) of Pizza in
Quantity Offered (S) Quantity Demand (D)
Rand
R 500 400 100
R400 300 150
R300 200 200
R200 150 300
R100 100 400

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 Demand and Supply of Pizza
600

500

400
Price (R)

300

200

100

Quantity (Q)

***Equilibrium is indicated with an E at the point where supply and demand intersect.

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Activity 3.1

1. Define the term demand.

2. Define the term supply.
3. Define the term equilibrium.
4. Define the term price.

Activity 3.2

1. Study the following table regarding the supply and demand of Kit-Kat Chocolates.

Quantity requested Quantity presented

Price (R)
(DEMAND) (SUPPLY)
R 20 250 50
R 40 200 100
R 60 150 150
R 80 100 100
R 100 50 250

1.1. Draw a supply and demand curve on the same graph. Label your chart throughout.
1.2. Identify the equilibrium quantity.
1.3. What is meant by the "slope/gradient of the curve".
1.4. Which curve has a negative slope?
1.5. Define the term "Law of Supply".
1.6. What will happen to the price of a product if the supply is more than the demand?

Activity 3.3

Complete the following sentences by choosing the correct word from the word bank.

Price Theory Producer Consumer Price Calculation

1.1. __________ explains the process by which prices are established through the interaction of
supply and demand.
1.2 __________ are the users of goods and services.

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Activity 3.4

1. Name factors that affect demand.

2. Name factors that affect supply.

Activity 3.5
Make a mind map of the Price Theory chapter in your writing. Use different colours and be
creative.

23
 CHAPTER 4: ECONOMIC SECTORS

4.1. Economic Sectors:

Business sectors consist of businesses grouped together and classified in the primary, secondary
or tertiary sectors. How the business is classified depends on the nature of its product or service.
The three Economic sectors refer to the different stages that products go through namely:

 the exploitation of raw materials (primary sector),

 the manufacture of products (secondary sector),

 selling products or providing services (tertiary sector).

4.1.1. Primary Sector:

The primary sector is the sector where all extraction of natural resources
takes place. This includes all industries that take raw materials from farming.
This sector is called the primary sector because it is the first step in the
process of taking raw materials and turning them into finished products.
Businesses extract/collect/process raw materials and natural resources such
as livestock, fish, wood, coal and gold.

4.1.2. Secondary Sector:

The secondary sector is the sector where the extracted resources are
converted/manufactured/processed into usable products. This is where
manufacturing and processing industries use raw materials to make other
goods. The secondary sector plays an important/critical role because not all
resources are functional/useful in their natural state and require further
processing.

Businesses transform raw materials from the primary sector into finished or semi-finished
products, that is, taking the raw materials from the primary sector and converting them into new
products. The secondary sector is often referred to manufacturing industries because valuable
products are created/manufactured so that these products can serve a meaningful
function/purpose to customers/consumers. The secondary sector plays an important/critical role
because not all resources are functional/useful in their natural state and require further
processing.

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4.1.3. Tertiary Sector:

The tertiary sector is the sector where all services and useful products are sold
and offered on the market. This sector includes all businesses that bring the
goods produced by primary and secondary industries to consumers through
their shops and informal trade.

Businesses that offer services to other businesses and consumers. They exist
to facilitate transport, distribution and sale of goods in the secondary sector.
This sector is also known as the service industry.

4.2. Types of businesses found in each of the three sectors:

Primary Sector Secondary Sector Tertiary Sector

 Agriculture  Construction  Financing

 Fisheries  Factories  Hospitality
 Forestry  Manufacture  Retailers and Wholesalers
 Mining  Electricity  Storage
 Tourism
 Transportation

4.2.1. Formal and Informal Sectors:

Businesses operating in South Africa are divided into the formal and informal sector.

Formal Sector Informal Sector

 Businesses in the formal sector are
registered with KMIE (Commission for
Companies and Intellectual Property).
 Businesses pay tax to SARS on turnover
and profit made.
 Formal sector activities are monitored by the
government.
 Businesses in the informal sector are not
registered.
 Businesses do not pay tax on the profits of
the business.
 These businesses are not monitored by the
government.

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4.21. Private and Public Sectors:

In South Africa's mixed economy, most businesses are privately owned and some businesses
are state owned. The private businesses form the private sector and the state-owned businesses
form part of the public sector.

Private Sector Public Sector

 The private sector consists of businesses
owned, financed and managed by private
individuals.
 The public sector consists of various
businesses and institutions owned and
managed by the government.
 It is composed of all levels of government and
government-owned enterprises.

4.3. Interrelationship between the three sectors:

The sectors work together to create an economic production chain. The primary sector collects
the raw materials, the secondary sector transforms the raw materials into usable goods. The
tertiary sector sells the goods or services and supports the activities of the primary and secondary
sectors. The primary and secondary sectors are also dependent on the tertiary sector to provide
services such as insurance and transport.

4.4. Sustainable use of resources in the three sectors:

The sustainable use of resources is about using resources in a way that will allow them to last.
Healthy ecosystems and environments give us important resources.
One approach to managing the impact on ecosystems is to manage our consumption of
resources.

Ways we can make sure we use resources sustainably:

 Recycle – this means returning goods to factories so that they can be reprocessed into new
goods, thus saving on the use of new raw materials.

 Reuse – this is about recycling certain parts of products that can be used again in new
products. For example, the components of computer circuit boards contain certain metals
that can be extracted and used to create new circuits.

 Reduce – it's about finding ways to reduce our use of raw materials. For example, car
manufacturers are always looking for ways to make cars run on less gas.

26
 4.5. The role of the three sectors in the economy:
Primary Sector
• Agricultural industries of the  The manufacturing sector in  In many developed countries,
primary sector are essential for
a country as they produce the
food that feeds the population.
Unfortunately, agricultural
production in South Africa has
gradually declined and is now
only about 5% of GDP.
South Africa is a major producer
of metals and coal.
South African mining industries
employ approximately 500,000
people, accounting for nearly
7% of GDP and approximately
30% of merchandise exports.
Secondary Sector
South Africa has also
declined over the past 20
years or so and now makes
up 16% of South Africa's
GDP.
 South Africa is the only
country in the world that
produces oil from coal.
 Manufacturing industries in a
number of developed
countries have also declined
in recent years, as they
could not compete with
cheaper imports from
countries such as China.
 South Africa's textile and
footwear industry suffered in
the same way.
27
Tertiary Sector
South Africa's tertiary sector is
growing rapidly and creating
jobs. It now contributes about
73% to GDP.
 South Africa's IT, electronics
and financial banking services
are world class and the mobile
phone market has grown
tremendously since 1994.
 ll these services have helped to
improve efficiency and
management decision making.
 Tourism is important as it
contributes 7% to GDP and
employs just over a million
people
 4.6. Types of skills needed in each of the three sectors:

Primary Sector Secondary Sector Tertiary Sector

• Primary sector jobs are largely  Jobs in the secondary sector  Jobs in the tertiary sector cover
unskilled, with some semi- are largely semi-skilled, the entire spectrum of available
skilled work in supervisory roles. with workers being trained to skills.
use specific machines
Physical labour is used in  Unskilled workers are found in
designed for the specific
mining, fishing and forestry routine cleaning and carrying
industry in which they work.
activities. positions or in small self-created
 Manual labor is generally businesses.
As specific jobs become more
limited to cleaning duties.
mechanized, the level of training  Semi-skilled and highly skilled
and skills increases.  Skilled positions are jobs are found in most
available in supervisory and specialized retail and service-
In this sector there are many
management positions. oriented businesses.
ordinary workers, but far fewer
positions at management level.  Skilled qualified professionals
are in medical centers, law
There are independent
offices, architecture, engineering
opportunities for farmers and
and quantity surveying firms.
fishermen, for example, to make
a good living.  Computer technologists are
employed by most modern
Some of the most prosperous
tertiary businesses.
companies in the world also
operate in the primary sector,
such as large oil companies and
gold mines.
Although the businesses
themselves are prosperous, the
workers usually do not earn
much.

28
Activity 3.1

1. Name the THREE economic sectors.

2. Explain each economic sector's skills required.
2. Explain the relationship between the three business sectors.
3. Name TWO types of businesses found in each sector.

Activity 3.2

1. Distinguish between the formal and informal sectors.

2. Distinguish between the private and public sectors.

Activity 3.3

1. Several options are given as possible answers to the following questions. Choose the answer
and write down only the letter next to the question numbers.
1.1. The … sector refers to industries that offer services.
A economic
B primary
C secondary
D tertiary

1.2 Businesses in the ... sector do not pay tax on the profit of the business.
A business
B formal
C informal
D public

Activity 3.4

1. Briefly discuss how a 'wooden chair' will be made in the different sectors.

Activity 3.5
Make a mind map of the Economic Sectors chapter in your writing. Use different colours and be
creative.

29
 CHAPTER 5: BUSINESS FUNCTIONS

5.1. Definitions:
Market Research Collecting information used in the business for marketing activities.

There are three environments:

1. Micro environment – Everything within the business, the business has
full control over the environment.
2. Market Environment - The market environment refers to the immediate
external components of the business that have the ability to directly
affect the industry.
Business
Environments 3. Macro environment - Businesses have no control over the macro
environment. This environment is constantly changing and therefore
leads to challenges for businesses. The eight business functions
depend on each other to achieve the goals of the business. These
functions work together to ensure the survival and sustainability of the
business. The eight business functions are all different, but they work
together to contribute to the success of the business. General
management usually oversees all other business functions.

The eight business functions depend on each other to achieve the goals of
the business. These functions work together to ensure the survival and
Business Functions sustainability of the business. The eight business functions are all different,
but they work together to contribute to the success of the business. General
management usually oversees all other business functions.

5.2. The Business Functions:

The eight business functions depend on each other to achieve the goals of the business. These
functions work together to ensure the survival and sustainability of the business. Specific functions
are responsible for supporting specific types of goals and objectives, for example, the marketing
function is involved in achieving targets linked to the development of new markets or increasing
sales.
Each business function performs a task related to each specific area. In a large business, it is
usually easier to identify separate business functions because people work together in
departments, for example the marketing department and the finance department. Roles and tasks
may change - but this is dependent on the size/type/stage of growth of the business.
There are EIGHT business functions:
1. General management function
2. Purchase function
3. Production function
4. Marketing function
5. Public relations function
6. Human resources function
7. Administration function
8. Financial function

30
5.2.1. The General Management Function:
The general management in a business coordinates the other business functions
to achieve the goals and objectives of the business. The general management
function plans, organizes, leads and controls resources in the business (carries out
the management tasks).
The management tasks ensure that the business' aims and objectives are achieved
and are described as follows:

The process of dealing with things or people to achieve the business's

Management
goals. Management includes a combination of management tasks.
Deciding in advance what needs to be done to achieve goals. An action
Planning
plan that is followed to achieve goals.
The implementation and elaboration of arrangements or preparations in a
Organising business to achieve goals. Implement the business plan, grouping and
assigning activities to achieve goals.
Lead and influence employees to complete the work that needs to be done.
Leading Provide employees with sufficient resources needed to achieve business
goals and manage employee conflict.
Ensure that targets and objectives are achieved. Good governance leads to
Control
ethical business practices.

To plan, the business must include the following elements:

 Mission
 Vision
 Goal
 Goals

The mission statement describes what the business provides or produces,

Mission
and why the business exists. It explains the goals and values of the business.
The vision of a company describes the long-term goal, that is, where the
Vision
company sees itself in the future.
Objectives are the long-term plans that the company wants to achieve.
Goal These serve as guidelines to help businesses achieve what they set out to
do.
Objectives describe how the objectives will be achieved. These are the short-
Objectives term steps that will guide the business owner on how to achieve the set
goals.

Large businesses will work efficiently if there is more than one manager in the business.
Managers must work at all levels of the business to make sure that the business's goals are
achieved. Just as the government is managed, the business also has three levels of
management namely:

31
Top level management
The top level management runs the entire business and defines the business's vision and goals
and ensures that they are achieved. E.g. CEO (chief executive director) or Board of Directors.
The top level management has the following functions:
 Give instructions for sections e.g. budgets, policies, schedules.
 Ensure that departments adhere to budgets.
 Manage departments and ensure that everyone works together.
 Make sure the departments work together to achieve the goals of the business.
 Hire and manage middle managers.
 Set up the business's main strategies.
 Give guidance in all areas.
 Accountable for everything that happens in the business.
 Set an example for middle management.
 Make strategic decisions (sustainability).
 Accept responsibility for business results.
 Do long-term planning (vision and mission).
 Set strategic goals.

Middle level management

The middle management is in charge of branches or divisions in the business. If the business is
large there may be layers of management at the level. E.g. Branch Managers, Department
Managers or Area Managers. The middle management has the following functions:
 Carry out the top level management's instructions on strategies and policies.
 Ensure that the low-level management functions optimally.
 Provide top level management with information about the business.
 Explain top-level management's policies and strategies to the lower-level management,
so that the lower-level management knows what they have to do and what to achieve.
 Coordinate all activities in departments.
 Train Lower Level Managers.
 Plan what happens in the sections.
 Set an example for Lower Level Managers.
 Make tactical decisions (medium-term decisions).
 Interpret top management's decision making.
 Develop plans.
 Establish tactical/functional objectives.

32
Low level management
The low level management works directly with the employees to supervise what the employees
are doing. The level of management performs administrative tasks such as performance appraisal
and disciplinary hearings. E.g. Supervisors, Floor Managers or Foremen. The low-level
management has the following functions:
 Give the employees instructions about daily activities.
 Ensure employees meet daily, weekly and monthly targets.
 Train employees.
 Ensure that the employees remain disciplined.
 Control quality.
 Provide middle management with information about the business.
 Solve employee problems.
 Communicate with employees, and stay in touch with their work.
 Assign work to the workers every day.
 Ensure that sufficient equipment is needed for the employees to complete their work.
 Make day to day decisions (daily decisions).
 Implement plans of middle management.
 Make short-term decision-making.
 Establish operational objectives.

5.2.2. The Purchase Function:

The purchasing function is responsible for purchasing all the resources the business needs to
produce goods and services. The function is constantly searching for suitable, new and better
suppliers. It must place orders with suppliers and follow them up to ensure that the ordered
products are delivered on time. It must ensure that goods that were ordered are delivered at the
agreed price, in the right quantities and of the right quality. Purchases can be made with cash or
credit, each with its own advantages and disadvantages.

Cash purchases Credit purchases

 Cash payment refers to all immediate
payments made by cash/cheque for
business purchases.
 Cash payments have an immediate effect
on the cash flow of the business.
 Cash payments may qualify for cash
discounts.
 Credit payment refers to all payments at a
future date.
 Credit payments lead to the creation of
assets (amounts receivable)/liabilities of
the business (amounts payable).
 The credit payer can pay more for goods
because of the interest added on credit
payments.

33
In order to make a company's purchases effectively, it is essential to find the best supplier.
Suppliers should be compared based on the following:
 Quality of the products and services provided.
 Price of goods and services.
 Availability of after sales service.
 Delivery charges.
 Delivery time.
Activities of the purchase function:
 The buyers must have expert knowledge of the product/s they have to buy and about the
market in which they trade.
 The purchasing manager must find out the needs of other departments.
 They are looking for suitable, new and better suppliers.
 They ensure that there is enough stock available for continuous production and sales.
 Follow up on orders placed with suppliers.
 Ensure that ordered products are delivered on time.
 Keep the correct stock levels for inventory on hand.
 Record the cost prices and selling prices of inventory.

5.2.3. The Production Function:

The production function is responsible for using all the organizational resources to apply the
processes necessary to deliver the expected outputs (goods and/or services) to consumers. Also
refers to the process of providing a product or service.
The items that are important in this process are:
 Finding the right natural resources.
 To find the right human resources, i.e. labour.
 Decide on the capital that will be invested.
 Use efficient and effective entrepreneurial skills to manage the process.

5.2.4. The Marketing Function:

The marketing function undertakes market research to determine the actual needs of the target
market. It is also responsible for the advertising and promotion of goods and services to
customers. The function is responsible for understanding, identifying the needs and desires of the
consumer and ensuring that the consumers are aware of the products and services that the
business offers.

34
The marketing plan can be explained using seven elements, often referred to as the 4Ps of
marketing. There are four main elements elements – it is a combination of product, price, place
and promotion.

 It is a description of the product, appearance and use that is available to

customers.
Product  The appearance of the product/services must be different from
competitors' products.
 What do the customers want to buy?
 It refers to the place where goods and services will be sold/the place where
consumers can access the goods or services.
Place  The business itself can sell the product directly to customers or can sell
the product through other businesses.
 Must be easy and accessible.
 The price of a product refers to the amount of money that must be paid by
Price
the consumer to obtain the product.
 A promotion must communicate the benefits of the product to customers.
Promotion  This refers to how the company will make the target market aware of the
product or service.

5.2.5. The Public Relations function:

The public relations function is responsible for creating a good public image for the business. This
ensures that there is proper communication between the business and all its stakeholders.
The public relations officer must deal with negative publicity quickly.
Positive feedback from public surveys regarding the business image should be obtained. A high
standard of internal publicity, appearance of buildings, professional telephone etiquette, etc., must
be maintained. Quality goods or services that promote the brand or image with key stakeholders,
customers, suppliers, government and service providers must be provided.

5.2.6. The Human Resources function:

The human resources function is responsible for attracting new employees to the business. It
must also manage all the people in the business by providing education and training to
employees.
The role of function is to supervise the recruitment, training and dismissal of employees in an
organization and also includes the following aspects:
 Recruitment and selection.
 Training programmes: Training programs are held by the MHO to improve the employees'
skills, as well as to motivate them.
 There are three main types of training: induction training, on-the-job training and off-the-job
training.

35
5.2.7. The Administration function:
The administration function is responsible for the collection, processing and storage of all the data
and information required by the business. The administration function must be up to date with the
latest information technology. It stores and collects information using the latest technology, and
performs general office work such as filing and storing information.
Activities of the function include:
 Management of information.
 Handling of information.
 Office practice.
 Collection of information.
 Information Technology (IT).

5.2.8. The Financial function:

The finance function is responsible for determining all the financial needs of the business. This
ensures that the company's funds are used efficiently. The finance function is responsible for
planning and managing all the funds and assets of the business.

The function includes the following:

 Managing all the financial transactions of the business.
 Managing the cash flow and budgets of the business.
 Keep the income and expenses of the business.
 Pay business taxes and business bills.
 Manage business investments, loans and shares.
 This includes employees such as finance administrators, financial clerks and accountants.
 Keep track of the purchases and sales made by a business, as well as capital expenditure.
 Preparation of final accounts.
 Providing management information: Managers need continuous financial information to
enable them to make better decisions.
 Management of wages: The wages department of the finance department will be responsible
for calculating the wages and salaries of employees and organizing the collection of income
tax and national insurance for the Revenue.
 Collecting finance: The finance department will also be responsible for the technical details of
how a business collects finance e.g. through loans, and the repayment of interest on that
financing.

36
5.3. The relationship between the Business Functions:
The eight business functions are interdependent. We say that they are interrelated. These
functions work together as a team for the business to be successful.
 The general management function is directly linked to the other seven business functions.
 The financial and administration functions are responsible for the collection, storage and
processing of information and financial records.
 The purchasing, production and marketing functions are responsible for the delivery of goods.
The purchasing function buys raw materials for the production function to process into finished
goods. The marketing function promotes and sells the product that the production function
produced. The public relations function promotes the business and ensures that there is a
good relationship between the business and the public/consumers.
 Qualified staff are sourced and appointed by the human resources function.

37
Activity 5.1

1. Define the concept of market research.

2. Explain each of the THREE business environments.
3. Describe the concept of business functions.
4. Name the EIGHT business functions.

Activity 5.2

1. Copy the table in your writing and complete the following table thoroughly:

Level of Functions Example Decision Making Type of Objectives being

management Period set

Top level

Middle level

Low level

2. Name and discuss the FOUR management tasks.

3. Differentiate between the concepts of vision and mission.
4. Differentiate between cash purchases and credit purchases.
5. Name any FOUR activities of the purchasing function.

Activity 5.3

1. Name and describe the 4Ps of marketing.

2. Identify any FOUR activities in the administration function.

3. Give any FOUR functions of the financial function.

Activity 5.4

1. Discuss the relationship between the business functions.

Activity 5.5
Make a mind map of the Business functions chapter in your script. Use different colours and be
creative.

38
 CHAPTER 6: BUSINESS PLAN

6.1. Definitions:
A written and systematic document that aims to transform the
entrepreneur's ideas into a business. A document that sets out a
business's future goals and strategies to achieve them. This includes:
Business Plan • What does the business do?
• How is trade conducted/services provided?
• Why will the business be successful?

Ethical To do what is morally correct.

Competitive advantage To be better than your competition.

Yield The amount obtained through the profit or sales.

6.2. Business Plan:

A business plan is a written, logical and systematic outline of what is intended in a business by
describing WHAT the business does, HOW it is done and WHY the business will be successful.
The business plan serves as a guide so that it can be checked to see if the business is moving in
the right direction and will indeed achieve success. This is a document that gives complete
information about the business's finances and shows estimates of how much money the business
intends to make. A business plan is important:
 the success of the business will be determined/indicated.
 make sure your target market's needs and wants are met to attract potential investors.
 to obtain capital.
 help entrepreneurs set goals and objectives.
 guide the entrepreneur on the viability of the business idea.
 it improves processes and practices of the business operations.
 it evaluates the success of the enterprise.
 it gives direction once the business is running.

It is important that the business plan:

 Logically laid out and easy to follow.
 Contains only relevant information.
 Is faultless.
 Neat appearance.
 Is organized.

39
6.3. The format of the business plan:
 Cover page (front page)
 Table of contents (index)
 Executive summary
 Description of the business
 SWOT analysis
 Marketing plan
 Operational plan
 Financial plan
 Management plan
 Competitor Analysis
 Summary
 Agenda

Cover page (front page)

The cover page contains the following information:
 the name of the business.
 contact details of the owner(s).
 the address of the business.
 the logo and slogan of the business.
 type of incorporation form.
 a copyright disclaimer to protect the content of the plan.
date of when the plan is offered.

Table of Contents (index)

 This page gives a title and page number of each subsection of the plan.
 It allows the reader to easily find information in the document.

Executive summary
 The executive summary (brief summary/introduction) is a detailed summary of the entire
business plan in order to attract investors, attract employees and obtain financing.
 It is written after the business plan is completed but appears at the beginning of the
business plan.

40
  It provides users with a brief overview before reading the details of the business plan and
is only one page long.
 The following aspects to be included in the executive summary:
◦ the form of business enterprise.
◦ the main business activity.
◦ information about the owner of the businesses.
◦ how capital will be obtained.
◦ motivation and reasons why the business will be a success.
◦ benefits that the business will bring to the community.

Description of the business

 This is usually a short description of the product/service that the company will offer.
 This includes:
◦ Objectives ◦ Legal requirements
◦ Goals ◦ Target market.
◦ Mission ◦ Product/Service.
◦ Vision

SWOT analysis (Strengths, Weaknesses, Opportunities, Threats)

 An SWOT analysis (acronym for strengths, weaknesses, opportunities and threats)
includes finding out what the strengths and weaknesses of each idea are and what
opportunities and threats exist in the environment.
 An entrepreneur must carry out a SWOT analysis when starting a business. It helps the
entrepreneur to build on what he/she does well, to address what is lacking, to minimize
risks, and to take the greatest possible advantage of chances of success.
 A SWOT analysis is a strategic plan used to help an organization identify strengths and
weaknesses of the business (internal factors). It also makes the business aware of
opportunities and threats in the external environment (external factors).
 A SWOT analysis is an indication that research has been done to establish a business.
 For weaknesses and strengths, you need to look inside the business, which you can
control. Strengths – all the things that you and your business are good at (e.g. Unique
product, ideal location, previous experience of the type of business, good management or
accounting skills, high levels of productivity and low costs. Weaknesses – all the things
in which your business are not good (e.g. No previous experience, lack of sufficient funds,
lack of management skills, higher costs than competitors.
 For opportunities and threats, you must look to the outside (external), things you cannot
control. Opportunities - any incidents, opportunities or circumstances outside the
business that can be used to the advantage of the business (e.g. fewer competitors,

41
 consumers not happy with existing products from competitors, good amount of skilled
labor in the community, good availability of raw materials) . Threats - The things outside
the business that will be detrimental to the business (eg new competitors, competitors
using new technology, shortage of trained workers, increased taxes by the government).

Marketing plan
 The marketing plan is the most important component of the business plan and it gives
information about the market research that was done in the business/for the business.
 It details the 4Ps of marketing: Product, Place, Price, Promotion.
 This plan also describes the target market, customers, communication with the market
and competition

Operational plan
 This plan includes where the business will be located and includes a description of the
product, and how and where it will be manufactured.
 It also provides details of the equipment and suppliers.
 Details of suppliers, the method used to manufacture products and quality control.

Financial plan
 The financial plan explains the entrepreneur's financial details, gives an indication of how
much capital he/she will need, and how this capital will be obtained.
 Include the following information:
◦ Income statement. ◦ Profit margin.
◦ Issue statement. ◦ Breakeven point.
◦ Budget. ◦ Capital required.
◦ Profit percentage.

Management plan
 The management plan considers the short and long term business strategies.
 It briefly describes who will be in charge of running the business as well as the skills of the
entrepreneur and others in the business.
 It also discusses the hierarchy (organogram) and roles of the employees.

Competitor analysis

42
  The competitor analysis provides a description of competitors in the market and their
products.
 It also provides the details of competitors' marketing strategies and their effect on the
proposed business.

Summary
 The business plan must end on a positive note, therefore the business indicates how they
will give back to the community and the environment.

Agenda
 The documents attached here are seen as attachments, and are documents referred to in
the plan. It gives more information and corroborates facts that have been reproduced.

43
Activity 6.1
1. Briefly describe the concept of business plan.

2. Name any TWO elements that must appear on the front page of a business plan.

Activity 6.2

Read the following case study and answer the questions that follow:

PEP MODEL
We put our customers at the center of everything we do. An integral part of the Pepkor
business model is to ensure that we improve and add value to both our customers' and our
employees' lives. This includes our corporate social responsibility initiatives, which form an
essential part of our business. Our four strategic pillars have been brought together and
collectively focus on empowering people by meeting our customers' needs for value-for-
money products at the best possible prices, and at their convenience. Pep's target market is
mainly the mass lower to middle class income end of the market. So it aims to sell low-cost
clothing and is the largest single-brand retailer in South Africa.
We aim to:
 to give our customers the best products they can afford.
 developing our people to be the best they can be, at work and at home.
 maintain efficiency and keep prices low.
 provide resources to charities that benefit the communities in which our customers
and employees live.
PEP operates in more than 2000 retail stores in Southern Africa. Although the mission
statement of PEP affirms that they offer durable products, the products themselves do not
affirm the mission. PEP competes with many other retailers such as Ackermans, Pick -n Pay
clothing and Jet. PEP intends to expand via e-commerce in the near future.
We believe in giving people, especially those with limited disposable income, the opportunity
to live their lives with dignity, respect and pride. We have been doing this for over 100 years
and will continue to do so through our trusted brands.
Article: https://www.pepkor.co.za/about-us/business-model/

1. According to the above case study, give a description of PEP.

2. PEP needs a new slogan. Design a slogan for PEP that fits.
3. Using the case study as a guide, prepare a SWOT analysis for PEP by completing the
following table.

Strengths Weaknesses

Opportunities Threats

44
Activity 6.3

Activity 6.4

Make a mind map of the Business Plan chapter in your writing. Use different colours and be
creative.

45
 CHAPTER 7 - TRADE UNIONS

7.1. Definitions:
A Trade Union is an organization of workers (employees) working together
to fight for the rights of workers and to fight for better working conditions.

OR
Trade Union A trade union is an association of employees who have common interests
and have formed an organisation with the purpose of protecting and
promoting their interests through collective bargaining/ negotiation with their
employers. Generally, negotiations concern WAGES and WORKING
CONDITIONS.

Lobbying The act of lawfully influencing other people

Arbitrator Somebody who is appointed when there is a disagreement, to hear both
sides of the story and then make a decision to resolve the situation
Collective bargaining When Trade unions negotiate workers’ rights with employers
Deadlock A situation in which two sides cannot reach an agreement
Go-slow A form of industrial action(strike) in which workers carry out their normal
working routines but at a considerably slower pace
Industrial action Any group action that workers take to protest against their employers
Lock-out the exclusion of employees by their employer from their place of work until
certain terms are agreed to.
Negotiation Aim of reaching an agreement between parties that disagree
Picketing Standing outside a workplace and try to prevent people going into or out of
the building
Shop steward A union member elected as the union representative of a shop or
department in dealings with the management.
Sit-ins a form of protest in which demonstrators occupy a place, refusing to leave
until their demands are met.
Strike To stop production by workers refusing to return to work until their
demands are met
Wildcat strike Sudden, unplanned, and unofficial strike not authorized by the employee’s
trade union

7.2. Impact of Trade Unions on Businesses:

46
 Negative impacts Positive Impacts
 Violent strike actions create an image of instability in  Trade unions are very effective
South Africa. in forming mechanisms to
 Strike actions discourage investments in South Africa by resolve conflicts in the
outside countries. workplace.
 Assets of a business can be damaged during protest
actions.
 Entrepreneurs increase prices to make for the damaged
goods.
 More jobs being lost if businesses close.
 It can reduce the output of a business.
 Resources can go to waste.
 Business can end up paying high fixed costs.
 Decrease in profitability.
 Dissatisfied customers.
 Lack of motivation of workers.
 Poor work ethics in the workplace.
 Unhappy working environment.
 Loss of wages due to not working.

7.3. Forms of Industrial Action:

Industrial action usually happens when a dispute in the workplace can't be resolved through
negotiation.
There are THREE main forms of industrial action (strikes):
 Strike - Where workers refuse to work for the employer.
 Slow strike - Where workers work slows.
 Lock-out - A work stoppage where the employer stops workers from working.

7.4. Contribution of trade unions to sustainable growth and development:

To create more jobs, the economy has to develop and grow. Growth in the economy means
production of goods and services needs to increase and this in turn increases the gross
domestic product (GDP). The grow needs to be ongoing and not stopped through strikes. It
needs to be sustainable, meaning it must grow year after year to create more jobs every year
as well for a growing population. But this growth should not have any bad effect on the
environment and the communities.

Trade unions can contribute in the following way:

 To put pressure on the government to spend money on big infrastructure projects to create
more jobs and help develop transport and communication networks.
 To urge the government to increase spending on skills training for workers through the
Skills Education and Training Authorities which help workers to be trained in several
industries.
 They ensure workers are paid fair wages and this improves productivity in the workplace,
which adds to growth.
 They ensure good working conditions and safety in the workplace, and this also increase
productivity. Th their wages and working conditions.
 They ensure that workers are happy within the workplace.
Through negotiations they can settle disputes in an orderly manner with employers. This
reduces disruptions to work that would occur if workers were negotiating as individuals.

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Different types of trade unions:

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Activity 7.1:
Read the following case study before answering the questions.

Unions are primarily formed to protect and promote the rights of workers in the workplace
focusing on bargaining with employers for their members. These negotiations often lead
employees and unions to the streets to protest unfair labour practices, working conditions and
low wages. These protests or strike actions have a negative impact on businesses and the
South African economy due to lost working hours and loss of income. They also create an
image of instability in the country that discourages foreign investment. Business contracts may
be lost causing some businesses to close and more job losses to occur. Workers usually suffer
a loss of income for the duration of the strike, go slow and stay away because of the "no work
pays rule". After 1990, the government passed the following laws that will protect the rights of
workers - The Labor Relations Act; The Basic Conditions of Employment Act; The Employment
Equity Act and the Skills Development Act.

1. Explain the concept of trade union.

2. Define the term strike.
3. Explain the negative impact of industrial actions on the economy.
4. State ONE reason for industrial action according to the case study.
5. Define the term collective bargaining.
6. List ONE law that protects the rights of workers according to the case study.
7. Name three types of industrial action (strikes).
8. Trade unions contribute to sustainable development and economic growth" Explain in
your own words how trade unions can achieve this.

Activity 7.2:
1. Define the concept of negotiation.
2. Give one term for the following descriptions by doing research:
2.1. The largest trade union in SA.
2.2. Acronym of The Federation of Trade Unions in South Africa.
2.3. Acronym of National Council of Trade Unions.
2.4. An agreement where different groups of people undertake to work together for one goal.

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Activity 7.3:
1. Name TWO main functions of a trade union.
2. Name ONE negative effect of strikes on employees and ONE negative effect of strikes on
businesses.

Activity 7.4:
Make a mind map of the chapter Trade Unions in your writing. Use different colors and be
creative.

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