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2021 2023 gr12 Economics p1 Essays Final
2021 2023 gr12 Economics p1 Essays Final
GRADE 12
ECONOMICS P1ESSAYS
2021-2023 PAPER 1 & 2 ESSAYS PER TOPIC AND PER QUESTIONS WITHOUT
ADDITIONAL PARTS
PAPER ONE
QUESTION 5: MACRO-ECONOMICS
TOPIC NO. ESSAY LAST YEAR
ASSESSED
CIRCULAR FLOW 1. Discuss in detail the role of various DBE Nov 2020
markets within the FOUR-SECTOR
model.
BUSINESS 2. Discuss in detail the features DBE Nov 2018
CYCLES underpinning the business cycle
forecasting.
3. Discuss in detail the new economic DBE Nov- 2021
paradigm in smoothing-out business (To be studied
cycles. for section B
ONLY in 2022)
PUBLIC SECTOR 4. Discuss in detail the main objectives DBE May- 2021
of the public sector in the economy.
5. Discuss in detail the reasons for DBE May-2022
public sector failure.
FOREIN 6. Discuss in detail the reasons for * NOT YET
EXCHANGE international trade. ASSESSED
MARKET
PAPER ONE
QUESTION 6: ECONOMIC PURSUITS
TOPIC NO. ESSAY LAST YEAR
ASSESSED
PROTECTIONISM 1. Examine South Africa's export DBE Nov-2019
& FREE TRADE promotion trade policy.
2. Discuss the arguments in favour of DBE Nov-2021
protectionism. (To be studied
for section B
ONLY in 2022)
ECONOMIC 3. Discuss in detail the demand-side DBE May 2022
GROWTH & approach in promoting economic
DEVELOPMENT growth and development in South
Africa.
4. Discuss in detail the South African * NOT YET
growth and development policies and ASSESSED
strategic initiatives
REGIONAL 5. Discuss in detail South Africa’s DBE NOV 2019
DEVELOPMENT initiatives (endeavours) in regional
development
ECONOMIC & 6. Discuss the various economic DBE May-2021
SOCIAL indicators in detail.
INDICATORS 7. Discuss the various social indicators DBE May- 2019
in detail.
QUESTION 5: MACRO-ECONOMICS
INTRODUCTION
• Markets coordinate economic activities and determine prices for goods and
services
• The circular flow model is a simplified representation of the interaction
between the participants of the economy
MAIN PART
Goods/Product/Output markets
• These are markets for consumer goods and services.
In economics a distinction is made between goods and services:
• Goods are defined as any tangible items such as food, clothing and cars that
satisfy some human wants or need
• Buying and selling of goods that are produced in markets, include:
- Capital goods market for trading of buildings and machinery
- Consumer goods market for trading of durable consumer goods, semi-
durable consumer goods and non-durable consumer goods.
• Services are defined as non-tangible actions and includes wholesale and
retail, transport and financial markets
• Flows of private and public goods and services are real flows and they are
accompanied by counter flows of expenditures and taxes on the product
market
Factors/Resources/Input markets
• Factors of production are bought and sold in the factor market
• The factor market includes the labour, property and financial markets
• Factor services are real flows and they are accompanied by counter flows of
income on the factor market.
Financial markets
• They are not directly involved in production of goods and services, but act as
a link between households, the business sector and other participants with
surplus funds
• Banks, insurance companies and pension funds form part of the financial
market
Money markets
• In the money market, short-term loans and very short-term funds (less than 3
years) are saved and borrowed by consumers and business enterprises
• Products sold in this market are bank debentures, treasury bills and
government bonds
• The SARB is the key institution in the money market
Capital markets
• In the capital market long-term funds (3 years or longer) are borrowed and
saved by consumers and business enterprises
• The Johannesburg Security Exchange is a key institution in the capital market
• Products sold in this market are mortgage bonds and shares
CONCLUSION
Markets are critically important institutions in our economic system because they regulate
the market, to safeguard price stability and general business confidence. (2)
• Interest rates can be reduced to make borrowing cheaper and encourage spending by
households and businesses.
• The increased spending increases the level of economic activity. Investment will increase
and more factors of production will be employed.
• Higher levels of production and income and expenditure will be achieved.
• If the supply of goods and services does not increase in line with increase in demand,
inflation will increase.
Fiscal policy:
• When the level of economic activity is low the minister of finance can use expansionary
fiscal measures to stimulate growth and reduce unemployment.
• An expansionary fiscal policy can be implemented when the economy is in recession in
order to stimulate economic activities.
• An increase in government expenditure will increase aggregate demand.
• When there is an increase in injection in the economy, production which will result in a
higher employment of factors of production.
• The result will be higher income and higher expenditure.
• Taxes can be reduced, which will lead to an increase in disposable income.
• This will increase consumer spending and investments, stimulating aggregate demand
Inflation:
❖ When the demand increases, the supply will react in the same way.
❖ If the supply does not react to an increase in demand, prices will increase (a new
equilibrium).
❖ Aggregate demand and supply are in equilibrium where AD = AS at point C, and again
where AD1 = AS1 at point E.
❖ When the demand increases, the supply will react in the same way.
❖ Fig (a) below illustrates that if AD1 increases and AS does not respond, the new
equilibrium will be at point F. Therefore, real production will increase and prices will also
increase. Inflation will prevail.
Unemployment:
❖ Demand-side policies are effective in stimulating economic growth.
❖ The demand for labour will increase due to economic growth, and that leads to reduced
unemployment.
❖ A decrease in unemployment results in an increase in inflation because more people are
employed, which causes an increase in demand for labour.
❖ This relationship between unemployment and inflation is illustrated using the Phillips
curve.
• The Phillips curve shows the relationship between unemployment and inflation.
• PC shows the initial situation, where at point C the PC curve intersects x/axis i.e. natural
rate of unemployment is 14%.
• If unemployment falls to D i.e. 9% causes wages to increase, thus inverse relationship
between unemployment and inflation.
• Supply-side measures that can relocate the Phillips curve to shift to the left, due to
improved education, effective training and fewer restrictions on immigration of skilled
workers,
• Demand-side policies are effective in stimulating economic growth.
• Economic growth can lead to an increase in demand for labour.
• As a result, more people will be employed and unemployment will decrease.
• As unemployment decreases inflation is likely to increase.
Supply-side policies:
• A demand-side approach does not render desirable outcome because growth has to be
cut due to problems in inflation.
• Aggregate supply needs to be managed as well by focusing on increased flexibility of
supply components.
• If the cost of increasing production is completely flexible, a greater output can be
supplied at any given price level.
• The governments can arrange things in the economy in a way that is cooperative to
changes in demand.
• Reduction of costs allows greater output to be supplied at any given price level.
3. Discuss ALL the features underpinning forecasting of business cycles, excluding the
economic indicators.
INTRODUCTION
• There are a number of techniques available to help economists to forecast business cycles
like economic indicators
• A business cycle can be described as successive periods of contraction and expansion of
economic activities
• The pattern of expansion and contraction of aggregate economic activity, measured as real
Gross Domestic Product, displays around its overall trend
• The process of making predictions about changing conditions of future events that may
significantly affect the economy
Amplitude
• It is the difference between the value of total output between peak and trough measured from
the trend line to the peak and trough
• Amplitude reflects the intensity of the upswing and downswing in economic activity
• The amplitude shows two things: -
❖ The power of the underlying forces, e.g., interest rates, exports or consumer spending
❖ A large amplitude during the upswing signifies strong underlying forces – which result
in longer cycles
❖ The extent of change: the larger the amplitude, the more extreme the changes that
may occur
❖ During an upswing, unemployment may decrease from 20% to 10% (a decrease of
50%) / inflation may increase from 3% to 6% (i.e. 100%) / a surplus on the current
account (BOP) can change from a surplus to a deficit.
Trend
❖ The trend indicates the general direction in which the indexes that were used in the
business cycle, moves.
❖ When the economy is growing, there is an upward trend, but when the economy is
decreasing, there is a downward trend.
❖ The trend will change when the time series data change their behaviour patterns
of the past.
❖ Resistance points indicates forces in the economy preventing it from repeating the
performance – unfavourable forces need to change or be removed for growth to
exceed previous tendencies.
❖ It normally has a positive slope because the production capacity of the economy
increases over time.
❖ Channels are formed when output growth reaches successive higher turning
points (upward channel).
Length
❖ Length is measured from peak to peak or from trough to trough.
❖ Longer cycles show strength and shorter cycles show weakness with regard to
economic activities.
❖ Cycles may overshoot with the effect that some composite indicators increase to
beyond its normal level.
Moving averages
❖ This method is repeatedly calculating a series of different average values along a
time series to produce a smooth curve
❖ It is used to analyse the changes in a series of data over a certain period of time
❖ To eliminate the effect of sharp fluctuations in the business cycle, economists use
moving averages to smooth out the business cycle so that it looks more like a
straight of slightly curved line(Accept any other correct relevant response) (A
maximum of 8 marks may be allocated for mere listing of facts/examples)
(Candidates would receive 2 marks if they indicated the amplitude, length and
trend line on a graph)
CONCLUSION
Policy makers should closely watch all these indicators because external factors are very
significant for South African business cycles.
Different methods can be used in forecasting like the quantitative method that is based on
mathematical models or qualitative methods being used in long term forecasting.
(Accept any other correct relevant higher order response) (Max. 2)
1. ECONOMIC GROWTH
• An increase in the production of goods and services by the economy.
• It is measured in terms of an increase in the real gross domestic product.
• Real GDP is the value of goods produced in the country after the effects of inflation have
been taken into account.
• For economic development to occur, the economic growth rate must be higher than the
population growth rate.
• A high economic growth rate also means there will be fewer people who are dependent
on the state to satisfy their basic needs.
• The state tries to ensure that there is continual growth in this capacity because it leads to
an improvement in the standard of living.
2. FULL EMPLOYMENT
• Attaining high levels of employment is one of the most important economic objectives for
all governments.
• Full employment means that all persons who would like to work and who are looking for
work, should be able to find work or create work for themselves.
• The unemployment rate increased over the past few years and above 30% after Covid-
19 pandemic.
• Informal sector activities must be promoted because it is an area where employment
increases.
• In the short-run, the state accelerates employment creation through direct employment
schemes, targeted subsidies and expansionary macroeconomic packages.
• Over the medium term the state support labour-intensive activities in the agricultural and
light manufacturing sectors.
• Over the longer run, as full employment is achieved, the state supports knowledge-
intensive and capital-intensive sectors to remain competitive.
3. EXCHANGE RATE STABILITY / BALANCE OF PAYMENTS (BoP) EQUILIBRIUM
• Depreciation and appreciation of a currency create uncertainty for producers and traders
and should therefore be limited.
• Government uses its monetary and fiscal policies to ensure that the exchange rate
remains relatively stable for as long as possible.
• BoP equilibrium influences the flow of goods, services and capital in a country.
• Exchange rate stability has a strong impact on the inflation rate and other
macroeconomic variables.
• The choice and management of an exchange rate system forms a critical aspect of
economic management to protect and encourage competitiveness, macroeconomic
stability and growth.
• More money inflows into a country result in a surplus on the Balance of Payments
account.
• The SARB changed the Exchange rate from a Managed floating to a Free-floating
exchange rate.
• Promoting domestic production will increase exports.
4. PRICE STABILITY
• Market economies produce better results in terms of economic growth and employment
when prices are relatively stable.
• In South Africa relative price stability means that the inflation rate remains within the
inflation target of 3–6%.
• Interest Rates, based on the Repo Rate are the main instruments used to achieve price
stability.
• The benefit of the inflation target is a greater degree of transparency in monetary policy.
• If inflation exceeds the upper limit of the range, the Reserve Bank must consider
increasing the interest rate to cool down the heated economy.
10
5. ECONOMIC EQUITY
• A redistribution of income and wealth is essential in market economies.
• There are sections of society that earn a large amount of money while others earn very
little.
• Progressive income tax and tax on profits, wealth and expenditure are used to finance free
social services.
• Basic education, primary healthcare, basic economic services and cash grants to poor and
other vulnerable people, will enhance economic equity.
(Accept any other correct relevant response) (Max 26)
CONCLUSION
The state plays a significant role in achieving the macroeconomic objectives by guiding the
economy through the national budget.
(Accept any other correct relevant higher order conclusion) (Max 2)
INTRODUCTION
• Public sector failure occurs when the government fails to manage the economy and the
resources under its control optimally.
• Public sector failure can be regarded as a failure of government to achieve its objectives.
(Accept any other correct relevant introduction.) (Max 2)
Management failure
• Ignorance leads to the implementation of conflicting or wrong policies.
• Incompetence in the public sector may be due to improper qualifications, lack of training,
experience and an attitude of apathy.
• Lack of skills may lead to wrong decisions and low productivity.
• Corruption exists when government official exploits their positions for personal gain.
• Taking bribes, committing fraud, nepotism, behaving dishonestly and committing
discrimination.
• Allowing rent-seeking, which is behaviour that improves the welfare of someone at the
expense of the welfare of others.
Apathy
• Government officials show little or no interest in delivering an efficient service to the
public.
• It is not always easy to hold the public sector officials accountable because of the huge
workforce in various departments.
• Corruption and poor service delivery are some of the symptoms of apathy
• People employed by the state do not always serve the interests of the public.
11
• Public sector officials seek to maximise their salaries, status and power and are not
required to produce a profit and loss statement.
• Poor accountability is the result of low motivation, poor training, and lack of competence.
Lack of motivation
• Frontline workers rarely receive incentives for successful service delivery but are only
monitored on inputs and following procedures and processes.
• Lack of motivation leads to limited services, high cost and low-quality service delivery
• There is no measurement of effectiveness or productivity and few rewards for
outstanding performance and penalties for poor performance.
• There are not enough systems in place to evaluate the services that government
employees give.
Bureaucracy
• Bureaucracy makes policies take long to be implemented or it is not implemented
successfully. for example, official rules and procedures.
• Bureaucrats tend to obey rules and procedures without judgements.
• Government officials tend to be more interested in obeying rules than the efficient
delivery of goods and services to the people.
• Bureaucrats can manipulate policies to benefit themselves at the expense of the people
Politicians
• Politicians tend to promote policies and spend money on projects as long as they get
votes in return.
• These policies might involve an inefficient allocation of resources.
• Politicians can also serve their own interests through corruption, personal and hidden
agendas and suspicious motives.
Structural weaknesses
• Objectives are not met, such as full employment and houses for all are not realistic and
attainable objectives.
• Too aggressive redistribution of income and wealth may cause the government not to
reach their macroeconomic objectives.
Special interest groups
• Groups such as labour unions and business groups can also cause government failure.
• Trade unions can influence the government to pass certain laws to favour their members.
• Business groups can influence the government to provide them with profitable contracts
and favourable regulations.
• Businesses may influence the government to distribute resources so that they can benefit
at the expense of the country.
A maximum of 8 marks may be allocated for headings/examples. (Max 26)
CONCLUSION
South Africa requires a creative and competitive private sector with new technologies that can
help entrepreneurs to enter industries where the state dominates.
(Accept any other relevant higher order conclusion.) (Max 2)
12
13
SUPPLY REASONS
Natural resources
• These resources are not evenly distributed across all countries of the world.
• They vary from country to country and can only be exploited in places where
these resources exist.
• South Africa is well endowed with different natural resources but less well
endowed with skilled labour and capital.
• whilst Japan and Ireland have relative abundance of skilled labour but they
lack natural resources
Climatic conditions
• These conditions make it possible for some countries to produce certain
goods at a lower price than other countries. E.g. Brazil is the biggest producer
of coffee
• Countries have different climatic conditions and are therefore able to produce
different products.
Labour resources
• Labour differs from country to country in terms of skills, knowledge, training,
quality, quantity and cost between them.
• Some countries have highly skilled, well-paid workers and high productivity
levels. E.g. Switzerland
Technological resources
• The development levels and innovation processes of countries will always
differ and as a result other countries may have them in abundance while
others may not.
• Countries like Germany, the United States, are able to use capital that
embodies high levels of technology while other countries do not have access
to the latest technology.
• These countries that have high technological labour force are able to produce
certain goods and services at a low unit cost. E.g., US and Germany
Specialisation
• The production of certain goods and services allows some countries to
produce them at a lower cost than others. E.g. Japan produces electronic
goods and sells these at a lower price
• International trade enables countries to specialize in the production of goods
and services in which they have a comparative advantage.
• Most of such surplus production gets exported to other countries and the
revenue earned from these exports can be used to finance imports.
Capital
• Some countries need to modernize their industries and economies with
advanced machinery, equipment and plant but cannot manufacture this
equipment because they lack capital to do so.
• This has then increased the need for international trade.
(Accept any other correct relevant answer) (Max 26)
BODY: ADDITIONAL PART (NOT TO BE PREDICTED)
CONCLUSION
While the Russia-Ukraine conflict is ongoing, the South African government has to
look at other ways of strengthening its infrastructure to take advantage of future
gains in commodity trade✓✓
(Accept any other correct and relevant higher order response) (Max. 2)
14
QUESTION 6 ESSAYS
INTRODUCTION
• Incentives:
− Involves a programme administered by EMIA, aiming to compensate exporters for
costs incurred in developing export markets for South Africa.
− Also participation in National Pavilion exhibitions, where government ministers
conclude future trade agreements for business.
− Providing support in credit facilities, such as government assisting businesses to get
low interest loans by signing surety on certain loan agreements.
− The DTI is providing Business Intelligence by providing market research as well as
export opportunities overseas
− Technical advice and expertise is provided by the DTI on matters such as product
specification, advertising and marketing.
- To provide insurance contracts for export transactions.
Other grants
- Tax concessions on earnings from exports
- Tax concessions on capital investments to produced export goods
− Implementing Export-Processing Zones (EPZs) to attract export investment firms to
such zones by offering tax exemptions and less labour restrictions.
− The government supplies information on export markets in order to stimulate exports.
− Other examples are research on new markets, concessions on transport charges,
export credit.
• Subsidies:
− Incentives to encourage exporters to increase the amount of their production
− It includes direct and indirect subsidies:
o Direct subsidies: Cash payments to exporters
o Indirect subsidies: Refunds on import tariffs and general tax rebates
• Trade neutrality:
− Subsidies, equal in size to import duties, are paid − Neutrality can be achieved through
trade liberalisation.
− Experience growth in exports if cost-raising effects of protection are neutralized by
Subsidies.
15
Advantages
• No limitations of size of scale since world market is very large.
• Production is based on cost and efficiency organized according to comparative
advantages.
• Increased domestic production leads to growth in exports and imports (supply foreign
exchange to pay for necessary imports).
• Exchange rates would be realistic no exchange control or quantitative limitations
exists.
• Increased employment opportunities, which could improve income and skills.
• The increased size of domestic businesses and the increase in the number of
producers will result in increased competition, more efficient output, lower prices and
larger variety of goods/inflation could be reduced.
16
− Powerful overseas businesses can afford to offer similar products at much lower
prices.
− Compared to their production, the subsidised business's domestic market may
be so small that it will destroy the business who received the subsidy
• Protection of labour-intensive industries:
− Developed countries often maintain high levels of effective protection for their
industries that produce labour-intensive goods in which developing countries
already have or can achieve comparative advantage.
− Export promotion results in the protection of labour-intensive industries by
developed countries.
− Increased exports could be seen as dumping, which enables foreign firms to
obtain a larger market share and force local producers out of the market.
(Max 26)
BODY: ADDITIONAL PART (NOT TO BE PREDICTED)
CONCLUSION
World economies grow and develop on better international relations with other countries by
applying different trade policies such as import substitution and free trade.
(Accept any other correct relevant response) (Max 2)
INTRODUCTION
A trade policy whereby state implements measures to protect local industries against unfair
competition from abroad. (Max 2)
(Accept any other correct relevant response)
BODY: MAIN PART
Industrial development
• Some developing countries are suitable for establishing certain kinds of industries
• Free trade makes it impossible to compete with well-established older countries, due to
the first few years of existence of an industry being the most difficult.
• Older industries use unfair methods of price-cutting and dumping – therefore young
industries need protection until properly established.
• Protection will prevent competition, because it is difficult to do away with, once applied.
Infant industries
• It is difficult for a young industry to survive, due to their average costs being higher than
well-established foreign competitors.
• If they are given protection in their early years, they may grow and take advantage of
economies of scale/lower their average costs/become competitive.
• A country with high wages has a view that standard of living will be undermined if
cheaper goods are imported from countries with low wages.
• In reality, high wages are paid to workers with high productivity.
17
Increased employment
• Local industries cannot find profitable markets, may stop production and cause
unemployment.
• Protection will result in less unemployment.
Prevent dumping
• Countries selling goods in a foreign country at lower prices than cost of production in
home country.
• Dumping is used to capture new markets and forces financially weaker industries out of
competition.
• Foreign enterprises may engage in dumping because government subsidies permit them
to sell goods at very low prices or below cost or because they are seeking to raise profits
through price discrimination.
• The initial reason for exporting products at a low price may be to dispose of accumulated
stocks of goods.
• In the short term, consumers in the importing country will benefit.
• However, their long-term objective may be to drive out domestic producers and gain a
strong market position.
• In this case consumers are likely to lose out as a result of the reduction in choice and the
higher prices that the exporters will be able to charge.
• Protectionism prevents foreign industries from dumping their surpluses and out of season
goods at low prices, which may be harmful to home industries.
18
INTRODUCTION
The demand-side approach involves discretionary changes in monetary and fiscal policies with
the aim of changing the level of aggregate demand and therefore output.
(Accept any other correct relevant introduction.) (Max 2)
MONETARY POLICY
• The SARB is co-responsible for formulating and implementing South Africa's monetary
policy.
• Its primary goal is to protect the value of the currency by stabilising prices in terms of
inflation targets.
19
20
2. Wealth taxes
• Properties such as houses, offices and factory buildings in urban areas are taxed
annually.
• Transfer duties are paid when properties are bought.
• Securities (shares and bonds) are taxed when they are traded.
• Capital gains tax (CGT) is levied on gains earned on the sale of capital goods, such as
properties and shares.
• Estate duties are levied on the estates of deceased persons.
• Taxes are used to finance development expenditures which benefit the poor more than
those who are not poor.
3. Cash benefits
• Old-age pensions, disability grants, child support grants and unemployment insurance
are important cash grants.
4. Benefits in kind
• These include the provision of healthcare, education and school meals, protection,
municipal services and infrastructure.
• Where user-fees are charged, poor people and low-income earners benefit more than
others because they pay nothing or less than higher-income earners.
• Limited quantities of free electricity and water are provided.
5. Other redistributions
• Some macroeconomic policies have advantages that favour poor and low income
earners.
• Public work programmes, for example, provide employment and Strategic Investment
projects (SIPs) provide employment subsidies and a number of other cash and financial
benefits to SMMEs.
• Previously disadvantaged persons receive preference.
7. Property subsidies
• Subsidies help beneficiaries to acquire ownership of fixed residential property.
• The government's housing subsidy scheme provides funding options to all eligible
persons earning less than R3 500 per month.
• The money for this scheme comes from the main budget.
A maximum of 8 marks may be allocated for headings/examples (Max 26)
BODY: ADDITIONAL PART (NOT TO BE PREDICTED)
CONCLUSION
21
4. Discuss in detail the South African growth and development policies and strategic
initiatives.
INTRODUCTION
Almost 30% of the South African population is poor, therefore poverty is a serious policy matter
for the government.
Any other relevant definition. (Max. 2)
22
23
❖ Phase in national health insurance, with a focus on upgrading public health facilities,
producing more health professionals and reducing the relative cost of health care.
❖ Public infrastructure investment at 10% of GDP financed through tariffs, public-private
partnerships, taxes and loans and focused on transport, energy and water.
❖ Interventions to ensure environmental sustainability and resilience to future shocks.
❖ New spatial norms and standards – densifying cities, improving transport, locating jobs
where people live, upgrading informal settlements and fixing housing market gaps.
❖ Reduce crime by strengthening criminal justice and improving community environments
25
❖ a lack of skills and necessary knowledge led to many black women and youth
not being able to occupy top management strategic positions in companies.
BODY: ADDITIONAL PART (NOT TO BE PREDICTED)
CONCLUSION
It is debatable whether the new strategies implemented will be successful in addressing the
various economic objectives because past policies have failed to meet their targets, e.g. Asgisa
(Max. 2)
Accept any other relevant higher order conclusion.
5. Discuss in detail South Africa's initiatives (endeavours) in regional development.
INTRODUCTION
• Regional development refers to policies which are aimed at increasing the economic
livelihood of specific areas or regions.
(Any other correct relevant introduction) (Max 2)
BODY: MAIN PART
SPATIAL DEVELOPMENT INITIATIVES(SDI):
• SDI is a policy to promote sustainable industrial development in areas where poverty and
unemployment are at their highest.
• It can be defined as a link between important economic hubs and regions in a country.
• The intention was to grow the SDI's mostly through private sector investment.
• The state was to enhance inward investment through the granting of incentives.
• The Public Private Partnerships, promotes the economic potential of underdeveloped
areas.
• In a PPP a private business may provide the capital to build the factory and to buy raw
materials and employ labour, while the government provides the capital for the
infrastructure e.g. roads and water.
• There are 2 types of PPPs which are compensated differently: unitary payments and
user-fees.
• The SDI involves an interdepartmental investment strategy that the DTI and the
Department of Transport (DOT) lead.
• Government’s industrial policy strives towards balance between openness and in
promoting local competitiveness by opening up the domestic economy to international
competition.
• DTI is driving force behind industrial and spatial development.
• Relies on networking with other central provincial government departments, IDC,
parastatals (like Telkom, Eskom and Transnet) and research institutions to plan and
monitor development.
• Key policy remains sustainable industrial development in areas where poverty and
unemployment are at their highest.
• SDI’s focus on high-level support on areas where socio-economic conditions require
concentrated government assistance and inherent economic potential exists.
• SDI goal to fast-track investment and maximize synergies between various types of
investments.
26
• They are purpose-built industrial estates, physically enclosed and linked to a port or
airport.
• They are in duty-free import areas.
• This strategy was aimed at making exports internationally competitive.
• They focus on creating jobs and promoting exports.
• Goods produced in these zones should be exported to foreign countries.
• As services are provided from outside, the economy in the areas should be stimulated.
• An IDZ offers a world-class infrastructure, enjoys a zero rate of VAT on supplies from
South African sources and reduced taxation on some products.
• IDZs were located to benefit:
- investing companies through support
- access to transport for exporting purposes
- products produced for export by wavering import duties
- skills training for employees by providing subsidies
• Each IDZ is designed to:
- provide location for establishment of strategic investments
- promote and develop links between domestic and zone-based industries
- enable exploitation of resource-intensive industries
(Accept any other correct relevant response) (Max 26)
BODY: ADDITIONAL PART (NOT TO BE PREDICTED)
CONCLUSION
Economic decentralisation would guarantee that greater emphasis of the development of the
country and comprehensive use of resources are used effectively for the improvement of the
well-being of the country.
(Accept any other correct relevant higher order response) (Max 2)
27
INTRODUCTION
Governments use different statistical data to predict economic trends and formulate suitable
developmental strategies toward influencing the direction that the economy should take /
Economic indicators are used to establish the performance of an economy in terms of the
basic economic objectives (Accept any other relevant response) (Max. 2)
BODY: MAIN PART
1. THE INFLATION RATE
Inflation can be described as an increase in the general level of prices in an economy that is
sustained over a period of time.
SARB aims to keep the inflation rate stable between 3 and 6%.
The following instruments measure inflation:
Consumer prices/CPI
• This is the weighted average of the prices of a general basket of goods and services likely to
be bought by consumers.
Production prices /PPI
• Measures prices of locally produced goods when they leave the factory and imported
goods when they enter the country.
• Serves as an indicator to predict consumer inflation (CPI).
3. EMPLOYMENT
The economically active population (EAP / labour force)
• The official employment ages in South Africa are between 15 and 65 who are willing to
work and it includes workers in the formal sector, informal sector, employers, self-
employed persons and unemployed persons.
Employment rate.
• The number of employed persons expressed as percentage of the EAP gives the
employment rate.
• The South African employment rate was 70,9% during 2019 and is not accompanied by a
similar growth in employment numbers.
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Unemployment rate
• The unemployment rate is expressed as the percentage of unemployed persons out of the
total number of people willing and able to work.
• In South Africa the official unemployment rate was 29,1 % in 2019 and is the most important
cause of poverty.
4. PRODUCTIVITY INDICATORS
Labour productivity
• Watched most closely, particularly in relation to real wage increases.
• In South Africa productivity increased less than labour remuneration.
• Labour productivity is measured by dividing the real GDP by the number of workers
employed.
Remuneration per worker
• If productivity increases are lower than the real wage increases, inflationary pressures will
occur.
• The relationship between productivity and wages is crucial for employers survive in vigorous
markets and workers to survive on their salaries.
(Accept analysis of other kind of productivity)
5. INTEREST RATES
Repo rate
• Repo rate is the rate at which the SARB provides loans to commercial banks.
• effective utilization of the decisions made on the change of the repo rate by the Monetary
Policy Committee (MPC).
• When the MPC lower the repo rate, banks should likewise reduce their interest rates in
order to produce increased consumption spending by consumers.
• When the MPC increases its repo rate, banks would increase their interest rates and this
would have a negative effect or decline in the consumption spending by consumers.
• If interest rates increase, debt of households and businesses increase and repayment of
debt becomes larger too.
• It may signal that a downturn in the business may occur and thus the welfare of
consumers becomes affected
6. MONEY SUPPLY
• Money supply is of critical importance to give early warning of likely changes in inflation
• The SARB is currently focusing on targeting inflation rather than the money supply
• South African Reserve Bank defines money in different categories:
❖ M1 - coins and notes
❖ M2 - equal to M1 plus all short- and medium-term deposits.
❖ M3 - equal to M2 plus all long-term deposits of domestic private sector with
monetary institutions.
BODY: ADDITIONAL PART (NOT TO BE PREDICTED)
CONCLUSION The use of economic indicators is important because analysts use the
data to interpret current or future investment possibilities. (Max 2)
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1. DEMOGRAPHICS
Demographics refers to data collected relating to the composition of the population of a country,
such as size, race, age, sex, income, geographic distribution, language, education, occupation,
religion, birth rate, fertility rate, life expectancy at birth, infant mortality rate, death rate.
Demographics consist of population growth and life expectancy.
Population growth
• Currently the South Africa's population is approximately 60.6 million.
• Census is done every few years in order to determine the population growth.
• The population growth rate is an important indicator to the government in terms of the
number of social services that are needed.
• The size and the change in the population indicate the future labour force and the needed
infrastructure.
• The Human Development Index represents an intention to define human well-being more
broadly. It provides a combined measure of three basic dimensions of human
development: health, education and income.
Life expectancy
• Life expectancy refers to the number of years that an individual is expected to live.
• It reflects the average age at which people in the country die.
• In South Africa life expectancy is low due to AIDS or other pandemics.
• Other demographic indicators include migration rates, population density, mortality rates
and birth rates.
• Assurance companies are interested in life expectancy reductions because it has an
impact on premiums and service delivery.
• Nutrition: This is an important indicator for the well-being of infants and young children two
important conditions of nutrition in child malnutrition and overweight which are both
particularly important for children under the age of five years of age:
- Child malnutrition:
❖ Malnutrition is expressed in two ways, namely weight for age (underweight) and
height for weight (stunted or dwarfism).
❖ the proportion of children who are underweight is the most important indicator of
malnutrition.
❖ it is important to monitor malnutrition and weight because being overweight
increases the risk of death and inhibits cognitive development in children.
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• HEALTH: A number of indicators are used both nationally and internationally to monitor
the health of a population
❖ Infant mortality: This is measured in terms of the number of infants who die before
reaching one year of age per thousand live births in a given year. In South Africa in
2010, it was at 34% per thousand.
❖ Under five mortality: This is measured in terms of the probability that a new born
baby will die before reaching the age of five years, if subject to present age-specific
mortality rates. The probability is expressed is a number per thousand and in South
Africa it was at 50 per thousand in 2010.
❖ Spending on health: This is measured in terms of the amount of public and private
expenditure on healthcare as a percentage of GDP. In 2009 South Africa's
expenditure was 8,4% compared to the 6,6% in the Sub-Saharan Africa and 5,3%
in the North Africa.
❖ Access to safe and drinking water: This is measure in terms of the percentage of
the population that a reasonable access to safe and drinking water (treated or
uncontaminated) - in 2009 91% of the South African population had access
compared to 60% in Sub Saharan Africa and 92% of North Africa.
❖ Access to sanitation facilities: This is measured in terms of the percentage of a
population with at least adequate sanitation facilities that can effectively prevent
human/animal/and insect contact. In 2009, 77% of the South African population had
access to improved sanitation, compared to 31% in sub-Saharan Africa and 89% in
North Africa. A healthy population saves on medical and other costs, produces
income and contributes to a stronger economy.
3. EDUCATION
• People’s standard of living is directly related to their level of education.
• Five or Six years of schooling is essential for the achievement of sustainable literacy and
numeracy skills.
• Public expenditure percentage. This shows the percentage of public expenditure that is
directed towards education.
• Secondary enrolment percentage. This shows the percentage of the designated age
group attending secondary education.
❖ In high-income countries, learners of a younger age attend secondary education.
• Primary completion. This shows the percentage of the designated age group that
completed primary education. It serves as indication for efficiency.
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• Youth literacy rate. This shows the percentage of the designated age group (15 - 24
years) that are literate. It serves as indication for the outcome of the education system.
4. SERVICES
• Services are vital to enhance people's lifestyles and level of economic and social
development In South Africa, in terms of the Constitution's requirements of human
dignity and social justice.
• The following are identified:
❖ Electricity: The national Electricity Regulator reports that 84% of households has
access to electricity in 2020 despite the loadshedding challenges.
❖ Refuse removal: Some 61% of households in South Africa had access to refuse
removal by the local authorities once a week.
❖ Water supply: Some 89% of households had access to clean water in 2020. This is
the average of urban and rural access to improved water schemes. Improved water
resources refers to an adequate amount of water from sources like households'
connections / taps inside the yard / public taps / boreholes / protected springs / and
rainwater collection
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PAPER TWO
QUESTION 5: MICRO-ECONOMICS
TOPIC NO. ESSAY LAST YEAR
ASSESSED
PERFECT MARKET 1. Discuss in detail the various equilibrium DBE Nov 2017
positions of a perfect market with the aid of
graphs (normal profit, economic profit
&economic loss)
IMPERFECT 2. Discuss, with/without graphs, monopoly as a DBE Nov 2019 with
MARKET market structure in detail the aid of graphs.
3. Discuss oligopoly as a market structure in DBE May 2022
detail
MARKET 4. Compare and contrast perfect and imperfect
STRUCTURE market structure OR imperfect and imperfect
MARKET FAILURE 5. Discuss the causes of market failure in DBE May-June
detail SCE 2021
6. Discuss, in detail, with/without drawing DBE Nov-Dec
graphs, state intervention as a consequence 2021 without
of market failures. graphs
PAPER TWO
QUESTION 6: CONTEMPORARY ECONOMIC ISSUES
TOPIC NO. ESSAY LAST YEAR
ASSESSED
INFLATION 1. Discuss the consequences of inflation. DBE Nov- 2021
2. Discuss measures to combat inflation DBE May-2022
TOURISM 3. Discuss in detail the benefits of tourism. DBE Nov-2021
4. Discuss in detail the effects of tourism. DBE Nov-2018
ENVIROMENTAL 5. Discuss in detail the measures used by DBE JUN- 2018
SUSTAINABILITY government to ensure sustainable
development.
6. Discuss the major environmental problems DBE Nov-2020
that affect countries globally.
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