4.1 T HE IMPACT OF SOCIO - ECONOMIC ISSUES ON BUSINESS OPERATIONS AND PRODUCTIVITY Socio-economic issues refer to problems that affect people (socio) and the economy (economic) of a country.
4.1.1 Income SA has one of the highest rates of income inequality in the world. This is due to large differences between salaries of high earners and low earners. Many South Africans are battling financially due to rising food prices, petrol prices and inflation rates. Income inequality often leads to poverty. Poverty causes more unemployment and skills shortages because poor people cannot afford to pay for educations.
4.1.1 Income Influence on business operation and productivity People with limited or no income cannot spend much money Businesses can only expand if there is an increase in the demand for their goods. People who earn low salaries and wages may become disheartened – this will influence productivity in a negative way
4.1.1 Income Possible solutions Creation of job opportunities Intiatives to encourage entrepreneurship
4.1.2 Inflation Inflation refers to the general increase in the prices of goods and services. Inflation influences consumers because inflation results in a reduction of buying power (money consumers can spend). The cost of raw materials is also affected by inflation. This means that business enterprises must increase prices in order to maintain reasonable profits. Price increases can scare off consumers easily.
4.1.2 Inflation Influence on business operation and productivity Goods and services become more expensive. Consumers have less money to spend. Businesses cannot expand. Consumers spend less and goods become more expensive due to inflations. This may lead to some businesses having to retrench employees. This has a negative effect on a country’s overall productivity.
4.1.2 Inflation Possible solutions Initiantives to encourage entrepreneurship.
4.1.3 Social, cultural and demographic issues a) Population growth: Refers to the number of people in a country. A population experiences growth when the number of people who are born in a particular year. If a population grows, the number of jobs available must increase.
4.1.3 Social, cultural and demographic issues a) Population growth: If this is not the case, a growing population can have a negative impact on unemployment. Crime rates are usually higher in countries with high rates of unemployment. A growing population demands an increase in consumable resources such as food. If the agricultural industry is unable to produce more food, a nation could face starvation. A growing population needs housing.
a) Population growth: This means that land must be made available for building houses. An increase in the number of people results in an increase in waste products such as refuse and sewage. Therefore, one could say that excessive population growth impacts negatively on employment, food supplies, housing, pollution, infrastructure and even crime. Remember, if the demand for a scarce product is high, that product is very expensive.
b) Illiteracy: If a person is illiterate, it means that the person cannot read or write. We can therefore accept that illiterate people do not possess a proper education. Many illiterate people cannot find work because most jobs require some reading and writing skills. Illiteracy impacts on business enterprises because it is very hard to market products to people who they cannot read.
c) Lack of skills: SA is currently experiencing severe skills shortages in fields such as education, medicine, engineering and the finance industry. SA is also experiencing a shortage of educators – this means that future generations will experience skills shortage as well. Enterprises looking to recruit candidates often struggle to find someone with the right combination of skills and experience.
c) Lack of skills: The cost of training falls on the enterprise. Training employees is an expensive process which impacts on productivity because it takes time for a newly trained employee to learn the ropes of his/her new job. Candidates are sometimes recruited from abroad, which is expensive and time consuming. Sometimes, enterprises have no choice but to appoint a candidate who lacks certain skills. This will result in lowering an enterprise’s standards.
4.1.3 Social, cultural and demographic issues Influence on business operations and productivity Possible solutions Increase in the demand for goods and services. Job creation Excessive population growth increases umemployment, crime and pollution. Skills development Difficult to market products to people who cannot read or write. Initiatives that encourage entrepreneurship
4.1.4 Economic crime Economic crime is also known as white collar crime. White collar crime includes the following criminal activities: Fraud Fraud refers to the unauthorised use of funds. Unauthorised means ”Wihtout permission.” Example: Using the business’s petrol card to fill up your own car to go on a personal trip. Earning money on behalf of a business without telling the other business owners about the earnings. Claiming more expenses on a trip that were actually incurred.
Money laundering Money laundering refers to hiding the source of money that was obtained illegally. Money can be obtained illegally in different ways for example stealing and drug dealing. Money that was obtained illegally is know as ”dirty money”. Dirty money is sometimes used to run legal businesses. He money made from legal business, then appears ”washed” or ”laundered”. 4.1.4 Economic crime
Influence on business operations and productivity Business owners who are involved in money laundering face criminal charges. Loss of income if money has been stolen from a business. Loss of jobs if a business closes down. 4.1.4 Economic crime
Possible solutions Implement fraud prevention strategies. Limit the number of people who have access to a business’s money to the absolute minimum. Identify vulnerable areas in the business. Conduct regular internal audits.
4.1.5 Ethical misconduct a) Sexual harassment: Sexual harassment in the workplace involves unwelcome or unwanted attention of a sexual nature from someone at work that causes discomfort, humiliation, offence distress, and/or interferes with the job. Sexual harassment includes: Unwelcome sexual advances Requests for sexual favours in return for employment benefits Pressure for sexual favours to clinch sales deals
a) Sexual harassment: It is immoral, wrong and unethical to abuse your position to take advantage of another person. Employers should be proactive and prevent the problem, rather than having to address it after damages have been suffered.
b) Corruption: Refers to acts of dishonesty. Involves the abuse of one’s position for dishonest gain, like in “bribery” and “kickbacks”. Description: Bribery: Money is offered to a person to influence that person Example: money is offered to a traffic officer by an offender to “forget” about a traffic offence. Kickbacks: Money is paid back to a person who makes a transaction possible. Example: a road construction company pays some of the money made back to the government official who awarded the job.
c) Mismanagement of funds: Mismanagement of funds refers to the wrongful use of funds that do not belong to you. Often used in the same context as fraud. It include inappropriate procurement procedures and irregular expenses.
4.1.5 Ethical misconduct Influence on business operations and productivity Employees who have been victims of sexual harassment will experience a lack of concentration, anxiousness and lack of productivity. Corruption and mismanagement of funds will lead to a loss of income.
4.1.5 Ethical misconduct Possible solutions Steps that an be taken to deal with sexual harrassment include: Formulating a clear policy regarding sexual harassment. Making others aware of the problem, of their own rights and of the rights of others. Implementing clear complaints and disciplinary procedures. Formulating an employment equity programme that ensures well planned career paths that are based on merit, for all employees. Working in a positive corporate culture, where the rights and dignity of all staff members are respected.
4.1.5 Ethical misconduct Possible solutions Corruption and mismanagement of funds: Adopt a zero tolerance approach towards corruption. Conduct regular internal audits. Limit the number of people who have access to a business’s funds. Offer awards to whisstle-blowers.
4.1.6 Natural resources a) Unavailability of natural resources: Some natural resources e.g. oil, coal, food, water and gold, are scarce. This means that if we do not monitor the use of natural resources, some resources will soon be depleted. The depletion of resources will not only impact business enterprises, but human life in general. SA has already experienced load shedding. Many business enterprises have lost millions of rands because of load shedding. Business enterprises, as well as the population in general, must guard against the inefficient use of natural resources, because resources are limited.
b) Inefficient use and exhaustion of resources: Inefficient use of resources means that resources are being wasted. Businesses must devise strategies to make sure that natural resources are used efficiently. If resources are used inefficiently they become even scarcer. This will lead to an increase in the price of goods and ultimately to the exhaustion of certain resources. Some resources, like oil and coal, cannot be reproduced. The growing human population means an increasing demand for resources – this also accelerates the depletion of resources
4.1.6 Natural resources Influence on business operations and productivity Businesses cannot continue with business operations if natural resources are depleted. Businesses must develop and implement environmental policies. Loss of productibity if business operations come to a halt due to unavailability of natural resources.
4.1.6 Natural resources Possible solutions Finding alternative sources of energy. Recycling. Finding businesses that fail to comply with environmental laws. Creating environmental awareness among businesses and individuals.
4.1.7 Dumping Dumping is when other countries dump their excess products on the SA market to dominate the local market. Dumped products are usually very cheap. Dumping has a negative influence on local businesses because local businesses are unable to produce the same products the same products at an equal or lower price. Consequently, consumers buy the dumped products. This hurts local businesses as they are unable to sell their products.
4.1.7 Dumping Influence on business operations and productivity Loss of income. Loss of job opportunities. Loss of productivity.
4.1.7 Dumping Possible solutions Intitiatives that encourage entrepreneurship. Limit the number of imported goods. Creating awareness among consumers about locally produced goods through marketing.
4.1.8 Piracy Takes place when a person makes copies of goods that are protected by either copyright law or trade mark laws, without the consent of the true owner of the goods. Products that are often associated with piracy are computer software, CD’s and DVD’s. Consumers create a demand of pirated goods. If no one buys pirate goods, then criminals will have no-one to sell pirated goods to.
4.1.8 Piracy Definitions: Intellectual property A product for example artwork, music or poetry that was the product of someone’s mind. Intellectual property belongs to its creator. Copyright Only an owner of intellectual property has the right to produce and copy it.
Patent An invention. Someone who holds a patent has the sole right the sole right to produce and sell an invention. Trade mark An unique mark that represents a business enterprise and that belongs to the business enterprise. Includes words, slogans, designs, signs and symbols. Registered trademarks may not be used by anyone other than the business enterprise/person it belongs to.
4.1.8 Piracy Influence on business operations and productivity Loss of income. Increase in prices of authentic goods. Loss of productivity.
4.1.8 Piracy Possible solutions Create awareness among consumers about the effects of piracy on business operations. Take action against people who produce and sell pirated goods.
4.1.9 Strikes A strike is usually the result of a labour dispute. A strike takes place if workers refuse to work. A labour dispute is a conflict of interest between members of a trade union and their employer. The most common reasons for strikes are wages, working hours and working conditions.
4.1.9 Strikes a) Different kinds of strikes: Description: Go-slow:Employees show up at work, but work very slowly and produce fewer goods than usual. Sympathy strike:Members of other trade unions, who are not in dispute with their employer, join the strike to support workers who are in dispute with their employer. Sit-down strike:Employees show up at work, but refuse to do any work. Wildcat strike:Against the law – takes place without any warning. Work to rule:Workers cause a decrease in production by doing only the minimum of what is expected of them, according to the rules of the workplace. Lockout:Employees are locked out by their employer and refused entry to their workplace.
b) The Labour Relations Act: nature and purpose: Makes provision for collective bargaining, e.g. during wage disputes. Makes provision for the settling for labour disputes. Makes provision for trade unions and discusses the roles and rights of trade unions. Regulates the right to strike and to recourse to lock-out in terns of the constitution. Promotes employee participation in decision-making through the establishment of workplace forums. Provides simple procedures for the resolution of labour disputes through conciliation, mediation, arbitration or independent alternative dispute resolution services.
c) What is a Trade Union? A trade union is an employee organisation that focus on improving working conditions. COSATU and Solidarity is an example.
d) History of trade unions: The Trade Union movement originated in Great Britain. Due to the fact that workers were uneducated and illiterate, workers could not negotiate better terms of employment and they did not have power to influence their employers. Workers realised that they have more power when they stand together. Workers formed trade unions to use their collective bargaining power for negotiation better working conditions. Initially, trade unions were not recognised by the law and employers did not want to deal with trade unions.
The Role of trade unions: Improve working conditions and terms of employment. Ensure that workers are treated fairly at work. Strive to ensure that workers get a fair share of the wealth generated by business enterprises. Try to improve social security. Achieve greater control over the management of employment relationships. Resolve grievances and disputes in the workplace. Try to prevent retrenchment.
f) Functions of trade unions: Represent people at work. Lobby government and other decision-makers to ensure the best possible deal for workers. Take part in collective bargaining processes. Protect the rights of members in the workplace. Negotiate equitable wages and benefits. Support gender equality. Provide and restructured medical aids.
4.1.9 Strikes Influence on business operations and productivity Loss of productivity. Loss of income. Can lead to the improvement of employer/employee relationships.
4.1.9 Strikes Possible solutions Employers and employees must adhere to labour legislation. Issues between members of trade unions and employers musst be resolved before labour action takes place.