2 CAPS requirementsComparison of South African growth and development in terms of international benchmarks; highlight the North/South divide.The demand-side approachThe supply-side approachEvaluation of the approaches used in South AfricaThe North/South divide
4 ECONOMIC GROWTH AND DEVELOPMENT 2 closely linked topics – you can’t have one without the other.Economic growth: increase in capacity of economy to produce goods and services.Economic development: sustained actions of policy makers that promote the standard of living and economic health of a country.
5 What’s the difference???Economic growth is about increasing production.Economic development is about improving the standard of living.
6 The HDIGDP is an objective measure, but development is harder to measure. A method that countries use to measure economic development is the Human Development Index (HDI). HDI: measure of a country’s life expectancy, literacy, education, per capita GNI, poverty and environmental sustainability. Classified as very high, high, medium and low.
7 Who do you think made the top 5? Out of 187 countries, where do you think SA are placed?Who do you think made the bottom 5?
12 ↑ in real GDP (economic growth) ↑ in economic development ↑ in wages↑ in economic development↑ in education, health
13 Factors influencing developmental policies State of government financesPolitics: balance needs to be found between the two policies.Resources: countries must take into account which they have, and decide on how best to use them.
14 Factors that promote economic growth (pollev.com/mrsmith1001) A greater quality or quantity of resources.Greater productivity of labourImprovement of infrastructureGreater use of technologyInvestment in new and existing businessesIncreasing entrepreneurship and establishing more SME’sLess government corruption and beaurocracy
15 Factors that promote economic development (pollev.com/mrsmith1001) Policies to reduce povertySufficient gov. finances for welfare payments↓ waste & corruption in welfare system↓ unemploymentImprovements to education and healthcareImproved housing, sanitation, water and power to poor communitiesInspire people to improve their own standard of living
16 UNIT 2 The Demand-Side Approach to Growth and Development
17 The demand side approach Demand side = fiscal & monetary policy. Attempts to stimulate C,I,G,(X-M) – Keynesian policies Fiscal policy: the use of government revenue collection and expenditure to influence AD and thus the economy. Monetary policy: central bank policy focussing on the quantity of money in economy and level of interest rates.
18 Changing Demand using fiscal policy Can also increase gov. expBUT…Budget deficit shouldn’t exceed 3% of GDP
20 Progressive tax system Reducing taxes Fiscal policy can improve economic development through… (pollev.com/mrsmith1001)Welfare grantsProgressive tax systemReducing taxesUse tax revenue from taxes on dividends, capital gains and estate duty to finance development.Housing subsidy schemesProviding state education, health and physical infrastructure for allMeans tested benifitsStimulate employment
21 Financial support and advice for new businesses Fiscal policy can improve economic growth through… (pollev.com/mrsmith1001)InfrastructureFinancial support and advice for new businessesIncreasing foreign trade increasing (X-M)Education and training to improve value added goods/services
23 UNIT 3 The Supply-Side Approach to Growth and Development
24 Focusses on factors that affect the production capacity of economy. Done by increasing quality/quantity of factors of production…Natural resourcesLabourCapitalEntrepreneurial skills
25 Natural resources (Land) What does SA have a lot of???Limited supply of minerals – max. value must be derived when they are mined.Must not negatively affect LT growth potential of region.E.g. mining vs tourism (ST gain, but LT decline)Management of renewable resources.E.g. water and arable land
26 LabourQuality of labour force affects economic growth. Education and training vital to boost supply side of economy.
27 CapitalNo investment in physical production equipment = no production process = no economic growth (increase in capacity/LRAS) Well organised financial system NB for investment. Quality of capital is NB for productivity. Infrastructure
28 EntrepreneursRules and regulations to start a business can limit economic growth. Copied from Facebook last week… To register a new company takes over 5.5months! GDP could probably go up a whole 1% if they just streamlined the process! (2 months to register via CIPC, 2 weeks to open bank account, 6 weeks for income tax registration, 6 weeks for VAT registration).
29 UNIT 4 Evaluation of approaches used in South Africa
30 Reconstruction and Development Programme (RDP) Set up in 1994Goal - reform social and economic environmentMain strategy: alleviate poverty and address the inequalities in social services
31 Growth, Employment and Redistribution Programme (GEAR) Macroeconomic strategy from Department of Finance from 1996 – 2001.Aims…strengthening economic developmentincreasing employmentredistributing incomecreating socioeconomic opportunities for the poor.
32 Key elements of GEARA faster fiscal deficit reduction programme Budget reform to redistribute gov exp to poor A reduction in tariffs Consistent monetary policy Speeding up privatisation Tax incentives to stimulate new investment in labour intensive business
33 Accelerated and Shared Growth Initiative for South Africa (AsgiSA) Launched in 2006.Objective: to co-ordinate government initiatives to create economic development.Aims:halving unemployment and poverty by 2014Accelerating economic growth to average at least 4,5% (2005 – 2009) & 6% average annual rate between 2010 and 2014.More value added to products/services, costs of production reduced.
34 The New Growth Path (NGP) Government’s latest economic policy (Oct 2010)Targets:5 million jobs in ten yearsReducing unemployment from 25% -15%.Achieved through:monetary policy interventionsMore competitive exchange rate and lower cost of capitalreprioritisation of public spending to ensure fiscal sustainability.
35 UNIT 4 Evaluation of approaches used in South Africa