Transcript Slide 1
LO3 AS1: Compare and evaluate South African growth and development policies in terms of international benchmarks. Economic Growth - the increase in real GDP - increase in production capacity of the country - has to do with the increase of goods and services and comes before economic development Economic Development - process whereby the standard of living of the citizens of the country improve over time. - increase in the economic welfare of the poor. DEMAND – SIDE APPROACH Focus on the macroeconomic components within the economy Involves discretionary changes in monetary and fiscal policies with the aim to increase demand for domestic goods and services. If and increase in local demand it will increase production of goods and services and economic growth An increase in AD will lead to increase in - consumer demand, investment spending, Govt spending and net exports SUPPLY – SIDE APPROACH An increase in Demand only will not lead to economic growth or development The country must have the capacity to increase production when demand increase The increase in D depends on availability and quality of FOP The FOP are the supply side factors needed in the correct quantity and quality. Supply side policies focus on supply and its microeconomic components Growth And Development Policies RDP = The Reconstruction and Development Programme GEAR = The Growth, Employment and Redistribution Programme AsgiSA = The Accelerated and Shared Growth Initiative for South Africa. THE RDP Policy introduced in 1994 with the following aims: - create a dynamic economy that can create new jobs - alleviate poverty - address low wages - address extreme inequality - meet basic needs - address structural problems in the economy that limit growth - expand the export potential of South Africa Since 1996 this programme has been part of the national budget and not a stand alone programme GEAR Introduced in 1996 – in line with international macroeconomic best practice Gear stressed the need for market-led growth, fiscal and monetary discipline and investor confidence The main aims of GEAR: - budget reforms – increase spending on service delivery to the poor - fiscal reduction - reduction in the overall budget deficit and govt borrowing - consistent monetary policy to contain inflation - relaxation of exchange controls – stimulate investment - skills development – through a skills levy. - expansion of the infrastructure – improve service delivery - expansion of trade and investment in Africa To ensure sustainable economic growth and development AsgiSA Due to problems in achieving the objectives of RDP and GEAR, AsgiSA was introduced in 2006 The main principle to achieve economic development through economic growth The following areas targeted: Infrastructure development - Govt to invest about 8% of GDP on infrastructure - Increase power supply, transport network and electronic communication Investment in specific sectors - improve production capacity - Three sectors: outsourcing, tourism, bio-fuels AsgiSA (cont) Education and skills development - address shortage of professional skills in SA - introduce new curriculum – National Skills Development Strategy etc Eliminating the second economy - poor find them in this economic – informal sector - address issues – finance, preferential procurement, SMME development Macroeconomic issues - mentioned in GEAR Governance and Institutional interventions - keeping interventions to a minimum - focus on improving efficiency The Evaluation of SA’s Policies Growth Policies Economic Growth - SA a developing country – Middle income country - Av growth rate 3% - Budget deficit 3% of GDP (Benchmark) Inflation - Inflation target 3-6% - Interest rate main instrument to control inflation - Stable budget has also stablise inflation. Employment - Employment in non-agri sect decreased - Gear used to increase employment - Productivity increase by 4,2% over past 10 years - Unemployment increased from 14 – 27% in 2006 Exchange rate stability - Currency depreciated from 1994 – appreciated in 2005 - Reserves increased from 3% in 1994 to 19% in 2005 The Evaluation of SA’s Policies (cont) Development Policies Macroeconomic policies - successful implementation important for poor and rich - increase in per capita GDP means improvement in standard of living - redistribution through tax system successful Microeconomic policies - employment in the different sectors increased by 32% Social polices - 34,1% of SA population is poor ($2 per day) - poverty reduction serious and focuses on basic needs for poor. Redress - empowerment of indigenous people of developing countries - SA passed both empowerment and affirmative acts The Evaluation of SA’s Policies (cont) Development policies Black Economic Empowerment (BEE) - legal transformation of the SA economy - speed agreed between government and various industries - DTI published scorecard to measure progress Land redistribution and restitution - Govt redistribute 30% of Agr Land to previous disadv groups - By 2004 1,5% of agr land distributed - 61% claims for lad restitution finalised Affirmative action - as per Affirmative Action Act - applies to employers with 50 and more employees North – South Divide Refers to the gap between developed (Northern hemisphere) and developing countries (Southern hemisphere) Unequal standard of living - described by three indicators The North The South Per capita income Is home to 35% of world’s population and creates 87% of world income Is home to 65% of world’s population and creates 13% of world income Life expectancy Is about 70 years old Is about 50 years old Education -Well educated -Secondary school level -Low education levels - low adult literacy North – South Divide Globalisation Inequalities - have the following problems: Poverty - growing gap between the rich and poor - number of poor have increased in Africa only Growth - still have difficulty in attracting FDI Trade - rich countries subsidise production of agr goods - difficult for developing countries to compete Environment - Northern countries burn huge amounts of coal and fuel. - Green house gases given off - Cause much pollution - Southern Countries – agricultural- degradation and depletion of land - Inability to produce enough food – malnutrition and hunger.