MEMORANDUM 

SECTION A (COMPULSORY) 
QUESTION 1  
1.1 MULTIPLE CHOICE QUESTIONS 
1.1.1 C money ✓✓ 
1.1.2 D Phillips ✓✓ 
1.1.3 A reserve assets ✓✓ 
1.1.4 A money ✓✓ 
1.1.5 B moral suasion ✓✓ 
1.1.6 B Joint Initiative on Priority Skills Acquisition ✓✓ 
1.1.7 D Integrated Manufacturing Strategy ✓✓ 
1.1.8 C formation ✓✓ (8 x 2) (16)

1.2 MATCHING ITEMS 
1.2.1 H C+G+I+(X-M) ✓ 
1.2.2 F obtained when the effects of irregular events and seasons  are removed from time series data ✓ 
1.2.3 A complete ban or embargo on certain goods from a certain  country ✓ 
1.2.4 I one country can produce goods and services cheaper than  another 
1.2.5 B a passageway allowing access from one area to another ✓ 
1.2.6 C developed a new support programme for clothing and  textiles ✓ 
1.2.7 D minister of Finance informs Parliament of any changes that  have occurred since February ✓ 
1.2.8 E important social indicator ✓ (8 x 1) (8)

1.3 GIVE ONE TERM 
1.3.1 Exogenous/monetarist view ✓ 
1.3.2 Taxes/taxation ✓ 
1.3.3 Transfer payment ✓ 
1.3.4 Urbanisation ✓ 
1.3.5 Repurchase rate/repo rate ✓ 
1.3.6 Land Restitution ✓ (6 x 1) (6)
TOTAL SECTION A: 30

SECTION B 
Answer TWO of the three questions in this section in the ANSWER BOOK.
QUESTION 2: MACROECONOMICS 
2.1
2.1.1 Name any TWO member countries of BRICS. 

• Brazil ✓ 
• Russia ✓ 
• China ✓ 
• South Africa ✓ 
• India ✓ (Any 2 x 1) (2) 

2.1.2 Why is the GDP at market prices normally higher than the GDP  at factor cost? 

• GDP at market prices takes into account the prices actually paid  for buying goods and services which already includes indirect  taxes. ✓✓ 
• Indirect taxes are added to GDP at factor cost to calculate GDP at  market price which makes GDP at market prices higher. ✓✓ 

(Accept any other correct relevant response) (Any 1 x 2) (2)

2.2 DATA RESPONSE 
2.2.1 Give an example of a leakage. 

• Savings ✓ 
• Taxes ✓ 
• Imports ✓ (Any 1 x 1) (1)

2.2.2 What factor influences the size of the multiplier? 

• A change in spending (mps) ✓  
• A change in consumption (mpc) ✓ 
  (Accept any other correct relevant response) (Any 1 x 1) (1)

2.2.3 Briefly describe the term multiplier 

• A small initial increase in spending produces a larger than  proportionate increase in aggregate national income. ✓✓
  (Accept any other correct relevant response) (2)

2.2.4 Explain the effect on national income when injections are more  than leakages. 

• Injections that are more than leakages increase demand of goods  and services. ✓✓ 
• More goods and services will be produced and more income will  be generated. ✓✓ 
• National income increases. ✓✓
  (Accept any other correct relevant response) (Any 1 x 2) (2) 

2.2.5 Suppose the South African government spends R250m on the  economy. Calculate the multiplier effect if mpc= 0,7. Show all  calculations. 

• α=1/1 – mpc.
  =1/1 – 0,7 ✓
  = 1/0,3
  = 3,33 ✓
  Multiplier effect = 3,33 x R250 m ✓
  = R832,5 m ✓
  
  OR
• α = 1/mps 
  = 1/0,3 ✓ 
  = 3,33 ✓
  Multiplier effect = 3,33 x R250 m ✓ 
  = R832,5 m ✓
  NB: (one mark awarded for answer only) (4)

2.3 DATA RESPONSE 
2.3.1 Except AfCTA, name any other free trade area in the world. 

• The North American Free Trade Agreement (NAFTA) ✓ 
• Southern African Development Community (SADC) ✓ 
• European Free Trade Association (EFTA) ✓ 
• South Asian Free Trade Area (SAFTA) ✓ 
  (Accept any other relevant correct response) (1) 

2.3.2 Which trade protocol is behind the establishment of a single  market in Africa? 

• African Union (AU) ✓ (1)

2.3.3 Briefly describe the term free trade area. 

• Free trade area is where restrictions such as tariffs and quotas  have been removed. ✓✓
  (Accept any other relevant correct response) (2)

2.3.4 Briefly explain the role of the World Trade Organisation as part  of globalisation. 
The role of WTO is to: 

• Oversee the implementation and administering of trade  agreements. ✓✓ 
• Identify non-compliance with trade agreements. ✓✓ 
• Resolve trade disputes. ✓✓
  (Accept any other relevant correct response) (Any 1 x 2) (2)

2.3.5 How can Africa benefit from being a single market? 
Africa can benefit through: 

• A boost in intra-African trade. ✓✓ 
• An opportunity for African countries to increase the share of  industrial goods in production and exports ✓✓ 
• Substantial opportunities for industrialisation and  employment. ✓✓
  (Accept any other relevant correct response) (Any 2 x 2) (4)

2.4 Discuss the length and amplitude of a business cycle.  
LENGTH 

• This is the time that it takes for a business cycle to move through one  complete cycle. ✓✓ 
• It is measured from peak to peak/trough to trough. ✓✓ 
• It is useful to know the length because the length tends to remain relatively  constant over time. ✓✓ 
• If business cycles have a longer length, we consider the economy to be  strong. ✓✓ 
• If business cycles have a shorter length, we consider the economy to be  weak ✓✓ (Any 2 x 2) 

AMPLITUDE 

• It is the difference between the total output between a peak and a  trough. ✓✓ 
• It measures the distance of the oscillation of a variable from the trend  line. ✓✓ 
• It is the intensity of the upswing and downswing in economic  activity. ✓✓ 
• The larger the amplitude the more extreme the changes that may occur. ✓✓  (Any 2 x 2) (8)

2.5 Evaluate the effects of a currency depreciation in an economy.
Positives 
Currency depreciation: 

• Can be used as an expansionary monetary policy to counter cyclical  measures to stimulate demand, profits, output and jobs when an  economy is in recession. ✓✓ 
• Brings an improvement in the balance trade through higher export  sales. ✓✓ 
• Provides a competitive boost to an economy through increasing the value of profits and income for a country’s businesses with investments overseas. ✓✓ 
• Leads to a positive multiplier within the circular flow of income and spending. ✓✓ 

Negatives 
Currency depreciation: 

• Makes it harder for the government to finance a budget deficit if foreign  investors lose confidence. ✓✓ 
• Increases the cost of imports e.g. rising prices for essential foodstuffs,  raw materials, which affects long-run productive potential of an  economy. ✓✓ 
• Makes it hard to pay for a trade deficit that is owed to overseas  creditors. ✓✓
  (Accept any other correct relevant response) (8) [40]

QUESTION 3: ECONOMIC PURSUITS 
3.1
3.1.1 Name TWO demand side approach policies to growth and  development.  

• Monetary policy ✓ 
• Fiscal policy ✓ (2) 

3.1.2 How can interest rates be used by the South African Reserve  Bank to stimulate production of goods and services? 

• Decreasing interest rates increases consumer spending. ✓✓ 
• Production is stimulated as businesses and firms make large  equipment purchases due to low cost of borrowing. ✓✓ 
• More goods and services will be produced in the long run to meet  the increase in demand on goods and services. ✓✓
  (Accept any other correct relevant response) (Any 1 x 2) (2)

3.2 DATA RESPONSE 
3.2.1 Name ONE example of a country of the North divide. 

• Canada ✓ 
• France ✓ 
• Italy ✓ 
• Germany ✓ 
• Japan ✓ 
• Russia ✓ 
• United Kingdom ✓ 
• United States ✓ 
• Australia ✓ 
• New Zealand ✓ (Any 1 x 1) (1) 

3.2.2 Provide a characteristic of the group of countries represented by  ‘South’ 

• Low standard of living ✓ 
• Lack of adequate infrastructure ✓ 
• Low life expectancy ✓  
• Lack of education ✓
  (Accept any other correct relevant response) (Any 1 x 1) (1)

3.2.3 Briefly describe the term globalisation. 

• The worldwide interaction of economies with trade as an important  element. ✓✓
  (Accept any other correct relevant response) (2)

3.2.4 Briefly explain trade as a challenge of globalisation. 
Trade is a challenge of globalisation as: 

• Rich countries continue to subsidise production of their  agricultural goods, making it difficult for developing countries to  compete. ✓✓ 
• They do this while insisting that developing countries must  remove their tariffs on manufactured goods. ✓✓ 
• Most of the world’s poor countries have very little foreign trade  and blame globalisation for that. ✓✓
  (Accept any other correct relevant response) (Any 1 x 2) (2) 

3.2.5 How do countries in the North contribute to the destruction of  the environment? 
They contribute to the destruction of the environment by: 

• Causing pollution through mass production of goods and  services. ✓✓ 
• Causing climate change by being involved in high levels of industrial activities. ✓✓ 
• Exhausting natural resources due to over industrialisation. ✓✓ 
• Deforestation due to over industrialisation. ✓✓ 
  (Accept any other correct relevant response) (Any 2 x 2) (4)

3.3 DATA RESPONSE 
3.3.1 Name ONE category of the secondary sector. 

• Manufacturing ✓ 
• Food processing ✓ 
• Oil refining ✓ 
• Energy production ✓
  (Accept any other correct relevant response) (Any 1 x 1) (1) 

3.3.2 What was the trend in the primary sector between 2017 and  2018? 

• It is declining ✓ (1)

3.3.3 Briefly describe the term Gross Domestic Product 

• Gross Domestic product is the value of all final goods and  services produced within the borders of a country over a  specific period. ✓✓
  (Accept any other correct relevant response) (2)

3.3.4 Explain the use of per capita GDP figures. 

• They are used to compare the standard of living of different  countries. ✓✓
  (Accept any other relevant correct response) (2)

3.3.5 How does the real growth of 0,8% negatively affect the  economy? 

• A low real growth of 0,8% is lower than the anticipated growth  rate.
  It affects the economy negatively by:  
  • Reducing employment opportunities as firms are unable to hire  more workers. ✓✓
  • Decreasing demand of goods and services as consumer’s spending decreases. ✓✓
  • Reducing investment confidence. ✓✓
    (Accept any other correct relevant response) (Any 2 x 2) (4) 

3.4 Briefly discuss cost of doing business as a supply-side approach in  promoting growth and development in South Africa. 
Transport costs ✓ 

• Transport options are air, road, rail and sea transport. ✓✓ 
• Government controls air and rail transport in South Africa. ✓✓ 
• A substantial proportion of cargo and passenger transport is moved by  road. ✓✓ 
• Only a reliable rail service that is cheaper than road transport will turn  this around. ✓✓ 

Communication costs ✓ 

• Communication options are in cable, signal and mail. ✓✓ 
• Government controls cable (land or fixed lines) and mail communication  services. ✓✓ 
• Cable communication services in South Africa is one of the most  expensive in the world but reasonably efficient. ✓✓ 
• High costs make IT services for businesses and individuals expensive  and inhibits global competitiveness. ✓✓ 

Energy costs ✓ 

• Electricity and liquid fuels are the main sources of energy in South  Africa. ✓✓ 
• Eskom is the only supplier (monopoly) ✓✓ 
• Government regulates the prices for petrol and paraffin ✓✓ 
• The prices for imported crude oil are linked to international market  prices, which are high ✓✓ 
• High liquid energy prices undermine the efficiency of the economy ✓✓ (8)

3.5 How do international organisations such as the World Bank and United  Nations standardise the indicators of member countries? 
WORLD BANK 

• The World Bank Group of Institutions provide definitions for a range of  economic and social indicators. ✓✓ 
• In partnership with International Organisation for Standardisation (ISO),  the World Bank provides standards which give world class specifications  for products, services and systems. ✓✓ 

UNITED NATIONS 

• Developed the best-known manual of economic indicators, the System of  National Accounts (SNA). ✓✓ 
• It focuses on production, income and expenditure and how to avoid  double counting. ✓✓ 
• It compiles data in the SARB Quarterly Bulletin in terms of the SNA  specifications. ✓✓
  (Accept any other correct relevant response) (8) [40]

QUESTION 4: MACROECONOMICS AND ECONOMIC PURSUITS
4.1
4.1.1 Name TWO types of business cycles. 

• Kitchen cycles ✓ 
• Jugler cycles ✓ 
• Kuznets cycles ✓ 
• Kondratieff cycles ✓ (Any 2 x 1) (2)

4.1.2 How can SMMEs contribute to economic growth?  
SMMEs can contribute to economic growth by: 

• Increasing production processes. ✓✓ 
• Creating employment opportunities for structurally unemployed  people. ✓✓ 
• Increasing competition. ✓✓ 
• Increasing opportunities for exports.✓✓ 
• Increasing entrepreneurial skills that will lead to higher  production and investment. ✓✓
  (Accept any other correct relevant response) (Any 1 x 2) (2)

4.2 DATA RESPONSE 
4.2.1 Identify the demand curve that indicates a decrease in the  demand for dollars? 

• D2D2 ✓ (1) 

4.2.2 What type of exchange rate system is currently used in South  Africa? 

• Free floating exchange rate system/ flexible exchange rate  system ✓ (1)

4.2.3 Briefly describe the term devaluation. 

• Devaluation refers to the deliberate decrease in the value of the  currency in terms of another currency as a result of central bank  intervention. ✓✓
  (Accept any other correct relevant response) (2) 

4.2.4 Explain ONE factor that can influence the demand for the  dollar. 

• Importing goods increases demand of foreign goods, therefore  payment needs to be made in a foreign currency. ✓✓ 
• Payment for services from foreign countries needs to be made  in foreign currency. ✓✓ 
• Buying shares or assets in another country increases the  demand. ✓✓ 
• Tourists spending money overseas. ✓✓ 
• Repayment of debt borrowed from foreign countries. ✓✓
  (Accept any other correct relevant response) (Any 1 x 2) (2)

4.2.5 What is the effect on the rand when there is a decrease in the  demand for dollars? 
A decrease in the demand of dollars will: 

• US$ – Depreciates ✓ 
• The Rand appreciates ✓ Reason: The demand for rand  increases from DD to D1D1 and the equilibrium point from e to  f. ✓✓ The price will be fixed at R10 which is higher than R8. ✓✓
  (Accept any other correct relevant response) (Any 2 x 2) (4)

4.3 DATA RESPONSE 
4.3.1 In which year is the NDP aiming to eliminate poverty? 

• 2030 ✓ (1) 

4.3.2 Name ONE way how the government can reduce the poverty of  the vulnerable groups in South Africa. 

• Providing social grants ✓ 
• Improving quality of education ✓ 
• Offering skills training ✓
  (Accept any other correct relevant response) (Any 1 x 1) (1)

4.3.3 Briefly describe the term economic development. 

• It implies an increase in the capacity of the population to produce  more goods and services ✓✓ 
• The process by which the standard of living improves. ✓✓
  (Accept any other correct relevant response) (Any 1 x 2) (2)

4.3.4 What negative effect can the NDP have on taxpayers? 
For implementation of the NDP the state will: 

• Need more revenue, therefore more and higher taxation will be  needed. ✓✓
  (Accept any other correct relevant response) (1 x 2) (2)

4.3.5 How will the South African economy benefit from the  implementation of the NDP? 
The South African economy will benefit from NDP implementation  by: 

• Reducing youth unemployment/ providing young people with  broader opportunities. ✓✓ 
• Increasing the competitive capacity of the economy. ✓✓ 
• Improving the standard of living of the people. ✓✓ 
• Increasing industrialisation. ✓✓
  (Accept any other correct relevant response) (Any 2 x 2) (4)

4.4 Briefly discuss the demographic social indicators.  
Population growth ✓ 

• Measuring population growth is important for delivering social  services. ✓✓ 
• Identifying the size of the tax base. ✓✓ 
• South Africa’s population numbered 58 million in 2019. ✓✓
   (Accept any other correct relevant response) (Any 2 x 2) 

Life expectancy ✓ 

• Estimated at 61 for males and 67 for females in South Africa. ✓✓ 
• Expresses the number of years a newborn infant will live if prevailing  patterns of mortality remained the same. ✓✓ 
• Used by the government and assurance companies. ✓✓ 
• The government uses it to determine the range of social services. ✓✓
•  Assurance companies use it to determine their premiums. ✓✓  (Any 2 x 2) (8) 

4.5 How will an increase in export prices and import prices affect the South  African economy? 
An increase in export prices will: 

• Result in terms of trade improving. ✓✓ 
• Increase economic welfare because more revenue is earned with the  same expenditure. ✓✓ 
• However, over the long-term result in a decrease in sales volume  depending on the price elasticity of demand. ✓✓ 
• Result in welfare loss eventually. ✓✓ 

An increase in import prices will: 

• Result in terms of trade deteriorating. ✓✓ 
• Decrease welfare because more resources were used to produce more  units to finance the higher cost of imports. ✓✓ 
  (Accept any other correct relevant response) (8) [40] 

TOTAL SECTION B: 80

SECTION C 
QUESTION 5: MACROECONOMICS 
Discuss in detail how the following factors contribute to poor public sector  provisioning: 

• Lack of accountability (10) 
• Inefficiency (8) 
• Difficulty in assessing needs (8) 

Suggest solutions on how efficiency of state-owned enterprises can be  improved.  
INTRODUCTION 

• The public sector consists of the central government responsible for national  matters, provincial government responsible for regional matters and local  government responsible for street lighting. ✓✓
  (Accept any other correct relevant introduction) (2)

MAIN PART 
Lack of Accountability 

• Accountability means to give an explanation for one’s decisions, actions and  expenditures. ✓✓ 
• The people require the state to use the taxes for the purpose for which they are  raised and not to abuse the powers it was granted. ✓✓ 
• People employed by the state do not always serve the interests of the public. ✓✓ 
• They seek to maximise their salaries, status and power and are not required to  produce a profit and loss statement. ✓✓ 
• They are budget driven. ✓✓ 
• The state tries to overcome this problem by making civil servants accountable to  the public. ✓✓ 

In South Africa, accountability is underpinned by:  

• Ministerial responsibilities: ministers are spokespersons for their departments. ✓✓
• The Director General of each department is accountable for the activities of the  Department ✓✓ 
• Portfolio Committees: monitor individual departments and make recommendations  to Parliament ✓✓ 
• Treasury control: the national treasury is responsible for expenditure control ✓✓ 
• The Treasury committee, chaired by the Minister of Finance, evaluates all  requests for additional funding throughout the year ✓✓ 
• The Auditor-General reports on each government department ✓✓ 
• The AG reports on the standard of financial management and points out fraudulent  and unauthorised spending ✓✓ (Max 10) 

Inefficiency  

• Accountability does not guarantee efficiency. ✓✓ 
• Public goods must be efficiently provided (Pareto efficiency where the welfare of  the community is at its maximum and it is therefore impossible to increase the  welfare of one individual without making another worse off) ✓✓ 

Three major reasons for inefficiency: 

• Bureaucracy: ✓ (official rules and procedures) ✓✓ 
• Officials may focus on correct procedures and rules and are indifferent to the  quantity (e.g. the number of patients attended to) ✓✓and quality of the service (e.g.  explaining the use of the medicine) ✓✓ 
• Some may be insensitive to the needs of their clients ✓✓ 
• Incompetence: ✓ i.e. lack of skill or ability to do a task properly ✓✓ 
• This may be due to improper qualifications, lack of training, experience and an  attitude of apathy. ✓✓ 
• Corruption: ✓ i.e. exploiting of a person’s position for personal gain ✓✓ 
• Taking bribes, committing fraud, nepotism, behaving dishonestly and committing  discrimination. ✓✓ (Max. 8) 

Difficulty in assessing needs 

• In the private sector, the forces of demand and supply dictate prices ✓✓ 
• The market prices act as signals to the producers, communicating the needs of  consumers and the quantity demanded ✓✓ 
• State-owned enterprises do not operate according to the forces of demand and  supply ✓✓ 
• It therefore becomes difficult for state-owned enterprises to assess the needs of  consumers and they are prone to under-or over-supplying public goods✓✓ 
• People’s needs are endless, so the government is unable to provide for  everyone ✓✓ 
• Serious structural weaknesses in the economy also cause the government to  undersupply in response to the needs that it identifies ✓✓ 
• Political agendas are more important than the needs that the government  identifies ✓✓ (Max. 8)

ADDITIONAL PART 
Suggest solutions on how efficiency of state-owned enterprises can be  improved. 
Efficiency of state-owned enterprises (SOEs) can be improved by: 

• Having proper and clear guidelines to fight corruption ✓✓ 
• Forming Private Public Partnerships to enable a faster, more efficient delivery of  goods and service. ✓✓ 
• Setting clear costing and development mandates with financial implications  clearly set out. ✓✓ 
• Developing a framework for the appointment and remuneration of members to the  Board of State-owned companies. ✓✓ 
• Ensuring efficient management. ✓✓ 
• Focusing on scarce resources for highest financial impact, ✓✓ e.g. encouraging a competitive work culture by hiring and retaining talented individuals  through competitive compensation packages. ✓✓
  (Accept any other correct relevant response) (10)

Conclusion 
Efficient public sector provisioning in South Africa is key for a higher growth rate,  higher employment rate and a better standard of living of all ✓✓ 
(Accept any higher order relevant conclusion) (2) [40]

QUESTION 6: ECONOMIC PURSUITS 
Discuss in detail the appropriateness of South Africa’s regional development  policies in terms of international benchmark criteria. (26) 
How successful has the SA government been in meeting the aims of regional  development? (10) 

INTRODUCTION 
Regional development is the promotion of economic development in areas where  poverty, unemployment and income inequality are high. ✓✓ 
(Accept any correct relevant introduction) 

MAIN PART 

• Competitiveness ✓ 
  • Industries established as a result of regional policies should be  competitive. ✓✓
  • Industries should not need on-going financial aid from the state ✓✓
  • They should be self-sufficient in the long run and not depend on the state ✓✓
• Sustainability ✓
  • The capacity of a region has to support its own development. ✓✓
  • The natural resources and human resources should be harnessed. ✓✓
  • Employment and sustainable development should be achieved. ✓✓
  • Development should be a long-term approach rather than profit making. ✓✓
• Good governance ✓
  • Development strategies to be managed effectively and free of corruption. ✓✓
  • Principles of accountability and transparency should be applied. ✓✓
  • Projects to be correctly programmed monitored and evaluated. ✓✓
  • Efficient financial control to be exercised. ✓✓
• Partnership ✓
  • Regional development should be the responsibility of different stake holders. ✓✓ 
  • Partnership to be built between government, civil society, special interest group and private sector. ✓✓
• Provision of resources ✓ 
  • Sufficient resources should be provided in resource poor areas, such as the development of infrastructure. ✓✓
  • Provision of infrastructure to be a priority ✓✓
• Free market orientation ✓
  • Government intervention in markets should be kept to a minimum so that the forces of supply and demand and profit motive can allow for efficient allocation of resource. ✓✓ 
  • Markets to be allowed to function independently. ✓✓
• Integration ✓ 
  • An integrated approach should be followed, ensuring that benefits in one part  of a region spill over to other industries and areas. ✓✓
• Investing of social capital ✓ 
  • Government need to improve the quality of education and health care in a Region. ✓✓ 
  • Government must build more schools in different regions. ✓✓ (Max. 26)

ADDITIONAL PART 
South Africa has been successful in achieving regional development aims because: 

• There has been an existence of vibrant economic activities in different  regions. ✓✓ 
• An estimated 80% of the country’s GDP is produced in various industrial  areas. ✓✓ e.g. Johannesburg-Pretoria-Tshwane, Durban-Pinetown, Port  Elizabeth-Coega-Uitenhage, Maputo development corridor, Richards Bay (Metals), Phalaborwa SDI ✓ 
• The department of Trade and Industry has formed a partnership with private  sector through the Spatial Development Initiative, ✓✓ that shows that the  government together with other stakeholders is committed to improving  development. ✓✓ 

South Africa has been unsuccessful in achieving regional development aims because: 

• There has been a lack of accountability in most public enterprises. ✓✓ 
• Mismanagement of funds puts the state under pressure to bail out these  enterprises when they cannot make profit. ✓✓ 
• The quality of service in hospitals and clinics has not improved in various  regions. ✓✓ 
• The country has not been able to attract significant flows of investment ✓✓ 
• There have been shortages of infrastructure in most regions ✓✓
  (Accept any other correct relevant response) (Max. 10)

CONCLUSION 
The long-term success of achieving economic development lies in the way the industrial policies are implemented. ✓✓ 
(Accept any other relevant higher order conclusion) (Max. 2) [40] 

TOTAL SECTION C: 40 
GRAND TOTAL: 150