N.B:  

• Questions based on this topic are not popular questions for candidates, those  candidates who attempt to answer questions on this topic perform poorly, in  comparison to questions about other topics. 
• It is evident from the poor performance of many learners that their teachers did  not cover some of the sub-topics from this topic.
• Candidates are showing some content gap on Economic pursuits as their  responses indicate that they are not familiar with the policies. candidates are  normally failing to understand the requirements of certain questions, e.g. Q 3.2.5  and Q 3.3.5 

DISCUSS IN DETAIL THE ARGUMENTS IN FAVOUR OF PROTECTIONISM. 

Protection is the application of a trade policy whereby the state discourages importing of  certain goods and services with a view to protecting home industries against unequal  competition from abroad. 

1. Industrial development 

• Some developing countries are well suited to establishing certain kinds of industries.
• Free trade makes it difficult for these countries to compete with countries with well established industries. 

2. Infant industries 

• Newly established industries find it difficult to survive because of high average costs of  production which are higher than those of well-established foreign competitors. 

3. Stable wage levels and high standard of living 

• A country with high wages has a view that the standard of living will be undermined if  cheaper goods are imported from countries with low wages. 

4. Increased employment 

• If local industries cannot find profitable markets because of cheaper imports,  production may decrease and this will lead to more unemployment. 

5. Self-sufficienty and strategic industries

• In times of conflict, cut-off or friction between countries occurs. 
• Protection should be granted, especially to key industries to ensure the availability of  these key products. 

6. Prevention of dumping 

• Some countries sell their surplus goods in a foreign country at lower prices than it  cost them to produce the goods. 
• Local producers cannot compete, and their factories may close. 

7. Stable exchange rates and BoP 

• Traders buy in the cheapest markets and sell in the most expensive ones. ▪ Countries export primary products and import manufactured goods, causing disrupted balance of payments and exchange rates. 

8. Protection of natural resources 

• Free trade can easily exhaust natural resources, therefore protection is needed to  protect local industries and indigenous knowledge systems so that they can  survive.
• The South African government has taken steps to protect Rooibos tea as natural  resource and safeguard indigenous knowledge that allows the hoodia plant to be  used for medicinal purposes. 

BRIEFLY EVALUATE THE SUCCESSES AND FAILURES OF THE FOLLOWING  SOUTH AFRICA'S TRADE PROTOCOLS: 

N.B: 

• Learners need to be aware of the specific requirements of a higher-order  question. In addition, teachers need to assess higher-order questions  appropriately so that learners clearly understand the mark allocation.
• While they are providing responses for such questions, they must avoid  shortening their responses since such responses loses meaning.
• A mere listing of facts without an explanation in context will earn only 2 marks,  instead of the full 8 marks. 

1. Southern African Custom Union (SACU)  

• The Southern African Customs Union (SACU) is a regional trade agreement that was  established in 1910 and is one of the oldest customs unions in the world.
• It comprises South Africa, Botswana, Eswatini (formerly Swaziland), Lesotho, and  Namibia. 
• SACU aims to promote economic integration, facilitate trade, and enhance regional  development.
• SACU has achieved notable successes in facilitating trade and promoting regional  economic integration, particularly through its revenue-sharing mechanism and  infrastructure development. 

Successes of SACU 

• SACU has successfully facilitated free trade among member countries by removing  tariffs on goods traded within the union. This has helped streamline trade and  reduce costs for businesses operating in the region.
• SACU members share customs revenue collected from tariffs on imports into the  union. This revenue-sharing mechanism provides financial support to smaller  member states, helping to balance economic disparities.
• SACU has contributed to regional infrastructure projects, such as roads and  transport networks, which enhance connectivity and trade efficiency within the  region. By participating in SACU, member countries gain access to a larger  regional market, which stimulate economic growth and attract investment. 

Failures of SACU 

• South Africa, as the largest and most economically developed member, often  dominates the union. This can lead to economic imbalances, with smaller members  relying heavily on South Africa’s economic performance and decisions.
• Smaller member states sometimes feel that the revenue-sharing formula does not  adequately address their development needs or compensate for economic  imbalances.
• The lack of comprehensive policy integration and coordination limit the effectiveness  of SACU’s regional economic strategies. 

2. Multilateral Monetary Area (MMA) 

• The Multilateral Monetary Area (MMA) is a regional monetary arrangement involving  South Africa, Lesotho, Namibia, and Eswatini (formerly Swaziland). 
• It was established to enhance monetary stability and economic cooperation among its  member countries
• The Multilateral Monetary Area (MMA) has achieved successes in terms of monetary  stability, regional economic integration, and reduced exchange rate risk by using the  South African rand. 

Successes of MMA 

• The MMA has successfully contributed to monetary stability in the member countries  by allowing them to use the South African rand as their official currency. This has  helped stabilize prices and reduce inflation in these countries.
• The use of a common currency (the rand) has facilitated economic integration among  member countries, promoting easier trade and investment flows within the region.
• By using the rand, member countries have mitigated exchange rate risks within the  MMA, reducing transaction costs and uncertainties for businesses and consumers  engaged in cross-border trade.
• The arrangement encourages some level of policy coordination with South Africa’s  monetary policy, which can help align economic policies across the region and  contribute to overall economic stability. 

Failures of MMA 

• Member countries do not have their own central banks or independent monetary  policies, making them dependent on South Africa’s monetary policy decisions. This  can be problematic if South Africa’s policies do not align with the economic needs of  the smaller member states.
• Economic conditions in South Africa can have a disproportionate impact on the  smaller member states, leading to challenges if South Africa experiences economic  difficulties or implements policies that do not suit the needs of its partners.
• Member countries have limited ability to address specific economic issues through  their own monetary policies, as they must adhere to South Africa’s monetary  framework.
• Differences in economic conditions and development levels between South Africa and  the smaller member states can lead to disparities in how the monetary arrangement  affects each country, potentially exacerbating economic inequalities. 

3. African Union (AU) 

• The African Union (AU) is a continental union consisting of 55 African countries,  established in 2001 and launched in 2002. 
• It aims to promote economic integration, peace, and development across Africa.
• The African Union has achieved notable successes in promoting peace, initiating  economic integration through AfCFTA, and advocating for African issues. 

Successes of AU 

• The AU has been involved in peacekeeping missions and conflict resolution efforts in  countries such as Sudan, South Sudan, and Somalia, contributing to regional stability.
• African Continental Free Trade Area (AfCFTA): Launched in 2018, AfCFTA aims to  create a single market for goods and services, which has the potential to boost intra African trade and economic growth.
• The AU has worked on various health initiatives, including combating diseases like  malaria and HIV/AIDS, and addressing the COVID-19 pandemic through initiatives like  the African Vaccine Acquisition Task Team (AVATT).
• The AU has been effective in advocating for African interests on the global stage,  including debt relief, climate change, and development aid. 

Failures of AU 

• Despite efforts, the AU has faced difficulties in effectively managing and resolving  some conflicts, such as in Libya and the Central African Republic, due to limited  resources and political complexities.
• There is often a gap between AU's strategic goals and the actual implementation at  the national level. Member states sometimes show inconsistent commitment to AU  directives and agreements.
• While AfCFTA is a significant step, actual implementation has been slow, with  challenges related to trade barriers, infrastructure, and varying national regulations  impacting progress.
• The AU has struggled with financial dependency on external donors and issues  related to funding its initiatives and operations, affecting its ability to execute projects  effectively. 

4. Mercusor 

• Mercusor – SA: SA signed a Framework Agreement with Mercusor in 2000,
• The Aim is to expand trade and create free trade area between parties (Latin America)
• The Free Trade Area will eventually include all SACU members.
• The Framework Agreement between South Africa and Mercusor has had some  success in enhancing trade relations and strengthening diplomatic ties. It has provided  South Africa with better access to South American markets and fostered strategic  partnerships.

Successes of Mercusor 

• The agreement has led to an increase in trade between South Africa and Mercusor  member countries. This includes both exports and imports, with South Africa gaining  better access to South American markets and vice versa.
• For South Africa, the agreement has provided opportunities to diversify its export  markets beyond traditional partners in Europe and Asia.
• The agreement has helped to strengthen diplomatic and economic ties between South  Africa and Mercusor countries, fostering better bilateral relationships and cooperation.
• South Africa has gained improved access to the Mercusor market, which is significant  for sectors like automotive, minerals, and agricultural products. Similarly, Mercusor  countries have benefited from access to South Africa’s markets. 

Failures of Mercusor 

• Factors such as logistical challenges, regulatory barriers, and the relatively small size  of the Mercosur market compared to South Africa's other trading partners have limited  the growth.
• There have been challenges in fully implementing the agreement's provisions. Issues  such as tariff adjustments and non-tariff barriers have sometimes slowed down the  benefits of the agreement.
• Economic and political instability in some Mercosur member countries has impacted  the effectiveness of the agreement.
• The agreement has largely facilitated trade and economic dialogues but has not  significantly deepened economic integration or collaboration in areas such as  investment, technology, or services. 

5. Japan – South Africa's Partnership Forum 

• The Japan-South Africa Partnership Forum was established to strengthen economic,  trade, and diplomatic relations between Japan and South Africa. 
• This forum aims to enhance cooperation in various sectors, including trade,  investment, technology, and development.
• The Japan-South Africa Partnership Forum has achieved noteworthy successes in  enhancing economic and trade relations, facilitating technology transfer, and  supporting development projects. 

Successes of Japan – South Africa's Partnership Forum 

• The forum has facilitated increased Japanese investment in South Africa, particularly  in sectors such as automotive, technology, and infrastructure. Companies like Toyota  and Nissan have expanded their operations in South Africa.
• Japan's advanced technology and expertise have been shared with South Africa,  contributing to the development of local industries and infrastructure projects.
• The forum has helped strengthen diplomatic and strategic ties between the two  countries, fostering a closer partnership and better bilateral cooperation.
• Japan has supported various development projects in South Africa, including those  focused on healthcare, education, and infrastructure, which have contributed to socio economic development.

Failures of Japan – South Africa's Partnership Forum 

• South Africa has often experienced a trade deficit with Japan, importing more from  Japan than it exports. This imbalance reflects a need for more diversified and  competitive South African exports.
• While the partnership has been successful in specific sectors, its impact on broader  economic integration and diversification within South Africa has been limited.
• Some development projects and agreements have faced delays or challenges in  implementation, impacting the overall effectiveness of the partnership.
• The benefits of the partnership have not always been evenly distributed across South  Africa, with certain regions and sectors benefiting more than others. 

DISTINGUISH BETWEEN GROWTH AND DEVELOPMENT 

• Economic growth should ensure more job opportunities and higher income to more  households thus leading to improvement to the standards of living of the people.
• When an economy is growing the following may result: 
  • More jobs will be created
  • More people will receive income
  • The standard of living will improve
  • You need economic growth for economic development to take place. Economic - growth does not guarantee economic development 

OUTLINE THE AIMS OF REGIONAL DEVELOPMENT 

• Regional industrial development refers to policies which are aimed at increasing the  economic livelihood of specific areas or regions/
• The purpose of this policy is to increase the economic livelihood of specific areas or  regions/
• Regional development initiatives in South Africa are to attract infrastructure and  business investments to neglected and underdeveloped areas.

Reasons for regional development 

• Attempts to reduce the centralization of industries
• To increase economic livelihoods of certain areas 

Aims of regional development 

• Refers to policies that are aimed at increasing the economic livelihood of specific  areas or geographical regions
• To limit the effects of economic centralisation, reduce the unequal development of  economic activities
• To promote the advantage of more regional development by using labour, other  natural recourses and infrastructure in neglected areas
• Stimulate development in poor rural areas to prevent new imbalances from emerging ▪ To implement and coordinate the implementation of national and regional industrial  policies 

An example of the regional development initiative 

• A regional development initiative focusing on the socio-economic development of  southern Africa is known as the Southern African Development Community (SADC).
• An estimated 80% of the South Africa’s GDP is produced in four industrialised areas,  namely:
  • Johannesburg-Pretoria-Tshwane
  • Durban-Pinetown
  • Cape Town metropole
  • Port Elizabeth-Coega-Uitenhage 

DISCUSS SPECIAL ECONOMIC ZONES (SEZs) IN SOUTH AFRICA. 

• SEZs are geographically demarcated area where specific economic activities have  been identified to be developed. 

OR 

• Geographical areas that have a wider industrial development objective and which can  be located anywhere to promote cluster development are called Special Economic  Zones (SEZs).
• It creates a basis for a broader range of industrial parks and provide economic  infrastructure to promote employment
• It was introduced because of the limitations of the IDZs and need not be linked to a  port of airport
• IDZs are only created for export industries while the SEZs cater for exports and  domestic consumption
• Geographically demarcated area where specific economic activities have been  identified to be developed
• These areas may enjoy incentives such as tax relief e.g. 15% incentive to attract new  industries
• Main aim is to expand the manufacturing sector
• Create employment
• Produce for the export market
• Create additional industrial hubs so that the national industry base will be diversified
• Investment is based on public-private partnerships with the state providing the  infrastructure and private enterprises setting up businesses. 

The aims of SEZ's: 

• Promote rapid development by acting as a magnet for investment in key growth areas
• Enable the development of new industrial regions through the establishment of new  industrial hubs in under-developed regions and the strengthening of existing one
• SEZ's are used for the purposes such as export promotion, enterprise development,  urban renewal, rural development and domestic or regional production 

How can special economic zones (SEZs) contribute to regional development? 

• The government will use the new programme specifically to promote the creation of a  regionally diversified industrial economy
• Establishing new industrial hubs in underdeveloped regions of the country
• This programme is crucial for government's strategic objectives of industrialization,  regional development and job creation
• It will improve South Africa's attractiveness as a destination for FDI as well as  domestic investment
• It gives a greater opportunity for regional development because it is not linked to a port  or airport
• SEZ’s accommodates the foreign market for goods and services as well as the  domestic market
• Because of a special tax incentive, more industries are established 

OUTLINE THE APPROPRIATENESS OF SOUTH AFRICA'S INDUSTRIAL POLICIES. 

• South Africa's industrial policies are designed to foster economic growth, industrial  development, and competitiveness.
• These policies aim to address structural challenges, enhance productivity, and create  jobs. 

Appropriateness: 

• Some policies aim to promote industrial development in underdeveloped regions,  addressing spatial imbalances and promoting inclusive growth.
• South Africa's industrial policies focus on key sectors such as automotive, aerospace,  and electronics, which are seen as having high growth potential and the ability to  generate substantial economic benefits.
• Policies such as the Industrial Policy Action Plan (IPAP) are aimed at diversifying the  economy away from reliance on mining and agriculture toward more value-added  sectors like manufacturing and technology.
• The policies target job creation, especially in high-potential sectors, to address high  unemployment rates.
• The policies include incentives like tax breaks, grants, and subsidies to attract  investment and boost production in these targeted sectors.
• The policies emphasize the importance of innovation and technological advancement,  supporting research and development (R&D) and technology transfer.
• They also focus on improving skills and education to enhance labour productivity and  competitiveness.
• Policies include measures to support SMEs, such as access to finance, training, and  market access, recognizing their role in job creation and economic growth.
• Recent policies include a focus on sustainability, promoting green technologies and  practices to ensure that industrial growth is environmentally sustainable. 

Challenges: 

• GEAR did not do enough to promote development and an increase in economic  growth did not occur.
• Asgisa policy was not successful in the main aim of reducing unemployment and  increasing skills.
• The New Growth Path has not seen any decrease in the number of people who are  unemployed.
• The National Industrial Policy Framework is an appropriate policy within best practice,  but is hindered by an unemployment problem.
• SDIs the growth rate is lower than expected despite the huge amount spent on  improvement on infrastructure in the SDIs. The main aim of creating employment has  not been achieved.
• IDZs – growth has been very slow. The incentives offered were not attractive enough.  Investors have not been attracted to Gauteng and Saldanha Bay as expected. Coega  and Richards Bay have been more successful.
• Regional development is still uneven, concentrated mainly in the four metropolitan  areas.
• Workers still have to move where employment is available.
• Small business development – specific government programmes were successful. The  promotion of entrepreneurship (amongst women and youth) have been reasonably  successful. Improved access to finance and capital, information and advice have been  reasonably successful. 

DISCUSS THE FOLLOWING ECONOMIC INDICATORS: 

• Economic indicators are statistics that show general trends in the economy and are  used to analyse the economic performance and predict the future performance of the  economy 

1. Employment indicators 

• Employment indicators are crucial for assessing the health of a labour market and the  overall economy.
• In addition to economic growth, the employment of people of working age (15-64  years) is a major economic objective.
• The numbers are determined, not only by age, but also by people’s willingness to  work. 

The economically active population (EAP) 

• The EAP is also known as the labour force.
• It consists of people between the age of 15 and 64 who are willing to work for income  in cash or in kind.
• It includes workers in the formal sector, informal sector, self-employed persons,  unemployed persons. 

Employment rate 

• The number of employed persons expressed as a percentage of the EAP gives the  employment rate
• The employment rate can also be converted into an index
• Employment Rate in South Africa decreased to 40.30 percent in the second quarter of  2024 from 40.70 percent in the first quarter of 2024. 
• This is low, compared to rates in developed and even some developing countries such  as Argentina and Pakistan
• In SA the growth in the economy is not accompanied by the similar growth in  employment numbers 

Employment indicators are used for: 

• To calculate trends in employment in different sectors or industries. This indicates  structural changes in the economy.
• To calculate productivity.
• To show the success of the economy in utilising its full potential. 

Unemployment rate 

• In South Africa, the unemployment rate measures the number of people actively  looking for a job as a percentage of the labour force.
• Statistics SA (SSA) obtains its labour data each year from Quarterly Labour Surveys  (QLFS)
• It uses the standard definition of the International labour Office (ILO) to calculate  unemployment.
• The strict definition of unemployment is used to calculate the unemployment rate.
• The unemployment are those people within the Economically Active Population (EAP)  who: 
  • Did not work during the seven days prior to the interview
  • Want to work and are available to start work within a week of the interview
  • Have taken active steps to look for work or to start some form of self- employment  in four weeks prior to the interview.
• South Africa's unemployment rate rose to 33.5% in Q2 of 2024, the highest in two  years 
• Youth unemployment is particularly high in South Africa, often significantly higher than  the overall unemployment rate, reflecting challenges in the transition from education to  employment.
• In developed countries, change in the unemployment rate trigger responses:
  • from governments to fine-tune the economy.
  • Increases require more funds for unemployment insurance (UIF) drawings.
  • In developing countries, unemployment is the most important cause of poverty. 

2. Interest rate indicators  

• Interest rates: Interest is the charge made for borrowing money
• Interest rate indicators are essential for understanding the monetary policy stance of a  country and its impact on the economy.
• Repo rate is one of the most important interest rate indicators. It is the rate at which  the SARB lends money to banks.
• The repo rate is a critical tool for monetary policy and influences other interest rates in  the economy, such as lending and deposit rates. 
• SARB adjusts the repo rate to control inflation and stabilise the economy.
• The prime interest rate is the interest rate that commercial banks charge their most  creditworthy customers, usually large corporations.
• Mortgage rates are the interest rates charged on home loans and are influenced by  the repo rate and other factors. 

3. Money supply indicators 

• Money supply indicators are crucial for understanding the availability of money in an  economy, which can influence inflation, interest rates, and overall economic activity.
• The supply of money is controlled by the SARB. The money is classified in three  categories.
  • M1 money supply: notes and coins in circulation and demand deposits of the  domestic private sector at banks.
  • M2 money supply: M1 plus other short term and medium term deposits of the  domestic private sector at banks.
  • M3 money supply: M2 plus long term deposits of the domestic private sector at  banks. 

DISCUSS NUTRITION AND HEALTH INDICATORS AS SOCIAL INDICATORS 

• Social indicators are a measure used by economists and governments to evaluate the  performance of the economy with regard to the social well-being of the inhabitants. 

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: 

1. 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 

2. Overweight children 

• The prevalence of overweight children is growing concern in South Africa
• There is an association between obesity in children and the high prevalence of  diabetes, respiratory diseases, high blood pressure, and psychological and orthopedic  disorders
• Being overweight can lead to numerous adverse health conditions which affect  people's ability to work and take care of themselves obesity is a killer
• Governments often legislate that health supplements such as vitamin A be added to  basic food stuffs such as bread while the health department also encourage breast  feeding
• Malnutrition and obesity in children are indicators taken into account when deciding on  feeding schemes and their extent 

Health 

• number of indicators are used both nationally and internationally to monitor the health  of a population

1. Infant mortality 

• The number of children who die before the age of 1 is a way to measure the health of  the population
• Child mortality is significantly higher in poor households 

2. Under five mortality 

• The number of children that will die before the age of 5 years 

3. Health expenditure 

• This is measured in terms of the amount of public and private expenditure on  healthcare as a percentage of GDP
• Healthcare has extremely positive externalities 

4. 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) 

5. 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
• A healthy population saves on medical and other costs, produces income and  contributes to a stronger economy