New Forest High School

Business Studies
Grade 12

BUSINESS
ENVIRONMENTS
PAPER 1
Name:
Grade:
 Business Environments
Topic Term
1 Impact of recent legislation on business 1
5 Macro environment: business strategies 1
6 Business sectors & their environments 2

FORMAT OF ASSESSMENTS
PAPER 1
2 HOURS
150 MARKS
SECTION A: COMPULSORY (30 marks)
QUESTION 1
5 Multiple Choice (10 marks)
5 Missing Words (10 marks)
5 Matching Columns (10 marks)

SECTION B: CHOOSE ANY TWO QUESTIONS (2x40=80 marks)

QUESTION 2
Business Environments (40 marks)

QUESTION 3
Business Operations (40 marks)

QUESTION 4 MISCELLANEOUS
Business Environments (20 marks)
Business Operations (20 marks)

SECTION C: CHOOSE ANY ONE QUESTION (40 marks)

QUESTION 5: Business Environments

QUESTION 6 Business Operations

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 TOPIC 1
IMPACT OF RECENT LEGISLATION ON BUSINESS
Learning objectives

At the end of this topic, learners should be able to:

• Outline/describe/explain/discuss the purpose of the SDA, LRA, EEA, BCEA, COIDA,
BBBEE, NCA and CPA
• Discuss/explain/evaluate the impact (positives/advantages and/or negatives/disadvantages)
of the SDA, LRA, EEA, BCEA, COIDA, BBBEE, NCA and CPA on businesses
• Outline/explain/discuss actions regarded as non-compliance by the SDA, LRA, EEA, BCEA,
COIDA, BBBEE, NCA and CPA
• Outline/explain/discuss penalties/consequences for non-compliance with the SDA, LRA,
EEA, BCEA, COIDA, BBBEE, NCA and CPA
• Suggest/recommend ways in which businesses can comply with the SDA, LRA, EEA, BCEA,
COIDA, BBBEE, NCA and CPA
• Outline/explain/discuss the role/functions of SETAs
• Explain how SETAs are funded
• Define/elaborate on the meaning of learnerships
• Explain the National Skills Development Strategy (NSDS) and the Human Resource
Development Strategy (HRDS) (that is, Sector Education and Training Authorities)
• Outline/explain/discuss the rights of employers and employees in terms of the LRA
• Outline/explain/discuss the provisions of the BCEA
• Distinguish/differentiate between Black Economic Empowerment (BEE) and the BBBEE Act
• Explain/discuss the implications of the following revised FIVE pillars of BBBEE on
businesses:
o Management control
o Ownership
o Enterprise and supplier development (ESD)
o Skills development
o Socio-economic development/social responsibility
• Recommend/suggest ways in which businesses could apply the revised FIVE pillars of
BBBEE in the workplace
• Outline/explain/discuss the rights of consumers in terms of the NCA and CPA.

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INTRODUCTION

The different legislation that we will learn about were established post-1994. The primary
purpose of the different legislation is to address the multiple injustices and discriminatory
laws of apartheid. These legislations will ensure actions of equality and fairness for all South
Africans and has been developed in response to the demands for redress and equity in South
Africa. Through the effective implementation of the various requirements stipulated in the
legislation, the lives of previously disadvantaged people may significantly improve.

THE SKILLS DEVELOPMENT ACT (SDA) (NO. 97 OF 1998)

The SDA plays a significant role in ensuring that the South African workforce is skilled and
contributes to the productivity and economic growth of the country.

The SDA aims to enable more South Africans to gain access to skills training opportunities that
have long-term benefits for the population and society.

The purpose of the SDA

• Develops the skills of South Africans in order to improve productivity in the workplace.
• Encourages businesses to improve the skills of new and existing workers.
• Invests in the education and training of the South African workforce.
• Purposefully redresses imbalances of the past through education and training.
• Improves the job prospects of previously disadvantaged people.
• Provides the systematic implementation of strategies on a national, sector and workplace
basis.

The impact of the SDA on businesses

Positives/advantages
• Increases the number of skilled employees with scarce skills.
• Improves productivity in the workplace because employees are empowered through training
programmes, thus becoming more knowledgeable.
• Increases global competitiveness of South African businesses, as more employees are
trained with upgraded, relevant and scarce skills.
• Improves the return on investment (ROI) in education and training.
• Increases investment in education and training in the South African labour market.
• Improves the delivery of services of businesses because employees are working at an
optimal level.

AND/OR

Negative/disadvantages
• The implementation of the SDA is time-consuming, expensive, prescriptive and
administratively burdensome.
• The Skills Development Levy (SDL) places an additional burden on financially struggling
businesses.
• The SDA initiative of the government may not always be supported by all businesses.
• Businesses find it difficult to monitor/control the implementation of this Act.
• Productivity in the workplace may decline, as employees have to attend learnerships during
work hours.
• Only companies/businesses with a staff payroll over R500 000 per annum can claim the SDL.

Actions regarded as non-compliance by the SDA

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• Preventing qualified employees from gaining access to training opportunities and
learnerships.
• Preventing employees’ access to learnerships based on any discriminatory grounds such a
pregnancy, age, position, language, gender, sexual orientation, culture or religion.
• Promoting skills development unfairly, for example, where only certain employees benefit.
• Falsifying information in any documentation such as tax documentation submitted to SARS
and workplace skills plans.
• Providing employment services for gain without being registered as an employer or
registered with the relevant SETA.
• Providing incorrect and irrelevant information to employees about a learnership to
deliberately mislead employees.

Penalties/consequences for non-compliance with the SDA

• Businesses that do not comply with the SDA may receive a compliance order from the
Labour Court. This order forces the business to comply with the SDA.
• Businesses who neglect to comply with the SDA may receive large fines and may be given a
jail sentence (imprisonment), which will be dependent on the severity of the non-compliance.
• Businesses that do not pay the SDL may not offer learnerships to employees or claim grants
from the SDA.
• A labour inspector may indefinitely stop the operations of the business if the business is
found guilty of illegal practices.
• The business’s operating licence may be revoked, which may prevent the business from
continuing any form of operations.

Ways in which businesses can comply with the SDA

• Display a summary of the SDA in the business where it is visible to all employees.
• Provide opportunities to all employees to improve their skills.
• Assess the skills of employees to determine/ascertain the areas in which skills development
is needed.
• Promote and encourage employees to improve their skills and to actively engage in
learnerships.
• Employers who collect PAYE (Pay As You Earn tax) should register with SETA.
• Employers whose payroll exceeds R500 000 (half a million rand) per annum should pay 1%
of it over to SETA.
• Employers should submit a workplace skills plan and provide evidence that it was
implemented.

The role/functions of SETAs (Sector and Education Training Authorities) in supporting/

implementing the SDA

A SETA is a vocational skills training organisation in South Africa that identifies/outlines/

manages and creates learnerships, internships, and apprenticeships in the various business
sectors.

The role/function of SETAs is to:

• register various learnerships and learning programmes.
• promote and establish various learnerships.
• approve the workplace skills plans and annual training reports submitted by businesses.
• develop skills plans that are in line with the aims of the National Skills Development Strategy.
• develop/build skills development plans for the various economic sectors.
• promote learnerships and learning programmes by correctly identifying the best workplaces
for practical work experience.
Funding of SETAs

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• Skills Development levies are paid by employers to SARS as a collecting agency for the
government.
• Employers who have a salary bill that exceeds R500 000 per annum, should pay one
percent (1%) of their annual salaries as a levy.
• The different SETAs receive 80% of the levy for organisational expenses and the remaining
20% is paid to the National Skills Fund.
• Donations/Grants received from the public/businesses/CSI programmes.
• Surplus funds from government institutions.
• Funds received from rendering their services.

Learnerships

The meaning of learnerships

• Learnerships are theoretical/practical training opportunities that lead to a recognised
occupational qualification.
• They provide structured learning programmes that are completed during work hours for a
specified period.
• It includes a training course with learning material as well as practical work experience.
• Agreement between a learner/trainee, employer and a training provider.
• It may sometimes include employment for a specified period after the learnership is
completed.

Enrichment: Additional information on learnerships

A learnership is a structured learning programme that consists of theoretical and practical skills
in the workplace. The completion of a learnership leads to the attainment of a nationally
recognised qualification that is registered on the National Qualifications Framework (NQF).
• This nationally recognised qualification is directly related to an occupation, for example, a
health care worker, motor mechanic, construction worker, IT technician or accountant.
• A learnership combines structured learning with practical work experience while being
employed by an accredited public or private learnership provider (approved government
department, company or small business).
• Learners have to attend classes at colleges/training centres to complete the classroom-
based learning, and they have to complete on-the-job training in a workplace.
• A learnership is outcomes-based and not time-based and allows for the recognition of prior
learning.
• The duration of a learnership varies, but the average is about 18 months.
• People entering a learnership must be at least 16 years old and younger than 35 years old.

The table below shows the NQF for learnership levels 1 – 4:

ARTISAN (TRADE TESTED OR L4 CERTIFICATE)

NQF LEVEL EDUCATION BAND QUALIFICATION PROVIDER
4 Artisan Accredited
3 Junior Further Education National Certificates Public/Private
2 Assistant Providers
Grade 9 – ABET Public/Private
1 General Education N2
Level 4 schools

The National Skills Development Strategy (NSDS) and the Human Resource Development
Strategy (HRDS)

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The NSDS aims to develop skills, improve education, support and provide training to the South
African workforce, improve economic growth and in the process, alleviate poverty and reduce
unemployment. It was developed as a result of the establishment of the SDA to introduce more
skilled workers into scarce fields in South Africa. The National Skills Authority (NSA), the
National Skills Fund (NSF), the various SETAs, and other government departments, have their
specific responsibilities and functions regarding the NSDS.

The HRDS on the other hand, aims to address equity and to reduce poverty and inequality in
South Africa by addressing skills deficits in the economy and implementing intervention plans to
develop human resources to improve the South African economy. Like the NSDS, the HRDS
was developed as a result of the establishment of the SDA. The HRDS is aligned to present
economic needs, increased global competition and globalisation.

Explanation of the National Skills Development Strategy (NSDS)

• Increases access to programmes that train people.
• Addresses the low level/deficit/shortage of language and mathematical skills among the
youth and adults.
• Promotes the public FET college system that has programmes to meet the skills needed by
SETAs/local/regional/provincial/national organisations.
• Makes better use of/enhances/improves workplace-based skills development.
• Encourages/supports small business/community-training groups/NGOs/worker-initiated
training initiatives.
• Increases/improves the skills of the public sector to improve service delivery.
• Builds career/vocational guidance/training centres.
• Sets out/outlines the responsibilities of other education and training stakeholders.
• Improves social development through economic development.

Explanation of the Human Resources Development Strategy (HRDS)

• Improves the supply of skills, which benefits the country directly.
• Promotes social development/social justice and helps to reduce poverty.
• Addresses skills shortages in the South African workplace.
• Achieves faster economic growth/higher employment levels and reduces the poverty level in
South Africa.
• Develops both short-term and long-term workforce skills.
• Increases/encourages employee participation in lifelong learning.

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THE LABOUR RELATIONS ACT (LRA) (NO. 66 OF 1995)

The LRA is an enabling framework that regulates the relationship between employees and
employers, and promotes sound relations between trade unions and employer organisations.
The Act also promotes democracy in the workplace through the prevention of unfair labour
practices. Through effective implementation of the LRA, fair labour practices in the workplace
contribute to improved efficiency in business operations with minimal disruptions.

The purpose of the LRA

• Provides an enabling framework and structure for labour relations between employees and
employers, trade unions and employer organisations.
• Promotes collective bargaining at the workplace/sectoral level.
• Promotes simple procedures for the registration of trade unions and employer organisations.
• Promotes fair labour practices between employers and employees.
• Established the Commission for Conciliation, Mediation and Arbitration (CCMA), Labour
Court and Labour Appeal Court.
• Advances social justice/labour peace/economic development, which ensures that the
workplace maintains the basic rights of employees.

The impact of the LRA on businesses

Positives/advantages
• Ensures the participation of all parties in the collective bargaining process, which reduces
conflict in the workplace.
• Protects the rights of businesses and employer organisations in labour-related issues.
• Promotes quick and less expensive labour dispute resolutions.
• Protects employers who recourse lawful lockouts when negotiations between parties fail and
when employees participate in strike action.
• Prevents unfair discrimination in the workplace because equal opportunities are promoted
for all employees.
• Provides sound dispute resolution through consensus between organised labour,
businesses and the state.

AND/OR

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Negatives/disadvantages
• The LRA may reduce the global competitiveness of businesses due to lower workplace
productivity.
• Businesses may lose their competitive advantage because important information, which
could be leaked to competitors, is often disclosed to trade union members during collective
bargaining.
• Decreased profitability of businesses because of a decline in productivity and sales.
• Productivity may decrease significantly if employees engage in trade union related activities
during work hours.
• The implementation of the LRA may be very costly and time-consuming – especially the
dispute resolution process.
• The employment of legal specialists and labour consultants increases the costs of the
business.

Actions regarded as non-compliance by the LRA

• Dismissing employees unfairly or illegally.
• Preventing employees from forming and joining trade unions.
• Refusing to provide trade union representatives leave to attend to trade union matters.
• Preventing employees from participating in legal strikes.
• Dismissing employees who participate in legal strikes.
• Forcing employees to give up their trade union membership and representation.

Penalties/consequences for non-compliance with the LRA

• Businesses that do not comply with the LRA may receive a compliance order from the
Labour Court that forces the business to comply.
• Businesses who neglect to comply with the LRA may receive large fines if they fail to meet
the agreements reached during the dispute resolution process.
• Businesses may be forced to enter into a dispute resolution process if they do not willingly
participate.
• The business’s licence may be revoked, which may prevent the business from continuing
any form of operations.
• Businesses that fail to comply with the LRA may incur financial costs such as legal
fees/CCMA fees.

Ways in which businesses can comply with the LRA

• Display a summary of the LRA in the workplace where it is visible to all employees.
• Employees must be allowed to form trade unions and participate in trade union-related
activities or legal strikes.
• The establishment of workplace forums must be supported by employers.
• Any agreements made during collective bargaining should not be ignored/breached by
employers.
• Fairness should be promoted, and employees should not be unfairly/illegally dismissed.
• Employers should disclose all relevant information to the trade union representatives for the
effective completion of required tasks.

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Rights of employers and employees in terms of the LRA

Rights of employers in terms of the LRA

Employers have the right to:

• recourse a lockout during periods when employees engage in unprotected/illegal/wildcat
strikes/labour action.
• form employer organisations.
• dismiss employees who engage in unprotected strikes/misconduct such as violence or
intimidation during strike action.
• form bargaining councils for the purpose of collective bargaining.
• not remunerate employees who participate in protected strikes and for work that was not
completed during protected strikes.

Rights of employees in terms of the LRA

Employees have the right to:

• join a trade union of their choice.
• establish a workplace forum where a business has 100 or more employees to resolve work-
related issues.
• request trade union representatives to represent and assist employees during the grievance
procedures/disciplinary hearings.
• embark upon legal strikes as a remedy for grievances.
• trade union representatives may take reasonable time off work with pay, to attend to trade
union duties.
• refer unresolved workplace disputes to the Commission for Conciliation, Mediation and
Arbitration (CCMA).
• refer unresolved CCMA disputes to the Labour Court for an appeal.

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THE EMPLOYMENT EQUITY ACT (EEA) (NO. 55 OF 1998)

The EEA creates an enabling framework of acceptable employment practices and was primarily
established to promote affirmative action. It allows for improved and greater transformation
processes in the workplace. Through the EEA, people are treated equally, regardless of race,
culture, age, language, gender, sexual orientation, disability and religion. The EEA also compels
businesses to compile employment equity plans.

The purpose of the EEA

• Ensures equal representation of all population groups of South Africa in the workplace
through the effective promotion and implementation of affirmative action.
• Advocates that employees who do work of the same or equal value must be paid equally.
• Promotes equal opportunity and fair treatment for all workers in the workplace.
• Prevents discrimination on the grounds of gender/race/disability in the workplace.
• Protects employees from victimisation in the context of exercising their rights as outlined in
the EEA.
• Provides the possibility for workers to refer unresolved issues to the CCMA.

The impact of the EEA on businesses

Positives/advantages
• Promotes the implementation of affirmative action measures to redress the various
imbalances in employment.
• Systematically prevents unfair discrimination as it ensures that the workforce is
representative of the demographics of the country.
• Promotes equal opportunities and fair treatment for all workers in the workplace.
• Encourages diversity in the business by employing people from various racial backgrounds.
• Encourages consultation between employers and employees.
• Provides all employees with an equal opportunity during selections, appointments and
promotions in the workplace.

AND/OR

Negatives/disadvantages
• The implementation of the EEA is time-consuming, expensive, prescriptive and
administratively burdensome because employment equity reports must be submitted to the
Department of Labour every two years.
• The training costs of the business increases because employees need to be correctly
trained regarding the implementation of the EEA.
• Employment Equity appointments may cause conflict in the workplace as some employees
may not respect the knowledge, skills, qualifications and experiences of the EE appointment.
• Businesses sometimes appoint unsuitable and unqualified candidates into an EE position to
meet the requirements of their employment equity plan.
• Businesses find it difficult to make appointments because of the unsuitability of candidates,
which results in the position not being filled.
• Businesses must submit employment equity plans and compliance certificates before
business can be conducted with the state.

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Actions regarded as non-compliance by the EEA
• Denying people access to the workplace, based on the grounds of any form of discrimination
such as gender, race, culture, religion, language and gender.
• Treating workers unfairly and incorrectly promoting affirmative action in the workplace.
• Refusing to employ young women because they would choose to have children in the future.
• Conducting HIV testing unless the testing is justified by the Labour Court.
• Refusing to employ a person because of strong religious or cultural beliefs, or because of a
disability.
• Harassing and victimisation of an employee in any form are regarded as discriminatory
according to the EEA.

Penalties/consequences for non-compliance with the EEA

• Businesses that do not comply with the EEA may receive a compliance order from the
Labour Court that forces the business to comply with the EEA.
• Businesses that do still not comply after the compliance order has been issued may then be
charged/prosecuted by the Labour Court for non-compliance.
• Businesses who neglect to comply with the EEA may receive large fines, which will be
dependent on the degree of non-compliance, especially in the context of fronting.
• The Department of Labour may prevent non-compliant businesses from conducting business
with the government, especially in the context of government tenders.
• Labour inspectors can visit the business and conduct interviews with employees to
determine whether the information supplied on the employment equity plans is true or has
been falsified.

Ways in which businesses can comply with the EEA

• Display a summary of the EEA in the workplace where it is visible to all employees.
• Provide equal opportunities to all employees in the workplace.
• Businesses should ensure that employees are paid equally for work of equal value.
• Implement affirmative action measures to promote diversity in the workplace.
• Compile employment equity plans that specify how affirmative action will be implemented in
the workplace.
• The workplace must be representative of the demographics of the country at all levels.
• Current employment policies/practices/procedures must be restructured and evaluated to
accommodate the various designated groups.

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THE BASIC CONDITIONS OF EMPLOYMENT ACT (BCEA) (NO. 75 OF 1997)

The BCEA sets out the minimum conditions that ensure fair labour practices and human
resources practices in the workplace. The BCEA applies to all employers and employees, except
for members of the National Defence Force, South African Secret Services, National Intelligence
Agency, and unpaid volunteers working for charities. The BCEA is applicable to all casual,
temporary and permanent employees, as well as independent contractors. Businesses must
keep abreast of amendments made regarding the variations/changes on the BCEA provisions by
the Minister of Labour.

The purpose of the BCEA

• Outlines clear terms and conditions of employment for employers and employees.
• Regulates and promotes the right to fair labour practices as outlined in the Constitution of
South Africa.
• Provides minimum requirements/standards for the creation of employment contracts.
• Advances the economic development and social justice of employees.
• Adheres to the rules and regulations set out by the International Labour Organisation (ILO).
• Regulates the variations of the basic conditions of employment.

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The provisions of the BCEA

PROVISION DISCUSSION
• Employees are not allowed to work for more than 45 hours per week.
• Employees may work 9 hours a day if they work five days or less per
Hours of week.
work / Work • Employees may work 8 hours a day if they work more than five days a
hours week.
• Night work performed by employees after 18:00 and before 6:00 the
following day should be done by mutual agreement, and employees
must be compensated by allowance/reduction of work hours.
• Employees cannot be forced to work overtime but must agree to work
overtime.
• Employees cannot work more than 3 hours overtime per day, or 10
hours per week.
Overtime • Overtime must be compensated as follows:
o 1½ times/One and a half times the normal rate of pay for overtime
worked on weekdays and Saturdays.
o 2 times/Twice/Double the normal rate of pay for overtime worked
on Sundays and public holidays.
• Employees must have a meal break of 60 minutes after 5 continuous
hours of work.
Meal breaks • The meal break can be reduced to 30 minutes/half an hour by a
and rest mutual written agreement when employees work less than 6 hours per
periods day.
• Employees must have a daily rest period of 12 continuous hours/a
weekly rest period of 36 continuous hours, which must include
Sundays.
• An employment contract may only be terminated following 1 weeks'
notice if the employee has been employed for 6 months or less.
Termination • A minimum of 4 weeks' notice must be given to the business if the
of employee has been employed for a year or longer.
employment • The employee must be given formal notice in writing if the employer
has terminated the contract, similarly, the employee must give the
employer formal notice in writing for terminating the contract.
• It is illegal to employ a child younger than 15 in South Africa.
• It is also illegal to force an employee to work.
Child and • Businesses may employ children over the age of 15 if employment is
forced not harmful to their well-being/health/education/moral and social
labour development.
• Minors under the age of 18 may not engage in dangerous work/work
meant for an adult.
• Employees must be paid for any public holiday that falls on a working
Public day.
holidays • Employees may work on public holidays when there is a mutual
agreement, and they are paid 2 times/twice/double their normal rate.

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 • Annual leave
Employees are entitled to:
o 21 consecutive days annual leave per year or 1 day for every 17
days worked/1 hour for every 17 hours worked.
o An employer can only pay a worker in lieu/instead of granting leave
if that worker leaves the job/terminates the employment contract.
o Annual leave must be granted within 6 months after the leave cycle
ended.
• Sick leave
Employees are entitled to:
o 30 days/6 weeks paid sick leave in a 3 year/36 months cycle.
o 1 day paid sick leave for 26 days worked during the first 6 months
of employment.
o A medical certificate may be required before paying an employee
who is absent for more than 2 consecutive days/who is frequently
absent. Thereafter, they may take all 30 days of sick leave,
provided they meet the legal requirements.
• Maternity leave
Employees are entitled to:
o Pregnant employees are entitled to four consecutive months of
maternity leave.
o Pregnant employees are prevented from performing work that may
be hazardous to themselves and the unborn child.
o Maternity leave usually commences any time from four weeks
before the expected date of birth of the unborn child under the
Leave advice of a doctor/midwife.
• Paternal leave
Employees are entitled to:
o An employee irrespective of gender, who is a parent, is entitled to
10 consecutive days parental leave after the birth of his/her child.
o Parental leave is unpaid but the employee/parent may claim from
the Unemployment Insurance Fund/UIF.
o The employer must be informed/notified at least one month before
the expected due date of birth.
o Adoption leave applies to the adoption of a child below the age of 2
years.
o One parent of the adopted child is entitled to 10 weeks of adoption
leave to take care of the child, while the other parent is entitled to
10 consecutive days normal parental leave.
o Commissioning parental leave is only applicable to surrogate
motherhood where one parent is entitled to 10 weeks
commissioning parental leave to take care of the child, while the
other parent is entitled to 10 consecutive days normal
• Family Responsibility leave
Employees are entitled to:
o An employee may receive 3 to 5 days paid leave per year on
request, in the event of the death of the employee’s spouse/life
partner/parent/adoptive parent/grandparent/child/adoptive
child/grandchild/sibling.
o An employer may require reasonable proof – before approving this
type of leave such as a death certificate of the family member
whose funeral will be attended.

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The impact of the BCEA on businesses

Positives/advantages
• Creates/establishes an enabling framework of acceptable employment practices, for
example, work hours, leave, legalities of employment contracts.
• Outlines the rules and regulations, and provides clear and specific guidelines for employers
to deal with employment issues.
• Encourages consultation between employers and employees in the workplace.
• Outlines the minimum/basic requirements for employment contracts
• Specifies work hours to prevent exploitation of employees.
• Workers are permitted/allowed to consult labour unions/trade unions in cases where the
BCEA conditions are violated.

AND/OR

Negatives/disadvantages
• The implementation of the BCEA is time-consuming, expensive, prescriptive and
administratively burdensome, especially the drafting of formal/legal contracts.
• The training costs of businesses may increase because employees have to be trained with
regard to the implication of the BCEA, and businesses often have to employ legal
specialists.
• Businesses often regard employment contracts as a negative aspect and sometimes do not
implement the requirements, which results in non-compliance.
• Employers and managers may not force employees to work more than 45 hours per week,
which may result in a reduction in productivity.
• Employers cannot hire cheap labour, and therefore cannot exploit employees.
• Businesses are forced to comply with the various legal requirements of the BCEA, which
directly increases the labour costs of businesses.

Actions regarded as non-compliance by the BCEA

• Unilaterally changing information in the employment contracts by employers without
consulting employees.
• Forbidding employees to discuss remuneration/wages and salaries matters with other
workers.
• Preventing employees from gaining access to employment contracts.
• Preventing pregnant employees from legally taking maternity leave.
• Refusing acceptance of a valid medical certificate of a sick employee.
• Refusing to grant an employee family responsibility leave for any aspect of family
responsibility leave as outlined in the BCEA, such as supporting a sick family member or
attending the funeral of a close family member.

Penalties/consequences for non-compliance with the BCEA

• Businesses that do not comply with the BCEA may receive a compliance order from the
Labour Court, that forces the business to comply with the BCEA.
• The Director-General of the Labour Court may agree, amend or cancel the compliance
order.
• Businesses may be taken to the Labour Court for a ruling.
• Labour inspectors may conduct investigations and inquiries about complaints in the context
of the BCEA and remove records as evidence.
• Businesses who neglect to comply with the BCEA may receive large fines and may even be
given a jail sentence, which will be dependent on the severity of the non-compliance.

16
Ways in which businesses can comply with the BCEA
• Remunerate/pay employees for working overtime, as stipulated in the provisions of the
BCEA.
• Ensure that employees do not exceed the stipulated working hours of 45 hours per week.
• Provide maternity leave for pregnant employees.
• Ensure that the employment contracts do not contravene any aspect of the requirements of
the BCEA.
• Allow sick employees to take off the required amount of sick leave i.e, six weeks in a 3 year
cycle.
• Refrain from employing children under the age of 16, as this is illegal.

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THE COMPENSATION FOR OCCUPATIONAL INJURIES AND DISEASES AMENDMENT
ACT (COIDA) (NO. 61 OF 1997)

COIDA was established to promote and protect the health and safety of employees in the
workplace. COIDA provides guidelines for the compensation of employees who sustain on-the-
job injuries and contract diseases. It also provides guidelines when employees die as a result of
work-related injuries. The various injuries and diseases for which claims can be made are
specified in COIDA. Significant progress has been made in the implementation of COIDA, as
more businesses are now more socially responsible for workers and their dependents.

The purpose of the COIDA

• COIDA applies to all casual and full-time employees who become injured/disabled/killed due
to a workplace accident/disease.
• COIDA excludes employees who are guilty of wilful misconduct such as horseplay in the
workplace/employees working outside South Africa for at least twelve months/members of
the South African Defence Force/members of the Police Services.
• The establishment of COIDA has resulted in the establishment of a Compensation Board,
whose function is to act in an advisory capacity to the Minister of Labour on the application/
provisions of COIDA.
• The type and severity of the injury will dictate the medical expenses and other compensation
that will be paid to employees.
• Employers make monthly contributions towards the Compensation Fund, which is based on
the number of employees in the workplace/the level of risk to which employees are exposed.

The impact of the COIDA on businesses

Positives/advantages
• Promotes health and safety in the workplace.
• Creates an enabling framework for acceptable employment practices/safety regulations.
• Covers all employees in the workplace, if both parties (employers and employees) meet all
the necessary safety provisions as outlined by COIDA.
• Supplies administrative guidelines/mechanisms for dealing with and processing claims.
• Provides employees with financial/monetary compensation for any injury/disability/illness
that results from performing workplace duties.
• Protects employees from financial burden should an accident occur in the workplace,
provided that the employer is not guilty of negligence and has made contributions to the
Compensation Fund.
• COIDA does provide compensation for domestic workers.

AND/OR

Negatives/disadvantages
• The implementation of COIDA is time-consuming, expensive, prescriptive and
administratively burdensome – especially the lengthy claiming processes/procedures.
• Employers have to register all their employees to make annual contributions to COIDA,
which may result in cash flow problems for businesses.
• Implementation processes/procedures required by the Act may be expensive and place an
additional financial burden on struggling businesses.
• Employers may be forced to pay heavy penalties if they are found guilty of negligence, or for
not enforcing safety measures.
• South Africans who are temporarily/permanently employed in foreign countries are not
covered by COIDA.
• COIDA does not cover employees in the South African National Defence Force.
Actions regarded as non-compliance by COIDA

18
• Bribing employees not to report the accident/injury based on the grounds of
race/religion/culture/language/gender/sexual orientation.
• Falsifying information about previous, serious accidents/occupational diseases on the
grounds of race/religion/culture/language/gender/sexual orientation.
• Failing to disclose all information to the Compensation Board when accidents or injuries
occur for specific employees.
• Deliberately contributing the incorrect amounts to the Compensation Fund, which prevents
employees from receiving compensation.
• Discriminating against injured employees when claims have to be submitted/employers who
refuse to submit claims of injured employees to the Compensation Board.
• Refusing to lodge the claims of domestic workers.

Penalties/consequences for non-compliance with COIDA

• Businesses that do not comply with COIDA may receive a compliance order from the Labour
Court, which forces the business to comply with COIDA.
• Businesses who neglect to comply with COIDA may receive large fines for refusing to lodge
claims and may even be given a jail sentence/imprisonment, which will be dependent on the
severity of the non-compliance.
• Businesses can be forced to make large payments if they did not implement the necessary
precautions to reduce accidents/fatalities, nor promote health and safety in the workplace.
• Businesses may be forced to pay recovery costs required by the compensation fund.
• Employees may take a business to court for not registering with the Commissioner of the
Compensation Fund.

Ways in which businesses can comply with COIDA

• Display a summary of COIDA in the workplace where it is visible to all employees.
• Organise training on COIDA with all relevant stakeholders so that employees know their
rights in the context of COIDA, but also to protect and promote health and safety in the
workplace.
• Provide and enhance the capacity to promote health and a safe working environment.
• Register with Compensation Board and Compensation Commissioner.
• Pay the required levies to the Compensation Fund.
• Report all accidents, injuries, illnesses and fatalities to the Compensation Commissioner as
they occur.

19
THE BROAD-BASED BLACK ECONOMIC EMPOWERMENT ACT (BBBEE) (NO. 53OF 2003,
AS AMENDED IN 2013)

BBBEE was established to bring the majority of South Africans into the mainstream of the
economy, to significantly accelerate economic growth, provide opportunities for previously
disadvantaged people, and to spread wealth more broadly across all population groups. The
implementation of BBBEE has increased the number of black people that manage/own/control
the South African economy. A BBBEE scorecard is used to determine the BBBEE statuses of
businesses. BBBEE aims to integrate all citizens of South Africa meaningfully into the economy.

The purpose of BBBEE

• Enables wealth to be spread more broadly across all population groups.
• Aims at targeting inequality in the South African economy.
• Outlines areas that would give the government a platform for bringing the equitable spread
of wealth amongst all population groups.
• Allows for the development of Codes of Good Practice.
• Increases the number of black people that manage/control South African businesses.

Differences between BEE and BBBEE

Black Economic Empowerment Broad-Based Black Economic
(BEE) Empowerment Act (BBBEE)
• A government policy that may not always • An Act that is enforced/must be complied
be enforced. with by businesses.
• Benefitted only a few previously • Encourages a wider group of previously
disadvantaged people in the economy. disadvantaged people – which includes
black women, people who are physically
challenged, youth, and people in rural
areas – to participate in the economy.
• This resulted in a few previously • Aims to distribute the country’s wealth
disadvantaged individuals sharing in the across a broader spectrum of society.
wealth of the economy.
• Focused only on three pillars that did not • Focuses on five pillars – which include all
include all previously disadvantaged sectors of the society – especially the
people. previously disadvantaged people and
previously disadvantaged communities.

20
Application and implications of the revised BBBEE pillars

Businesses must/should:
• Ensure that transformation is implemented at all levels.
Management

• Appoint black people in senior executive positions/to management.

control

• Involve black employees in decision-making processes.

• Ensure and prioritise black female representation in management.
Limitation/barrier:
• Due to a shortage of skilled black managers/directors, some businesses find it
difficult to make appointments. This limits the growth opportunities for the business.
Businesses must/should:
• Include black people in shareholding/partnerships/franchises.
• Create more opportunities for black people to become owners and entrepreneurs.
Ownership

• Encourage small black investors to invest in big companies and share ownership.
• Exempted Micro Enterprises (EME's) that have an ownership of 50% or more of
black people in management are automatically promoted to Level 3 of the BBBEE
scorecard.
Limitation/barrier:
• Businesses find it difficult to find suitable black business partners/shareholders that
can afford shares.
Businesses must/should:
• Be encouraged to invest in and support black-owned Small Medium and Micro
Enterprise and supplier
development (ESD)

Enterprises (SMMEs).
• Create jobs as ESD promotes and supports local manufacturing.
• Make monetary contributions to BBBEE compliant businesses and SMMEs, such as
loans/donations/investments.
• Also make non-monetary contributions to BBBEE compliant businesses and SMMEs
such as advisory services/consulting services/entrepreneurial programmes.
Limitation/barrier:
• ESD promotes preferential procurement and businesses often do not have a choice
but to transact with BBBEE approved vendors that are not necessarily their first
choice.
Businesses must/should:
• Engage/involve black employees in various skills development training programmes
Skills Development

and initiatives.
• Benefit from the increased pool of skilled/trained employees, which increases
overall productivity in the workplace.
• Provide learnerships and learning programmes to black employees.
• Contribute 1% of their annual payroll if the payroll exceeds R500 000 to fund the
skills development programmes.
Limitation/barrier:
• Businesses often compromise productivity as mentors/coaches have to use work
hours to participate in learnerships/training.
Businesses must/should:
• Contribute towards social investment projects and community development.
development / Social

• Focus on critical areas of CSI such as development in the country, for example,
Socio-economic

responsibility

environmental awareness/education/housing/poverty/ unemployment, and so on.

• Distribute scarce CSI resources to selected beneficiaries in the community.
• Promote sustainable use of natural resources and support businesses that make
use of sustainable production techniques and sustainable energy utilisation
practices.
Limitation/barrier:
• Businesses often are not knowledgeable or experts at societal issues and social
responsibility and may result in wastage of financial resources if not investigated
correctly

21
The impact of the BBBEE on businesses

Positives/advantages
• Businesses who are BBBEE-compliant will be rated high on the BBBEE scorecard/may get
government tenders/may attract other BBBEE business partners/suppliers.
• Encourages businesses to address the demands for redress/equity directly in the workplace.
• Provides for enhanced human resources development through effective training and
development.
• Promotes enterprise development by developing entrepreneurial skills of designated people
to establish their own businesses.
• Businesses that focus on BBBEE show commitment towards the social/education/economic
developments in the community/country.
• Improves the image of the business because a good BBBEE rating attracts more investors
to the business.

AND/OR

Negatives/disadvantages
• The implementation of BBBEE is time-consuming, expensive, prescriptive and administratively
burdensome, especially attaining BBBEE Scorecard ratings and training of employees.
• Businesses have to endure rigid processes of having their BBBEE compliance measured/
verified by an independent BBBEE verification agency.
• Some processes associated with BBBEE – if not monitored properly – may lead to corruption/
nepotism/cronyism.
• BBBEE advocates Enterprise and Supplier Development (ESD), which means certain
businesses that are not approved BBBEE vendors may be excluded from supplying goods
and services.
• Businesses that wish to acquire government tenders and conduct business with the state,
must have their BBBEE status assessed annually. This increases the administrative burden
of businesses.
• Costs increase as businesses have to spend money on the correct compliance with the five
BBBEE pillars to obtain a good BBBEE rating.

Actions regarded as non-compliance by BBBEE

• Employers who incorrectly implement the means to achieve the requirements of the five
BBBEE pillars.
• Employers who fail to correctly implement affirmative action in the context of employment
equity to meet BBBEE responsibilities.
• Employers who promote unsuitable people into management positions at the expense of
qualified previously disadvantaged people.
• Employers who are deliberately involved in fronting, corruption, nepotism and cronyism,
and because of this, certain individuals benefit at the expense of other individuals.
• Refusing to award government tenders to BBBEE-compliant vendors.

Penalties/consequences for non-compliance with BBBEE

• Businesses that do not comply with BBBEE may receive a compliance order from the
Labour Court, which forces the business to comply with BBBEE.
• Businesses who neglect to comply with BBBEE may receive large fines for fronting practices
and may even be given a jail sentence (imprisonment), which will be dependent on the
severity of the non-compliance.
• Businesses may be fined with a penalty of up to 10% of the annual turnover of businesses.
• The state may decide not to renew business licences, revoke the business licence, or refuse
to grant authorisations to conduct business activities.

22
• The state may cancel any contract awarded to businesses that have acquired them based
on false information regarding their BBBEE status.
• Approved BBBEE compliant vendors will withdraw their contracts with noncompliant
businesses.

Ways in which businesses can comply with BBBEE

• Businesses need to find all means to achieve the requirements of the five BBBEE pillars,
such as promoting affirmative action when making appointments.
• Conduct business activities with BBBEE compliant vendors/suppliers/participate in
preferential procurement.
• Conduct regular skills development training with black employees.
• Sell shares to more black individuals within and outside the organisation.
• Appoint and promote more black employees into managerial positions.
• Implement sound Corporate Social Investment (CSI) policies to improve and develop society
at large.

23
THE NATIONAL CREDIT ACT (NCA) (NO. 34 OF 2005)

The NCA is concerned with consumer credit and the credit industry. The NCA was established
to curb high levels of consumer debt, and to promote responsibility in making informed
decisions before buying on credit. The NCA, therefore, prevents the reckless granting of credit
to consumers to ensure that consumers do not become over-indebted. The NCA has resulted in
the establishment of the National Credit Regulator (NCR).

The purpose of the NCA

• Promotes the social and financial interests of South African consumers, and by extension
the South African economy.
• Ensures that consumers of credit are well informed about the details included in their credit
contracts.
• Promotes the responsible granting of credit by credit providers.
• Ensures that credit is equally available to all qualifying consumers.
• Protects both lenders and borrowers from negligent lending practices that may result in over-
indebtedness for consumers.
• Ensures that the credit bureau/credit providers/debt counsellors are registered to avoid
consumer exploitation.

The impact of the NCA on businesses

Positives/advantages
• The NCA protects businesses against non-paying customers.
• Businesses complete thorough credit checks and receive up-to-date documentation from the
consumer as proof that they can afford the repayments/credit.
• The information held by the credit bureau is made available to businesses so that they verify
the creditworthiness of consumers before granting credit.
• Businesses that are authorised credit providers may attract more consumers.
• The correct implementation of the NCA leads to more customers through credit sales as
they are now protected from abuse and exploitation.
• The whole credit process is transparent, that is, both credit providers/creditors and consumers/
debtors know their responsibilities in terms of the NCA.

AND/OR

Negatives/disadvantages
• The implementation of the NCA is time-consuming, expensive, prescriptive and
administratively burdensome, especially complex and expensive debt collection procedures.
• Failing to comply with the NCA may result in legal action faced by the business.
• Businesses need to ensure that all attempts have been exhausted to recover debt, before
blacklisting the consumer.
• Businesses/credit providers cannot collect a debt from consumers who are under debt
review.
• Businesses that grant credit recklessly cannot recover the debt.
• The profit of businesses may decline because they can no longer depend on customers who
had easy access to credit.

24
Actions regarded as non-compliance by the NCA
• Refusing to grant consumers credit based on any form of discrimination such as race,
gender, age, religion, language, culture, sexual orientation.
• Charging different interest rates to different consumers based on discriminatory grounds
such as race, gender, age, religion, language, culture, sexual orientation.
• Granting credit recklessly to consumers and failing to explain the credit contract to
consumers.
• Failing to conduct affordability assessments to determine whether the customer actually can
afford the credit being offered.
• Blacklisting customers without exhausting all efforts to recover the debt from the consumer.

Penalties/consequences for non-compliance with the NCA

• The National Credit Regulator (NCR) may impose a fine/penalty on the business for non-
compliance.
• Businesses/credit providers may not charge any fee/interest/other charges under that
specific credit agreement.
• The court may declare the granting of credit by the business as reckless, and may order
consumers not to repay the credit/or part thereof to the business.
• Businesses may not demand payment, sue or attach the clients/consumer’s salaries/assets
to repay debt.
• The business bears all costs of removing the negative information of clients/consumers who
were blacklisted as a result of granting credit recklessly.
• The business licence may be revoked for reckless granting of credit and gross violations
contravening the NCA.

Ways in which businesses can comply with the NCA

• Conduct credit checks with a registered credit bureau and/or consult the National Credit
Register.
• Register the business with the National Credit Regulator (NCR).
• Submit annual compliance reports to the NCR.
• Conduct affordability assessments to ensure that consumers can meet their obligations.
• Comply with the necessary procedures regarding the provisions of the Financial Intelligence
Centre Act (FICA).
• Verify the identity of clients and report suspicious transactions/train staff on their obligations
in terms of FICA.

The rights of consumers in terms of the NCA

Consumers of credit have the right to:

• apply for credit and to be free from discrimination of any form.
• obtain reasons for credit being refused by credit providers.
• receive protection of their personal information.
• receive pre-agreement documentation before concluding any credit transaction.
• fair and responsible credit marketing.
• receive information in plain and understandable language.
• receive documentation as required by the NCA.
• access and challenge credit records and information held by the Credit Bureau.
• surrender/return goods to the credit provider to settle the outstanding amount/debt.
• apply for debt review/counselling if the consumers cannot afford to repay their debts.
• receive protection from being held accountable for the use of their credit facility after they
reported the loss/theft.
• refuse a credit limit increase.

25
THE CONSUMER PROTECTION ACT (CPA) (NO. 68 OF 2008)

The CPA was established to redress economic inequalities of the past and to promote equality
in the consumer market for all consumers of goods and services. The CPA promotes and
advances the social and economic welfare of consumers in South Africa. The establishment of
the CPA has resulted in the establishment of the National Consumer Commission (NCC). The
CPA compels both businesses and consumers to act responsibly when conducting business
activities. In addition, the CPA applies to every single transaction involving the buying and
selling of goods and services in South Africa.

The purpose of the CPA

• Promotes fair/accessible and sustainable places for producers to sell their products.
• Promotes responsible consumer behaviour amongst consumers.
• Ensures the consistent application of laws relating to consumer transactions and
agreements.
• Promotes the rights and full participation of historically disadvantaged individuals as
consumers in the economy.
• Establishes national standards to protect consumers regardless of economic status.
• Provides guidelines for better consumer information and prohibits unfair business practices.

The impact of the CPA on businesses

Positives/advantages
• Enables businesses to resolve disputes fairly through the National Consumer Commission
(NCC)/Consumer Court/Industrial ombudsmen.
• Allows businesses to build a good image when they ensure that consumer rights are
effectively promoted and not violated.
• Protects businesses if they are regarded as consumers.
• Safeguards businesses from dishonest competitors.
• Businesses may gain increased customer loyalty and improve profitability because of
compliance with the CPA.
• There is a significant drop in court cases against businesses, as businesses consciously and
actively prevent consumer rights violations.

AND/OR

Negatives/disadvantages
• The implementation of the CPA is time-consuming, expensive, prescriptive and
administratively burdensome, especially the implementation processes and procedures
required by the CPA.
• Consumers can take advantage of businesses and return goods when it is not necessary to
do so.
• Businesses may lose their competitive advantage as confidential and classified information
may become available to competitors.
• Training costs of the business increases as staff need to be trained on the implications of the
CPA, and businesses often need to employ legal specialists that are knowledgeable of the
CPA to conduct such training.
• Documentation, such as sales contracts, must be edited, upgraded and simplified. This
places additional financial strain on the business because consumers have the right to
receive contracts in a language that is easy to understand.
• Businesses experience significant increases in administration costs because legal contracts
need to be reworded in plain language that is easily understandable by consumers.

26
Actions regarded as non-compliance by the CPA
• Treating customers unfairly based on any form of discrimination such as race, gender, age,
religion, language, culture, disability, sexual orientation.
• Charging different and unfair prices to consumers for the same goods and services.
• Denying/refusing customers proper information about the goods and services.
• Varying/differentiating the quality of goods when selling in different areas – this is known as
place discrimination.
• Prioritising the needs of any consumer group over another when marketing/selling goods
and services.
• Falsifying information such as country of origin, types of ingredients and expiry dates, etc.,
about the product.

Penalties/consequences for non-compliance with the CPA

• Businesses that do not comply may receive a compliance order that forces the business to
comply with the CPA.
• Businesses who neglect to comply with the CPA may receive large fines and may be given a
jail sentence/imprisonment, which will be dependent on the severity of the non-compliance.
• Licences of businesses may be revoked for unfair consumer practices.
• A business may be requested by the NCC to suspend activities indefinitely.
• Businesses may be compelled to pay interest or damages that are due to the consumer.

Ways in which businesses can comply with the CPA

• Display the name of the business all business documentation, for example, letterheads/
invoices/contracts.
• Allow consumers a five-day cooling-off period in the sales agreement.
• Disclose the prices of all products that are on sale.
• Ensure that the quality of the goods and services is standardised and identical for all
consumers.
• Comply with requirements regarding the display of information on labels/packaging, for
example, smoking is hazardous for pregnant women.
• Conduct training with all staff members and stakeholders on the CPA.

27
The rights of consumers in terms of the CPA
Consumer rights Explanation
Consumers have the right to:
• Choose suppliers and goods and services.
• Shop around for the best prices and then make informed choices.
• Return goods that are unsafe/defective for a full refund.
• Request written quotations and cost estimates.

• Suppliers may not give misleading/false information to consumers.

• Suppliers may not use physical force/harass consumers to buy products.
• Businesses may not overbook/oversell goods/services and then dishonour
the agreement.
• Businesses may not promote pyramid schemes and chain-letter schemes.

Businesses must:
• Ensure that contracts/agreements should be in a plain language, that is
simple and easy to understand.
• Label product and trade descriptions accurately.
• Display prices that are fully inclusive/disclosing of all costs.
• Charge consumers a lower price if the two different prices for the same
product are displayed.

• Businesses should disclose all information related to the country of origin,

expiry dates/ingredients of the products.
• Consumers may cancel purchases made through direct marketing within five
working days/cooling-off period.
• Businesses should not deliberately mislead consumers on pricing,
benefits/uses of goods.
• Businesses should conduct marketing of business activities in a responsible
manner that complies with guidelines as outlined in the CPA.

• Businesses should honour credit vouchers and prepaid services.

• Suppliers in possession of any prepaid certificates/credit vouchers must not
treat such property as theirs and must exercise care/diligence and skill/and
assume liability for any losses suffered by consumers in this regard.
• Consumers have the right to be protected in lay-bye agreements.
• Suppliers must supply equivalent or superior products or offer a full refund
with interest if goods in the lay-bye are not provided by businesses.

Consumers have the right to:

• Protection against unfair, unreasonable or unjust contract terms.
• Approach the Court to ensure fair and just conduct, terms and conditions.
• Businesses should provide consumers with written notices of clauses that
may limit consumer rights.
• Businesses may not market/sell goods at unfair prices to consumers.

• Businesses may not charge different prices for the same goods/services.
• Businesses should not discriminate against any group of consumers when
marketing their products and services in different areas/places.
• Businesses should not limit access to goods and services in the consumer
market.
• Businesses may not under any circumstance, vary the quality of their goods
to different consumers as this is discriminatory.

28
TOPIC 1 ACTIVITIES

ACTIVITY 1: SDA

1.1 Choose a description from COLUMN B that matches a term in COLUMN A.

Write only the letter (A–J) next to the question numbers (1.1.1–1.1.5) in the
ANSWER BOOK, for example 1.1.6 K.

COLUMN A COLUMN B
1.1.1 Skills Development A 1% is paid to SETA if the annual
Levy (SDL) turnover exceeds half a million rand
1.1.2 Learnership B competitiveness of local firms improve
because of more access to skills training
1.1.3 Skills Development Act C promotes the public FET college system
(SDA) that has programmes to meet the skills
needed by SETAs
1.1.4 National Skills D registration of trade unions is conducted
Development Strategy by this body
(NSDS)
1.1.5 Sector and Education E theoretical and practical training
Training Authorities opportunities that lead to a recognised
(SETAs) occupational qualification
F businesses with the annual payroll
exceeding half a million rand must pay
1% to SETA
G labour relations are enhanced because
of this Act
H learners acquire a recognised degree on
completion of this training
I conducts registrations of learnerships
and learning programmes
J achieves goals outlined by the South
African university system
(5 x 2) (10)

ACTIVITY 2: SDA

2.1 Read the scenario below and answer the questions that follow.
GLORIA BALEKA ENGINEERING (GBE)
Gloria Baleka Engineering is planning to use the services of Sector Education and Training
Authorities (SETAs) in supporting the implementation of the Skills Development Act (SDA),
1998 (Act 97 of 1998). They have established that SETAs develop skills plans for the various
economic sectors. SETAs also promote various learnerships. GBE should ensure compliance
with the SDA.

2.1.1 Quote TWO roles of SETAs from the scenario above. (2)

2.1.2 Outline THREE other roles of SETAs in supporting the implementation

of the SDA. (6)

2.1.3 Elaborate on the meaning of learnerships. (4)

29
 2.1.4 Discuss the impact of the SDA on GBE as a business. (6)

2.1.5 Recommend ways in which GBE can comply with the SDA. (8)

ACTIVITY 3: LRA

3.1 Complete the following statements by using the word(s) in the list below. Write
only the word(s) next to the question number (1.1.1–1.1.5) in your notebook.

Labour Relations Act ; go-slows ; collective bargaining ; Labour Court

trade union ; Skills Development Act ; workplace forum ; lockout
Commission for Conciliation, Mediation and Arbitration ; dismissal

3.1.1 The workers of Getsmart Traders approached the ... for unresolved
disputes.

3.1.2 A … can be formed when a business has 100 or more employees to

resolve work-related issues.

3.1.3 Katlego Insurers applied a … in the fear that employees will loot and
damage the businesses during strike action.

3.1.4 The … provides an enabling framework for labour relations in South

Africa.

3.1.5 Bedford Manufacturers embarked upon … processes with trade union

representatives to solve labour disputes.
(5 x 2) (10)

ACTIVITY 4: BUSINESS ENVIRONMENTS (LABOUR RELATIONS ACT)

Goldman Miners (GM) has outsourced a legal specialist to conduct training on the
requirements of Labour Relations Act (LRA), (No. 66 of 1995). The training session focused
on the rights of employees and employers, as well as the impact of the LRA on businesses. In
addition, actions regarded as non-compliance and penalties for non-compliance were
discussed.

Write an essay on the LRA in which you include the following aspects:

• Outline the rights of the employers and employees in terms of the LRA.
• Explain the impact of the LRA on businesses.
• Discuss the actions that are regarded as non-compliance by the LRA.
• Advise businesses on the penalties they may face for not complying with the LRA.
[40]

30
ACTIVITY 5

5.1 Various options are provided as possible answers to the following questions.
Choose the answer and write only the letter (A–D) next to the question numbers
(5.1.1–5.1.5) in the ANSWER BOOK, e.g. 5.1.6 D.

5.1.1 De Lange Bookkeeping implements the… to promote affirmative action

in the workplace.

A Skills Development Act (SDA), 1998 (No. 97 of 1998)

B Labour Relations Act (LRA), 1995 (No. 66 of 1995)
C Employment Equity Act (EEA), 1998 (No. 55 of 1998)
D Basic Conditions of Employment Act (BCEA), 1997 (No. 75 of 1997)

5.1.2 An employment equity plan is a document that outlines how the

business intends to achieve employment equity over a…period.

A two-year
B three-year
C four-year
D five-year

5.1.3 One way in which Rethabile Retailers ensures compliance with the
Employment Equity Act (EEA), 1998 (No. 55 of 1998) is to…

A pay employees equally for work of equal value.

B treat workers unfairly based on the grounds of discrimination.
C remunerate workers differently for work of the same worth.
D refuse to employ a person because of strong cultural beliefs.

5.1.4 A major advantage of the Employment Equity Act (EEA), 1998 (No. 55
of 1998) is that…

A its implementation is time-consuming and prescriptive.

B it promotes diversity in the business.
C difficulties are experienced by the business in making appointments.
D it promotes the establishment of workplace forums.

5.1.5 The management of Myburgh Manufacturers was issued with a…for

not obeying the EEA in the workplace.

A compliance order
B business licence
C SARS Tax compliance certificate
D financing grant
(5 x 2) (10)

31
ACTIVITY 6: EEA

6.1 Outline the purpose of the Employment Equity Act (EEA), 1998 (Act 55 of 1998). (6)

6.2 Discuss the impact of the EEA on businesses. (8)

6.3 Read the scenario below and answer the questions that follow.
CONQUEST WHOLESALERS (CW)
A compliance inspection with regards to the Employment Equity Act (EEA), 1998 (Act 55 of
1998) was conducted at Conquest Wholesalers. The findings discovered that the workforce is
not representative of the demographics of South Africa. CW does not implement affirmative
action measures. A summary of the EEA is not displayed at the business.

6.3.1 Quote TWO actions that are regarded as non-compliance with the
EEA from the scenario above. (2)

6.3.2 Explain THREE other actions that can be regarded as non-compliance

with the EEA by businesses. (6)

6.3.3 Suggest the penalties that CW may face for non-compliance in terms
of the EEA. (6)

ACTIVITY 7: BCEA

7.1 Identify the provision of the Basic Conditions of Employment Act (BCEA), 1997
(No. 75 of 1997) applicable to Dalwai Investors (DI) in each statement below.

7.1.1 Megan, an employee, was paid one and a half times her normal rate
for additional hours worked on weekdays.

7.1.2 DI does not employ children under the age of 15 because it is against
the law.

7.1.3 The training manager, Mbali, provided four weeks’ notice before taking
a post at a rival firm.

7.1.4 A sixty-minute interval is provided to all employees of DI after five

continuous hours of work.

7.1.5 Rynard was granted 10 days consecutive unpaid leave after the birth
of his daughter. (10)

32
ACTIVITY 8: BUSINESS ENVIRONMENTS (BASIC CONDITIONS OF EMPLOYMENT ACT)

Businesses must have sound knowledge of the purpose and provisions of the Basic
Conditions of Employment Act (BCEA), 1997 (Act 75 of 1997). The implementation of the
BCEA may have a direct impact on business operations. A concerted effort is therefore
required by businesses to comply with the BCEA.

Write an essay on the BCEA in which you include the following aspects:

• Outline the purpose of the Basic Conditions of Employment Act.

• Explain the following provisions of the BCEA:
o Hours of work
o Termination of employment
o Child and forced labour
• Discuss the impact of the BCEA on businesses.
• Recommend ways in which businesses can comply with the BCEA.
[40]

ACTIVITY 9: COIDA

9.1 Read the scenario below and answer the questions that follow.
CARMEN BUILDING CONTRACTORS (CBC)
Faraaz Essop an employee at Carmen Building Contractors, lost his life due to injuries
sustained at the workplace. CBC did not submit the necessary claim as required by law. CBC
will face penalties for non-compliance.

9.1.1 Identify the Act violated by CBC in the scenario above. (2)

9.1.2 Discuss penalties for non-compliance with the Act identified in

QUESTION 9.1.1 above. (8)

9.2 Evaluate the impact of COIDA on businesses. (10)

ACTIVITY 10: BBBEE

10.1 Identify the BBBEE pillar implemented by Botha Food Retailers (BFR) in each
statement below.

10.1.1 More opportunities have been created by BFR to sell shares to black
people.

10.1.2 Black employees are encouraged to engage in various training

programmes being offered at BFR.

10.1.3 There is greater visibility of appointed female managers at all BFR

branches. (6)

33
ACTIVITY 11: BBBEE

11.1 Read the scenario below and answer the questions that follow.
WATIBE LIMITED (WL)
Watibe Limited requested Pondo Consultants to train all employees on the differences
between BEE and BBBEE. It was highlighted that BEE is a policy that is not enforced by the
government. Businesses are compelled to comply with the BBBEE Act. WL was also advised
on how to apply the BBBEE pillars in the workplace.

11.1.1 Quote the difference between BEE and BBBEE as mentioned in the
scenario. (2)

11.1.2 Describe other differences between BEE and BBBEE. (4)

11.1.3 Explain how WL can apply the following BBBEE pillars in the
workplace:
a) Enterprise and Supplier Development (ESD) (4)
b) Social responsibility (4)

11.1.4 Evaluate the impact of BBBEE on WL as a business. (6)

ACTIVITY 12

12.1 Choose a description from COLUMN B that matches a term in COLUMN A.

Write only the letter (A–J) next to the question numbers (12.3.1–12.3.3) in the
ANSWER BOOK, for example 12.3.4 K.

COLUMN A COLUMN B
12.1.1 National Credit A established to curb high levels of
Regulator (NCR) consumer debt and promote responsibility
before making credit purchases
12.1.2 Debt review B consumers may receive credit even though
affordability assessments prove otherwise
12.1.3 National Credit Act C ensures that employment contracts meet
(NCA) certain basic requirements
D protects consumer rights in the consumer
market
E monitors the credit industry in South Africa
F this right applies if consumers cannot
afford to repay their debts
(3 x 2) (6)

34
ACTIVITY 13: BUSINESS ENVIRONMENTS (NATIONAL CREDIT ACT)

The National Credit Act (NCA), 2005 (No. 34 of 2005) has transformed the credit industry in
South Africa and stipulates the rights of consumers in the context of the NCA. Businesses
must know the impact of the NCA on their operations and comply with this Act.

Write an essay on the NCA in which you include the following aspects:

• Outline the purpose of the National Credit Act.

• Explain the rights of consumers as stipulated in the NCA.
• Discuss the impact of the NCA on businesses.
• Recommend ways in which businesses can comply with the NCA.
[40]

ACTIVITY 14: CPA

14.1 Identify the correct right according to the CPA represented by each statement
below.

14.1.1 Suppliers may not provide consumers with false information.

14.1.2 Consumers may shop around for the best prices and then make
informed decisions.

14.1.3 Labelling of products and trade descriptions must accurately be

provided to consumers.

14.1.4 Consumers have the right to be protected in lay-bye agreements.

14.1.5 Businesses may not charge different prices for the same goods and
services. (10)

ACTIVITY 15: CPA

15.1 Read the scenario below and answer the questions that follow.
OUTSTANDING CLOTHING RETAILERS (OCR)
Outstanding Clothing Retailers (OCR) has spent a significant amount of money on training all
staff members on the various legislation. The different legislation has different purposes,
which may include the following:
• Ensures that credit is equally available to all qualifying consumers.
• Promotes responsible consumer behaviour amongst consumers.
• Establishes national standards to protect consumers regardless of economic status.

15.1.1 Quote TWO purposes of the CPA from the scenario above. (2)
15.1.2 Outline actions regarded as discriminatory according to the CPA. (4)
15.1.3 Explain the negative impact of the CPA on OCR as a business. (6)
15.1.4 Discuss any FOUR consumer rights in terms of the CPA. (12)
15.1.4 Advise OCR on the penalties for non-compliance with regards to the
CPA. (6)

35
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 TOPIC 5
MACRO ENVIRONMENT: BUSINESS STRATEGIES
Learning objectives

At the end of this topic, learners should be able to:

• Compile a SWOT analysis of a particular business from a given scenario
• Name and identify Porter’s Five forces model from given statements/scenarios
• Explain/advise businesses on how they could apply Porter’s Five Forces model to analyse
their position in the market
• Name and apply PESTLE analysis factors from given scenarios/statements
• Explain how PESTLE factors pose challenges to businesses
• Recommend ways in which businesses can deal with the challenges that are posed by
PESTLE factors
• Explain/describe/discuss the following types of business strategies:
o integration strategies
o intensive strategies
o diversification strategies
o defensive strategies
• Outline/explain/discuss the advantages of intensive and diversification strategies
• Outline/explain/recommend/advise businesses on the steps in strategy evaluation:
o examine the underlying bases of the business strategy
o look forward and backwards into the implementation process
o compare expected performance (measure business performance)
o take corrective action where necessary
o set specific dates for control and follow up
o decide on the desired outcome.

41
INTRODUCTION

In Grade 10 you were introduced to formulating and implementing a strategy as one of the
problem-solving cycle/steps. You also compiled a SWOT analysis to identify a viable business
venture. We also learned about how each PESTLE analysis factor poses a challenge to
businesses.

In Grade 11 we learned about the challenges posed by the micro, market and macro
environment and strategies businesses can use to deal with these challenges.

In Grade 12 we will provide a detailed analysis of a SWOT analysis, Porter’s Five Forces Model
and PESTLE analysis factors through the strategic management process.

THE STRATEGIC MANAGEMENT PROCESS AND INDUSTRIAL ANALYSIS TOOLS

Successful businesses conduct the strategic management process in order to identify suitable
business strategies that will enable them to remain profitable and sustainable. It is conducted by
management to implement specific strategies that are aimed at improving/retaining/enhancing
the competitive advantage of the business and to address various challenges of the business
environments. It allows the business to stay ahead of competitors and to increase its market
share. Strategic management forms an integral part of the overall accountability of
management.

Strategy (Definition/Description)
• A strategy is a purposeful course of action that a business follows to achieve its
purpose/objectives/goals/aims.
• It is defined as a long-term plan of action to achieve a specific goal.
• A strategy is a specific plan of action to solve a problem/address an opportunity.
• It enhances the ability of the business to achieve its mission/vision.
• A strategy integrates/allocates/manages organisational activities/resources to meet
present/future goals/objectives/aims.
• It is concerned with long-term developments/plans rather than routine operations/processes.

The strategic management process

The strategic management process is defined as the way in which an organisation defines its
strategy. It enables managers to make choices/devise actions regarding a set of strategies that
will enable the business to enhance/achieve improved performance.

It is a continuous process that enables the business to identify/improve its ability to deal with
challenges and enables businesses to implement strategies that will improve performance. The
main/core purpose of the strategic management process is that the business maintains a
competitive advantage over competitors.

42
The strategic management process consists of TWO options as follows:

Option 1

The business must:

• Have a clear vision, mission statement, and measurable/realistic/achievable objectives in
place.
• Identify strengths/weaknesses/opportunities/threats by conducting environmental
scanning/situational analysis.
• Use available tools/methods for environmental scanning, which may include a SWOT
Analysis/Porter’s Five Forces Model/PESTLE Analysis/industrial analysis tools.
• Formulate alternative strategies to respond to business challenges.
• Develop/create (an) action plan(s), which includes the tasks to be completed/deadlines to be
met/resources to be procured, and so on.
• Organise the business resources and motivate staff.
• Implement selected strategies by communicating them effectively/efficiently/correctly to all
stakeholders.
• Continuously evaluate/monitor/assess/measure strategies in order to take corrective action.

Option 2

The business must:

• Review/Analyse/Re-examine their vision/mission statement.
• Conduct (an) environmental analysis/environmental scanning using models such as SWOT
Analysis/Porter’s Five Forces Model/PESTLE Analysis.
• Formulate a strategy such as a(n) integration/intensive/diversification/defensive strategy.
• Implement a strategy, using a template such as an action plan.
• Control/Evaluate/Monitor the implemented strategy to identify gaps/deviations/differences in
implementation.
• Take corrective action to ensure goals/objectives/aims are met.

The diagram below can be used to study the strategic management process:

43
INDUSTRIAL ANALYSIS TOOLS

SWOT analysis

A SWOT analysis is an industrial analysis tool/environmental scanning technique that

enables a business to study the internal (micro) and external (market and macro) environments
of a business. The methodological simplicity of SWOT analysis allows a business to
purposefully identify/analyse the strengths and weaknesses of the business, and the
opportunities and threats to which the business is exposed. The purpose of a SWOT analysis is,
therefore, a strategic plan that is used to identify the factors that influence the functioning of the
business/ability of the organisation to reach objectives/goals.

However, it is worth noting that many businesses use a SWOT Analysis to identify internal
strengths and weaknesses. On deeper investigation, the business applies the other industrial
analysis tools to identify opportunities and threats. The other industrial analysis tools are
discussed further on in this unit.

44
Unpacking the components of a SWOT analysis

Examples of the various components of a SWOT analysis

Strengths Weaknesses
Examples of strengths Examples of weaknesses
• Internal aspects that the business does • Internal aspects in which the business is
well not doing well
• The success of the business/Successful • Inefficient use of organisational resources
business processes • Resources that are lacking within the
• The competitive advantage of the business
business • Limitations regarding funding
• Product differentiation • The internal business process that needs
• Unique resources being used by the improvement
business • Inefficient/weak work ethic
• Efficient skills/expertise/knowledge of • Employees arriving late for work
human resources • Employees unable to work cohesively
• High quality products/services being within a team
provided to customers • Inefficient products/services being
• The strategic location of the business provided to customers
• Successful marketing campaigns • High employee attrition/turnover rates
• Sound financial management/budgeting • Untrustworthy/inefficient/ineffective
practices organisational culture
• High brand visibility/identity/presence
within the market
Opportunities Threats
Examples of opportunities Examples of threats
• Potential trends within the market • Aggressive competition from competitors
• Identification of gaps within the market • Inefficient suppliers delivering poor quality
• Foreclosure of competitors goods
• Vacant buildings for expansion • Inefficient suppliers delivering inputs late
opportunities • Load shedding/national power outages
• Upcoming external events for networking • Increases in the interest rate
• Local government encouraging/supporting • International/world crises such as Covid-
SMMEs 19
• Suppliers reducing prices of scarce inputs • Economic decline in the country
• Competitors that cannot adapt to • Social issues such as
customer needs crime/poverty/unemployment
• Competitors that cannot adapt to • Changes in technological devices
changing technology • Environmental degradation
• Underserved markets for certain products • The decline in demand for
• Few competitors in the area products/Services

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Porter’s Five Forces Model

The Porter’s Five Forces Model is an industrial analysis tool that was developed by Michael E.
Porter to analyse the position of the business in the market environment. This model is based
on the rationale that five forces determine/influence the competitive strength/position of the
business within the market/industry. It is used by businesses around the world to measure
amongst others, profitability/competitive intensity/ competitive environment/competitive
position/attractiveness within the market/industry. Porter’s Five Forces Model enables
businesses to develop suitable strategies to address challenges posed by the business.

Application of Porter’s Five Forces Model by businesses

Bargaining • Suppliers that deliver high quality products may have power over the
power of business.
suppliers/ • The more powerful the suppliers, the less control the business has over
Power of them.
suppliers • Assess/Evaluate the power of the suppliers in influencing prices.
• Suppliers have a high degree of power when they sell a unique/scarce
good/service.
• Identify the kind of power suppliers have regarding the quality of
products/services/reliability/ efficiency/ability to make prompt deliveries,
and so on.
Bargaining • A few powerful buyers are often able to dictate their terms/prices to the
power of business.
buyers/ • Assess how easy it is for buyers/customers to drive prices
Power down/decrease prices.
of buyers • Determine the number of buyers/the importance of each buyer to the
business and the cost of switching to other products.
• Buyers buying in bulk can bargain/negotiate for prices in their favour.
• Conduct market research to gather more information about its
buyers/customers.
Threat/ • If the barriers to enter the market are low, then it is easy for new
Barriers of businesses to enter the market/industry.
new entrants • Assess/identify and sustain/enhance the barriers to enter the market,
to the market which may prevent new business from entering the market/industry.
• If the business is highly profitable, it will attract potential competitors that
want to benefit from high profits.
• New businesses can quickly/easily enter the market if it takes little
time/money/resources to enter the market.
• If there are a few suppliers of a product/service but many buyers, it may
be easy to enter the market.

46
Competitive • Competitors selling the same/similar products/services may have a
rivalry/ greater impact on the market of the business.
Power of • If competitors have a unique/scarce product/service, then they will have
competitors greater power.
• A business with many competitors in the same market has very little
power in its market/industry.
• Compile/Draw up a competitor’s profile so that they can determine
their own strength and that of their competitors.
• Some businesses have the necessary resources/capital to start price
wars and continue selling at a loss until some/all competitors leave the
market.
The threat of • Establish/Determine whether the sellers of substitute products have
substitution/ improved/enhanced their product/sell lower quality goods at lower prices.
substitutes • If the business’s product can be easily substituted, it weakens/reduces
the power of the business in the market.
• If the business sells unique/scarce products it will not be
threatened/influenced by substitute products.
• Assess if customers are using substitute products/services and
determine reasons for using substitutes.
• Change/improve the design/quality/efficiency of their products/services
to remain competitive.

47
PESTLE analysis

PESTLE analysis is an industrial analysis tool/environmental scanning technique that is used to

identify and evaluate the factors that pose challenges in the external environment (macro
environment). This tool enables businesses to identify challenges posed by the external
environment and develop ways to deal with these challenges. Businesses that apply PESTLE
analysis can respond quickly to challenges posed by the external environment. The correct
application of the PESTLE analysis factors ensures that the business remains
competitive/sustainable/profitable in the market.

Examples of PESTLE factors

The following table shows examples of each PESTLE factor. The illustration is provided as
enrichment to enhance your understanding/interpretation of PESTLE Analysis. Below is a short
reminder on the PESTLE factors that you learned in Grade 10.

PESTLE factor Description Examples

These factors determine the extent to • Political stability/instability
which the state/government may influence • Foreign trade policy
Political the economy/certain industry. • National Competition
policy
These factors are determinants of the • Economic
performance of the economy that impacts growth/economic stability
Economic directly on the business. • Exchange rates
• Inflation rates (prime rate
and repo rate)
These factors depict/portray/assess the • Demographics of
state of the social environment of the consumers
Social business that may influence its operations. • Income/wealth distribution
• Education level/literacy
level
These factors pertain to everchanging/ • Level of technological
innovative/updated technology that may innovation
Technological affect the operations of the business and • Access to new technology
the market favourably/unfavourably. • Internet/communication
infrastructure
These factors reflect/indicate the various • Labour/employment laws
laws/Acts/policies that affect the • Copyright/patent laws
Legal operations of the business. • Privacy and data
protection laws
These factors indicate/highlight the various • Climate/climate
ecological/environmental aspects that may change/global warming
Environmental influence the operations of the • Carbon footprint reduction
business. • Environmental
sustainability/

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Challenges posed by PESTLE factors and recommendations

PESTLE FACTOR: POLITICAL

CHALLENGES RECOMMENDATIONS
• Some government policies may affect • Research/apply recent government
businesses. policies.
• Consumer rights organisations may • Network/lobby with the NGOs/CBOs and
prevent businesses from selling products all consumer rights organisations.
if they do not meet certain requirements.
• Trade agreements may prevent • Trade only with countries that have
businesses from importing some favourable trade agreements with the
medicine/products. government.
• The National Competition Policy of South • Investigate/adhere to/comply with the
Africa may influence the operations of a National Competition Policy.
business.

PESTLE FACTOR: ECONOMIC

CHALLENGES RECOMMENDATIONS
• High inflation/interest rates may • Consider decreasing profit margins rather
negatively impact business/decrease the than increasing product prices.
market share of business as customers
cannot afford high prices/increases in
taxes lowers consumer spending.
• Loans may be expensive because of high • Borrow money from financial institutions
interest rates. when interest rates are favourable.
• Fluctuations in foreign currency may • Consider exchange rates when trading
restrict imports. with other countries./Trade with countries
with a favourable exchange rate.
• Decreases in foreign direct investment by • Provide shares at competitive/lower prices
important foreign investors. to attract more foreign direct investment.

PESTLE FACTOR: SOCIAL

CHALLENGES RECOMMENDATIONS
• Customers may not be able to afford • Sell substitute products at lower prices
products because of low income due to low levels of income distribution /
levels/retrenchment/ unemployment. Employ people from the local community.
• Businesses may not be conversant with • Learn local/indigenous languages/hire
the local/indigenous language of their employees who are well conversant with
customers. the local/indigenous language of
customers.
• High crime rates may affect the trading • Work together with community police
hours of businesses resulting in forums and improve security in the
decreased profit. business.
• Some businesses may lose sales as • Develop/produce/incorporate/innovate
customers may prefer to spend their new products that aim to address the
money on medical bills/expenses. lifestyle attitudes/trends of customers.
•

49
 PESTLE FACTOR: TECHNOLOGICAL
CHALLENGES RECOMMENDATIONS
• May not keep up with/be aware/stay • Conduct continuous research on the latest
abreast of the latest technology. available technology/equipment in the
market.
• Employees may not be skilled to • Train existing/appoint new employees to
operate/maintain new technology/ maintain/use new equipment/technology.
equipment.
• Businesses may not be able to afford new • Compare prices/Select suitable suppliers
technology. for new equipment/machinery/technology
at reasonable prices.
• May not be able to cater for/afford/have • Businesses must be geared for online
access to online transactions/ecommerce. trading/e-commerce.

PESTLE FACTOR: LEGAL

CHALLENGES RECOMMENDATIONS
• Consider the implication of the various • Comply with all relevant legislation that
Acts that may have a direct may impact businesses.
impact/influence on a business, for
example, the CPA/BCEA.
• Legal requirements for operating certain • Comply with the legal requirements for
types of businesses are time consuming. operating businesses, for example,
licence/trademark registration/patents.
• High legal costs involved in obtaining a • Budget for high legal establishment/start-
licence/trademark/patent/copyright may up costs.
prevent some establishments.
• Legalities of business contracts may limit • Businesses must know/understand the
business operations. legalities of business contracts so that
they comply with all the requirements.

PESTLE FACTOR: ENVIRONMENTAL

CHALLENGES RECOMMENDATIONS
• Chemicals/Ingredients in business’ • Chemicals/Ingredients should be
products may be harmful to consumers. indicated on labels/packaging to inform
customers about possible side
effects/correct use of products/disclose
the ingredients/origin of the product to
consumers.
• Measures to dispose of business waste • Implement cost-effective measures to
may be expensive. dispose of medical waste.
• Packaging of some products may not be • Implement recycling measures to prevent
environmentally friendly/may not be pollution of the environment/Use
recyclable. packaging that is reusable/recyclable/bio-
degradable.
• The business may not be aware that its • Engage in environmentally sustainable
current practices are environmentally practices such as the
unsustainable/contribute towards conservation/preservation of natural
environmental degradation. resources.

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BUSINESS STRATEGIES

Now that the business has identified the various challenges from conducting environmental
scanning using the THREE industrial analysis tools, they will now be in a better position to
develop and implement the various types of business strategies.

Business strategies serve as a guideline on how businesses should remain sustainable in a

particular market. The correct application of any type of business strategy depends on the
challenges that were identified during the strategic management process.

The diagram below illustrates the FOUR main types of business strategies that will be dealt with
in this unit.

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INTEGRATION STRATEGIES

A business uses integration strategies to expand/extend its scope of business operations. It

occurs when a business integrates its activities with another business/other businesses.
Integration strategies allow a business to improve its supply/distribution channel/reduce
operating costs/control competition. It can be used by a business to combine resources
effectively/access new markets/obtain control over suppliers/distributors.

TYPES OF INTEGRATION STRATEGIES

• The business combines/merges with/takes over its distributors down the supply
Forward vertical

chain/production chain.
integration

• It involves the expansion of business activities to gain control over the distribution
of products/services.
• The business takes over the distribution system and sells products/services
directly to consumers/customers.
• The business merges with businesses that were once their customers, while still
maintaining control of the initial/primary business activities.
Backward vertical

• The business combines with/merges/takes over its suppliers up the supply

chain/production chain.
integration

• This is done to decrease the business’s dependency on suppliers.

• The business expands its role to fulfil activities/tasks that were formerly/previously
completed by suppliers.
• It involves buying over/merging with another business that supplies
products/services to the business.

• The business takes control of/incorporates/merges with other businesses in the

same/related industry that produce/sell the same/similar products.
integration
Horizontal

• The aim is to reduce the threat of competition/substitute products/services.

• The business can strengthen/expand its market share/position and enhance
production/distribution.
• It is the acquisition/takeover of a related business that operates at the same level
of the supply chain in the industry.

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INTENSIVE STRATEGIES

Successful businesses always find ways to increase sales and establish new outlets. Intensive
strategies require businesses to make additional efforts to improve the performance of existing
products in the market. Businesses usually conduct extensive sales promotion and marketing
campaigns when applying various types of intensive strategies. They use these strategies to
expand their product lines/scale of operations/market share.

TYPES OF INTENSIVE STRATEGIES

• The business focuses on selling existing/current products into the existing/current

market to increase their market share.
penetration

• Market research on existing/current consumers/customers is used to determine

Market

how to improve the marketing mix of the business.

• Aggressive marketing campaigns such as lowering/reducing prices to attract
potential/existing clients are used by the business.
• The business does not modify existing/current products or launch new products
during market penetration.
• The business uses this growth strategy to sell its existing/current products in new
markets/geographical areas.
development

• Consumers/customers are targeted in a potential market that is outside of its

Market

normal/regular/current target market.

• The business increases sales of existing/current products through the
development of new markets.
• Prices are restructured/reviewed to cater to customers/consumers of all income
levels.
• The business uses this growth strategy to introduce new products into
development

existing/current markets.
Product

• New ideas/products are generated/ produced by the business for existing/current

markets.
• The business conducts test marketing/market research to establish whether new
products will be accepted by existing customers.
• New products may be different/of a higher quality than those of competitors.

Differences between market development and product development

Market development Product development

• It is a growth strategy where a business • It is a growth strategy where a business
aims to sell its existing/current products in aims to introduce new products into
new markets. existing/current markets.
• The business implements the idea of • The business improves/enhances the
expanding/selling products in other product line by adding different types of
geographical areas. related products/services.
• The business finds new ways of • The business conducts test marketing/
distributing products. market research to establish whether new
products will be accepted by existing
customers.
• Prices are restructured/reviewed to cater • New products may be different/of a higher
to customers/consumers of all income quality than those of competitors.
levels.

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Advantages of intensive strategies

The business may experience a(n)/can:

• Increased/enhanced/improved market share as intensive strategies reduces the business’s
vulnerability to the actions of competitors.
• Increase in sales/revenue/income/profitability because of aggressive advertising campaigns/
because more products/services are being sold.
• Improve service delivery which may improve business image/brand/brand awareness.
• Increase the control over the prices charged for products/services.
• Increase customer loyalty through effective promotion campaigns.
• Decrease prices that may influence customers/consumers to buy more products/services.
• Increase in regular sales from existing customers/consumers that may increase.
• Remove existing competitors and dominate market prices.
• Improve the focus on markets/well-researched quality products that satisfy the needs of
customers/consumers.

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DIVERSIFICATION STRATEGIES

Diversification strategies are used by businesses to expand operations into markets/

industries that it has not currently explored. It enables the business to expand its market
share/enter new markets to explore new sales avenues/achieve greater profitability. It affords
the business extensive opportunities to improve its brand identity/boost brand image.

Diversification strategies are used as a purposeful mechanism to potentially minimise/reduce

current market/industry downturn/protect the business from strong competitors.

TYPES OF DIVERSIFICATION STRATEGIES

• The business adds new products/services that are related to existing/current
products/services but will appeal to new customers/consumers.
diversification

• Occurs when a business wants to increase/expand/progress its product range and

Concentric

markets.
• The business creates a new product that is technologically similar to
existing/current products that are aimed at new customers/consumers/markets.
• Occurs when a business uses existing infrastructure/organisational
resources/expertise to create products with some degree of similarity but with
clear differentiation from existing/current products.
• The business adds new products/services that are unrelated to existing/current
products, but which may appeal to existing/current customers/consumers.
diversification

• Occurs when a business acquires/merges with a business that is at the same

Horizontal

production stage, but it may offer a different product.

• The business extends the production of products/services above/beyond the
market/industry in which it currently operates.
• Occurs when the business increases its development potential/extends its brand
and significantly reduces risk as the new products are aimed at existing
customers/consumers.
• The business adds new products/services that are unrelated to existing products
diversification
Conglomerate

which may appeal to new groups of customers.

• Occurs when the business operates multiple product lines/business entities for
entirely different industries/consumers/customers.
• The business grows into new products/services and markets.
• Occurs when the business can increase overall product/service
flexibility/proficiency by extending activities to unexplored/untapped/unfamiliar
markets.

Advantages of diversification strategies

The business may experience a(n)/can:

• Increase in sales/revenue/income and business growth.
• Sustained profitability from different product lines during times of fluctuating economic
activity.
• Increase in the number of products being sold to existing/new customers/consumers.
• Establish additional new markets in unrelated markets/industries.
• Gain more technological capabilities through product modification.
• Improve brand/image/brand awareness of the business.
• Reduce the risk of relying only on one product for sales/revenue/income.
• Retain its competitive advantage by meeting the needs of current/new customers/expanding
into new unexplored markets.
• Remain relevant/functional/operational in the context of ever-changing business
environments.

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DEFENSIVE STRATEGIES

The business applies defensive strategies when experiencing financial instability/difficulty due
to unstable economic conditions. The business may be required to make difficult decisions that
affect its future/growth/ survival. Defensive strategies are used to avoid/prevent the business
from closing down. It is also used by the business to protect itself from suffering a potential loss
of sales/income/market share.

TYPES OF DEFENSIVE STRATEGIES

• The business disposes/sells some assets/divisions that are no longer

Divestiture/
Divestment

profitable/productive/ functional/relevant.
• Selling off divisions/product lines with slow growth potential/Paying off debts by
selling unproductive assets.
• The business decreases the number of shareholders by selling ownership.
• Shareholders withdraw their investment share in another business (divesting).

• The business terminates the employment contracts of employees for

Retrenchment

operational/structural/restructuring reasons.
• Decreasing the number of product lines/Closing certain departments resulting in
some workers becoming redundant/obsolete.
• This is an aggressive strategy where management takes bold decisions by letting
go of employees to reduce operational costs/expenses.
• Through retrenchment, the business can reduce prices/offer discounts/incentives
for customers/consumers.
• The business sells all assets to pay creditors due to a lack of capital/the inability to
repay creditors/bankruptcy.
Liquidation

• Selling the entire business to pay shareholders a fair price for their shares upon
the closure of the business.
• The process of liquidation allows creditors to apply for forced liquidation to have
their claims settled.
• It is an unpleasant process of bringing business activities to an end/last resort to
repay creditors.

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Strategy evaluation

The business must continuously evaluate strategies to change/adapt them according to the
current demands of the market/industry. Strategy evaluation enables a business to keep/remain
abreast with changes in the business environment. It allows a business to evaluate/assess
whether the intended strategy is serving its purpose.

Steps in strategy evaluation

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TOPIC 5 ACTIVITIES

ACTIVITY 1

1.1 Read the scenario below and answer the questions that follow.
JONAS DOUGHNUTS (JD)
Jonas Doughnuts applied Porter’s Five Forces Model to analyse their position in the market.
JD formulated alternative strategies in response to their business challenges. JD ensured that
the business finance is well managed.

1.1.1 Quote TWO ways in which JD applied the strategic management

process from the scenario above. (2)

1.1.2 Describe other ways in which JD can apply the strategic

management process. (8)

ACTIVITY 2

2.1 Read the scenario below and answer the questions that follow.
UNATHI NONO ENTERPRISES (UNE)
The marketing department of Unathi Nono Enterprises is knowledgeable on current market
trends. There is a new upmarket residential area situated close to UNE. Employees however,
have a poor work ethic. Inefficient suppliers fail to deliver inputs timeously. Competitors are
unable to adapt to consumer demand. During load shedding, UNE suspends operations
because of high crime rates. Organisational resources are used inadequately. The business is
strategically situated.

2.1.1 Compile a SWOT analysis for UNE from the scenario above.

Use the table below as a GUIDE to answer QUESTION 2.1.1.

STRENGTHS WEAKNESSES
1. 1.
2. 2.
OPPORTUNITIES THREATS
1. 1.
2. 2. (8)

ACTIVITY 3

3.1 Read the scenario below and answer the questions that follow.
PROTECH DRONERS (PD)
Protech Droners is unable to provide droning services due to high start-up costs and
complicated licencing procedures. Customers have already prepaid PD for these services.

3.1.1 Identify the element of Porter’s Five Forces model that affects PD.
Motivate your answer by quoting from the scenario above. (3)

3.1.2 Explain how PD can apply any other THREE forces/elements of

Porter’s Five Forces model that can be used to analyse their
position in the market. (9)

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ACTIVITY 4

4.1 Read the scenario below and answer the questions that follow.
AGATHA INDUSTRIAL SUPPLIERS (AIS)
Agatha Industrial Suppliers is not operating profitably due to the following challenges:
• Enterprise and Supplier Development (ESD) as one of the pillars of BBBEE limits the
operations of AIS.
• Measures to dispose of business waste is expensive.
• The high inflation rate has meant that demand for products have declined.
• Some of their employees lack the skills to use new technology.
• Imports for main raw materials have been paused because of trade agreements.
• AIS is not conversant with the local language of consumers.

Use the table below as a GUIDE to answer QUESTION 4.1.1 – 4.1.3.

CHALLENGES PESTLE FACTORS RECOMMENDATIONS
(4.1.1) (4.1.2) (4.1.3)
1.
2.
3.
4.
5.
6.

4.1.1 Quote SIX challenges for AIS from the scenario above. (6)

4.1.2 Classify EACH challenge identified in QUESTION 4.1.1 according

to a relevant PESTLE factor. (6)

4.1.3 Recommend ways in which AIS can deal with the challenges
posed by EACH PESTLE factor, identified in QUESTION 4.1.2. (12)

ACTIVITY 5

5.1 Read the scenario below and answer the questions that follow.
NDOU GARDEN SERVICES (NGS)
Ndou Garden Services wants to gain a competitive advantage in the market. NGS decided to
take over Pristine Gardening to reduce the threat of competition.

5.1.1 Identify the type of integration strategy applied by NGS. Motivate

your answer by quoting from the scenario above. (3)

5.1.2 Discuss TWO other integration strategies that could be applied by

NGS. (6)

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ACTIVITY 6

6.1 Read the scenario below and answer the questions that follow.
DURBAN FRIED CHICKEN (DFC)
Durban Fried Chicken has lowered the prices of their products to increase the market share.
The success of the business has led to DFC opening a new branch in Mpumalanga.

6.1.1 Identify TWO types of intensive strategies applied by DFC.

Motivate your answer by quoting from the scenario above.

Use the table below as a GUIDE to answer QUESTION 6.1.1.

INTENSIVE STRATEGIES MOTIVATIONS
1.
2. (6)

6.1.2 Explain the other intensive strategy that could be applied by DFC. (3)

6.1.3 Advise the management of DFC on the advantages of intensive

strategies. (6)

ACTIVITY 7

7.1 Read the scenario below and answer the questions that follow.
BOKANG DESIGNERS (BD)
Bokang Designers specialises in selling clothing for teenagers. BD decided to add a new
clothing line for toddlers to attract new customers.

7.1.1 Identify the type of diversification strategy applied by BD. Motivate

your answer by quoting from the scenario above. (3)

7.1.2 Explain TWO other types of diversification strategies that could be

applied by BD. (3)

7.1.3 Discuss the advantages of diversification strategies. (6)

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ACTIVITY 8

8.1 Read the scenario below and answer the questions that follow.
NEWMAN PHOTOGRAPHY (NP)
Newman Photography applied for a loan to cover operational costs. The employment
contracts of certain employees were terminated due to a decrease in the number of product
lines. Some of NP’s assets that were no longer functional were sold. NP finally decided to sell
their assets to repay creditors.

8.1.1 Identify THREE types of defensive strategies applied by NP.

Motivate your answer by quoting from the scenario above. (3)

Use the table below as a GUIDE to answer QUESTION 8.1.1.

DEFENSIVE STRATEGIES MOTIVATIONS
1.
2.
3. (9)

ACTIVITY 9

9.1 Read the scenario below and answer the questions that follow.
KATHRADA PROPERTY DEVELOPERS (KPD)
Kathrada Property Developers implemented different types of business strategies that need to
be evaluated. KPD assessed the underlying basis of the business strategy. They also took
corrective action so that deviations from the standards may be corrected. Specific dates were
set by KPD for control and follow up.

9.1.1 Quote THREE steps in strategy evaluation applied by KPD. (3)

9.1.2 Explain other steps in strategy evaluation that could be applied by

KPD. (6)

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 TOPIC 6
BUSINESS SECTORS AND
THEIR ENVIRONMENTS
Learning objectives

At the end of this topic, learners should be able to:

• Name three types of business sectors: primary, secondary and tertiary
• Identify/name a business sector from given scenarios/statements
• Identify business challenges from given scenarios/case studies and classify them according
to the three business environments
• State the extent to which a business (operating in any of the three sectors) can control the
three business environments from given scenarios and case studies.

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INTRODUCTION

In Grade 10 you were introduced to the concepts of Business environments and the components
of EACH environment. In addition, different business sectors were discussed in detail.

The focus in Grade 11 was on the link/relationship between the primary, secondary and tertiary
sector, including challenges emanating from the THREE business environments.

The focus areas in Grade 12 will be on the identification of business sectors, and the
identification and classification of business challenges. The extent to which businesses can
control the THREE business environments will also be discussed.

BUSINESS SECTORS

Businesses are divided according to three different sectors. These sectors are based on the
nature of the business/type of product/service offered by businesses.

The three business sectors form a chain of production from the source/origin of the product until
it reaches consumers/customers. The chain of production is interdependent to make
meaningful/functional goods/services available to consumers/customers. The interaction
between the three sectors makes it possible for various business operations to take place.

Primary sector
• The primary sector focuses on activities related to the extraction/exploitation/cultivation/
harvesting of natural resources/raw materials.
• It is often referred to as extractive/exploitative industries as it involves acquiring natural
resources/raw materials.
• The primary sector is dependent on nature/the natural environment because it utilises/uses
the earth’s natural resources, land, minerals, and vegetation.
• The primary sector plays a critical/essential role in production activities, because with
without it.

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Secondary sector
• The secondary sector focuses on activities related to the production/manufacturing of
products.
• It uses the natural resources/raw materials sourced by the primary sector and adds value to
them.
• The secondary sector is often referred to as manufacturing industries because valuable
products are created/manufactured/produced so that these products can serve a meaningful
function/purpose to customers/consumers.
• It transforms/converts/processes natural resources/raw materials into meaningful
products/semi-finished products.
• The secondary sector plays an important/critical role because not all resources in their
natural state are functional/useful and require further processing.

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Tertiary sector
• The tertiary sector focuses on activities related to providing final products and services to
consumers/customers.
• It is often referred to as the services sector because a variety/diverse range of commercial
services are provided to consumers/customers.
• The tertiary sector involves all activities aimed at making the distribution of products/services
possible.
• It plays a unique/different role because it allows natural resources/raw materials that were
collected and transformed available to consumers/customers.
• Businesses in the primary/secondary sectors rely on the tertiary sector to make their
products/services available to consumers/customers in a convenient/effective/efficient
manner.

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BUSINESS ENVIRONMENTS

The three business environments are dynamic/multifaceted/interdependent as they consist of

many interrelated features and are characterised by constant change. Changes within the
business environment affect businesses differently.

Businesses strive to address the unpredictability within the three business environments in
order to remain profitable/relevant. Businesses must be aware of various challenges that may
emanate from the three business environments and the extent of control they have over these
environments.

BUSINESS EXTENT OF
DESCRIPTION
ENVIRONMENT CONTROL
Micro • The micro environment refers to the business Full/complete
environment itself, which is characterised by all the control
processes/functions/factors within the business.
• The micro environment refers to the internal
environment in which the business operates.
• The micro environment refers to all the internal
aspects of a business/refers to all
resources/functions managed by the business.
Market • The market environment refers to the immediate Limited control but
environment external environment. can influence
• The market environment refers to
components/elements/factors immediately outside
the business.
• The business often regularly interacts with these
immediate external components/elements/factors.
Macro • The macro environment refers to the external No control
environment environment that is directly outside the market
environment.
• The macro environment refers to the
uncontrollable factors/forces outside the business.
• The external components/elements/factors of the
macro environment affect the operations/
profitability of the business.

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Challenges in the business environments

BUSINESS
COMMON CHALLENGES
ENVIRONMENTS
Micro environment • Difficult/Unmotivated employees
• Lack of adequate management skills
• Lack of vision/mission
• Strikes/go-slows
• Outdated goals/objectives
• Lack of human resource capacity
• Various business functions working/operating inefficiently
• Poor working conditions
Market environment • Competition
• Supply shortages
• Changes in consumer behaviour
• Demographics/Psychographics
• Socio-cultural factors
Macro environment • Changes in income levels
• Political changes
• Contemporary legislation
• Labour restrictions
• Globalisation/international changes
• Socio-economic issues
• Technological advances

Business
Components Examples of possible challenges
environment
Mission and • A lack of mission/vision exists within the business.
vision • The mission/vision of the business is irrelevant/outdated.
Goals and • The business does not achieve its objectives because of
objectives a lack of planning.
• The objectives of the business are unrealistic and
unattainable.
Organisational • The organisational resources (financial resources/
resources human resources, physical resources/other resources)
are not being used optimally.
• There are limited resources available to achieve
productivity/goals.
Micro Organisational • Internal control mechanisms are not in place to improve
environment processes organisational processes.
• Organisational processes have not been improved.
Organisational • Sound organisational culture is absent.
culture • There is a lack of integrity/ethical/professional business
practices.
Business • The incorrect application of sound/efficient business
functions practices within the general management/marketing/
finance/public relations/purchasing/production/
administration/human resources business function.
• Poor strategic direction within the general management/
marketing/finance/public relations/purchasing/
production/administration/human resources function.

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 Customers • Changes in the demand of customers.
• Customers buying cheaper alternatives.
Suppliers • Suppliers increasing the prices of inputs.
• Shortage of supply of critical/important inputs.
Competitors • Competitors reducing the prices of their
products/services thus creating price wars.
• Market share of competitors is increasing.
Intermediaries • Intermediaries increasing the prices of their
Market products/services.
environment • Intermediaries are unavailable to provide the required
services to the business.
Civil society • Civil society placing demands on the business to change
certain business practices.
• Civil society may disrupt how business activities may be
conducted.
Trade unions • May place unreasonable pressure on the business to
increase wages/salaries/employee benefits.
• Trade unions may disrupt business activities.
Political • The government increases the corporate tax rate for
businesses.
• High levels of political instability/corruption/bureaucracy
within a country.
Economic • A decrease in the availability of credit in the country.
• The decline in foreign direct investment/economic
growth.
Social • A decline in the income/wealth of consumers because of
increases in the unemployment rate.
• An increase in the immigration rates of skilled South
Africans to foreign countries.
Macro
Technological • New/updated/innovative technology becomes
environment unaffordable for businesses.
• Businesses do not mechanise/improve the production
process with new/updated/innovative technology.
Legal • Current and new legislation/Acts that affect the
operations/processes of businesses.
• Time-consuming/increased costs associated with the
compliance of the various legislation/Acts.
Environmental • Environmental
sustainability/preservation/conservation/climate
change/sustainable energy use places businesses under
pressure to change/transform their current practices.
• Environmental degradation/Unsustainable business
practices cause a reduction in the availability of natural
resources.

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Identifying challenges and the extent of control within the business environments

The illustration/explanation below is based on Naledi Solar Distributors. It aims to enhance your
understanding of the challenges and extent of control the business has on the three business
environments.

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TOPIC 6 ACTIVITIES

ACTIVITY 1

1.1 Read the scenario below and answer the questions that follow.
NALEDI SOLAR DISTRIBUTORS (NSD)
The government has increased the corporate tax rate payable by Naledi Solar Distributors.
The management of NSD indicated that they might not be able to pay tax because of financial
constraints. Customers have decided to buy affordable solar products from another cheap
rival.

Use the table below as a GUIDE to answer QUESTIONS 1.1.1 – 1.1.3.

BUSINESS
CHALLENGES EXTENT OF
ENVIRONMENTS
(1.1.1) CONTROL (1.1.3)
(1.1.2)
1.
2.
3.

1.1.1 Quote THREE challenges for ND from the scenario above. (3)

1.1.2 Classify ND’s challenges according to the THREE business

environments. (3)

1.1.3 State the extent of control ND has over EACH business

environment named in QUESTION 1.1.2. (3)

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