Term 3

How can the SA economy grow?

Module 9 SA growth and dev policies

Terminology
• Economic growth: When • Economic development:
the economy produces a Improvement in standard
greater value of output of of living and more access
g+s. to g+s, making life easier.
• GDP
 Factors promoting eco
growth Factors promoting eco dev

• Greater quality and quantity • State welfare grants

of resources • Reduced unemployment
• Skilled workforce rate
• Efficient infrastructure • Improved edu + skills
• Greater Tech training
• Invest in businesses • Improved public services
• Entrepreneurship
• Corruption free government
 Ways
to improve economic Gr
owth & Development
 Eco Growth
& Dev

Demand Supply side

side policy policy

Decrease
Market
Monetary Fiscal Inputs (F.) production Fiscal
efficiency
cost

Open
Interest Rat Cash Moral Suasi Exchange
market
e changes Reserv req. on control
transct.
Monetary policy
• Interest rate- repo and prime
• Cash reserve req
• Open
market transactions (bonds)
• Moral suasion
• Exchange rate
Interest rate Interest rate Decrease
= Increase in Consumer spending and I

Increase in Interest rate = increases the

value of the Rand = Stronger Rand
decrease the price of imported goods.

Repo
rate
8.25%

Prime rat
e
11.75%
 Cash Reserve Requirements
Increase
in CRR=?

Decrease
in CRR=?
AD
2

AD
AD1
 Open Market Transactions

• Aka Money creation

• Government sells G bonds
= less money available
• Government buys back G bonds
= more money available
Moral Suasion
Exchange Control
• Prevent capital assets (foreign currency) being
transferred to other nations
 Fiscal Policy

• Taxes
-Increase taxes on the • Government spending
wealthy, (capital gains
tax, estate duty) • Infrastructure,
clinics, sanitation
-Progressive tax system- the
more you earn the more you pay. -Social welfare grants
• Government spending • Housing subsidies
- infrastructure-ports, roads • Skills training SETA
-public goods and services (Edu) • Public goods and
Employee subsidies
Services (Edu+ Healthcare)
 Supply
Side policies
1) Greater quality and quantity of
inputs/resources/F.O.P's
Making more nat resources available
(Saldanha)
Increasing entrep.
More and better skilled labour
Better tech
2) Decrease production cost
Subsidies on production
Decrease in tax
3) Effective and productive markets
Remove redtape
Privatize inefficient SOE
Remove barriers/regulations to entry
and exit
 Approaches/ policies implemented by
the SA Gov for economic growth and development

RDP BEE
NSD
1994 2003 JIPSA SBDPP
S
2006 2014
2005

GEA EPWP AsgiS NGP NDP

R 2004 A 2010 2012
1996 2005
Growth and Development policies
Name: RDP
Reconstruction and Development
Programme
Year: 1994
Aim: Reduce poverty
Distribution of Wealth
More Growth
Provide for basic needs
Improve quality of Edu
Name: GEAR
Growth Employment and
Redistribution Programme
Year: 1996
Aim: Increase Eco growth
Reduce spending by state
Reduce international debt
Encourage FDI
Reduce redtape/ beurocracy
Promote privatization
Name: ASGISA
Accelerated and
Shared Growth Initiative
for South Africa
Year: 2006
Aim: Reducing poverty
Increasing growth to 6%
Increasing
state investment in infrastructure
Greater role of the state in eco
development
Name: BEE
Black Economic Empowerment

Year: 2003
Aim: Redress
economic inequalities caused by
apartheid
Name: ASGISA
EPWP
Expanded Public
Accelerated and Works
Shared Growth Initiative
Programme
for South Africa
Year: 2004
2006
Aim: Reducing poverty
To
Increasing
create employment
growth toopportunities,
6%
Increasing under the poor
specfically
stateunskilled
and investment
labour
in infrastructure
force
Greater role of the state in eco
development
North & South divide
North South

15% of world population 85% of world population

Low eco growth (3%), High eco High eco growth, low eco
development development

Life expectancy 70-80 years Life expectancy 40-50 years

Literacy rate 95% Literacy rate <50%

Produces 78% of world income 22% of world income

 SA Industrial
and Development Policies South African Special
Economic Zones (SEZ)
Prioritize Gas,
Renewable Energy to
• SEZ (IDZ) Drive Efficiency
• SDI • Closer to ports
• Spatial • Business find it attractive to invest
Development Initiative • Exports will increase
• Utilization of inherent • Less bureaucracy
eco potential • No company tax for 6 years
"The West Coast SDI, known as the West Coast • High quality transport facilities
Investment Initiative (WCII), falls within the Western • Resources imported tax free
Cape province. It covers the coastal area from Atlantis
just north of Cape Town, to the boundary with the
Northern Cape province. The major towns in the WCII
area are Vredenburg-Saldanha in the south and
Vredendal in the north. The sectoral focus of this SDI is
broad, including a wide range of projects in sectors
SDI
South Africa’s Durban Opens
New Special Economic Zone
Focused on Logistics and
Automotive Sectors

"A new area of the Special

Economic Zone (SEZ)
adjacent to King Shaka
International Airport has
opened in South Africa’s
Durban. The SEZ has already
created over 5,000
permanent jobs and the new
area is expected to generate
an additional 600 jobs over
the next five years."
How can the establishment of more labour-
intensive industries benefit South Africa? (4x2)(8)
• More labour intensive industries will benefit South Africa by:
• providing more jobs
• improving the utilisation of available resources
• transferring a greater variety of knowledge and skills to the
workers
• improving the standard of living of the citizens (economic
development)
• generating more revenue for the state via income tax (Accept
any other correct relevant response) (Allocate a maximum of 2
marks for mere listing of facts / examples)
Discuss special economic zones as part of the
industrial development plan of South Africa. (4x2)
(8)
• Special Economic Zones (SEZ)
• Geographically demarcated area where specific economic activities have been
identified to be developed
• These areas may enjoy incentives such as tax relief and support
• systems to promote industrial development
• It creates a basis for a broader range of industrial parks
• It also provides economic infrastructure to enable the effective clustering of value-
adding and employment-enhancing manufacturers The aims of SEZ's:
• Promote rapid development by acting as a magnet for investment in key growth areas

• Enable the development of new industrial regions through the establishment of new
industrial hubs in under-developed regions and the strengthening of existing one
• SEZ's are used for the purposes such as export promotion, enterprise development,
urban renewal, rural development and domestic or regional production
(Allocate a maximum of 4 marks for mere listing of facts / examples)
Reasons for Industrial
development
• Creating employment
-EPWP high amount of unskilled labour
• Diversyfing the economy
-Primary + Secondery sector
• Increasing exports
- Type of goods
• Attracting FDI
- Capital is exp, require FDI invest in
Secodary sect
• Macroeconomic stability
-Ec.Fe.Pr.Eq
Industrial Development policies
Department of Trade
and Industry Which Institution
promotes Industrial
https://www.thedtic.gov.z
a/ development ?
What are
the Two Industrial
Development Policies
1.1.1 A
1.1.2 A
1.1.3 B
1.1.4 C
1.1.5 C
1.3.1 Globalisation
1.3.2 Land restituition
1.3.3 RDP
1.3.4 Economic development
1. Interest Rate, Cash reserve req, Open
market transactions, Moral Suassion, Exchange rate
2. BBBEE, Land redistribution, Employment Equity Act
3. GEAR, NGP
Industrial Policies vs Strategies

Policies Strategies
- NIPF • IMS
- More participation from -Decreasing prices of inputs
previously disadt -Improving infrast + skills
- Labour intsve indust
- Increase X
• NRDS
- IPAP
- To strengthen indust that have show
potent to improve
 "(AsgiSA) was prepared during 2005 and
launched in February 2006. Its objectives were to
introduce policies, programmes and
ASGISA
interventions..."

Indust Dev policy

NIPF
NIPF
• "The National Industrial Policy Framework (NIPF) has a fundamental role
to play in achieving the Accelerated and Shared Growth Initiative of
South Africa’s (ASGI-SA) goals of accelerating GDP growth to over 6
percent by 2010 and to halving unemployment and poverty by 2014
and the further intensification of industrialisation towards a knowledge
economy beyond 2014."
Objectives:
• To make the economy more diverse so that exports can
increase.
• To make industrialisation more intensive in the long run.
• To promote the development of labour-intensive industries.
• Greater participation by disadvantaged groups and
development of marginalised areas.
• Increase potential for large scale production
IPAP
• "Over the 10-year IPAP period, manufactured exports have grown four-fold,
while imports have doubled. South Africa’s exports of manufactured goods
were dominated by metals, metal products, machinery and equipment,
(including capital equipment and mining machinery and equipment)."
• was designed to increase industrialisation in the manufacturing sector
Industrial Development Strategies
• IMS
• Integrated Manufacturing Strategy
• To developing global competitiveness
• All process that turns N.R. into finished products
• X, tourism, agriculture, IT
• NRDS
• National Research and Development strategy
• To increase economic livelihood of specific areas
• to attract infrastructure and business investments to
neglected and underdeveloped areas.
• Attempts to reduce the centralization of industries