Business

• Three economic sectors

  • Extraction of raw materials (primary sector)
  • Manufacturing process (secondary sector)
  • Product/service ready for resale (tertiary sector)
• The contribution from the tertiary sector has remained more or less constant, but the biggest movement took place in the primary sector
• The primary sector is linked to agriculture (impact of weather) and mining (impact of the price of minerals)
• The trend in the secondary sector is concerning, as this is an important sector for job creation in South Africa
• The South African economy is estimated to contract by close to 7% in 2020
• Primary sector

  Extraction of raw materials
• Secondary sector

  Production process
• Tertiary sector

  Products/services that are ready for consumption by the final user
• Different types of natural resources in South Africa's primary sector

  • Coal
  • Gold
  • Diamonds
  • Iron deposits
  • Platinum
  • Fish (snoek, sardines, hake)
  • Fresh water
• South Africa has a relatively favourable climate with fertile soil, but experiences a scarcity of water which is a limiting factor for agriculture
• Examples of crops cultivated in South Africa

  • Mealies
  • Sugar
  • Oranges
  • Wheat
  • Grapes
  • Sunflowers
  • Tobacco
• There are not too many natural forests in South Africa, but there are many plantations of oak, blue gum and other tree types
• People are realising the importance of protecting the environment due to factors like growing communities, urbanisation and technological improvement
• What can we do to protect the environment?

  • Plant new trees when existing ones are chopped down
  • Prevent overgrazing and allow land to 'rest'
  • Build dams and utilize other water conservation methods
  • Avoid wasting or polluting water
  • Use biodegradable materials and recycle
  • Develop cost-effective renewable energy resources
• The primary sector requires a lot of manual labour, but more tasks are being performed with the help of machines
• Managers in the primary sector are highly skilled with a high level of formal education
• Examples of activities in the secondary sector

  • Construction
  • Manufacturing of food
  • Car manufacturing
  • Clothing manufacturing
  • Furniture making
  • Engineering
  • Chemical plants
  • Electricity generation
• The secondary sector still plays a vital role in South Africa when it comes to job creation, even as businesses become more automated
• Sasol is one of South Africa's giants in the chemical industry, producing oil from coal and various by-products
• Sasol reported an annual loss in 2020 due to a drop in oil and chemical prices and the impact of the COVID-19 pandemic
• The secondary sector's existence depends on the availability of certain natural resources, so it is in their interest to protect those resources
• The tertiary sector includes the sale of all goods and services, both to other businesses and to consumers
• Examples of businesses in the tertiary sector

  • Wholesalers (Makro, Cash & Carry)
  • Retailers (Pick n Pay, Edgars, Mr Price, etc.)
  • Service providers (hairdressers, doctors, banks, insurance, transport, etc.)
• The tertiary sector contributes the most to South Africa's economy and generates the most growth
• The tertiary sector has an indirect impact on natural resources through the products it sells from the secondary sector
• Skills required in the tertiary sector

  • Creative thinking and problem-solving
  • Computer literacy and technological skills
  • Teamwork, cultural diversity, emotional intelligence
• Economic growth

  The country's actual GDP (Gross Domestic Product) grows from one year to the next
• Economic development

  Economic growth alone does not automatically mean the people of the country have a higher standard of living
• Businesses cannot afford to miss out on opportunities to improve their skills
• GDP (Gross Domestic Product)

  The total amount of final products and services that are produced within the country's borders, in a period of a year
• Real GDP

  Takes into account the impact of inflation on the prices of goods and services, to see their true value
• Economic growth does not automatically mean economic development - the rich get richer while the poor's living standards remain unaltered or worsen
• Economic development

  The average GDP improves (higher GDP per capita) and the majority of people in the country experience a higher standard of living
• Strategies to increase real GDP per capita

  1. Better use of the labour force by equipping people with additional skills

  2. Addressing issues that prevent certain groups from making a productive contribution to the GDP

  3. Preserving and sustainably using natural resources

  4. Encouraging capital formation through savings and foreign investment

  5. Balancing the use of technology to avoid structural unemployment
• Partnerships between the private and public sectors (PPPs) are used to facilitate economic growth and development
• Examples of organisations that support economic growth and development

  • IDC (Industrial Development Corporation)
  • SBDC (Small Business Development Corporation)
  • DBSA (Development Bank of Southern Africa)
• Private sector

  Consists of all businesses that are privately owned, regardless of formal or informal
• Formal sector

  Tax-paying businesses which the government is aware of, and their output is included in GDP calculations
• Informal sector

  Economic activities that are not included in the GDP, often due to lack of skills, education and employment opportunities
• Importance (advantages) of the informal sector

  • Helps people create work for themselves to survive
  • Develops entrepreneurial skills and self-confidence
  • Low capital requirements to start a business
  • Keeps prices low by competing with formal sector
  • Some informal businesses eventually become formal and pay tax
  • Creates jobs and decreases unemployment