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PREPARATORY EXAMINATION
2023
MARKING GUIDELINES

ECONOMICS PAPER 1 (10731)

22 pages
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SECTION A (COMPULSORY)

QUESTION 1

1.1 MULTPLE-CHOICE QUESTIONS

1.1.1 D – increase in the national income ✓✓

1.1.2 A – lagging ✓✓

1.1.3 C – sell products and buy factors of production ✓✓

1.1.4 B – balance of trade ✓✓

1.1.5 C – sanctions ✓✓

1.1.6 A – Special Economic Zone ✓✓ OR B -Industrial Development Zone✓✓

–
1.1.7 B – Maputo Development Corridor ✓✓

1.1.8 D – terms of trade ✓✓ (8 x 2) (16)

1.2 MATCHING ITEMS

1.2.1 G – economic activities at its lowest ✓

1.2.2 F – total spending on goods and services in the economy ✓

1.2.3 A – the absence of excessive fluctuations in the GDP of a country ✓

1.2.4 D – a world organisation that assists countries with balance of payment

problems ✓

1.2.5 E – key institution in the capital market in South Africa ✓

1.2.6 H – a cause of changes in technology ✓

1.2.7 I – very important infrastructure and technology that cause large

innovative spillover effects ✓

1.2.8 C – improvement in the well-being and quality of life of people ✓ (8 x 1) (8)

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1.3 GIVE THE TERM

1.3.1 Residual item ✓

1.3.2 Extrapolation ✓

1.3.3 Capital transfer account ✓

1.3.4 Import substitution ✓

1.3.5 Capital deepening/capital intensive production ✓

1.3.6 Economic hub (node)/Special Economic Zone/Industrial Development

Zone/Corridor/Cities ✓ (6 x 1) (6)

TOTAL SECTION A: 30

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SECTION B

Answer any TWO of the three questions from this section in the ANSWER
BOOK.

QUESTION 2: MACROECONOMICS

2.1 Answer the following questions.

2.1.1 Name TWO examples of real flows within the four-sector model.

• Goods and services ✓

• Imports of goods and services ✓
• Export of goods and services ✓
• Factors of production ✓
• Public goods and services ✓ (2 x 1) (2)

2.1.2 How does comparative advantage encourage the production of

specialised goods?

• Countries will specialise in goods where they have comparative

advantages, therefore channel all resources and research to
improve the product and enjoy economies of scale. ✓✓
(Accept any other correct relevant response.) (1 x 2) (2)

2.2 DATA RESPONSE

2.2.1 Name ONE fiscal measure to increase economic activity during a

recession.

• Reduce taxes ✓
• Increase government spending ✓ (1)

2.2.2 Which school of thought proposes external shocks as reasons for

business cycles?

• Exogenous/Monetarist view ✓ (1)

2.2.3 Briefly describe the term monetary policy.

• The approach taken by a country’s central bank to influence

spending in an economy by controlling the interest rates and the
money supply. ✓✓
(Accept any other correct relevant response.) (2)

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2.2.4 What is the relationship between unemployment and inflation in the

Phillips curve?

• A reduction in unemployment will cause an increase in inflation

because of the increased amount of spending by people that were
previously unemployed. ✓✓
• Inverse relationship occurs when unemployment decreases, and
inflation will increase✓✓
(Accept any other correct relevant response.) (2)

2.2.5 How can raising interest rates slow down economic growth?

• When central banks increase interest rates, it reduces demand for

goods and services. ✓✓
• This could result in companies hiring fewer or laying off their
workers and potentially lead to a recession. ✓✓
• Borrowing money becomes more expensive and the cost of doing
business rises. ✓✓
• Over time, higher costs and less business could mean lower
revenue and earnings for firms, possibly impacting their growth
rate. ✓✓
(Accept any other correct relevant response.) (4)

2.3 DATA RESPONSE

2.3.1 Who manages exchange rate policies in South Africa?

• The central bank/South African Reserve bank ✓ (1)

2.3.2 Which diagram above represents an increase in the number of

tourists from the USA to South Africa?

• Diagram A ✓ (1)

2.3.3 Briefly describe the term foreign exchange control.

• Foreign exchange control governs the measures taken by the

South African Reserve bank regarding the purchase of foreign
currency. ✓✓
• Restrictions applied by some governments to ban or limit the sale or
purchase of foreign currencies by nationals and/or the sale or
purchase of the local currency by foreigner✓✓
(Accept any other correct relevant response.) (2)

2.3.4 How can the SARB correct an undervalued currency?

• When the currency is undervalued, interest rates can be decreased

to cause an outflow of foreign currency and drain excess liquidity
from the economy and release inflation pressure. ✓✓
(Accept any other correct relevant response.) (2)

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2.3.5 Explain the impact on the rand if the number of tourists from South
Africa to the USA decreases. Use the information from the
diagrams to prove your answer.

• A decrease in the number of tourists from South Africa to the USA

will cause a decrease in the demand for dollars, therefore the USA
will decrease the supply of dollars to South Africa. ✓✓
• The decreased number of tourists will shift the supply curve from S1
to S2. ✓✓
• Consequently, the equilibrium quantity of the dollar will reduce from
16 to 12. ✓✓
• The initial exchange rate was $:R16 at quantity 16 dollars, but the
decrease in the demand for the dollar increased the value of the
dollar to $:R17 at quantity 12 for the dollar. ✓✓
• The exchange rate will rise as the rand depreciates against the
dollar. ✓✓
(Accept any other correct relevant response.) (2 x 2) (4)

2.4 Briefly explain real business cycles without the use of a graph.

• A real business cycle is obtained when the effects of irregular events,

seasons and long-term growth trends are removed from time series
data. ✓✓
• Real business cycle fluctuations are the result of exogenous changes in the
real economic environment. ✓✓
• Exogenous factors, like technological advances, cause fluctuations in real
output (supply). ✓✓
• Such supply-side shocks in the production function cause fluctuations of
output and employment. ✓✓
• It causes the rise and decline of the economic activities taking place in an
economy i.e., the expansion and recession of the economy. ✓✓
• Random technological changes cause permanent effects on potential
output. In other words, GDP is effected by these fluctuations. ✓✓
(Accept any other correct relevant response.) (4 x 2) (8)

2.5 How can an increase in the gross domestic product (GDP) influence the
multiplier?

• A higher GDP refers to higher income levels, higher spending/demand and

positive economic growth. ✓✓
• There will be high levels of investment and additional income for
consumers. ✓✓
• This will lead to a higher mpc in the economy. (Consumers tend to spend
additional income.) ✓✓
• E.g., for every extra R100, the consumers will be prepared to spend a
higher fraction. i.e., R70, resulting in an mpc of 0,7. ✓✓
• This increase in income/spending will have a snowball effect, i.e., an even
higher GDP. ✓✓
(Accept any other correct relevant response.) (8)
[40]

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QUESTION 3: ECONOMIC PURSUITS

3.1 Answer the following questions

3.1.1 Name any TWO examples of SETAs in South Africa.

• Agricultural Sector Education and Training Authority (AgriSETA) ✓

• Banking Sector Education and Training Authority (BANKSETA) ✓
• Chemical Industries Education and Training Authority (CHIETA) ✓
• Construction Education and Training Authority (CETA) ✓
• Culture, Arts, Tourism, Hospitality and Sport Sector Education and
Training Authority (CATHSSETA) ✓
• Education, Training and Development Practices Sector Education
and Training Authority (ETDP SETA) ✓
• Energy and Water Sector Education and Training Authority
(EWSETA) ✓
• Fibre Processing and Manufacturing Sector Education and Training
Authority (FP&M SETA) ✓
• Finance and Accounting Services Sector Education and Training
Authority (Fasset) ✓
• Food and Beverage Manufacturing Industry Sector Education and
Training Authority (FoodBev SETA) ✓
• Health and Welfare Sector Education and Training Authority
(HWSETA) ✓
• Insurance Sector Education and Training Authority (Inseta) ✓
• Local Government Sector Education and Training Authority
(LGSETA) ✓
• Manufacturing, Engineering and Related Services Sector Education
and Training Authority (merSETA) ✓
• Media, Information and Communication Technologies Sector
Education and Training Authority (MICT SETA) ✓
• Mining Qualifications Authority (MQA) ✓
• Public Service Sector Education and Training Authority (PSETA) ✓
• Safety and Security Sector Education and Training Authority
(SASSETA) ✓
• Services Sector Education and Training Authority (SSETA) ✓
• Transport Education Training Authority (TETA) ✓
• Wholesale and Retail Sector Education and Training Authority
(W&RSETA) ✓ (2 x 1) (2)

3.1.2 How does deregulation improve Broad-Based Black Economic

Empowerment (BBBEE)?

• It will create healthy competition within the economy and increase

access to more black people working. ✓✓
(Accept any other correct relevant response.) (1 x 2) (2)

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3.2 DATA RESPONSE

3.2.1 Name ONE country that is a member of SACU.

• South Africa ✓
• Namibia ✓
• Botswana ✓
• Lesotho ✓
• Swaziland ✓ (1)

3.2.2 How many countries does SADC consist of?

• 16 ✓ (1)

3.2.3 Briefly describe the term trading bloc.

• Trading blocs are groups of countries that establish rules for trade
among all participating countries. ✓✓
(Accept any other correct relevant response.) (2)

3.2.4 How do tariffs on imported goods influence domestic prices?

• For local producers, the import tariff raises the price of imported
goods, domestic prices will be lower because the tariffs on imported
goods will cause it to be higher than domestic prices. ✓✓
(Accept any other correct relevant response.) (2)

3.2.5 How can countries benefit by being members of a trading block?

• There will be variety of goods and services among countries. ✓✓

• Countries in SADC enjoy free trade. ✓✓
• Factors of production can flow freely amongst these countries. ✓✓
• They can decide on common tariffs when trading with other countries
that are not part of SADC. ✓✓
• Employment will increase within the trade bloc which will improve the
standard of living. ✓✓
(Accept any other correct relevant response.) (2 x 2) (4)

3.3 DATA RESPONSE

3.3.1 Identify ONE cross-cutting issue of the integrated manufacturing

strategy from the information above.

• Technology ✓ (1)

3.3.2 Name ONE reason for industrial development.

• To create employment ✓
• To diversify the economy ✓
• To increase exports ✓
• To create macroeconomic stability ✓
(Accept any other correct relevant response.) (1)

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3.3.3 Briefly describe the term private-public partnership.

• It is a relationship between the government and the private sector

where the expertise and efficiency and/or capital of the private sector
is used to develop certain regions. ✓✓
(Accept any other correct relevant response.) (2)

3.3.4 What is “development within” in regional development?

• Development from within means that each region will be responsible

for its own development. ✓✓
(Accept any other correct relevant response.) (2)

3.3.5 How does foreign direct investment affect employment in South

Africa?

• Direct investments occur when foreign parties invest in South African

businesses, or when South African people or businesses invest in
foreign businesses. ✓✓
• The investment is an injection into the local economy, spiralling the
multiplier effect and stimulating economic growth in various sectors of
the economy. ✓✓
• This could cause the demand for more labour – i.e., employment
opportunities. ✓✓
(Accept any other correct relevant response.) (2 x 2) (4)

3.4 Briefly discuss good governance and provision of resources as regional

development policies in terms of international benchmark criteria.

Good governance

• Regional development strategies should be managed effectively and free of

corruption. ✓✓
• Democratic decision making, where the views of different role players are
considered, and factored into decision making. ✓✓
• Transparency, where free and open engagements are promoted so that role
players gain a sense of ownership. ✓✓
• Financial management and control where resources are not wasted and are
properly accounted for. ✓✓

Provision of resources

• Adequate resources such as infrastructure and energy supply should be

provided in poor resource regions to promote decentralisation of industrial
hubs. ✓✓
• Providing enough social resources such as education and healthcare and
nutrition should be the holistic development for regional development. ✓✓
(Accept any other correct relevant response.) (2 x 4) (8)

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3.5 Evaluate the impact of the National Skills Development Strategy (NSDS) on
economic development since 1994.

Successes of NSDS

• Individuals who engaged in NSDS gained qualifications, gained work

experience and gained confidence to apply for jobs. ✓✓
• About 330 000 learners were funded by the National Skills Fund which
showed an increase of 1,4 million people who received skills of
development. ✓✓
• Increasing the supply of semi-skilled labour and alleviating poverty to a
certain degree in the process. ✓✓
• The growth of FET Colleges was promoted which addressed the critical skills
shortage. ✓✓

NSDS was not successful because:

• All SETAS produce quality guides, but they are not well known by the public.
This reduced the number of trainees (student). ✓✓
• Skills development has been ineffective in the informal sector. ✓✓
• TVET colleges had limited success and employee confidence remained very
low in TVET Sector. ✓✓
• Most registered companies do not participate at all in the skills development
system which has compromised the objectives of NSDS. ✓✓
(Accept any other correct relevant response.) (4 x 2) (8)
[40]

QUESTION 4: MACROECONOMICS AND ECONOMIC PURSUITS

4.1 Answer the following questions.

4.1.1 Name TWO examples of capital goods.

• Tools ✓
• Machinery ✓
• Buildings ✓
• Vehicles ✓
• Computers ✓
• Construction equipment ✓
(Accept any other correct relevant response.) (2 x 1) (2)

4.1.2 How does mass production influence international trade?

• Mass production means the production of a good on a large scale,

can facilitate surplus trade of goods between countries and allow
consumers to buy a variety of goods at lower prices. ✓✓
(Accept any other correct relevant response.) (1 x 2) (2)

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4.2 DATA RESPONSE

4.2.1 Give another term for “compensation of employees”.

• Wages/Salaries ✓ (1)

4.2.2 Give ONE example of taxes on production.

• Payroll tax ✓
• Taxes on land and buildings ✓
• License fees ✓
• Stamps ✓
• Registration fees ✓
(Accept any other correct relevant response.) (1)

4.2.3 Briefly describe the term factor cost.

• It is the cost of the factors of production (that is labour, capital, land

and enterprise.) ✓✓
(Accept any other correct relevant response.) (2)

4.2.4 What is the main purpose of subsidies on production?

• It is to keep prices below the market level for consumers. ✓✓

(Accept any other correct relevant response.) (2)

4.2.5 Calculate gross domestic product at market prices. Show ALL

calculations.

Gross value added at basic prices 5 949 671 ✓

Taxes on products 704 144 ✓
Less: Subsidies on products 15 469 ✓
Gross domestic product at market prices 6 638 346 ✓ (4)

4.3 DATA RESPONSE

4.3.1 Which initiative was established in 2021 to boost trade in Africa?

• African Continental Free Trade Area (AfCFTA) ✓ (1)

4.3.2 Which current South African growth and development policy aims to
eliminate poverty by 2030?

• National Development Plan (NDP) ✓ (1)

4.3.3 Briefly describe the term global market.

• The market in which goods and services of one country are traded
(purchased or sold) to people of other countries. ✓✓
(Accept any other correct relevant response.) (2)

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4.3.4 Why does the North have little interest in the welfare of the South?

• The North is mainly interested in the cheap resources that they can get
from developing countries in the South. ✓✓
• This exploitation is their objective therefore they will never have
interest in the welfare of the South. ✓✓
• The improvement of welfare will result in the North not being able to
get resources at cheap prices. ✓✓
• When the North gives foreign aid, there will be strings attached and
thus increased loss of our natural resources and freedom. ✓✓
• If the North recognises the wealth of the South, it will not have access
to resources and cheap labour. ✓✓
(Accept any other correct relevant response.) (2)

4.3.5 How can Africa become a major global player?

• African countries need to undertake bold domestic structural reforms to

scale up the supply capacity of the region by improving digital
connectivity, reforming fundamental institutions of legal
frameworks. ✓✓
• Diversify trade with Asia: Asia’s growing middle class and its
substantial demand presents an opportunity for Africa to expand trade
with the region. ✓✓
• Deepening regional integration within Africa: Sub-Saharan Africa’s
success in the global market rests on deepening regional integration to
scale up supply capacity and build regional value chains. ✓✓
• There is a need to integrate unilateral trade preferences with other
efforts to deepen trade and investment between African countries and
advanced countries, mainly the US and the EU, addressing the
structural challenges limiting the region’s export capacity. ✓✓
(Accept any other correct relevant response.) (2 x 2) (4)

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4.4 Discuss direct investments and portfolio investments as sub-accounts of the

financial account in the Balance of Payments.

Direct investment

• Foreign direct investment (FDI) refers to investment in real estate (fixed

property) and obtaining a meaningful share (10%+) or control of such
business. ✓✓
• Direct investments occur when foreign parties invest in South African
businesses, or when South African people or businesses invest in foreign
businesses. ✓✓
• When a foreign business invests in a South African business, this results in
money flowing into the country. ✓✓
• Such an inward direct investment is recorded as a liability because it needs to
be repaid. ✓✓
• When a South African business person invests in a business in a foreign
country, this results in money flowing out of the country. ✓✓
• Such an outward direct investment is recorded as an asset because the entity
acquired will generate an income for South African investors. ✓✓ (Max. 4)

Portfolio investments

• Refers to the buying of financial assets such as shares in companies on the

stock exchange of another country. ✓✓
• These investments are highly liquid, and their flows can be reversed at any
time. ✓✓
• Portfolio investment money is also known as ‘hot money’. ✓✓
• The investor is only interested in financial returns from investing in shares and
not in the management of a business. ✓✓
• When foreign people or businesses buy shares on the JSE or government
bonds, this results in money flowing into the country. ✓✓
• However, these money need to be repaid at some stage, therefore it is
recorded as a liability. ✓✓
• When South Africans buy shares in companies that are listed on foreign
exchanges or buy foreign government bonds, this results in an outflow of
money. ✓✓
• However, when South Africans are obtaining ownership of foreign shares or
bonds, the purchases are recorded as assets. ✓✓ (Max. 4)
(Accept any other correct relevant response.) (8)

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4.5 Examine South Africa’s endeavours to reduce inequality in the country.

• South Africa focused on higher social spending, targeted government

transfers, and affirmative action as efforts to reduce poverty among the
previously marginalised. ✓✓
• Currently more than 18 million people are receiving a grant from the state. ✓✓
• A progressive tax system is in place to tax higher income groups at higher tax
rates. This revenue is used as a redistributive method. ✓✓
• The equitable share formula used to determine transfers to provincial and local
spheres of government contains a poverty component as a redistributive
measure. ✓✓
• The ‘social wage’ has been used as a redistributive mechanism of the
government budget deliberately aimed at improving the lives of the poor and
reducing their cost of living. ✓✓
• This has been achieved through, among others, free primary health care; no-
fee paying schools; old age and child support grants; housing; and free basic
services (water, electricity and sanitation) to poor households. ✓✓
• Despite these efforts, inequality has remained high. ✓✓
• According to laffer curve/gini coeffeicit South Africa income distribution
remains highly skewed. ✓✓
• The top 20 percent of the population holds over 68 percent of income
(compared to a median of 47 percent for similar emerging markets).✓✓
• The bottom 40 percent of the population holds 7 percent of income.✓✓
• The South African land reform policies was not so successful only 23% have
benefited from land reform policy.✓✓
• Significant differences remain across regions. Income per capita in Gauteng –
the main economic province that comprises large cities like Johannesburg and
Pretoria – is almost twice the levels as that found in the mostly rural provinces
like Limpopo and Eastern Cape. ✓✓
• Despite various job creation initiatives e.g EPWP,JIPSA,GEAR,high
unemployment is still a major factor behind the inequality levels. ✓✓
• South Africa's unemployment rate is significantly higher than in other emerging
markets, with youth unemployment exceeding 50 percent. ✓✓
(Accept any other correct relevant response.) (8)
[40]

TOTAL SECTION B: 80

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SECTION C

Answer any ONE of the two questions in this section in the ANSWER BOOK.

QUESTION 5: MACROECONOMICS

• Discuss, in detail, the reasons for public sector failure (link them to a
typical problems experienced through public sector provisioning)
(26 marks)
• Examine the practicality of the medium-term expenditure framework in the
South African economy. (10 marks)

INTRODUCTION

Public sector failure occurs when government intervention in the economy leads to an
inefficient allocation of resources and leads to an overall decline in economic
welfare. ✓✓
(Accept any other relevant introduction.) (Max. 2)

BODY
MAIN PART

Management failure ✓

Government departments often underperform for the following reasons:

• Lack of training and experience. ✓✓

• Public servants are employed to perform a certain role, but they do not have the
correct training, skills, and experience. ✓✓
• This becomes a waste because they will be remunerated for the roles they were
not qualified to perform. ✓✓
• People working in parastatals might lack management skills and might end up
implementing wrong policies that may cause the public sector to fail. ✓✓
• If the management cannot explain the decisions that they took and explain how
they spent the money they have been allocated, they are not accountable and this
may be a result of corruption, corruption results in inefficiencies that lead to failure
in the public sector. ✓✓
• The state employs a civil servant in the capacity of an accountant, but the
employee does not have the required qualifications, and is therefore under
qualified for this role. ✓✓
• Poor leadership – people in some managerial positions are not able to motivate,
mentor and lead their staff complement. ✓✓
• Employees take the lead from their superiors and display the same lack of ability or
become demotivated in their roles. ✓✓
• Management failure is therefore linked to efficiency as a problem of public sector
provisioning. ✓✓
(Two marks for an accurate linking assertion that includes an explanation of the
public sector failure. Only statement of linking: 1 mark)

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Apathy ✓

• This occurs when civil servants are disinterested, lack of enthusiasm and are
incompetent in their roles. ✓✓
• When public servants are apathetic, their productivity levels decrease resulting in
poor service delivery. ✓✓
• Corruption and poor service delivery are signs of apathy and may result in poor
accountability. ✓✓
• Parastatal employees lack the interest or concern because they know they will get
paid even when they are underperforming. ✓✓
• E.g., a ward councillor receives the approval for the building of new communal
toilets at the local park, but the building of the toilets is delayed because the
required paperwork was never submitted to the building contractor ✓✓
• Apathy is therefore linked to efficiency as a problem of public sector
provisioning. ✓✓
(Two marks for an accurate linking assertion that includes an explanation of the
public sector failure)

Bureaucracy ✓

• Complex rules and procedures might lead to inefficiencies in the public sector and
the public sector might fail to provide the goods and services in time to the
consumers. ✓✓
• For example, if there is an electricity fault at some house, the state company Eskom
will send their workers to fix the fault and the workers will only fix that fault because
they were told to fix that only. Even if there is a fault in the neighbouring house they
will not fix it but they will need that fault to be reported so they can come fix it. ✓✓
• This simply means that the parastatals cannot satisfy the needs of consumers in
time because of the rules and procedures that must be followed that may take time
to finish following them. ✓✓
• Bureaucracy is linked to typical problems experienced through public sector
provisioning of efficiency and assessing needs. ✓✓
(Two marks for an accurate linking assertion that includes an explanation of the
public sector failure)

Lack of motivation ✓

• Civil servants do not get evaluated, acknowledged or rewarded for excellence as in

the private sector. ✓✓
• Civil servants do not get evaluated, acknowledged, or rewarded for excellent service
by their clients, whereas their private sector counterparts do. ✓✓
• Furthermore, private sector employees are often incentivised through bonuses,
awards etc. for excellent service whereas public sector employees are not. ✓✓
• Customer service is also not regarded as a priority. ✓✓
• Lack of motivation links to typical problems experienced through public sector
provisioning of efficiency and assessing needs. ✓✓
(Two marks for an accurate linking assertion that includes an explanation of the
public sector failure)

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Politicians ✓

• In order to secure their political careers, politicians may be tempted to act in their
personal capacity rather then in the interest of the public. ✓✓
• They could therefore promote and endorse projects and policies to secure votes for
their re-election. ✓✓
• These projects and policies could lead to misallocation or wastage or resources. ✓✓
• Lack of accountability by politicians may be a result of corruption and this may lead
to them not fulfilling the promises they made to community when they were running
their campaigns. ✓✓
• As the politicians are not accountable for their actions then resources may not be
allocated fairly because of corruption. ✓✓
• E.g., the Minister of Health approves a contract for a vaccination programme from a
company where he is a major stakeholder without disclosing this information. ✓✓
• Politicians are linked to accountability and efficiency as problems of public
provisioning. ✓✓
(Two marks for an accurate linking assertion that includes an explanation of the
public sector failure. Only statement of linking: 1 mark)

Structural weaknesses ✓

• When the state is the only service provider of a good or service and there is an
undersupply, it compromises the efficiency of the entire economy. ✓✓
• If the good or service provided is critical to the optimum functioning of the economy,
and there are problems with its provisioning, all role players within the economy will
be compromised. ✓✓
• This will have far-reaching negative consequences, most specifically hampering
economic growth. ✓✓
• E.g., Eskom is the only service provider of electricity in South Africa and when
power outages occur, it impacts on the efficiency of the entire country. ✓✓
• Linked to accountability, efficiency, and parastatals as problems of public
provisioning. ✓✓
(Two marks for an accurate linking assertion that includes an explanation of the
public sector failure)

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Special interest groups ✓

• Rent-seeking is a process where people or businesses lobby for certain aspects in

their favour. ✓✓
• Trade unions and other organisations often try to influence government officials to
act in their favour. ✓✓
• Special interest groups' political power leads to more government spending which
strain the government expenditure for the fiscal year✓✓
• Strikes by special interest groups such as South African taxi association decreases
production of the economy since people will not have alternative transportation to
work. ✓✓
• This is linked to efficiency as a problem in public sector provisioning. ✓✓
(Accept any other correct and relevant response.) (Max. 26)
(Two marks for an accurate linking assertion that includes an explanation of the
public sector failure)
(Maximum 8 marks for linking the reasons to the problems of public sector
provisioning)
(A maximum of 8 marks should be allocated for headings and examples)

ADDITIONAL PART

Examine the practicality of the medium-term expenditure framework in the South

African economy.

• Greater transparency of budget and service delivery information for the public. ✓✓
• The policy goals and resource allocation are clearly set out. ✓✓
• In this way it empowers government to determine priorities and deliver change. ✓✓
• Strengthen links between planning and prioritisation, budgeting, and service delivery
in the country. ✓✓
• Improved efficiency of public expenditure and predictability of resource flows in the
country. ✓✓
• The quest for greater efficiency in the management of public resources to deliver
services more effectively and fairly. ✓✓
• Enhancing the partnership between government and the private sector to improve
service delivery and quality. ✓✓
• It became evident during the pandemic that certain sectors were inefficient and
underspend. ✓✓
• There has been underspending on capital programmes in recent years. The capital
budgets for the future are the result for less and inelastic examination/accountability
of budgets. ✓✓
• Municipalities fail to collect enough revenue during or within the fiscal year which
increases pressure on MTEF. ✓✓
• Lack of quality and timely information by provincial and local municipalities as only
16% of South Africa's 257 municipalities have been given a clean audit by the
auditor general for the 2020 – 21 financial year. ✓✓

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• Pressure on the government’s wage bill ceiling could undermine fiscal consolidation
measures. ✓✓
• The government should consider how much they spend on salaries, as the wage bill
is normally the highest in the total expenditure, and there has been attempts to
reduce it, but the labour and unions are not in favour of such actions. ✓✓
(Accept any other relevant correct response.) (Max. 10)
(A maximum of 2 marks will be allocated for a mere listing facts)

CONCLUSION

Increased transparency can help deliver change in public sector performance ensuring
information-sharing, and publishing or disseminating performance information. ✓✓
(Accept any other higher-order conclusion.) (Max. 2)
[40]

QUESTION 6

• Discuss, in detail, South Africa’s social indicators. (26 marks)

• How important is productivity as an economic indicator? (10 marks)

INTRODUCTION

Social indicators describe the living conditions of people in a country and measure the
level of development in living standards over time. ✓✓ (Max. 2)

BODY
MAIN PART

Demographics indicators ✓
Population growth ✓

• The population of South Africa is estimated to be 60,6 million by the end of June
2022. Between 2002 and 2022 South Africa experienced a positive population
growth year-on-year. ✓✓
• A high population growth combined with low economic growth harms efforts to
improve the average standard of living of the population✓✓
• Measuring population growth is important for delivering social services and for
identifying the size of the tax base (the total number of people paying taxes). ✓✓

Life expectancy ✓

• Number of years a new-born infant is likely to live under the prevailing

conditions. ✓✓
• Life expectancy at birth for 2021 was estimated at 59,3 years for males and
64,6 years for females. ✓✓
• Infant mortality is the number of children per 1 000 births who die before the age of
one year in a year. ✓✓
• The infant mortality rate for 2021 is estimated at 24,1 per 1 000 live births. ✓✓

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Nutrition and health indicators ✓

• The standard of living of the population is related to the quality of nutrition and
health. ✓✓
• These indicators are used by the government and other institutions to investigate
health-related issues. ✓✓
• Malnutrition is expressed as underweight or dwarfism. ✓✓
• It contributes towards the risks of death and prevents cognitive development of
children in SA. ✓✓
• Between 2018 and 2020, the number of people undernourished in South Africa
amounted to 3.8 million, showing an increase compared to previous years. ✓✓
• Overweight is associated with obesity in childhood, diabetes, respiratory diseases,
high blood pressure and psychological disorders. ✓✓
• Being overweight can lead to numerous adverse health conditions, which affects
people’s ability to work and take care of themselves. ✓✓
• Approximately 31% of men and 68% of women in South Africa are obese. ✓✓

Education indicators ✓

• The standard of living is related to the level of education. ✓✓

• Education directly influences the level of income and standards of living for the
people. ✓✓
• If the level of education increases, more people will find jobs, unemployment will
decrease and poverty will decline. ✓✓
• The level of education of the population also affects the country’s level of
productivity, competitiveness, and national wealth. ✓✓
• Public expenditure: The percentage of the national budget that is directed towards
education. ✓✓
• The average percentage spending on the main budget was 20% – 25% over the last
decade. ✓✓
• The average spending of education was 6,6% of GDP in 2022. ✓✓
• Secondary enrolment: This shows the percentage of an age group attending high
school. ✓✓
• In 2020, the gross enrolment ratio for secondary school students in South Africa
was about 102,1 percent. ✓✓
• Secondary education is considered as a minimum entry requirement to employment
for semi-skilled labour. ✓✓
• Primary completion: The percentage of an age group that has completed primary
education is an indicator of the efficiency of the education system. ✓✓
• In 2018, the gross primary enrolment ratio in South Africa amounted to 98,54
percent. ✓✓
• Young women are less likely to be employed than young men, particularly those
with lower levels of education. Only 26% of 25 – 34 year-old women with below
upper secondary attainment were employed in 2020 compared to 41% of men in
South Africa ✓✓
• The impact of the pandemic on the economy has raised concerns about the
prospects of young adults, especially those leaving education earlier than others. In
South Africa, the unemployment rate among 25 – 34-year-olds with below upper
secondary attainment was 44,4% in 2020, a decrease of 6 percentage points from
the previous year ✓✓

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• Education is one of the methods to decrease poverty and income inequality. ✓✓

• In South Africa, 15% of 25 – 34 year-olds had a tertiary qualification in 2020
compared to 47% on average across OECD countries. ✓✓

Services indicators ✓

• Basic services such as housing, water, sanitation, and electricity are important
factors that indicate the standard of living of people in a country. ✓✓
• Electricity: the government promotes access to electricity to all members of the
population, regardless of whether they live in rural or urban areas. ✓✓
• South Africa citizens with electricity access for 2020 was 84,39%, a 0,61% decline
from 2019. ✓✓
• Refuse removal: In South Africa, the collection of households' waste decreased from
66,4% households in 2018 to 61,5% households in 2019. ✓✓
• South African households had access to refuse removal by local government
services and dumping sites. ✓✓
• Water supply and sanitation is an objective of SA government for all people to have
access to clean water and a basic functioning sanitation system. ✓✓
• An estimated 45,2% of households had access to piped water in their dwellings in
2021. A further 29,4% accessed water on-site while 12,2% relied on communal taps
and 1,9% relied on neighbours’ taps. ✓✓
• Although generally households’ access to water improved, 2,7% of households still
had to fetch water from rivers, streams, stagnant water pools, dams, wells and
springs in 2021. ✓✓

Housing and urbanisation indicators ✓

• Housing: to secure social and economic benefits of proper housing, the government
facilitates home ownership by means of housing subsidy scheme and loans from the
private sector. ✓✓
• The RDP was also introduced to provide housing to previously disadvantaged
people. ✓✓
• Various housing projects such as the People’s Housing Process and the hostel
redevelopments have been implemented to provide housing to such people. ✓✓
• Urbanisation is the increase in population numbers of urban areas (cities and
towns). ✓✓
• South Africa had an urbanisation rate of 73% in 2021. The urbanisation rate in
South Africa decreased by 1,4% on a year-on-year basis in 2021. Between 2010
and 2021, the indicator decreased by 15,1% ✓✓
• Causes of urbanisation may include natural growth in urban population, migration in
form of rural-urban migration or international migration and founding/establishment
of new towns. ✓✓
(Accept any other correct relevant response.) (Max. 26)
(A maximum of 8 marks for headings and examples)

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ADDITIONAL PART

How important is productivity as an economic indicator?

• Productivity refers to how much output can be produced with a given set of
inputs. ✓✓
• It measures how efficiently production inputs, such as labour and capital, are being
used in an economy to produce a given level of output. ✓✓
• Productivity increases when more output is produced with the same amount of
inputs or when the same amount of output is produced with less inputs. ✓✓
• A country's ability to improve its standard of living depends almost entirely on its
ability to raise its output per worker (i.e., producing more goods and services for a
given number of hours of work). ✓✓
• The four reasons of a nation's productivity are physical capital, technology, human
capital, and natural resources. ✓✓
• Labour productivity measures the hourly output of a country's economy. ✓✓
• Capital productivity is used to determine the efficiency of fixed assets. It is a
measure of the amount of output to the amount of physical capital used as input. ✓✓
• Material productivity is a measure of the output generated to the amount of input
materials used. ✓✓
• New machines, technologies, and techniques are crucial factors in determining
productivity. ✓✓
(Accept any other relevant correct response.) (Max. 10)
(A maximum of 2 marks will be allocated for a mere listing facts)

CONCLUSION

Social indicators are key in helping the government to decide on appropriate policies
that can help in achieving economic development. ✓✓ (Max. 2)
(Accept any relevant higher order conclusion.) [40]

TOTAL SECTION C: 40

TOTAL: 150

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