Lesson 1, Topic 1
In Progress

1.11. Use mathematics to debate aspects of the national economy

ryanrori January 25, 2021

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You could often find yourself in discussions or debates in which aspects of the national economy are discussed.  This could include topics such as:

  • Tax
  • Productivity
  • Equitable distribution of resources

To understand the context of the national economy of the country, it is important to understand the national and provincial budgets and the associated tax and inflation issues.

National and Provincial budgets 

The national, provincial and municipal budgets and the budgetary process is prescribed by the South Africa Constitution:

Section 215 (1) of the Constitution states that: 

  • national, provincial and municipal budgets and budgetary processes must promote transparency, accountability and effective financial management of the economy, debt and the public sector 

Section 215 (2) of the Constitution states that:

  • National legislation must prescribe –

(a) the form of national, provincial and municipal budgets;

(b) when national and provincial budgets must be tabled; and

(c) that budgets in each sphere of government must show the sources of revenue and the way in which proposed expenditure will comply with national legislation. 

The National Budget Speech for 2010 delivered by Pravin Gordhan had the following key elements:

This budget outlines several aspects of a new growth path for our country:

1. A concerted effort to reduce joblessness among young people

2. Support for labour-intensive industries through industrial policy interventions, skills development, public employment programmes and a rural development strategy.

3. Sustaining high levels of public and private investment and raising our savings level.

4. Improving the performance and effectiveness of the state, especially the provision of quality education and training at all levels.

5. Reforms to increase inclusion and participation in the labour market, alongside efforts to improve competition in product markets.

6. Keeping inflation low, striving for a stable and competitive exchange rate, and providing a buffer against global volatility.

7. Raising productivity and competitiveness, opening up the economy to investment and trade opportunities that can boost exports.

We need to produce the goods and services that other people desire to have; that we can export to the rest of the world.

Our approach to employment creation includes measures to encourage industries and services that have significant jobs potential, stepped up implementation of the expanded public works program, investment in further education and skills development, encouragement of small business development and entrepreneurship and a new focus on promoting youth employment.

This budget outlines several aspects of a new growth path for our country:

1. A concerted effort to reduce joblessness among young people

2. Support for labour-intensive industries through industrial policy interventions, skills development, public employment programmes and a rural development strategy.

3. Sustaining high levels of public and private investment and raising our savings level.

4. Improving the performance and effectiveness of the state, especially the provision of quality education and training at all levels.

5. Reforms to increase inclusion and participation in the labour market, alongside efforts to improve competition in product markets.

6. Keeping inflation low, striving for a stable and competitive exchange rate, and providing a buffer against global volatility.

7. Raising productivity and competitiveness, opening up the economy to investment and trade opportunities that can boost exports.

We need to produce the goods and services that other people desire to have; that we can export to the rest of the world.

Our approach to employment creation includes measures to encourage industries and services that have significant jobs potential, stepped up implementation of the expanded public works program, investment in further education and skills development, encouragement of small business development and entrepreneurship and a new focus on promoting youth employment.

Term Budget Policy Statement, which set out the key spending priorities as:

  • •Improving the quality of basic education
  • •Enhancing the health of our people
  • •Making our communities safer
  • •Fostering rural development
  • •Creating jobs; and
  • •Investing in local government and human settlements.

The provinces and municipalities will implement and use various programmes in the provinces / communities to effectively use the budgets, under strict monitoring and control by the national government. Examples of these project / programmes are:

  • Formalisation of informal settlements
  • Roads and Transport Infrastructure
  • Provision of Electricity Infrastructure and Alternate Energy
  • Development and Support of Cooperatives
  • The Expanded Public Works Programme

The following is an example of the strategic objectives of one of the provinces – Limpopo:

Welcome to Limpopo Provincial Government – Office of the Premier

Overview of the Department Strategic Objectives 

The Premier’s office is the visible flagship of the province, providing leadership in terms of policy and direction and setting the style and tone of government’s administration. It is the driving force behind the Reconstruction and Development Programme. 

Its main strategic objectives and goals includes: 

Growth and Development Objectives 

  • Facilitating economic growth that produces employment 
  • Maintaining existing services and addressing backlogs 
  • Developing infrastructure and maintain existing infrastructure 
  • Building the administration 

Transformation of the Public Service

One crucial responsibility of this office is to give strategic direction to all provincial departments on matters of policy regarding organisational arrangement, employment and other personnel practice, labour relations, public services transformation and reform. Transformation is thus identified as a major strategic focus area for the office.

  • Limpopo Provincial Government has the following departments: 
    • Office of the Premier 
    • Public Works o Treasury 
    • Local Government and Housing 
    • Education 
    • Health and social development 
    • Safety, Security and Liaison 
    • Economic development, Tourism and Environment 
    • Roads & Transport 
    • Agriculture 
    • Sport, Arts and Culture 

Provincial Challenges 

The economic vision of making the Limpopo the major contributor to national wealth by the year 2020 could be negatively affected by the following challenges: 

1. Implications of Poverty and Demographic Dynamics 

  • The youthful population dictates a need for social spending in skills training in addition to accelerated investment spending required for growth and development. 
  • On the other hand, the reduction of the unemployment rate to below national average, requires a significant re prioritisation of the budget in favor of capital expenditure, coupled with a dynamic economic diversification program to increase the economy’s propensity to absorb labour and stimulate growth. 
  • Substantial opportunities for stimulating entrepreneurial development, employment creation exist in the process of addressing the social problems arising out of poverty, income inequality and disparities in access to services. 

2. Social Development

  • Ensuring a well-trained labour force is an integral challenge for growth and development. Adequate skills base to implement and sustain the desired growth should be ensured through a balanced package of human resource development policies and strategies which impacts on vocational training and curricula. Thus, future education and training at all levels of the formal schooling system, including informal training and adult education, should have a bearing on and/or be influenced by the Provincial Growth and Development Strategy. 
  • A sustainable primary health care system focused on preventative, rather than curative approach, is a key health challenge – a clear strategy of encouraging the private sector’s involvement (which is currently minimal) in the higher care market is crucial in the medium to long term. 
  • Peace in the youthful society, without adequate labour absorption capacity, remains unguaranteed and not sustainable in the long run. Thus, social security programs remain a mammoth challenge. 
  • A clear hierarchical system of Social Services (Criminal Justice Network, Health Care system, Educational System, Welfare System, etc.) with regional equity distribution, is necessary to alleviate inequitable access and ease the backlogs. This would improve changes for integrated planning and provision of services through regional service centres. • Educational backlogs remain a major obstacle to development. The present matric failure rate is a matter of great concern and poses further challenges for the Growth and Development Strategy. 

3. Economic Challenges

  • The Limpopo economy is currently the second least contributor to GDP and labour absorption, and its capacity as a major market for goods is constrained by unemployment. The challenge is to catalyse economic growth while exploiting opportunities arising out of our aggressive program(s) of addressing social-economic backlogs. 
  • A fairly developed network of secondary rural towns and emerging peri-urban nodes provides a network of economic “engines” with both comparative and competitive advantages which must be identified and exploited to the maximum. 
  • The province is endowed with mineral deposits of national and international importance. Thus, the challenge is to catalyse the exploitation of these dormant resources, while creating an enabling environment for increased production and downstream processing. 
  • A healthy balance between maintaining existing infrastructure and new Capital projects is necessary in the medium to long term to fulfill the need for sustainability of basic services such as electricity, water and sanitation are formidable catalyst strategies to improve access to credit and to ensure bridging finance availability. 

4. Institutional Capacity 

  • The integration of the four former administrations is now behind us, however, new key focus challenges include the strengthening of management capacity, financial control systems and deliberate and structured human resource development strategy and programs – including strategies and programs that are focused on information technology and information management. 
  • Right sizing of the provincial administration remains a key challenge to ensure a healthy balance or ratio of capital expenditure (capex) to recurrent expenditure and to ensure appropriate “skill-job” fit. 
  • There is a need for a medium to long term personnel plan to address the needs of a mean, but highly skilled and competitively skilled administration. 
  • Existing institutional capacity of our tertiary towns and the network of secondary towns should be tapped to provide institutional back up for the development of adjacent rural hinterland – the existing capacity is highly under-utilized. 
  • The capacity of emerging TLC’s to initiate, implement and manage their own development programs can still be improved through structured interventions – this includes the capacity of NGO’s and community based development organisations as well. 
  • The optimal utilisation of the existing public private sector and NGO institutional capacity require a uniform set of planning regions and a common set of regional boundaries by all departments. 
  • It also requires inter-departmental and intergovernmental coordination and collaboration framework for spatial allocation of public investments. 

Provincial Development Targets

The setting of specific targets is important since they determine the level of growth and development performance that is required and serve as a measure of actual performance.

1. Economic Development 

  • Job Creation 
    • At least 487,000 people (i.e. 46 % of the economically active population) are unemployed (Census 1996) 
    • To reduce the unemployment rate to below national average by the year 2004, 97,000 new jobs need to be created each year for the next five (5) years. 
    • Thriving SMME’s, with special emphasis on manufacturing. 
  • Equitable Distribution of Resources 
    • According to the 1995 October Household Survey National Census, 44.5 % of the provincial households had no apparent cash income. This correlates with the present unemployment rate of about 46 % (Census 1996). 
    • New jobs should accommodate the very poor (preferably women and youth) to improve the current income inequalities. 
  • Above Average Increase in Economic Growth 
    • According to the DBSA, the average employment factor is calculated at fifty jobs per million (and of GGP R1 million = 50 different jobs). 
    • If 97,000 new jobs are to be created, the GGP will have to grow by 11.25 % a year.
  • Above Average Increase in Investment 
    • Approximately R4.85-billion will be required in new capital investment per year (foreign direct investment) if we have to create at least the targeted 9,000 new jobs per year. 
  • Promotion of fair trade 
    • Consumer protection is significant to ensure that the public is protected from detrimental trade practices 
    • Setting productivity and service standards. 

2. Social Services 

  • Addressing educational backlogs i.e. classroom shortage, adverse matric failure rate, illiteracy, shortage of science and skills training teachers. 
  • The provision of a clinic within a walking distance. 
  • The provision of transport services within a radius of 2km. 

3. Infrastructure Development 

  • A backlog of approximately 300 000 houses in rural areas and 81 000 houses in urban areas at an estimated cost of R1.28bn. 
  • Rehabilitation of tarred economic roads of 289km costing R369m and 319km of social roads costing R640m. • A backlog of 4000km new roads to be paved at a cost of R1.5bn. 
  • A backlog of 35 000 classrooms. 
  • Building of Government Complex Phase I (R1000m) as part of R4000m which is total project cost. 
  • A ten year municipal infrastructure development worth R700m. 
  • To bring household water within 200m radius and effectively manage underground water.