Comprehensive Study Notes on Factors of Production, Labor Laws & Entrepreneurship

Factors of Production

Factors of production, often abbreviated as CELL, are the resources used to produce goods and services. Economists categorize these into four main areas:

1. Capital: This refers to the machinery, tools, and buildings used in production. Examples include hammers, forklifts, conveyor belts, computers, and delivery vans. Capital is formed through savings and profits, initially supplied by the owners, and depreciates over time due to wear and tear.

   • Sources of Capital:

     • Own Capital: Investments made by the owner, partners, or shareholders.

     • Borrowed Capital: Capital borrowed over different periods.

       • Long-term (fixed) capital: Repaid over more than 12 months.

       • Short-term (working) capital: Repaid in less than 12 months.

   • Different Uses of Capital:

     • Fixed Capital: Used to invest in fixed assets like land, buildings, vehicles, and equipment. A capital budget is used to plan these fixed capital requirements and is a long-term financial planning tool.

     • Working Capital: Used to purchase stock and cover everyday business expenses like telephone bills, salaries, stationery, and insurance. It covers the day-to-day running of the business. A cash budget, a short-term financial planning tool, is used to plan working capital requirements.

   Capital vs Cash Budget:

   Cost	Capital Budget	Cash Budget	Cost	Capital Budget	Cash Budget
   Rent		X	Lights and water		X
   Factory equipment	X		Delivery vehicle	X
   Salary and wages		X	Advertising		X
   Factory building	X

2. Land (Natural Resources): Includes all raw materials converted into finished products during manufacturing. These resources are limited and often irreplaceable, varying from place to place and requiring processing before use. Examples in South Africa include minerals, forestry, agriculture, fishing, and water.

3. Labour: Refers to human effort, both physical and mental, used to create goods and services. Remuneration is usually in the form of salaries or wages.

   • Skill Levels in the Working World:

     • Unskilled: No formal qualifications (e.g., Gardener, Packer, Porter).

     • Semi-skilled: Limited education, on-the-job training (e.g., Cashier, Forklift operator).

     • Skilled: Completion of matric and additional training (e.g., Hairdresser, Plumber, Electrician).

     • Professional: Minimum tertiary qualification (degree or diploma) (e.g., Lawyer, Accountant, Civil Engineer).

   • Remuneration:

     • Salary plus Benefits: Fixed salary with additional benefits like medical aid and pension.

     • Cost to Company (CTC): Total cost including salary and all benefits.

   Responsibilities of Employers and Employees:

   EMPLOYEE RESPONSIBILITIES	EMPLOYER RESPONSIBILITIES
   On-time arrival Accountability Professionalism Reporting important matters Maintaining a positive attitude Respecting colleagues Adhering to workplace safety standards work-life balance.	Fair and timely remuneration Employee benefits (healthcare, retirement) Workplace safety Professional development opportunities Equal opportunities Employee well-being support.

   Role of Workers in Business:

   • Workers are crucial for productivity and output, creating goods and services for profit. A skilled, motivated workforce increases profitability and growth, contributing time, energy, and expertise.

4. Entrepreneurship: The process of combining the other factors of production to create goods or services for profit. The entrepreneur uses skills, vision, and resources to bring a business idea to life.

Fair Employment Practices – Trade Unions and Labour Laws

Trade Unions: Functions & Role

A trade union is an organization of employees within a specific industry or occupation that is formed to protect the rights of its members and to improve their working conditions.

Functions/Role of Trade Unions:

1. Representing workers' interests and advocating for fair treatment.

2. Negotiating for better wages, benefits, and working conditions (collective bargaining).

3. Improving working hours, safety measures, and facilities.

4. Handling grievances, wage negotiations, and other workplace disputes on behalf of employees.

5. Providing legal and other assistance in disciplinary issues.

6. Informing members about their rights and duties under employment law.

Collective Bargaining:

Collective bargaining involves negotiations between employees (represented by trade unions) and employers to address wages, working conditions, and grievances. The aim is to find a compromise that satisfies both parties through structured negotiations.

Methods Used by Trade Unions and Employers to Make Themselves Heard:

1. Strike:

   • Employees refuse to work to compel the employer to meet their demands regarding wages, working conditions, or other grievances.

   • Requires participation of two or more employees and must be related to work-related issues.

2. Lockout:

   • An employer denies employees access to the workplace, typically in response to a strike, to pressure workers into accepting specific conditions or to prevent damage to company property.

3. Picketing:

   • Employees protest outside the workplace to make their voices heard. The demonstration must be peaceful and organized by a registered trade union.

4. Stay Away:

   • Employees refuse to come to work to support socio-economic issues. The action must be authorized by a registered union and discussed in forums like NEDLAC (National Economic Development and Labour Council).

5. Work-to-Rule (Go-slow):

   • Employees continue to work but perform only the minimum required tasks at a much slower pace, decreasing productivity and pressuring employers to listen to workers' demands.

Fair Employment Practices – Labour Laws

1. Basic Conditions of Employment Act (BCEA) - 1997

   • Protects vulnerable workers, ensuring basic rights and protections.

   • Key Issues Covered by the BCEA:

     • Working Hours:

       • Maximum of 45 hours per week (9 hours per day for a 5-day week, or 8 hours per day for a 6-day week).

       • Overtime: Up to 3 hours per day or 10 hours per week, compensated at 1.5 times the normal rate or paid time off.

     • Leave:

       • Annual Leave: 21 consecutive days of paid leave after 12 months of full-time employment.

       • Maternity Leave: 4 consecutive months, which may be unpaid. Employees can claim from the Unemployment Insurance Fund (UIF) if the company does not provide paid maternity leave.

       • Paternity Leave: 10 days' leave for fathers after the birth of a child.

       • Family Responsibility Leave: 3 days per year for personal reasons like family illness or death.

     • Sick Leave:

       • 30 days of sick leave for employees working a 5-day week and 36 days for those working a 6-day week, within a 36-month cycle.

     • Public Holidays:

       • Employees must be paid for public holidays falling on a working day. If they work on a public holiday, they must be paid at double the normal rate.

     • Notice of Termination:

       • 1 week notice for employment of less than a month.

       • 2 weeks notice for employment of less than a year.

       • 4 weeks notice for employment of 1 year or more.

     • Deductions:

       • Employers must deduct income tax and unemployment insurance contributions from employees’ wages.

       • Deductions for union fees and any other agreed amounts may also be made.

     • Employment Contract:

       • Must include:

         • Employer and employee’s names, addresses, and the workplace.

         • Date employment begins and job description.

         • Working hours, wage rates, overtime rates, and leave entitlements.

         • Period of notice required for termination.

         • Signed by both parties.

2. Employment Equity Act (EEA) - 1998

   • Aims to eliminate discrimination and promote fairness in employment by implementing affirmative action policies.

   • Seeks to address imbalances caused by apartheid-era policies.

   • Key Provisions:

     • Affirmative Action: Employers with 50 or more employees must develop specific plans to address racial, gender, and disability imbalances in their workforce. Plans must be monitored and submitted to government authorities.

     • Equal Opportunity: Prohibits discrimination based on race, gender, disability, and religion.

3. Broad-Based Black Economic Empowerment (BBBEE)

   • A policy that goes beyond the Employment Equity Act to promote the economic participation of historically disadvantaged groups.

   • Objective:

     • Encourage the integration of Black South Africans (including African, Indian, and Coloured people) into business management and ownership positions.

     • Ensure that businesses actively contribute to black economic empowerment.

   • Key Elements:

     • Ownership: Encouraging businesses to allow Black South Africans to own a meaningful share in those businesses.

     • Management: Promoting Black professionals into managerial roles.

     • Skills Development: Encouraging companies to train and develop skills in the Black workforce.

Entrepreneurship: The Role of the Entrepreneur

Entrepreneurship is the process of combining factors of production to create goods or services for profit. Entrepreneurs use their skills, vision, and resources to bring a business idea to life.

Who Can Be an Entrepreneur?

• By Choice: Motivated by a creative idea or a desire to be their own boss.

• By Necessity: Creating income due to lack of traditional job opportunities.

Characteristics of an Entrepreneur:

1. Creative:

   • Why it matters: Entrepreneurs need to come up with new ideas and innovative solutions.

   • Example: Creating a new product or service that addresses a gap in the market or improves upon existing offerings.

2. Passionate:

   • Why it matters: Passion drives entrepreneurs to push through challenges.

   • Example: An entrepreneur who is deeply invested in their business, working tirelessly to ensure its success.

3. Motivated:

   • Why it matters: Entrepreneurs are self-driven and don't need others to push them.

   • Example: Entrepreneurs put in the long hours and effort required to get their business off the ground, even when it seems difficult.

4. Optimistic:

   • Why it matters: Entrepreneurs need to remain hopeful and positive, focusing on opportunities rather than obstacles.

   • Example: An entrepreneur encountering a setback but viewing it as a learning opportunity to pivot or adjust their business model.

5. Future-Oriented:

   • Why it matters: Successful entrepreneurs are focused on the future, setting clear goals and striving to achieve them.

   • Example: An entrepreneur who plans for the next five years and works toward expanding their business into new markets.

6. Persuasive:

   • Why it matters: Entrepreneurs often need to convince others to believe in their ideas.

   • Example: Pitching an idea to investors, customers, or even potential business partners, using their persuasive skills to gain support.

7. Flexible:

   • Why it matters: Entrepreneurs need to be adaptable, adjusting to changing market conditions or customer needs.

   • Example: Learning new technology or changing business strategies based on customer feedback or shifting market demands.

8. Resourceful:

   • Why it matters: Entrepreneurs are good at making the most of available resources.

   • Example: Using limited capital in creative ways, or solving a complex problem with minimal resources.

9. Adventurous:

   • Why it matters: Entrepreneurship often involves taking calculated risks.

   • Example: Investing in a new business venture or launching a product in a new market, knowing the risks but believing in the potential rewards.

10. Decisive:

    • Why it matters: Entrepreneurs make quick decisions.

    • Example: Deciding on a critical business move (like pivoting the product) without hesitation when the opportunity presents itself.

Intrapreneurship: The Employee Entrepreneur

An intrapreneur is an employee who acts like an entrepreneur within an existing organization. They take on the innovative and entrepreneurial spirit of an entrepreneur, helping to create and drive new projects or innovations within a company.

Characteristics of an Intrapreneur:

1. Innovative: Creative thinkers and problem-solvers who introduce new ideas and improvements within the company.

2. Committed: Dedicated to the company's mission and goals, bringing a high level of energy and focus to their work.

3. Hard-working: Go the extra mile to make their ideas a reality, putting in significant effort to achieve success.

4. Energetic: Exhibit a strong drive and passion for the work they do.

Differences Between Entrepreneurs and Intrapreneurs:

Conclusion: The Role of Entrepreneurs and Intrapreneurs in the Economy

Entrepreneurs drive innovation, create jobs, and introduce new products and services. Intrapreneurs foster innovation within existing companies, ensuring they remain competitive and dynamic. Whether as an entrepreneur or an intrapreneur, these individuals contribute significantly to the economy.