Economic Growth and Economic Development

Economic Growth (EG) serves as an essential prerequisite for Economic Development (ED).
Economic Growth is defined as an increase in the total production of goods and services within a country over the duration of one year.
- Focuses specifically on the production levels and output capacity of a country.
- Measured primarily through Gross Domestic Product (GDP) and must always be measured and expressed in terms of Real GDP to account for price changes.
- Evaluated using macroeconomic indicators such as the unemployment rate, inflation rate, and investment rate to determine how well the broader economy is performing.
- Achieving high economic growth is a primary macroeconomic policy objective because it contributes directly to the overall material prosperity of the community.
Economic Development focuses on the overall well-being and standard of living of the population.
- Examines social standard metrics including housing quality, healthcare availability and access, and education standards.
- Measured using GDP per capita, which represents the average earnings per individual across the population:

$\text{GDP per Capita} = \frac{\text{GDP}}{\text{Population}}$

Evaluated through social indicators to determine how well society as a whole is performing rather than focusing solely on production totals.

Productivity represents the direct economic relationship between real output and one unit of factor input.
An increase in productivity is signaled under any of the following five conditions:
- Real output increases while input remains constant.
- Real output increases while input declines.
- Real output increases at a faster rate than input increases.
- Real output remains constant while input declines.
- Real output declines at a slower rate than input declines.

Labour Force:
- Economic growth is achieved when the ratio of the working population relative to the overall total population increases.
Land and Natural Resources:
- Absolute increases in physical land or natural resource availability are rarely possible.
- Economic growth is driven by reallocating existing land toward new uses that yield significantly higher economic returns (for example, shifting agricultural production from wheat to canola).
Capital Accumulation:
- Growth requires the pursuit of both capital widening and capital deepening.
- Production volume directly depends on a nation's existing Capital Stock (CKS).

Increasing capital equipment per worker generally raises individual productivity and overall national output.
Expanding the capital stock requires physical investment, which is fundamentally constrained by available national savings:

$S = I$

Technology refers to any technical instrument, technique, or practical method utilized to extend human capability.
Technological improvement occurs when innovation reveals new operational methods that allow a greater volume of goods and services to be produced using identical input levels (such as developments in cell phones, internet infrastructure, and modern computers).

Government policy must actively align with pre-set growth objectives, targeting strategic areas such as export expansion, tourism sector growth, and the enlargement of manufacturing industries.
Efficient public administration requires executing policy strategies in a manner that minimizes time waste, bureaucratic inconvenience, and operational costs.
Administrative dysfunction—including nepotism, corruption, and laziness—directly elevates transaction costs across the business sector, inhibiting growth.

Adequate national savings are required to finance investment projects.
South African national savings currently hover around $15\%$ of GDP, driven down by extremely low household savings rates.
To sustain an annual economic growth rate of $6\%$ , South Africa requires a national savings rate of $21\%$ of GDP.
South Africa's fixed investment rate must increase from its current level of $15\%$ up to $25\%$ of GDP to sustain a targeted annual economic growth rate of $5\%$ .

A high demand for highly skilled workers creates a severe structural constraint on overall national economic growth.
Primary and Secondary Schooling Infrastructure:
- School literacy and numeracy performance fall significantly below international standard benchmarks.
- A low proportion of school candidates qualify for higher education; only $20\%$ of candidates who passed the Senior Certificate examination achieved admission requirements for a bachelor's degree.
Vocational and Apprenticeship Training:
- In 2009, despite an increased number of candidates writing the learnership (apprenticeship) trade test, only $40\%$ achieved a passing grade.
- The total volume of trade qualifiers remains insufficient to satisfy wider industry needs.
Impact of the HIV/AIDS Epidemic:
- South Africa maintains one of the largest HIV-infected populations worldwide.
- Infections disproportionately affect individuals in their economically active working years.
- Infection reduces active workforce productivity, while mortality permanently destroys accumulated workplace knowledge and experience.
- Escalating medical treatment costs impose negative financial pressures on personal savings, tax revenues, and business profitability.

Attracting New Businesses:
- Expanding the business footprint creates direct employment, increases economic diversity, and stimulates local growth.
Building Community Capacity:
- Empowering individuals to develop personal skills allows local populations to maximize economic opportunities.
Expanding Local Markets:
- Local government authorities must promote regional products and broaden markets through targeted export promotion and local import substitution.
Adapting Outdated Facilities:
- Outdated or disused physical infrastructure should be transformed and adapted to serve active community needs.
Promoting Direct Investment:
- Governments must directly upgrade public infrastructure and build new operational facilities to stimulate job creation.
Sustainable Natural Resource Management:
- Natural resources must be managed efficiently and effectively to directly elevate the standard of living for local residents.

Adopted as the primary socio-economic policy framework to address historical economic inequalities and eradicate widespread poverty.
Focused key development initiatives on:
- Land reform implementation.
- Provision of housing, clean water, and adequate sanitation.
- Healthcare service delivery and improved access to basic education.
- Direct job creation and essential human infrastructure development.

Introduced in 1996 as the macro-economic replacement strategy for RDP to structure economic reform, formal sector real GDP growth, and market expansion.

Implemented to meet fundamental basic needs, construct water and sanitation infrastructure, generate temporary formal employment, and drive growth in the formal sector.