Economic and Management Sciences Grade 8 - Term 1: Business & Economy

The Economy: Government

  • A government is a group elected by citizens to govern in the best interests of the country, setting policies and laws.
  • In a democracy like South Africa, citizens over 18 can vote.
  • A dictator rules without being elected by the majority.
  • Democratic: A government elected by the people (with voting rights).
  • Dictator: A ruler who hasn't been voted into power.

Role of the Government

  • Creates policies and laws regarding citizens' rights, responsibilities, and government services.
  • Collects revenue through taxes.
  • Uses tax revenue to provide services and infrastructure, especially for the poor.
  • The South African Government uses parliament to debate laws to ensure they are in the citizen’s best interest.
  • A law is called a Bill before it is passed.

Levels of Government

  1. National Government: Highest level.
  2. Provincial Government: Middle level.
  3. Local Government (Municipalities): Lowest level.

The National Government

  • Consists of three branches:
    1. Legislative Branch
    2. Executive Branch
    3. Judicial Branch

1. Legislative Branch

  • Consists of Parliament, which debates laws.
  • Parliament includes the National Assembly and the National Council of Provinces.
  • Members of parliament create new laws, which are passed to the Executive Branch as bills.
  • A new law is called a bill before the Executive Branch passes it.

2. Executive Branch

  • Consists of the President and Cabinet Ministers.
  • Each minister is appointed by the President to head government departments.
  • The Executive Branch reviews and passes bills from Parliament.
  • The President appoints a leader of governance in the National Assembly.

3. Judicial Branch

  • An independent branch that ensures citizens follow the laws.

The Provincial Government

  • Second level of government.
  • In charge of the 9 provinces of South Africa.
  • A Premier leads each province and its departments.
  • The Premier is the leader of the winning political party in the provincial elections.
  • The Premier appoints Members of the Executive Council (MECs) to head each department.
  • MECs appoint Directors General, directors, and public servants.

The Local Government

  • Third level of government, also known as municipalities.
  • South Africa has three types of municipalities:
    1. Metropolitan Municipalities: Exist in the 8 largest cities.
    2. Local Municipalities: 231 areas outside the metropolitan municipalities.
    3. District Municipalities: Coordinate and comprise local municipalities; there are 46 districts.
  • Each municipality has wards represented by a ward councilor.

Definitions

  • Infrastructure: Basic physical structures like buildings, roads, power, and water supplies.
  • Debate: A formal public discussion with different arguments.
  • General Election: A day when representatives for the national government are voted for.
  • Wards: Areas into which a town or city is divided.

Roles of Different Government Levels

National Government

  • Makes policies and laws about people's rights, responsibilities, and service delivery.
  • Each Cabinet Minister heads a government department dealing with country-wide issues.

Government Departments

  • Agriculture and Forestry: Oversees and supports the agricultural sector; ensures food access.
  • Energy: Ensures accessible, affordable, and reliable energy; diversifies energy sources.
  • Social Development: Provides social services and welfare.
  • Arts and Culture: Promotes, supports, develops, and protects arts, culture, and heritage.
  • Health: Improves health through prevention and healthcare delivery.
  • Sports and Recreation: Improves sport and recreation access and development.
  • Basic Education: Oversees primary and secondary education.
  • Higher Education and Training: Supports post-school education and training.
  • State Security: Responsible for national safety.
  • Communications: Oversees communications, telecommunications, and broadcasting.
  • Justice and Constitutional Development: Upholds the Constitution and the rule of law; ensures justice.
  • Tourism: Promotes and develops tourism.
  • Correctional Services: Enforces sentences and detains prisoners.
  • Labor: Reduces unemployment and inequality through policies and programs.
  • Trade and Industry: Promotes industrial transformation and a competitive economy.
  • Defense: Oversees the South African National Defence Force.
  • Police: Oversees the South African Police Service.
  • Transport: Provides a safe and reliable transport system.
  • Economic Development: Coordinates economic development efforts.
  • Public Works: Provides property management services to other ministries.
  • Water and Environmental Affairs: Protects and conserves the environment.

Provincial Government

  • Departments managed by members of the Executive Council.
  • Fewer departments than the national government.

Local Government/Municipalities Responsibilities

  • Electricity supply
  • Water for household use
  • Sewage and sanitation
  • Storm water systems
  • Refuse removal
  • Fire-fighting services
  • Municipal health services
  • Decisions about land use
  • Municipal roads
  • Municipal public transport
  • Street Trading
  • Abattoirs and fresh produce markets
  • Parks and recreational areas
  • Libraries and other facilities
  • Local tourism

Government Budgets

  • The National Government prepares an annual budget showing income and expenditure.
  • The budget shows expected taxes from households.
  • Households pay income tax and value-added tax (VAT).
  • The budget also shows how the government intends to spend their income.
  • Tax money is used to manage government departments.

Government and Businesses

  • The government works with private businesses to provide goods and services.
  • State businesses are called parastatals (e.g., Transnet, Eskom, South African Airways).
  • Producers of essential goods and services may receive subsidies.
  • The government protects citizens and businesses through laws.

Laws Protecting Consumers and Producers

  • Employment Equity Act
  • Companies Act
  • Labour Relations Act

Definitions

  • Private Sector: The part of the economy not under direct government control.
  • Sustainably: Using resources without damaging them or using them all up.
  • Employment Equity Act: Ensures equal opportunity and fair treatment in the workplace.
  • Companies Act: Outlines different forms of ownership.
  • Labour Relations Act: Defines how labor disputes should be handled.

The National Budget

  • Announced each year in February.
  • The Department: National Treasury, with input from other ministers, draws up the National budget.
  • The Minister of Finance (Tito Mboweni) presents it to Parliament.
  • It outlines planned income and expenditure for the financial year.
  • The financial year runs from April 1 to March 31.
  • Parliament debates and approves the budget before implementation.
  • The budget shows how the state will influence the economy.

State Income and Expenditure Account

  • The main financial account for the state.
  • The government's budget begins with how much it needs to spend, then considers expected income.

Budget Calculations

  • Surplus: Revenue > Expenditure
  • Deficit: Revenue < Expenditure
  • Income more than expenditure = surplus
  • Income less than expenditure = deficit
  • The budget must show how the government will finance a deficit.
  • Local and foreign loans can help relieve a budget deficit.

Types of Government Revenue

  • Government revenue mainly comes from taxes.

Government Spending

  • Government spending uses revenue to serve the public.
  • Key spending priorities in South Africa’s 2019/2020 budget.

Classification of Government Spending

Government spending is classified into:

  1. Functional
  2. Administrative
  3. Financial
  • Functional: Based on the nature of the service provided. Social Services (education, housing, health), Economic Services (infrastructure), Security Services (Police, Defense).
  • Administrative: Spending placed with the responsible department (e.g., Department of Health, Department of Education).
  • Financial: Recorded in accounting terms, showing how the government will use its income to finance spending.

Definitions

  • Social Services: Education, housing, health services, and social development
  • Economic Services: Research or projects in which the government acts as the entrepreneur, e.g. building infrastructure and repayment of debt
  • Security Services: The police and defense services
  • Public Debt: Money that the government owes.
  • Bequests: Money and property in an estate.
  • Human settlements: Local housing.
  • Underscore growth: Focus on growth.
  • Informal settlements: Houses and settlements that are not part of the town/city plans.
  • Sustain: Ensure that it keeps happening.
  • Inflation: The general increase in the price of goods and services.