Economic Sciences & Management Notes / Revision

1. The Poverty rap

A lack of resources makes it very difficult to escape from poverty. Education is a key factor in
development and reducing inequality. Good education provides access to good jobs and
enables career growth, while poor education leads to unemployment or low levels of income.
A lack of education and money make it very difficult to find a good job or start your own
business. If you are unskilled, you will get a job that pays badly and have a low income. If
your income is low, you cannot afford to get a better education, and so the poverty cycle
continues.

2. Education and skills training.

One way to break the poverty cycle is through education and skills
development. When people are empowered with knowledge and
education they are more equipped to participate in the economy. They
can find jobs or create their own employment. Likewise, when people
have knowledge and information they are less vulnerable to
exploitation, discrimination and social injustice. The government has
been trying to improve the standard of education and training in South
Africa in order to empower people to find employment and increase their
income. Schools and universities have been provided with resources to
improve the quality of teaching and learning. The government has also
revised the curriculum to ensure that people learn skills and knowledge
which will help them in the workplace. The government has also encouraged
businesses to invest money in ongoing training and development of their
employees. Some success has been achieved in this area but there are still
many people in South Africa who do not have the skills and education they
need to find work.

Activity 1 – Discuss the poverty cycle

1. Define the term ‘poverty’.
2. Explain what is meant by the ‘poverty cycle’.
3. The poverty cycle is often called the poverty trap. Can you explain why?
4. Explain how learning new skills could help people to escape the poverty trap.
5. Suggest how the government could help people to get out of the poverty trap.
3. Urban and rural challenges.

An urban area is an area where many people

live (i.e. it is densely populated).
Urban areas are built-up areas with many
houses, shops, offices, entertainment centres,
and public buildings. Urban areas have a well-
developed infrastructure (such as roads,
electricity, sewerage works and running water).

A rural area is an area where not very many

people live (it has a low population density).
Rural areas are not well developed or built
up and they have a great deal of open space.
They consist of natural countryside and
farming lands. Rural areas have a poorly
developed infrastructure (public services like
running water and electricity may not be well
provided).

The socio-economic challenges faced by

rural areas are different from those in urban
areas.

4. Socio-economic challenges in urban areas

There are many social and economic challenges presented by life in urban areas. Some
examples include:
• High cost of living: It is often very expensive to live in a city. Rent and accommodation are
costly and food is more expensive. This high cost of living in the city can create a large gap
between those who are wealthy and those who are poor. This can lead to slums developing
within and around cities, where poor people live.
• Pollution: Because cities are densely populated, there is a high level of economic activity
and many cars. Cities generally produce large amounts of waste that have to be gotten rid
of. All these characteristics of city life lead to pollution (air pollution, noise pollution and water
pollution).
• Influx of people. Many people come to cities looking for employment and entertainment.
This creates an influx of people that makes the cities more populated.
• Traffic congestion. There are many cars and other types of vehicles in cities. These
create traffic congestion and put strain on the road system. Transport within urban areas can
be a difficult problem to deal with.

5. Socio-economic challenges in rural areas

There are also many social and economic challenges in rural areas. These include:
• Lack of infrastructure. The infrastructure in rural areas is mostly underdeveloped. This
means that roads are often in bad shape or don’t exist at all. Services as electricity and
water are also not easy to access. One of the consequences of this is that some people in
rural areas have to spend quite a big part of their day collecting water and firewood.
This lack of infrastructure contributes to a lower standard of living in rural areas.
• Inadequate access to public services. Public goods and services (like schools, hospitals
and clinics) are not well provided for in rural areas. This means that it is difficult for people
living in rural areas to get healthcare and an education. People in rural areas often have to
travel long distances to visit a doctor or get to school.
• Lack of employment opportunities. Because there is a lack of economic activity in rural
areas, it is often difficult for people to find jobs there. Levels of unemployment are generally
much higher in the rural parts of South Africa.

Activity 2 - Identify the Socio-Economic Challenges in Rural and Urban Areas

1. Explain the difference between rural and urban areas.
2. Find a rural area picture.
3. Find an urban area picture.
4. Where do you live?
5. Urban socio-economic challenges.
6. Rural socio-economic challenges.

6. Creating sustainable job opportunities

Long-term unemployment is a problem for many people in South Africa. There are too many
people and too few jobs. Unemployment rates in South Africa are generally higher among
women, young people, disabled people and those without education and training.
Unemployment has become an economic and social problem. South Africa faces a big
challenge to create sustainable job opportunities. In Unit 3 you learned that education and
training are a good way to reduce unemployment. In this unit you will learn about the
strategies that can be used to create sustainable job opportunities.
Strategies to create sustainable job opportunities. There are a number of different strategies
that can be followed to create sustainable job opportunities. We will discuss a few of them
here.
Promoting entrepreneurship and new businesses. It is possible to create jobs and reduce
unemployment by encouraging people to become entrepreneurs. If people are encouraged
to start their own businesses, they not only create their own jobs but can also create jobs for
other people. As these businesses grow, they begin to create even more employment
opportunities. The government of a country can promote entrepreneurship by providing
training in business development and offering entrepreneurs on-going advice and support.
Making money available to entrepreneurs to cover their start-up costs is another way to
promote new businesses.
Stimulating business development. Another way to reduce unemployment is to encourage
existing businesses to grow and expand. When a business grows, it employs more people
and this creates new jobs. The government can encourage new business development by
making money available to existing businesses in the form of subsidies or loans to pay for
the costs of expanding the business.
Encouraging manufacturing. One way to create jobs in a country is to encourage
entrepreneurs to start manufacturing businesses. The advantage of a manufacturing
business is that it usually requires large numbers of workers, unlike service businesses
which generally only employ a few people. The government of a country can stimulate
manufacturing businesses by offering incentives and subsidies to entrepreneurs who are
engaged in making products.
Improving the infrastructure. It is easier to start a new business or expand an existing
business in an area where there is a good infrastructure. The success of any business
depends on factors such as: the quality of the roads, water and electricity supply, safety and
security and other basic forms of infrastructure. When these factors are absent, businesses
are more likely to fail. When they are present, it is easier for a business to flourish. So the
government can stimulate economic development by expanding the infrastructure in the
country and improving the quality of the infrastructure in areas where it is inadequate.

7. Topic Summaries

Unit 1 Causes of socio-economic imbalance

Socio-economic imbalance is a term used to describe a situation where people do not have
equal access to resources.
Socio-economic imbalances cause a large gap (inequality) between the wealthy and the
poor.
Economic inequality refers to the gap in levels of wealth and income between the rich and
the poor.
The main reason for economic inequality is differences in the wages and salaries that people
earn.
Social inequality refers to a situation in which certain groups of people do not have equal
social status, social class, or access to resources.
Social inequality is the result of prejudice, social attitudes and spiritual beliefs.

Unit 2 Inequality in South Africa

South Africa is a country where there are high levels of social and economic inequality.
One example of socio-economic inequality in South Africa is the level of poverty among the
different racial groups.
Poverty and unemployment are more common among black families in South Africa.
The high levels of socio-economic inequality in South Africa are mostly the result of a policy
called ‘Apartheid’, which was introduced as a law in South Africa in 1948.
Apartheid resulted in many laws and practices that discriminated against people on the basis
of their skin colour.
Apartheid was enforced to give white people in South Africa control over the economic
resources of the country.

Unit 3 Education and skills to fight inequality and injustice.

The poverty trap refers to a situation in which poor people do not have access to adequate
education.
Being uneducated means the people cannot get good jobs and this keeps them poor.
One way to escape the poverty trap is to get better education and skills training.
Good education and skills make it easier to avoid unemployment.

Unit 4 Urban and rural challenges.

An urban area is an area where many people live (it is densely populated).
A rural area is an area where not very many people live (it has a low population density).
The socio-economic challenges of urban areas include: high costs of living, pollution, influx
of people and traffic congestion.
The socio-economic challenges of rural areas include: lack of infrastructure, inadequate
access to public services and lack of employment opportunities.

Unit 5 Creating sustainable job opportunities

Many people in South Africa are unemployed.
Unemployment rates in South Africa are generally higher among women, young people,
disabled people and those without education and training.
Strategies to create employment include: Promoting entrepreneurship and new businesses,
Stimulating business development, Encouraging manufacturing, Improving the infrastructure.
8. Final Revision Questions

Topic 8 The entrepreneur

1. Describe in your own words what it means to be an entrepreneur.
(6)
2. List four characteristics of successful entrepreneurs. (8)
3. Think carefully about what skills are required to be a successful entrepreneur. Critically
evaluate yourself and discuss which of those skills you have and which of them you need to
develop. (8)
4. Entrepreneurs have to carry out four basic actions:
1. Buying; 2. Producing; 3. Selling; and 4. Making a profit. Explain
what is meant by each of these actions. (8)
Total [30]

Topic 9 Starting a business

1. Explain the difference between a need and a want. Give two examples
of each. (4)
2. The following businesses exist in town. Identify the products that they are selling and
whether they are satisfying a need or a want.
a) Smith and Jones Medical Practice
b) Petal Florists
c) Pip and Pack Grocery Stores
d) Smash Sporting Goods
e) Hillford Primary School
f) Sparkly Jewellers (12)
3. In South Africa it is law for businesses to make customers pay for plastic bags for their
shopping. Describe how this can help the environment. (5)
4. Businesses should draw up a SWOT analysis. Choose one of the following ideas and
prepare a SWOT analysis:
a) Your school
b) Your school tuck shop
c) Introducing a coffee shop for parents at your school
d) Introducing an ATM at your school (4)
5. Design a flyer for your business using the AIDA principles of advertising. (15)
6. Explain the difference between a variable and a fixed cost. Give an example of a fixed and
a variable cost from your business. (4)
Total [44]