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The following module explain the four factors of production and indicate how each can be optimize for the benefit of the economy in general and review the latest profile of South African foreign trade (import and export) is there a need for a change of this profile.
What role the banking sector plays in an economy and how organization can contribute to effective realization of the banking sector and then describe consumer habit and behavior affect the raise and fall of the inflation rate.
Discus the 4 factors of production and indicate how each can be optimise for the benefit of the economy in general and within organization how will you optimise those assets that are in your disposal for improved organization performance
Economy demands for better product quality are impacting on the survival of the manufacturing industries. To help the industries survive we must looks at workability four factors which can optimise the production process.
Economy is impacting on good producers, and pressures from the reassertion have led to economic deficits for the country. As prices fall, the dilemma is compounded by demand from customers for better product quality, which results in unrecuperable production costs. These problems have led to economic reactions within the country in 2009, which has necessitated staff retrenchment, what does the future hold? Will the country survive? Of course it will, but without action there is no chance for it to grow.
1.2 The following are four factors of production to benefit the economy
Example of capital: machinery, factories, bridges, Roads.
Capital can be optimise by the following discussion to benefit the economy in general
Capital is the manufactured, artificial, or synthetic goods used in the production of other goods, including machinery, equipment, tools, and buildings.
Capital is the produced factor of production.
This factor must be produced using other factors of production, which means that society is often faced with the choice between producing consumption goods that satisfy wants and needs and capital goods that are used for future production.
Without capital, labor would do all production by hand; the key role of capital in the production process is to make labor more productive.
To reassess and improve capital organizations should undertake a four-step approach:
1 Uncover sources of uncertainty
Companies should begin by determining what new
and existing risks they face and how those risks will have an impact on demands on
2 Conduct a capital diagnostic
Companies can assess capital effectively by
analyzing data about their operations and benchmark to peers on percent of assets held
in cash, cost of capital, average receivable and payable periods, and the length of the
3 Reassess capital policy
Capital policy is a function of an organization’s business model and risk tolerance.
These are used to determine whether current risks allow for an aggressive, moderate
or conservative policy.
An organization must consider all scenarios in light of the business, customer base
and ability to finance current assets.
4 Optimize capital
Optimizing capital also is a function of the organization business model and risk
Opportunities to optimize capital exist in areas including cash and marketable
Land can be optimise by the following discussion to benefit the economy in general
Land is the naturally occurring materials of the planet that are used for the production of goods and services
The minerals and nutrients in the ground water wildlife and vegetation on the surface and the air above.
The natural resources and materials of the land become the goods produced.
With these materials of the land, there is production.
Production is the basic process of transforming naturally occurring materials that provide little satisfaction in their natural state, to goods and services that provide more satisfaction.
Policies and activities aimed at integrating economic principles with environmental concerns so as to simultaneously maintain or enhance production/services (Productivity),
reduce the level of production risk (Security), protect the potential of natural resources and prevent degradation of soil and water quality (Protection), be economically viable (Viability) and socially acceptable (Acceptability).”
Soil degradation control
Land management or land use should not damage the soil surface and affect soil nutrient levels, land improvement projects should not lead to soil losses and land degradation.
Land management or land use should save water resources and safeguard water for urban and rural areas, especially for the arid area and semiarid areas, land use should safeguard potable water resources for people and domestic animals.
Gas Emission control
Land management or land use should not produce harmful gasses and lead to gas pollution, land use plans should control such pollution Solid waste and harmful substance control, land management and land use must not increase the emission of solid wastes and harmful substances.
Sustainable land management must not destroy grassland.
The suitable land for agricultural use should be evaluated, marginal land cannot be cultivated fully and a certain proportion of the area should be planted to planted grasses, trees to form a green cover.
Labor can be optimise by the following discussion to benefit the economy in general.
Labor is the mental and physical efforts of humans, used for the production of goods and services.
Labor includes both the physical effort of workers and as well as the mental effort of executives and supervisors.
Workers are needed with the appropriate knowledge, skills and experience to make goods or service, to achieve the above the following must be provided
Safety and security
Innovative and creative
Enterprise can be optimise by the following discussion to benefit the economy in general.
Entrepreneurship is the special sort of human effort that takes on the risk of bringing labor, capital, and land together to produce goods.
Entrepreneurship is the factor that organizes the other three, without someone to organize production; the other three factors do NOT produce.
A key component of entrepreneurship is risk. This resource takes the risk of organizing production BEFORE anything is produced and with no guarantee that production will be successful.
Without risk the free enterprise system cannot function. Not all risks and challenges can be anticipated, but once identified.
They can be managed by lead entrepreneurs, executives, and boards working together. We all have some kind of belief that entrepreneurship is risky, but the facts are startling.
Question must be asked to optimize entrepreneur for the benefit of economy
How is the business world today? What is the window of opportunity for this venture? Include geopolitical threats, economic cycles, interest rates, and governmental regulations.
What about the venture team? How did they come together? Have they worked together before? Can they make through the growth stage, or will there be too many cooks in the kitchen?
How are the dynamics of this industry sector? Is there going to be room for growth in this market? What about the risks of other competitors?
Does the product work? What about some technology coming along in the future that will make this product/technology worthless like a buggy whip?
Is there a sustainable competitive advantage? Include sharing the risk with strategic alliances and finding the right operations strategy with a viable business model.
Can this venture or activity get funded now? What about later rounds of financing, when growth kicks in and it needs fed with cash?
Can the lead entrepreneurs truly commit? There are many sacrifices, as other priorities in life, like family, friends, and vacations that will have to come second.
1.3 Within the organization how will you optimize those assets that are in your disposal for improvement of organization performance?
Asset disposal is the process of disposing of used equipment such as PCs, printers, and servers in an effort to upgrade to a new system.
There are certain precautions that are necessary with asset disposal since the process can make an organization vulnerable to security risks pertaining to data.
Some of the security risks include the proper handling of sensitive data and legal compliance with the method of disposal of the equipment.
When considering IT asset disposal, organization effectively balances factors such as risk tolerance that is involved with disposing of secure data, the regulatory requirements associated with IT asset disposal.
The organization must consider the following factors:
Whether there are net disposal benefits, either in financial or other forms.
Whether there is secondary service obligations associated with the asset which dictates its retention.
Whether disposal be carried out without adverse impacts on the physical environment.
In assessing the benefits of disposal, the advantages and disadvantages for the whole business unit, not just the controlling Business Unit, must be considered.
Assets that have been identified as surplus may need to be retained due to heritage, social, environmental considerations or requirements of other Business Units.
The symbolic importance and the cultural significance of assets should be considered when assessing the disposal of the asset.
The organization should consider the advantages of engaging experts if their experience in disposal activities is infrequent or not core business to assist with the activities in the disposal cycle.
1.3.2 Optimization of assets disposal structure must be followed by organization
Dose not contribute to the organization
Contribute to organization
Unable to improve performance
Review the latest profile of South African foreign trade (import and export) is there a need for a change of this profile, what can individual and business organization do in order to achieve a profile that would enhance economic growth for South Africa
2.1 Current profile of South Africa trade
Type of Goods
Exports % Contribution to Total Export Earnings
Type of Goods
Imports % Contribution to Total Imports Bill
Machinery & Equip.
Iron & Steel
Plastic & Rubber Prod.
Machinery & Equip.
Base Metals & Prod.
Wood & Pulp
Edible Fruits & Nuts
Vehicles & Accessories
Paper & Paper Prod.
Need for a change of this S.A profile
The country has experienced a trade surplus over the years.
The important exportable items of the country include gold, coal mining and manufacturing. The exports partners of the country are UK, US, Japan, Germany, China and Italy.
Major importable items of the country are food, fuel and energy, and capital goods. The imports partners in the country are Germany, UK, US, Japan, Saudi Arabia and France.
Change we need to look to export and import to African countries because some of the country are developing
E.g. buying Trade Crude Oil = Gabon, Angola and Nigeria
South Africa export 22.0 percent of gold to foreign countries.
this need to be change because most of the gold mine is south Africa are closed down and retrench hundreds of employee this affect the south African economy.
South Africa export gold and other countries thy just buy and produce jewelries and sell back to South Africa with high price.
Vegetable Products (Farms)
The government must invest in the farming industry because South Africa only export 3.3 percent of product and when the petrol and oil price increase the most farmers are more affected and price of farm good become expensive.
Must find a way to export and import more than 3.3 percent for then not to be affected
South Africa has a two tiered economy; one rivaling other developed countries and the other with only the most basic infrastructure. It is therefore a productive and industrialized economy that exhibits many characteristics associated with developing countries, including a division of labour between formal and informal sectors and an uneven distribution of wealth and income. The primary sector, based on manufacturing, services, mining, and agriculture, is well developed.
Agriculture in South Africa
Unlike other African countries, South Africa’s agricultural sector is not dominated by subsistence farming, with most farms being large commercial, albeit family-owned, enterprises. The country is completely self-reliant and has more than enough output to export massive amounts of agricultural produce. Many other southern African countries rely on South Africa for maize imports.
Due to the country’s varied climate, many different crops are grown. The Western Cape province has the most varied and prolific agricultural sector. Wine has become a massive export, with South Africa now being the 5th largest producer worldwide.
Agriculture contributes less than 4% to GDP but accounts for 10% of total reported employment.
Trade and investment
South Africa has rich mineral resources. It is the world’s largest producer and exporter of gold and platinum and also exports a significant amount of coal. Another major export is diamonds. During 2000, platinum overtook gold as South Africa’s largest foreign exchange earner.
The country’s diverse manufacturing industry is a world leader in several specialized sectors, including railway rolling stock, synthetic fuels, and mining equipment and machinery.
South African exports in 2006
South Africa has made great progress in dismantling its old economic system, which was based on import substitution, high tariffs and subsidies, anticompetitive behaviour, and extensive government intervention in the economy.
The new leadership has moved to reduce the government’s role in the economy and to promote private sector investment and competition. It has significantly reduced tariffs and export subsidies, loosened exchange controls, cut the secondary tax on corporate dividends, and improved enforcement of intellectual property laws. A new competition law was passed and became effective on 1 September 1999. A U.S.-South Africa bilateral tax treaty went into effect on 1 January 1998, and a bilateral trade and investment framework agreement was signed in February 1999.
South Africa is a member of the World Trade Organization (WTO). U.S. products qualify for South Africa’s most-favoured-nation tariff rates.
South Africa also is an eligible country for the benefits under the African Growth and Opportunity Act (AGOA), and most of its products can enter the United States market duty free. South Africa has done away with most import permits except on used products and products regulated by international treaties. It also remains committed to the simplification and continued reduction of tariffs within the WTO framework and maintains active discussions with that body and its major trading partners.
Despite the numerous positive economic achievements since 1994, South Africa has struggled to attract significant Foreign Direct Investment. The situation may have started to change however, with 2005 seeing the largest single FDI into South Africa when Barclays bought a majority share in local bank Absa Group Limited. Deals between the British based Vodafone and South Africa’s Vodacom have taken place in 2006.
This need to change Human capital flight
There has been a large degree of human capital flight from South Africa in recent years. To quote the first of the preceding references:
South Africa has lost 25% of its graduates to the United States alone. Moreover, South Africans account for 9.7% of all international medical graduates practicing in Canada. Out of all the medical graduates produced by the University of Witwatersrand in the last 35 years, more than 45% (or 2,000 physicians), have left the country. South Africa’s Bureau of Statistics estimates that between 1 million and 1.6 million people in skilled, professional, and managerial occupations have emigrated since 1994 and that, for every emigrant, 10 unskilled people lose their jobs.
There are a range of causes cited for the migration of skilled South Africans. In mid 1998, the Southern African Migration Project (SAMP) undertook a study to examine and assess the range of factors that contribute to skilled South Africans’ desire to leave the country:
The electrical crisis
In 2007 the state-owned electricity supplier (Eskom) started experiencing a lack of capacity in the electrical generating and reticulation infrastructure. This led to an inability to meet the routine demands of industry and consumers, resulting in countrywide rolling blackouts. Initially the lack of capacity was triggered by a failure at Koeberg nuclear power station, but since then a general lack of capacity became evident. The supplier has been widely criticised for failing to adequately maintain existing power stations or plan for and construct sufficient electrical generating capacity.
What role the banking sector play in an economy and how can your organization your immediate team and your self do to contribute to effective realization of the banking sector.
3.1 FNB Public Sector Banking
FNB Public Sector Banking (PSB) offers South African municipalities a holistic banking partner, in order to assist them in improving their financial systems and processes, as well as providing value-added benefits to the entire municipal community.
PSB would like to not only strengthen our existing relationships with municipalities, but also extend our learning to those whom we do not currently service.
First National Bank (FNB) believes that municipalities have a key role to play in South Africa’s social and economic development, thus ensuring that everyone receives basic services.
Municipalities should be free to focus on attending to the needs of their constituents and for this reason we have developed a range of comprehensive solutions to take care of our municipalities’ unique financial and administrative needs…
Based on the requirements of the MFMA (Municipal Finance Management Act), we have identified the following solutions, amongst others, which are vital to municipalities and which our offering is designed to cater for:
A single point of contact for all dealings with the bank to simplify their financial transactions
Multiple operational accounts for the various functions the municipality is required to perform (However, the primary account is particularly important, as reports on this must be submitted to the Auditor General)
All revenue must be reflected in the account for ease of reconciliation
Appropriate and effective cash management solutions
Money that is not immediately required should be invested in order to optimise the funds available to the municipality
Local governments are no longer purely instruments of service delivery, but are also assigned a key role as agents of economic development.
Government’s commitment to assisting municipalities with poverty relief, primarily through the provision of free basic services to impoverished households, is made clear by substantial increases in the equitable share grant from R4,0 billion in 2002/03 to R6,3 billion in 2003/04 and R7,1 billion in 2004/05.
A municipality must strive (within its financial and administrative capacity) to:
Provide democratic and accountable government for local communities
Deliver services to communities in a sustainable manner
Promote social and economic development
Promote a safe and healthy environment
Involve communities in the matters of local government
Unemployment is one of the most important challenges facing the poor people in our country. This has been made worse by the fact that over the last two decades, the formal economy (especially mining) has been shedding jobs and many workers were retrenched. Furthermore, every year hundreds of thousands of new job seekers (the vast majority of them youth) join the army of unemployed.
In September 2004, a labour force survey showed that South Africa’s unemployment rate was pegged at 26.2%. This means that, of our country’s 15 million economically active South Africans, four million find themselves without a job.
Small businesses are big drivers of economic growth and employment – owner managed businesses contribute 50% of private sector employment and, as such, they should be viewed as a way of addressing the unemployment problem facing our country.
In South Africa, we have entrepreneurs who have big dreams; dreams that need finance in order to turn them into reality. We also have individuals and companies who can make this happen; individuals and companies who have the power to provide finance and much needed support.
As Texas billionaire Ross Perot once said: “Most new jobs won’t come from our biggest employers. They will come from our smallest. We’ve got to do everything we can to make entrepreneurial dreams a reality.
Gouws pointed out that South African business confidence is at historic levels. GDP keeps growing and consumer confidence is at record highs on the back of low interest rates. The economic environment is also showing a turnaround to fixed investment in social and economic infrastructure.
This form of investment will make it possible for private businesses to thrive, as more jobs are being created. As Gouws says, now is the time for small business development.
FNB has been helping South Africans since 1838, taking its inspiration from a rich South African heritage.
Helpfulness is at the heart of FNB’s brand promise to its stakeholders and personifies its customer service ethic with the catchphrase: “How can we help you?”
Mdu Bophela, who heads up Solutions for New Business at FNB, says that the bank is aware of the difficulties associated with starting a new enterprise and the risk for failure.
It is accepted worldwide that the development and growth of economy, Bank can play an important role in turning this situation around. Policies and programmes to support the development economy are therefore an important part of the democratic government’s programmes to create a better life.
The challenge we have set ourselves is to find a way of supporting them to succeed,” says Bophela. “Through offering business related resources, services, products and support, FNB Solutions for New Businesses aims to nurture and advance the longevity of small business ventures in South Africa.”
The bank offers assistance in the form of the establishment of a legal entity, such as off-the-shelf companies and close corporations, through to innovative financing offerings. These include FNB Leveraged Finance for viable businesses experiencing difficulty in raising capital and the Progress Fund to assist black South African youths between the ages of 18 and 35 who require finance to start up or expand their businesses.
To round this off, FNB offers mentorship services, business plan creator and cash flow projection toolkits with the help of Enterprise Support where you can access a matching service that links you to a national network of over 500 accredited, skilled and experienced mentors.
FNB also runs the Bionetwork entrepreneurs club that affords members quarterly events at Ster Kinekor cinemas nationwide, monthly regional networking events across the country, and a host of empowering knowledge and information through an extensive web portal and special offers.
3.3 Providing finance to emerging farmers
First National Bank Supply chain lending model among the obstacles that need to be overcome to transform the agricultural sector, access to finance is arguably one of the most fundamental.
In South Africa, financial institutions are developing original models and approaches towards the low-income, subsistence farming sector in order to help it grow and become not only self sufficient, but actually commercially productive.
When this approach is successful, the impact in terms of poverty relief can be remarkable according to the same World Bank report, GDP growth originating in agriculture is about four times effective in raising incomes of extremely poor people than GDP growth originating outside the sector.
This latest fact sheet on the financial sector will look at how First National Bank, one of the big four retail banks in South Africa, is encouraging development in the emerging
Agricultural sector, through an original supply chain lending model that helps to secure markets and outlets for emerging farmers, while managing to avoid some of the challenges faced by emerging farmers to of secure credit when they lack collateral.
FNB’s supply chain lending model is only one of many different solutions that banks and financial institutions in South Africa have been developing over the last decade or so, driven as much by regulatory imperatives as by their commercial interest.
How do consumer habit and behavior affect the raise and fall of the inflation rate, discus desirable consumer behavior in Micro and Macro economical performance is to be sustainable improve.
How do consumer habit and behavior affect the raise and fall of the inflation rate?
4.1 Consumer habit and behavior
Inflation rate is affected by the consumer behavior first.
Employees in the companies go on strike for weeks or months.
Production stops in the company and no supply to the stores.
Companies lose profit.
Mining industries close down and employee lose jobs
People borrow money from the banks.
Spend borrowed money on the luxury materials.
People can’t pay back their debts.
4.2 Effects after Consumer habit and behavior in the inflation rate
Rise in Production Costs
When production costs rise, producers – in order to stay in business – are forced to pass those higher costs to the consumers
An unfavorable current rand/dollar exchange
A price rise of a critical commodity such as oil
Each time salaries and wages are increased that potentially contributes to a higher inflation rate situation
If the demand for goods and services is at levels that suppliers are unwilling or unable to meet, then prices will increase.
Production levels not matching ever-increasing demand
Increase of households’ disposable incomes
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.
When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation is also erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy.
A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the Consumer Price Index) over time.
Inflation can have positive and negative effects on an economy.
Negative effects of inflation include a decrease in the real value of money and other monetary items over time; uncertainty about future inflation may discourage investment and saving, and high inflation may lead to shortages of goods if consumers begin hoarding out of concern that prices will increase in the future.
Positive effects include a mitigation of economic recessions and debt relief by reducing
HIV/AIDS has a tremendous impact on all sectors of the South Africa’s economy; this includes microeconomic and macroeconomic perspectives. A study on its economic impact singles out the following effects:
A decline in total labour supply
A decline in labour productivity resulting from HIV/AIDS-related morbidity
Increased production costs, prices, and a decline in aggregate demand, savings and investment
Increased household expenditure
Increased government expenditure
Discus desirable consumer behavior in Micro and Macro economical performance is to be sustainable improve.
Micro-economics is thus concerned with economic decisions which the individual consumer must make, while macro-economics deals with questions of broad economic arid social policy.
Micro level performance on macro economy there is a tendency to blame poor micro level organizational performance on external environmental factors in general and macroeconomic environment in particular.
The converse is that the cumulative performance of micro level organizations feeds into the strength or otherwise of the macro economy.
The macro economy will be as strong or as weak as its micro constituents will be microeconomic conditions are found to be highly important for corporate and country competitiveness and for economic development economic development.
As for the national business environment, business information availability, information infrastructure, demand conditions, domestic supplier quality, intellectual property protection, and absence of bribery all explain variations in GDP per capita more strongly t
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