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Econom
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Grad
Book
J. Bantjes • D. Kerdachi • A. Kriel • K. Mzolo
It is illegal to photocopy any pages from this book
without the written permission of the copyright holder.
EMS Today Grade 7
Learner’s Book
Maskew Miller Longman (Pty) Ltd
Forest Drive, Pinelands, Cape Town
website: www.mml.co.za
© Maskew Miller Longman (Pty) Ltd 2013
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted in any form or by any means, electronic, mechanical,
photocopying, recording, or otherwise, without the prior written permission of the
copyright holder.
Every effort has been made to trace the copyright holders of material produced in this
title. We would like to apologise for any infringement of copyright so caused, and
copyright holders are requested to contact the publishers in order to rectify the matter.
First published in 2013
ISBN 978-0-636-14014-1
Editor: Deanne Vorster
Cover photo: Sean Wilson
Cover design: MML Studio
Illustrator: Annelise Meyer
Photo acknowledgements
p. 1 MFfoto/bigstock; pp. 3 & 4 Cape Archive; p. 6 Mushakesa/bigstock; pp. 7 & 10
iStock; p. 11 rbird/bigstock; p. 13 a) Guy Stubbs/Independent Contributor/Africa
Media Online, b) marmion/bigstock, c) elenthewise/bigstock, d) nrhuboc/bigstock;
p. 21 iStock; p. 24 a) Jan van der Poll, b) nruboc/bigstock, c) mocker/bigstock, d)
Guy Stubbs/Independent Contributors/Africa Med; p. 30 jtinjaca/bigstock; p. 30 a)
b) c) jlye/bigstock; p. 32 Hroe/iStock; p. 35 Hans Lenherr/PictureNet Africa; p. 41
africa11/bigstock; p. 47 iStock; p. 54 Gallo Images – LKIS; p. 57 Yastremska/bigstock;
p. 59 Cecilia L/bigstock; p. 65 Andres/bigstock Photo; p. 68 Ken Hurst/bigstock; p. 74
Baloncici/bigstock; p. 77 Danie Nel/big stock Photo; p. 84 George Fairbairn/bigstock;
p. 88 a) aasimon/bigstock, b) Viktorus/bigstock, c) Elzbieta Sekowska/bigstock;
p. 90 Micky Wiswedel/iStock; p. 94 Jan van der Poll; p. 95 Mano Africa/iStock; p. 97
buketbariskan/bigstock; p. 100 Gallo images/Stuart Fox; p. 115 Gallo Images/Stuart Fox;
p. 118 a) Jan van der Poll, b) sonaye/iStock, c) Kakhimullin/iStock, d) David Pickett/
DIS; p. 125 a) GREATSTOCK/CORBIS, b) Crowman/iStock, c) Rapid Eye/iStock, d)
Izusek/iStock, IS2/bigstock; p. 128 Pryzmat/bigstock; p. 130 a) GREATSTOCK/CORBIS,
b) Kbrowne41/bigstock, c) Meunierd/bigstock; p. 131 Mattattak/bigstock; pp. 133 & 134
iStock; p. 136 a) Michael Jung/bigstock, b) Gallo images/Getty Images; p. 137 a) Nikky
Tok/bigstock, b) Jim Glab/bigstock, c) Jim Glab/bigstock; p. 139 a) Gallo, b) iStock;
p. 145 a) Chic Type/iStock, b) Shutter Worx/iStock, c) Izaokas Sapiro/iStock, d) Shkurd/
bigstock; p. 152 Radubalint/bigstock; p. 153 a) & b) AFP PHOTO/Anna Zieminski,
c) Danie Nel Photography CC/iStock; p. 155 Gallo Images; p. 159 Olga Miltsova/
bigstock; p. 160 Ricardo Azoury/iStock; p. 165 David Pickett/DIS; p. 169 a) nruboc/
bigstock, b) Kurhan/bigstock, c) nruboc/bigstock
Contents
Term 1
Topic 1
History of money . . . . . . . . . . . 1
Traditional societies and
bartering . . . . . . . . . . . . . 2
Unit 2 Money and electronic
banking . . . . . . . . . . . . . . 5
Unit 3 The role of money . . . . . . 9
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Unit 1
Topic 2
Needs and wants . . . . . . . . . . . 13
Unit 1
Unit 2
Types of needs . . . . . . . . 14
Primary and secondary
needs . . . . . . . . . . . . . . . 18
Unit 3: Limited resources to
satisfy needs and wants 21
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Topic 3
Goods and services . . . . . . . . 24
Unit 1
Unit 2
Unit 3
Unit 4
Goods and services . . . . 25
Producers and
consumers . . . . . . . . . . . 27
The role of households
as producers and
consumers . . . . . . . . . . . 28
Using goods and services
efficiently and
effectively . . . . . . . . . . . . 30
Unit 5
How to recycle and reuse
goods to satisfy needs
and wants . . . . . . . . . . . 32
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Topic 4
Businesses . . . . . . . . . . . . . . . . 35
Formal and informal
businesses . . . . . . . . . . . . 36
Unit 2 Types of businesses in
the formal and informal
sector . . . . . . . . . . . . . . . 40
Unit 3 The advantages and
disadvantages of formal
and informal businesses 42
Unit 4 The role of formal and
informal businesses as
producers and
consumers . . . . . . . . . . . 45
Unit 5 The effect of natural
disasters and health
epidemics on formal and
informal businesses . . . . 47
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Unit 1
Term 2
Term 1 Revision . . . . . . . . . . . . . . . . . . . . . . . . 51
Topic 5
Accounting concepts . . . . . . 54
Accounting concepts: capital,
assets and liabilities . . . . 55
Unit 2 Income and expenses . . 57
Unit 3 Profits and losses . . . . . . 58
Unit 4 Banking, savings and
budgets . . . . . . . . . . . . . 60
Unit 5 Financial records and
transactions . . . . . . . . . . 62
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Unit 1
Topic 6
Income and expenses . . . . . . 65
Unit 1
Personal income and
expenses . . . . . . . . . . . . . 66
Unit 2
Personal Statements of
Net Worth . . . . . . . . . . . 71
Unit 3 Business income and
expenses . . . . . . . . . . . . . 72
Unit 4 Savings and investments
in business . . . . . . . . . . . 74
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Topic 7
Budgets . . . . . . . . . . . . . . . . . . 77
Definition of a budget,
income and expenditure 78
Unit 2 Personal budgets . . . . . . 81
Unit 3 Business budgets . . . . . . 84
Unit 4 Savings, buying and
planning . . . . . . . . . . . . . 86
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Unit 1
Term 3
Term 2 Revision . . . . . . . . . . . . . . . . . . . . . . . . 87
Topic 10
Entrepreneurs’ Day . . . . . . . 115
Unit 1
Topic 8
The entrepreneur . . . . . . . . . 90
Unit 1
Definition of an
entrepreneur . . . . . . . . . 91
Unit 2 Characteristics and skills 93
Unit 3 Entrepreneurial actions . 96
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Hosting an Entrepreneurs’
Day . . . . . . . . . . . . . . . 116
Unit 2 Calculating your profit or
loss . . . . . . . . . . . . . . . 122
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Topic 11
Inequality and poverty . . . 125
Causes of socio-economic
imbalance . . . . . . . . . . . 126
Unit 2 Inequality in South
Africa . . . . . . . . . . . . . . 129
Unit 3 Education and skills to
fight inequality and
injustice . . . . . . . . . . . . 134
Unit 4 Urban and rural
challenges . . . . . . . . . . 136
Unit 5 Creating sustainable job
opportunities . . . . . . . . 139
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Unit 1
Topic 9
Starting a business . . . . . . . 100
Needs and wants of
consumers . . . . . . . . . . 101
Unit 2 Use of recycled
materials . . . . . . . . . . . 103
Unit 3 SWOT analysis . . . . . . . 104
Unit 4 Setting and achieving
goals . . . . . . . . . . . . . . . 105
Unit 5 Advertising . . . . . . . . . . 106
Unit 6 Budgeting for
Entrepreneurs’ Day . . . 108
Unit 7 Costing . . . . . . . . . . . . . 110
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Unit 1
Term 4
Term 3 Revision . . . . . . . . . . . . . . . . . . . . . . . 142
Topic 12
The production process . . . 145
What is production? . . 146
Inputs and outputs . . . 150
Sustainable use of
resources . . . . . . . . . . . 152
Unit 4 Meaning of economic
growth . . . . . . . . . . . . . 154
Unit 5 Productivity . . . . . . . . . 156
Unit 6 The effect of productivity
on economic growth . . 158
Unit 7 Technology in the
production process . . . 159
Unit 8 Contribution of technology
to improving productivity
and economic growth . 161
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Unit 1
Unit 2
Unit 3
Topic 13
Savings . . . . . . . . . . . . . . . . . . 165
Personal savings . . . . . . 166
Banks . . . . . . . . . . . . . . 168
Community savings
schemes . . . . . . . . . . . . 173
Unit 4 Financial institutions and
organisations promoting
entrepreneurship . . . . . 174
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
Term 4 Revision . . . . . . . . . . . . . . . . . . . . . . . 177
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
Unit 1
Unit 2
Unit 3
History of money
The economy
Topic 1
Topic overview
• Discuss how people trade in traditional
societies.
• Explain bartering.
• Discuss the development of money.
• Explain promissory notes.
• Discuss the development of coins and
paper money.
• Explain electronic banking.
• Explain the role and function of
money.
1
Topic 1 Unit 1
Unit 1 Traditional societies and bartering
key word
barter – trade
that takes place
without money;
goods and services
are exchanged for
one another
Today, when people buy something, they usually use money to pay for it. But
this has not always been the case. In traditional societies there was no money
as we know it. People did not use coins or paper money to buy the things they
needed. They had other ways of trading. In this unit you will learn more about
how traditional societies traded goods by bartering.
Traditional societies
A long time ago, people had to produce all the goods and services that they
needed. There were no markets and people did not trade. Therefore, there was
a very limited range of goods and services available. People’s standard of living
was low because they had to produce everything that they needed themselves.
This kind of society, where people produce all the things that they need, is
called a subsistence economy.
key words
With the passing of time, people in traditional societies realised that they
could have a greater number and range of goods if they specialised in the
production of only a few things. By focusing their efforts on the production
of something they were good at making they could produce a surplus. This
surplus could then be traded with other people. As a result of specialisation,
more goods were produced and a greater range of goods and services became
available to people.
subsistence economy – a way of living where people produce everything they need
themselves
specialise – to focus on one thing and become really good at it
surplus – more of something than is needed
Activity 1.1 Describe economic life in a traditional society
1.
2.
2
Suppose that you are part of an economy in which there are no markets,
no money and no trade. In this economy, individuals have to produce all
the goods and services they need or want.
Work with your partner and complete the following tasks:
a) Make a list of the goods and services you would choose to produce.
Explain why you chose to produce these goods and services.
(3)
b) Describe the problems that you would experience in this economy. (3)
c) Suggest ways in which these problems could be solved.
(2)
Unit 1 Topic 1
Soon markets began to develop where people could
bring the goods they had produced and trade
them with other people. There was no money to
shop with in those days. People had to trade by
exchanging goods with one another. This kind of
trading where goods are swapped and no money is
used is called bartering.
Bartering
When people barter, they exchange goods without
using money. People bartered because money had
Markets developed as a place where people could
not been invented yet. Although some people still
barter, people don’t often trade in this way anymore. bring their goods to trade with others.
Problems with bartering
Bartering is inefficient because, before trade can happen, each person must
want what the other person has, and must be willing to trade for it. This
makes trading complicated and time consuming. As a result of this problem,
money was invented to make trade easier.
key word
market – a place
where people
come together to
buy and sell goods
Barter is often regarded as an old-fashioned means of trading. Today, bartering
is seldom used because money makes trade much more efficient. For instance,
in an economy that has money, an apple farmer who needs shoes simply has
to find a shoe shop to buy shoes. In a barter economy, the apple farmer would
have to find not just a shoe producer, but one who happened to want apples
at a time when he wanted shoes.
Activity 1.2 Investigate the difficulties of bartering
1.
2.
3.
This activity will allow you to experience what life was like in an economy
that did not have money.
Imagine that you are a producer. You are going to trade with other
learners in your class so you will have to try to produce what the
consumers (the learners in your class) want. Decide what product (good)
you want to produce.
Once you have decided what product you want to produce, complete the
following tasks:
a) Divide a sheet of A4 paper into four equal pieces.
b) On each of the four pieces of paper draw a product that you know your
classmates would want to have. You must draw the same product on
all four pieces of paper. Ensure that the quality of your drawing is of a
high standard, otherwise no one might want your products.
3
Topic 1 Unit 1
c)
d)
You will be given a chance to advertise your product to the rest of the
class by telling everyone what you have made and explaining why
they should trade for this product.
Once you have seen what other learners have produced, decide what
products you would like to have. You will be given five minutes to
trade (by barter) to get the products you would like. You may need to
make many trades to get the products you want. Remember you do
not have to trade if you do not want to.
Did you know?
Even after money
was invented,
people still
continued to barter
with one another.
Portuguese sailors
were still trading
with the local
inhabitants of
KwaZulu-Natal at
the port of Durban
in the 15th century.
Activity 1.3 Describe your experience of bartering
1.
2.
4
Think about your experience in Activity 1.2.
Now answer the following questions on your own in your exercise book:
a) Why do individuals trade with one another?
(2)
b) Did everyone in your class get the products they wanted? Why not?
(2)
c) How many trades did it take to get the products you wanted? Why? (2)
d) Who benefited when you made a trade – you or the person you were
trading with?
(2)
e) What could be done to make trading easier in this game?
(2)
f) What happens if businesses make goods and services that consumers
don’t want to buy?
(3)
g) What happens to businesses that produce goods and services that
many consumers want?
(3)
h) In trade of this nature, who has more power – the consumer or the
producer?
(2)
i) Write a brief description of what life would be like in South Africa
today without money.
(3)
Unit 2 Topic 1
Unit 2 Money and electronic banking
In today’s modern economy we usually use money to buy the things we want.
Money, like fire and the wheel, has been around for a very long time, but as
you have learned there was a time when money did not exist. No one knows
exactly when money came into existence, although we do know that many
different items have served as money in the past. In this unit you will have the
opportunity to learn more about how money and banking developed.
Money makes it easier
to trade
The use of money allows for
indirect trade. In indirect trade,
individuals accept money for the
products they have produced and
then use the money to purchase
other goods and services. Money
makes trade much simpler and
faster.
key word
money − any object
(such as notes or
coins) that can
be exchanged for
goods or services
indirect trade –
trade that occurs
when money is
used to pay for
goods or services
Money is used to make trade easier.
The development of money
Many items, such as shells, tobacco and furs have been used as money in
the past. Cattle were often used to trade in the past and continue to be used,
not only in rituals and ceremonies, but also as a form of money. The practice
of measuring an individual’s wealth by the amount of cattle they have is
common throughout Africa. Precious metals, such as gold and silver, were also
used as money in many ancient societies and civilisations.
Different forms of money that were used in the past
5
Topic 1 Unit 2
Promissory Note
I, Jane Monroe, do promise to pay City Finance Co. the
sum of R50 000. Repayment is to be made in the form of
300 equal payments at 6% interest, or R322,15 payable on
the 1st of each month, beginning 8/1/2005 until the total
debt is satisfied.
Signed,
Jane Monroe
____________________
Promissory notes
A promissory note is a piece of paper on
which one person writes a promise to pay
the other person a certain sum of money at
some time in the future. It is like an ‘I owe
you’ given to someone as a promise to pay
them in the future.
The earliest forms of promissory notes
were first used in China as early as the 8th
century. There is also evidence to show that
An example of a promissory note
something similar to promissory notes were
used by Arab merchants between the 10th and 13th centuries. Since then,
key word
they have been used in most economies as a type of money that is issued by
promissory note − a
piece of paper on
a private individual. The idea of a promissory note developed into what we
which one person
know as paper money today. Promissory notes were the first type of paper
writes a promise
money that existed in history.
to pay the other
7/1/2005
____________________
person a certain
sum of money at
some time in the
future
Did you know?
The first money
issued in South
Africa was called
the rix dollar.
6
Coins
No one knows exactly when or where
the first coins were made. There is
evidence that coins were being used
in ancient Greece as early as 650 B.C.
Since then coins have been the most
commonly used form of money.
Coins have been used in South
Africa as a form of money since 1652
when Jan van Riebeeck founded
the settlement at the Cape. At that
time, Spanish coins (the basic coins
used in the Netherlands) were the
most commonly used coins in South
Africa. Other coins in circulation
Examples of some early coins
included copper doits (from
Banjarmasin in Indonesia) and Dutch
silver ducatoons. There were also many coins from India in use in South Africa
(including silver rupees, gold pagodas and mohurs). Other coins in circulation
included Japanese kobans, English guineas, Portuguese joannes as well as
Russian roubles.
Unit 2 Topic 1
Paper money
The first forms of paper money were used in China during the 7th century.
Later, paper money was introduced in the Mongol Empire and throughout
Europe and America. Since then paper money has been extensively used in all
countries of the world.
In 1782, paper money was introduced for the first time in the history of the
Cape Colony by the Dutch Governor Van Plettenberg. This early paper money
was issued in rix dollar and stiver denominations, the currency of the Cape at
that time. Because there was no printing press in the Cape at the time, all the
notes, until about 1803, had to be hand written and stamped with an official
government stamp. After 1803, all notes were printed.
Did you know?
In South Africa our money is called rand. The
rand has the symbol ‘R’ and is subdivided into
100 cents. We use the symbol ‘c’ for cents. Our
money takes its name from the Witwatersrand,
the ridge upon which Johannesburg is built and
where most of South Africa’s gold deposits were
found. The rand was introduced as the official
currency of the country in 1961. Before then the
British pound sterling was used as currency.
Activity 1.4 Use money to trade
1.
2.
3.
You are going to repeat Activity 1.2 using money as a medium of exchange.
Use an A4 sheet of paper and make ten R5 notes. Once you have made
your money and produced your products, you will be given five minutes
to trade. Try to make the best deals possible, using any combination of
goods or money. You can make as many trades as you want to but you do
not have to trade.
After the trading session is over, discuss the following questions as a class:
a) Did you get the goods you wanted? Why or why not?
(2)
b) Did using money make it easier or more difficult to make a trade? Why? (2)
c) When you made a trade or purchase, who benefited? How do you
know?
(2)
d) What could you do next time to ensure that you get the goods you
want?
(2)
7
Topic 1 Unit 2
Electronic banking
We are now moving into a period of history
where computer technology is changing the
way people spend their money and buy and sell
goods. Many people buy goods on the internet
and pay for them electronically without any
notes or coins being exchanged. This kind of
‘electronic money’ or ‘digital currency’ will be
the money of the future.
Today people can use their computers, cell
phones and iPads or tablets to do their banking.
Money can be transferred electronically and
Electronic and online banking has made it much easier
people can be paid electronically without going
for people to keep control of their money.
into a bank or standing in a queue waiting to
be served. This has made it much easier for people to keep control of their
money and conduct business.
Advantages and disadvantages of electronic banking
There are many advantages of electronic banking. These include:
• Electronic banking saves time since you do not need to go to a bank or
stand in long queues in order to carry out transactions.
• Electronic banking is convenient since it allows you to carry out your
banking at any time and from anywhere in the world.
• Electronic banking is efficient since transactions are processed much more
quickly through the use of computers.
The single biggest disadvantage of electronic banking is security. If someone
has access to your password and log in details it is possible for them to take
control of your money and to make payments from your bank account. For
this reason, if you make use of electronic banking, you have to make sure that
your personal information like your password, user name and pin number of
your bank account is kept in a safe place.
8
Unit 3 Topic 1
Unit 3 The role of money
When money is used to make trade easier it is known as a medium of
exchange. Using money as a medium of exchange makes trade more efficient
because it reduces the time and resources needed to find a trading partner.
Because trade takes place more easily and time is saved, producers are able
to spend more time on the actual production of goods and services. When
money is used as a medium of exchange in trade, producers can specialise in
what they produce. Specialisation in production leads to greater productivity
which in turn leads to the production of a greater quantity of goods and
services. Because a greater quantity of goods and services are available, there is
a higher standard of living.
key word
medium of
exchange – an
item that is
used to make
trade easier, for
example, notes
and coins; money
is a medium of
exchange
Characteristics of money
For money to be an effective medium of exchange, it should have certain
characteristics. These include:
• The item used as money should be relatively scarce. Items that can be easily
found or copied are not a good form of money.
• The item should be durable. Items that break or fall apart and lose their
form should not be used as money.
• The item should be portable. Items that cannot be easily carried around or
transported are not a good form of money.
• It should be possible to divide the item used as money into smaller parts.
Items that cannot be broken down into smaller units are not suitable as a
form of money because it is difficult to give people change.
We usually think of money as being notes and coins. However, money does
not only consist of notes and coins. Other means of payment that we use
include cheques, debit cards and credit cards.
key word
durable – lasts for
a long time and is
not easily broken
or used up
An example of a cheque
9
Topic 1 Unit 3
Activity 1.5 Discuss the characteristics of money
Working with a partner, discuss the answers to the following questions and
then individually write down the answers in your exercise book.
1. Copy and complete the following table, by deciding if these items possess
the four characteristics of money.
Is the item
relatively
scarce?
Is the item
durable?
Is the item
portable?
Can the item
be divided
into smaller
units?
Sand
Shells
Coins
Cheques
Notes
2.
(20)
Add an item of your choice to the bottom of the table. Assess whether the item
you have chosen would be a good form of money by completing the table. (4)
Current forms of money
key word
cheque − a written
instruction to a
bank ordering
them to pay a
certain sum of
money to the
person named on
the cheque
10
Money was originally a physical item, like gold and silver. It could even be
alive – as we have seen, cattle are one of the oldest forms of money. Today,
much of the money used by individuals is still in the form of notes and coins
but we also use other forms of
money. In the modern economy
the following forms of money
are used:
• Notes and coins. Many
payments are still made using
metallic coins and paper
money.
• Cheques. A cheque is a written
instruction to a bank ordering
them to pay a certain sum of
Notes changing hands
money to the person named on
the cheque. The money is paid from the bank account of the individual who
writes and signs the cheque.
• Digital money. We are now moving into a period of history where computer
technology is changing the way people spend their money and buy and
sell goods. Many people buy goods on the internet and pay for them
electronically without any notes or coins being exchanged. People also
Unit 3 Topic 1
settle debts by transferring money electronically from their bank account
into other people’s bank accounts. When payments are made in this way we
say that electronic money or digital money is being used.
• Bank cards. Bank cards can sometimes be
used to make payments and purchase goods
and services. Typically two kinds of bank
cards are used to make payments: credit
cards and debit cards. Credit cards are
cards issued by the bank which allow the
holder to borrow money in order to make
payments. Debit cards are cards issued by
the bank which allow the holder to use
money that they have already deposited in
Credit and debit cards are
the bank to make payments.
other forms of money.
Characteristics of bank cards
A bank card is a piece of plastic with particular dimensions (size and shape)
and characteristics. Bank cards are used to conduct electronic banking at ATMs
(automatic teller machines) and make payments.
key words
bank card – a
piece of plastic
with particular
characteristics
issued by a bank
which allows the
holder to make
payments and
conduct electronic
banking
credit card – a type
of bank card
which allows the
holder to borrow
money in order to
make payments
debit card – a type
of bank card
which allows the
holder to use
money that they
have already
deposited in the
bank to make
payments
Bank cards are a form of money. As such they have the following
characteristics of money:
• Bank cards are scarce. They have particular security features which prevent
people from copying them.
• Bank cards are durable. They do not easily fall apart or lose their form.
• Bank cards are portable. They can be easily carried around.
• Bank cards are divisible. They can be used to pay for goods of any price.
Bank cards usually show the following information:
• The name of the bank that issued the card.
• The identity of the card holder (their name) and signature.
• A unique card number.
• The date on which the card expires.
• A security feature (such as a magnetic strip or electronic chip) to ensure that
people do not make their own fake bank cards.
11
Summary
Unit 1 Traditional societies and bartering
• In early traditional societies there was no money or trade. People had to
produce or grow everything they needed.
• When people started to specialise in the production of items they were
good at making, they produced a surplus which could be traded.
• At first, trade took place by bartering.
• Bartering occurs when people swap goods without using money to trade.
• The problem with bartering is that it is a slow and difficult way to trade.
Unit 2 Money and electronic banking
• Money developed in order to make it easier for people to trade.
• Money enables indirect trade to occur.
• Many items, such as shells, tobacco and furs, have been used as money in
the past before coins and paper money were introduced.
• A promissory note is a piece of paper on which one person writes a promise
to pay another person a certain sum of money at some time in the future.
• Current forms of money include notes and coins, bank cards, cheques and
digital money (payment via the internet).
• Today people can use their cell phones and computers to do electronic
banking without having to go into a bank.
Unit 3 The role of money
• Money is anything that is used as a medium of exchange (that is, anything
that is used to enable trade to take place).
• Money has four important characteristics that make it a sustainable
medium of exchange: (1) it is scarce; (2) it is durable; (3) it is portable; (4) it
can be divided into smaller units.
• It is possible, that in the future, coins and banknotes will become as out of
date as cowrie shells and whales’ teeth.
12
Needs and wants
The economy
Topic 2
Topic overview
• Analyse the basic needs of individuals,
families, communities and countries.
• Discuss primary and secondary needs.
• Explain how needs are satisfied.
• Discuss the unlimited wants of
individuals and the problem of scarcity.
• Explain why resources are limited.
• Discuss the economic problem.
13
Topic 2 Unit 1
Unit 1 Types of needs
key words
need – something
you have to have
in order to stay
alive
want – something
you would like to
have but do not
need
There are many things that we need in order to stay alive. There are also many
things that we want that we don’t actually need, but they make our lives
better in some way. A need is something you have to have, something you
can’t do without. Water and food
are good examples of things that
needs
satisfy needs. If you do not eat
and drink you will not be able to
survive. A need is different from
a want. A want is something you
would like to have but it is not
necessary for your survival. Music
and cell phones are good examples
of things that satisfy wants. In this
wants
unit you will learn more about
basic needs of individuals, families,
The difference between needs and wants
communities and countries.
Basic needs of individuals and families
All individuals have certain basic needs that have to be satisfied in order for
them to survive. These basic needs include the need for food, water, shelter
and security.
Activity 2.1 Think about your basic needs
1.
2.
Imagine that you have no money and that you have to leave home and
live by yourself. Make a list of the ten most important things that you
would take with you.
(10)
Read through the lists of two of your class mates and then discuss the
following questions:
a) Are there some things that are on all your lists? What are they and
what do these things have in common?
(3)
b) What things do you have on your list that other learners don’t have?
(3)
Why did you put these things on your list?
c) Do you think it is possible to list all the things that you might need if
you left home? Why?
(2)
Individuals generally do not live alone. They live together in families and
other small groups. Living together in groups makes it easier for individuals
to satisfy their basic needs. In economics we call groups of people who live
14
Unit 1 Topic 2
together households. Sometimes households are made up of family members
and sometimes they are individuals who have decided to live together. The
basic needs of families and households are the same as those of individuals.
Families need food, water, shelter and security.
Activity 2.2 Investigate the basic needs of individuals
Imagine that you have been shipwrecked on the island of Lala. You have
nothing with you except the clothes that you are wearing, a copy of the map
on the right, and a wet matchbox with five matches in it. While exploring
the island to find out what resources are available, you
discover that:
• There are fruit and berries in the forest.
• There are fish in the sea that you can eat, but you need
to find ways to catch them.
• Goats run wild in the mountains and there are snakes
in the desert.
• It is hot in the daytime and cold at night.
• You can only drink the river water if you boil it first.
• There is very little chance of being rescued, so you will
probably have to live on the island for the rest of your life.
1. Imagine that you are the only survivor of the
shipwreck. Think of the things that you will have to do in order to
survive. Write down what you will do each day of the first week.
(7)
2. Now discuss and write a survival plan for a group of six. In your plan, you
must be sure to answer the questions below:
a) What are the first things you will do on the island? Which needs will
(3)
you satisfy by doing this?
b) What resources are on the island? Are any of them limited or scarce?
Can any of the resources be used for other purposes? If so, what can
(6)
they be used for?
c) What problems will limited resources lead to?
(2)
d) Do you think that your community will ever have everything that it
needs? Give reasons for your answer.
(2)
e) What have you learnt about using limited resources to meet
unlimited wants and needs?
(2)
Community needs
A community is a large group of people who live or work together in a
particular place. When people live or work together they have certain
collective needs. Examples of these collective community needs are:
key words
households – groups
of individuals
(such as family
members) who live
together
key words
community – a large
group of people
who live or work
together
collective –
belonging to
everyone
15
Topic 2 Unit 1
key words
public goods –
things that the
government
provides that
everyone in the
community uses,
for example a park
public services
– services that
the government
provides that
everyone in the
community needs,
for example water
and electricity
standard of living
– the level
of income,
wealth, comfort,
material goods
and necessities
available to a
person
the need to be protected from criminals
the need for education and training
the need for medical care
the need for entertainment, sport and recreation.
•
•
•
•
It is the responsibility of local and provincial government to meet the
collective needs of a community. Community needs and wants are satisfied
by the provision of public goods and services. Examples of public goods and
services are:
• street lights
• a police force
• roads
• buses and trains
• libraries
• hospitals
You will learn more about public goods and services in the next topic.
In some communities the standard of living is high because the community
is able to satisfy many of its needs. In other communities, where resources
are more limited and not many public goods and services are provided, the
standard of living is low.
Activity 2.3 Discuss community needs and how these are
satisfied
1.
2.
List five needs that your local community has today that you think people
in South Africa did not have 300 years ago. Discuss why these needs may
(5)
have changed.
Look at the pictures below and on the next page showing three different
communities in South Africa. Find the public goods and services provided
in each of the three communities. There are nine public goods and
services provided in community A, five in community B and only one in
community C. On your own, list the public goods and services provided
in each community in your exercise book.
(15)
A
16
Unit 1 Topic 2
B
C
Pictures showing three different communities
3.
4.
5.
Where does the government get the money to provide public goods and
(2)
services for all citizens?
Which public goods and services do you think are the most important
and why? Use your own ideas, as well as the things shown in the pictures,
to list ten public goods and services from the most important (1) to the
(5)
least important (10).
Are exactly the same public goods and services important in all
communities? If not, why not?
(3)
The needs of a country
Just as a community of people have certain needs, so too a country has needs.
For example, there is a need for law and order in a country. There is also a
need for protection from attacks or invasions from other countries.
The national government of a country is established to make sure that these
needs are satisfied. The government satisfies the country’s need for law
and order by setting up a legal system with laws, courts and prisons. The
government will also establish a defence force to protect the country from
external threats.
17
Topic 2 Unit 2
key words
primary needs −
our most basic
survival needs,
which include our
need for food and
water (physical
needs) and our
need for safety
(security needs)
secondary needs
− needs that
develop once
our basic primary
needs have been
satisfied (for
example, our
social needs and
self-esteem needs)
Unit 2
Primary and secondary needs
In Unit 1 you learned about the basic needs of individuals, families,
communities and the country. In this unit you will learn more about the
different kinds of needs that individuals have and how these can be classified
into primary and secondary needs.
Primary needs
Primary needs are our most basic survival needs. These are the things we have
to have in order to stay alive. There are two groups of primary needs: physical
needs and security needs.
Physical needs
Physical needs are the needs that our bodies have for food, water and sleep.
If these physical needs are not met our bodies cannot function properly.
Examples of physical needs are:
• the need for oxygen to breathe
• the need for food to eat
• the need for water to drink
• the need to sleep
• the need to be protected from the weather (the cold and the heat).
Security needs
The need to drink
water is an example of
a physical need.
People need to feel safe and secure. Examples of security
needs are:
• the need to feel that others will not hurt us
• the need to feel that our belongings will not be taken or
broken by others
• the need for structure, rules, law and order
• the need to know that we live and work in a safe
environment.
Physical and security needs are known as primary needs
because people usually try to satisfy these needs first.
The need to feel safe
is an example of a
security need.
Secondary needs
In addition to our primary survival needs, people have other needs such
as a need to belong and a need for social interaction. These are known as
secondary needs. There are two important groups of secondary needs: social
needs and self-esteem needs.
18
Unit 2 Topic 2
Social needs
People like to have friends and be part of a group. A person’s desire to be part
of a network of people is known as a social need. Examples of social needs are:
• the need to have friends
• the need to be part of a team or group
• the need to feel that we belong somewhere
• the need to give and receive love.
Self-esteem needs
Our self-esteem is the way we feel about ourselves. Individuals with a good
self-esteem believe that they are capable and worthy people. Individuals with a
poor self-esteem do not believe in their abilities and lack confidence. Our selfesteem needs are needs that must be met for us to feel good about ourselves.
Examples of self-esteem needs are:
• the need to achieve success
• the need to be good at something
• the need to feel that what we do is important and valuable
• the need to be recognised and feel that others respect us.
The need to have
friends is an example
of a social need.
Activity 2.4 Demonstrate understanding of primary and
secondary needs
1.
2.
Explain the difference between primary and secondary needs.
Copy and complete the following table in your exercise book.
Need
What type of need is this?
(4)
Order of importance
according to your needs
The need to be safe
The need to be loved
The need to be part of a
group
The need to achieve
success is an example
of a self-esteem
need.
The need for activity
The need to achieve success
(10)
How do people satisfy their needs?
One of the ways in which people satisfy their needs is by making or buying
goods and services. Goods are objects that we can see and touch. Examples of
goods are cars, clothes and houses. Services, on the other hand, are things we
cannot touch, such as education, medical care and rubbish removal. You will
learn more about goods and services in the next topic.
19
Topic 2 Unit 2
People produce or buy only those goods that they believe will satisfy their
needs. In the same way, producers only produce goods and services that they
know will meet people’s needs. In other words, the desire to satisfy people’s
needs and wants is the driving force behind all economic activity. People work
to make money to buy goods to satisfy their needs.
People’s unlimited wants
Human beings seem to have unlimited needs and wants. The moment one
need is satisfied, people develop a desire for something else. People are thus
driven to buy more and to have more. Getting and owning more and more is
one of the driving forces behind economic activity.
Activity 2.5 Demonstrate your understanding of the
different types of needs
1.
Look at each of the items in the pictures below and identify what kind of
need this item would satisfy:
a)
b)
c)
e)
f)
d)
(6)
20
Unit 3 Topic 2
Unit 3 Limited resources to satisfy needs and
wants
In Unit 2 you learned that individuals seem to have unlimited needs and
wants. However, the resources available to satisfy people’s needs and wants
are limited. In this unit you will learn more about how the problem of scarce
resources results in people having to make decisions about which needs to
satisfy and what goods and services to produce.
Resources are scarce
All the items that are used to produce goods and services are called resources.
There are many different kinds of resources, including:
• metals
• power
• land
• buildings
• crops
• supplies
• equipment
• animals
• transport
• water
• machinery
• labour
Can you add other resources to this list?
key words
resources – the
things we use to
produce goods
and services
scarce – only a small
or limited quantity
available
non-renewable
resources –
resources that can
run out and can’t
be replaced
renewable resources
– resources that
can be replaced
and will never run
out
Resources are often limited or scarce. Because there is a limited quantity of
resources available we cannot always satisfy all our needs. We call resources
which will run out completely one day non-renewable resources. Oil, for
example, is a non-renewable resource. Some resources won’t
run out because we are able to make more, or because nature
replaces the supply. There is always heat and light from the
sun for us to use, for example, and we can grow more trees
to produce wood and paper. These are called renewable
resources. Resources are not only scarce, they are also unevenly
distributed. For example, some areas are rich in natural
resources, while other areas have hardly any natural resources.
This uneven distribution of resources leads to some places in
the world being very rich while others are very poor.
Another important characteristic of resources is that most
resources can have many different uses. Water, for example, can
be used for drinking, washing or for irrigating crops.
Because resources are limited, we have to choose how best to
use them. We have to be careful how we use the resources we
have so that we can continue to satisfy our needs and wants.
Water is a limited resource that can be
used for drinking and washing.
21
Topic 2 Unit 3
Activity 2.6 Demonstrate your understanding of the
characteristics of resources
1.
2.
3.
4.
5.
key words
economic problem
– having unlimited
needs and wants
but limited
resources to satisfy
them
scarcity – not
enough of
something
economics – the
study of needs
and how to satisfy
them
List five limited resources.
(5)
(4)
List four ways in which each of these limited resources is used.
Write a paragraph about how we can use each of these limited resources so
that they don’t run out.
(4)
List as many examples of renewable resources as you can.
(5)
Can we use any of these renewable resources instead of the limited
resources? Explain.
(2)
The economic problem
The economic problem which we all face is that
we have unlimited needs and wants but limited
resources to satisfy them. This problem of scarcity
is known as the economic problem. Because it is
impossible to meet all of our needs and wants, we
have to choose which ones we will be able to satisfy.
Economics is the study of how people decide which
needs to satisfy and how to satisfy these needs.
The problem of scarcity
is also the economic
problem.
22
Summary
Unit 1 Types of needs
• A need is something you can’t do without if you want to survive.
• A want is something you would like to have, but it is not necessary for your
survival.
• The basic survival needs of an individual include: the need for food, water,
shelter and security.
• Groups of individuals who live together are known as households.
• A community is a large group of people who live or work together in a
particular place.
• Communities have collective needs such as the need for roads and
education.
• Collective needs are met through the provision of public goods and
services.
• The needs of a country are met by the national government.
Unit 2 Primary and secondary needs
• Primary needs are our most basic survival needs.
• There are two types of primary needs:
° physical needs
° security needs.
• Secondary needs are those things that we would like to have but that are
not essential for our survival.
• There are two types of secondary needs:
° social needs
° self-esteem needs.
• People purchase goods and services to satisfy their needs.
• People seem to have unlimited needs and wants – the moment one need is
satisfied they develop a desire for something else.
Unit 3 Limited resources to satisfy needs and wants
• Resources are those things that we use to produce goods and services.
• Resources are limited.
• Because resources are scarce, we cannot satisfy all our needs and have to
then decide which goods and service to produce and purchase.
• The economic problem is also known as the scarcity problem.
• The economic problem is a result of the fact that people have unlimited
needs and wants while the resources available to satisfy these needs and
wants are limited.
23
Goods and services
The economy
Topic 3
Topic overview
•
•
•
•
Describe what goods and services are.
List examples of goods and services.
Identify who produces goods and services.
Identify who consumes goods and
services.
• Examine the role of the household as a
producer.
• Explain the role of the household as
consumer.
24
• Explain why efficient production of
goods and services is important.
• Explain why efficient use of goods and
services is important.
• Explain why effective production of
goods and services is important.
• Explain why effective use of goods and
services is important.
• Explain how to reuse and recycle goods
in the home.
Unit 1 Topic 3
Unit 1 Goods and services
What are goods and services?
Goods and services are the things people consume in order to satisfy their
needs and wants. Individuals satisfy their needs by making or buying goods
and services. People and businesses need money to buy the things that will
satisfy their needs and wants. An individual or a business that buys goods and
services is called a consumer. Another word for goods is products.
This topic will look at why goods are made, what services are for sale, and who
provides and uses goods and services.
Everything that people need or want is made by people. For example, a
bricklayer builds a house, and organisations, such
as an oil refinery, produce petrol. When households
make the things they need, for example, bake their
own bread, they can save money by not going out
and buying a loaf of bread. However, households
cannot make everything they need or want.
key words
goods – things that
we consume
services – work done
for the benefit of
another
consume – to use up
or finish
consumer – a person
or business that
consumes
For those things that a family needs or wants, that
they cannot make for themselves, they need money.
To get money, you need to work and sometimes you
need to save to be able to buy a certain item. Not all
needs can be satisfied; sometimes alternative needs
have to be satisfied. At other times a need or want
will not be satisfied at all.
Some needs that people have are a major concern
for the government, for example, the delivery of
water to households. A renewable resource like
Water is a need.
water is both a good and a service. When water is
a need, it is a good and when government delivers
it to your house, it is a service. Water has to be collected, stored and treated
before it can be delivered to households for drinking, cooking and washing.
Goods
Goods are the things that we can see and touch, like bread or a pair of shoes.
The things (goods) that people need and want are made by:
• people or individuals
• households
• companies, by factory workers
• government agencies.
key words
government agency
– an organisation
like Umgeni
Water, that
supplies water to
the people who
live and work in
Durban; or Eskom,
that generates
electricity and
delivers it to
the homes and
factories of
Southern Africa
25
Topic 3 Unit 1
Services
Services are generally things that we cannot see or touch. Services help people
live better lives and can be to the benefit of the individual or the community.
Small businesses such as a hair salon provide a service cutting people’s
hair, while large organisations such as universities and hospitals provide
educational and medical services. Services such as electricity supply or garbage
removal are services that will benefit the whole community.
Generally individuals and businesses produce goods and services so that they
can make a profit from their sales. They use these profits to make their businesses
grow by opening more shops and then make bigger profits in the future.
Examples of goods and services
Examples of goods are cars and busses that transport people, clothes and
houses that protect and shelter people and the food that we eat.
Examples of goods
Services, on the other hand, are
things which we cannot touch,
such as education, medical care and
rubbish removal.
Education is a service.
Activity 3.1 Identify goods and services that satisfy needs
and wants
1.
2.
3.
4.
5.
26
Bring a few old magazines and newspapers to class.
Cut out five pictures that show goods that you would purchase that would
satisfy a need or want.
(5)
Name the good and what need or want is satisfied when you use it.
(10)
Find three pictures or adverts from the magazine that show a service to
(3)
the people of a community.
Say what type of service it is. What need or want is satisfied when people
(2)
buy and consume these services?
Unit 2 Topic 3
Unit 2 Producers and consumers
Producers and consumers
A producer is the person, household, business or government agency that
finds out what people need or want. They will then design and manufacture
a product or service to satisfy this need. For example, the development of
social media, like Facebook, Twitter, Skype and even e-mail, has seen cellular
telephone manufacturers improve cell phones. Things that we could only do
on computers before, can now easily be done on cell phones and tablets.
key word
producers – people
or organisations
who make or
develop goods
and/or services
Products and services change and develop as people change and develop.
Mxit has been replaced with BBM and WhatsApp as the main methods of text
communication. A business makes items that they think people will need, and
then tries to sell as many as they can to grow their profit. The more popular
their product is, the more they will sell. The desire to satisfy people’s needs
and wants is the driving force behind economic activity. People work to make
money, to buy goods and to satisfy their needs.
A consumer uses the goods and services that
have been made by the producers. This means
that individuals, households, companies and
government agencies are all consumers. They are all
interdependent on one another as they compete with
each other for the limited resources available. For
example, a baker produces fresh bread, but consumes
water and electricity that the government agencies
provide.
When the government plans for the future water
needs of a community it is the supplier. But before
it can become a supplier, the government will be a
A baker is producer of bread but also a consumer
consumer. For example:
of water and electricity that the government
• They employ geologists and surveyors to find the
provides.
best place to build a new dam. Then government
must decide where the water will be purified, so that it is clean enough for
the people to drink.
• Engineers will be employed to design the dam, reservoirs and pipelines
needed to transport the water from the dam to the purification plant and
then on to the homes and businesses for people to use.
• Builders and labourers will be employed and materials will be bought.
To be a producer and supplier of goods (water) and services (the delivery of
the water to our homes), the government agency must first be a consumer of
goods (building materials) and services too (survey and engineering services).
27
Topic 3 Unit 3
Unit 3 The role of households as producers and
consumers
key words
entrepreneurs –
people with skills
that start their
own businesses
operating costs –
costs of running a
business
The role of a household as a producer
There are people who do not want to work for other people but rather want
to be their own boss. Entrepreneurs such as electricians or architects, who
start their own businesses, will often start their business from home. This will
keep the operating costs down. These people will produce goods: the architect
draws up building plans and the electrician repairs electrical appliances or does
home electrical installations.
Many people lose their jobs when factories close down. Factories close
down when local businesses start importing goods such as clothes from
China. Businesses import goods because labour could be cheaper in other
countries and this makes the imported products cheaper than the local ones.
Unemployed South Africans can, however, use the skills they developed in
their previous jobs to provide goods and services to their communities from
home, for example, dressmakers.
Activity 3.2 Study local businesses that are run from home
1.
Walk around your neighbourhood and record the number of different
businesses that operate out of homes.
(2)
a) List the different types of businesses you see.
b) Note whether the business sells a product or a service.
(2)
c) Describe the business that looks the most profitable. Give a reason
for your answer.
(2)
d) Does anyone in your family run a business from home? Describe
the business.
(2)
The role of a household as a consumer
Households must first satisfy their basic survival needs by buying food,
clothing and shelter. Once these lower order needs are satisfied, households
will consume goods that will satisfy higher order needs and wants. When
a household has enough water, food, clothing, and shelter, they will start
consuming other products. For example, they will protect their family by
fencing their homes and buy goods such as TVs and DVDs for entertainment.
28
Unit 3 Topic 3
Activity 3.3 Examine the cost of a basic need
The Constitution says that everyone must have access to basic goods
and services. Water is a basic necessity, so big cities in South Africa like
Johannesburg, Durban or Cape town gives all families 300 litres of free water
per day. This is called the water grant.
1. Study the municipal account for a resident below and answer the
following questions about the water used by this family in one month.
REFERENCE
ACCOUNT DETAILS
1896.02
1896.02CR
ELECTRICITY ACCOUNT
====================
FOR METER READING QUERIES, PHONE (011) 649 5864
–--------------------------------SCALE 004 – RESIDENTIAL
METER NBR. 2669994S – ESTIMATED CONSUMPTION
FROM 16 JAN 2012 TO 20 FEB 2012
1610 kWh
BASIC WATER AND SEWAGE DISPOSAL ACCOUNT
==========================================
ALL RELATED QUERIES: PHONE 080 13131013
WATER METER 3415376
READING 06JAN 06FEB
4680
4698
300 1/Day*31 Days
9.3kls
@
0.00 =
> 300 /Day
8.7kls
@
9.97 =
----------Totals
18.0kls
06FEB
DOMESTIC REFUSE REMOVAL - FEBRUARY
MONTHLY RATES - FEBRUARY INSTALLMENT
a)
b)
c)
d)
e)
f)
g)
constitution – all the
laws governing a
country
grant – an allowance
which means that
no payment is
required
AMOUNT
BALANCE BROUGHT FORWARD
PAYMENT – THANK YOU
WATER FIXED CHARGE 06JAN
key words
18kl
0.00
86.74
---------86.74
*
1508.73
*
86.74
*
92.70
*
60.67
476.17
VAT RAISED ON ITEMS ‘*’
224.83
DIRECT DEBIT PAYMENT DUE ON 2012-03-15
2469.84
January has 31 days. How many free kilolitres of water did this family
get in January?
(1)
If a household uses more than the free water grant in a month then
they must pay a fixed cost for the water supply. What is the fixed
water cost this family must pay?
(1)
What is the cost of the water per kilolitre charged by this
municipality for the extra water used?
(1)
What was the total amount of water used by this family in January? (1)
What was the cost of this water?
(1)
(1)
What was the total cost for the water used by this family?
Do businesses receive a water grant?
(1)
29
Topic 3 Unit 4
Unit 4 Using goods and services efficiently and
effectively
The choices producers and consumers make will influence the efficient and
effective use of goods and services. For example, producers need to decide:
• who to employ
• who to promote
• how many items to produce
• who to buy raw materials from
• when to replace machinery.
As consumers we need to decide:
• what to eat for breakfast
• what clothes to wear each day
• whether to do our homework or go out and play football or netball.
As consumers we have many choices.
key words
effectively –
choosing the best
option to get
what you need at
the best price at
the right time
efficiently – getting
the best results
from what is
available with
the least possible
waste in time and
materials
30
A business will try to make as much profit as possible, by getting the best price
for the material that they need to make goods. They will also try to get the
best price for the goods they sell. Businesses must be aware that there is a lot
of competition for consumers’ money. If they do not buy their materials at the
best price and keep wastage to a minimum or if they charge too much for the
goods that they sell, the business could fail.
To keep the business profitable, producers must be effective when they buy the
goods and services they need or want. As a consumer, the business must compare
prices to make sure they get the most for their money. Businesses must efficiently
use the goods or services they have paid for as consumers and producers.
Unit 4 Topic 3
To be effective and efficient, the business must decide on the best option to:
• buy material
• employ staff
• determine how much to produce
• determine the timing of production.
As businesses are always competing for resources in production and market
share in sales, the business’ profitability will depend on how successful these
choices were.
Families can also be consumers or producers, so they can also benefit or suffer
hardship as a result of inefficient decision making and ineffective use of
resources. People buy things that they think will give them the most benefit.
Sometimes people choose things they see advertised without really checking if
it is the best thing for them to buy and consume. Some families spend money
on cigarettes and lotto tickets rather than buying fruit, vegetables and books.
key words
market share – the
part of the market
in which you sell
your goods and
services
Activity 3.4 Investigate how you would spend pocket
money if you had any
Think about how you would spend your pocket money if you had any.
Imagine that you receive R150 a month and then answer the questions.
1. How often do you get pocket money? Daily, weekly or monthly?
2. What do you buy with the money you have?
3. a) Do you use your money effectively and efficiently when you buy the
items you want?
b) Think about one of the things that you buy. Is there an alternative
item that you can buy that will be a more effective and efficient way
of spending your money?
4. After you have spent all your pocket money, do you wish you had bought
something else? Explain your answer.
5. Did you save some of your birthday money? Explain your answer.
31
Topic 3 Unit 5
Unit 5 How to recycle and reuse goods to
satisfy needs and wants
It is important that businesses and consumers recycle and reuse goods.
How to recycle and reuse
We do not always need to spend our money buying new items to satisfy our
needs and wants. We can recycle and reuse waste items, for example, plastic
containers for milk or dishwashing liquid that are reused to manufacture
rubbish bins and garden furniture. The new material made from the recycled
plastic is called polywood.
We often talk about the three Rs: reduce, reuse and recycle. This simply
means that we are trying to be efficient and effective with the things we use.
An example of a large landfill site. Many of the articles here could have been reused or
recycled.
• Reuse – Efficient use of our goods means we can often reuse a product
many times if we use it carefully. Clothes worn by an older child can be
cared for so that younger brothers and sisters will be able to use those same
clothes in future.
• Reduce – People can reduce how much of something they use. This will help
to reduce waste and the cost of waste removal. It will also prolong the life of
the landfill site and protect the environment. For example, taking a shower
rather than a bath can save water, as well as electricity, as less hot water is used.
• Recycle – Throwing garbage into the bin is just one way of keeping our
environment clean. We can do a lot more for our community if we sort our
waste and recycle wherever possible. Items such as paper, glass and scrap
metal can all be taken to recyclers who will pay you for this waste.
32
Unit 5 Topic 3
The recycling logo uses the three arrows for reduce, reuse and recycle as a
reminder that we need to be more careful how we use things and how much
we use. But there are many other words starting with ‘r’ that can help us save
more and not throw so much away.
• Return – Buying goods in returnable containers means that we reduce the
packaging costs for the product. The 1.5 l glass cool drink bottle is a good
example of a returnable container. This makes the actual product being
consumed cheaper.
• Re-engineer – Goods that could quite easily be repaired are often thrown
away. For example, an old pair of denim jeans can be stitched, patched or
even reused in a new way as shorts. They could also be converted into a
sling bag for school.
By using other people’s waste items, unemployed people can make a living for
themselves and their families. Goods such as cars made from wire or suitcases
made from old oil cans can be sold to tourists for an income. By re-engineering
an old bicycle light dynamo a young entrepreneur made a cell phone charger
that he uses while riding his bicycle.
Activity 3.5 How you can reduce, reuse and
recycle in your home
1.
2.
Think of three other verbs starting with ‘re’ that can help us
reuse items at home.
(3)
Use one of the new verbs you chose in 1 and explain how
you can do this to save resources for your family, business or
government agency. Use your imagination.
(2)
Did you know?
Recycling one ton (1 000 kg) of paper will save:
• 15 trees from being chopped down – important for oxygen generation
• 2.5 barrels of oil – not having to transport the logs to the paper factory and the
paper to the shops
• 4132 kWh of electricity – to power the production process to change the wood logs
into pulp and then paper
• 2.26 m³ of landfill space after we have used the paper and thrown it away
• 142 188 l of water from the paper making and bleaching process
• 26.8 kg of air pollution from being emitted from the paper factory.
Adapted from The Green Line, ISBN 978-0-7993-4955-9
33
Summary
Unit 1 Goods and services
• Goods and services are both produced and
consumed by individuals, households,
companies and government agencies to
satisfy their needs and wants.
• Goods are things we can touch and use like
bread or a bicycle to satisfy a need or want.
• Services cannot be touched but can help
people, for example, a good education can
help a person get a good job.
Unit 2 Producers and consumers
• Entrepreneurs and businesses grow when
they know what people and businesses in
the country/community need or want.
• They can then design a product or service
to satisfy that need. When this product
is manufactured and sold the successful
organisation is able to make a profit. This
allows the business to grow.
• When manufacturing these goods and
services, the business becomes a consumer
of raw materials and services.
Unit 3 The role of households as
producers and consumers
• Like any business or government agency,
the household can be both a producer of
goods and services, as well as a consumer.
• To save money, members of a household
will make things that can help satisfy their
needs and wants.
34
• There are some things that households
cannot make for themselves and these
things need to be bought when resources
allow, for example, a motor car.
Unit 4 Using goods and services
efficiently and effectively
• Efficiency and effectiveness are key
managerial concepts. Whether managing a
business, factory or household, we always
have to choose what we will consume. As
consumer or producer these choices will
determine whether needs and wants are
successfully satisfied or not.
Unit 5 How to recycle and reuse
goods to satisfy needs and
wants
• Needs and wants can be satisfied by reusing
old goods in new ways. This also saves
money by reducing consumption.
• Recycling reduces waste that is usually
dumped in a landfill site and will help
preserve the natural environment.
• There are also many other ‘re’ verbs that
describe how we can be more efficient and
effective in the way we consume products
and services to satisfy our needs and wants.
Businesses
Entrepreneurship
Topic 4
Topic overview
• Differentiate between manufacturing,
trading and service businesses.
• Differentiate between formal and
informal businesses.
• Understand where informal businesses
are located, how they are owned and
managed and the type of goods and
services they trade in.
• Understand why people start informal
businesses, who their target market is
and what problems they experience.
• List some of the rules or regulations that
formal businesses have to adhere to.
• Understand what factors determine
whether a business is a microenterprise or a small, medium or large
business.
• List and explain the advantages and
disadvantages of informal and formal
businesses.
• Explain the role of formal and informal
businesses as producers and consumers.
• Understand and explain the effect of
natural disasters and health epidemics
on formal and informal businesses.
35
Topic 4 Unit 1
Unit 1 Formal and informal businesses
Businesses provide the goods and services that consumers need to satisfy
their needs and wants. These businesses can vary from a small, one person
operation where the owner braids a customer’s hair by the side of the road to
large multinational corporations like South African Breweries.
Different ways that businesses can be grouped
key words
sectors – sections or
parts
informal business
– any business that
is not regulated or
controlled by the
government
formal business
– regulated or
controlled by the
government in
some way
accounting records
– books or records
that are drawn
up by a business
or person to keep
track of all their
transactions and
business deals
tax – a payment
charged by the
government
to pay for the
provision of goods
and services that
are needed to run
the country
rural areas – areas in
the country where
people live and
work
South Africa’s economy is divided into two different sectors that function sideby-side. The one sector is modern and formal and the other sector is informal
and made up of about two million micro-enterprises. This topic looks at the
different ways in which businesses can be grouped and it focuses on informal
and formal businesses.
Informal businesses
An informal business is any business that is easily started and simple to
run without following the rules that formal businesses adhere to. It does
not pay tax and is not monitored in any way by any form of government.
These businesses do not keep accurate accounting records, and this makes it
difficult to calculate how much profit has been made.
Informal businesses or micro-businesses are usually very small and do not
usually operate from the same office building or retail space every day. They
are mostly found by the sides of roads in the city centre, in suburbs, or rural
areas. They are often managed by the owner, but some have family members
who are also involved in working in the business. Some informal businesses
have one or two paid employees or workers.
Most informal businesses sell their goods and services to customers who
are relatively poor. Informal businesses often sell the same goods as other
informal businesses in the area, so they struggle to sell in large quantities.
They normally sell goods with a low mark-up, so their profits are small. A good
example of this is a street vendor that sells small packets of chips and sweets.
Did you know?
Informal businesses in South Africa do about R30 billion a year in sales. Of this,
R17 billion is from food alone.
A large number of informal traders do not choose to be entrepreneurs; they
become entrepreneurs as a matter of survival because they cannot find any
other form of employment. They often have no, or very little, education or
skills and many of them cannot read or write.
36
Unit1 Topic 4
Case study: Nomzano’s informal business
Nomzamo has an informal business near East London in a township called
Mdantsane. She hires out chairs, tables and tents that are used mainly for
ceremonies. She keeps all her furniture at the back of her house and owns
an old truck that she uses to deliver and fetch the equipment. She employs
a driver who helps her fetch and carry the furniture. Her aunt, Vuyiwe,
helps her clean and repair the equipment.
Activity 4.1 Identify the characteristics of an informal
business
1.
Which of the following are typical characteristics of an informal business?
Tick the correct answer.
Characteristic
Yes
No
It is a medium to large business.
There are many rules and regulations that the business has to follow.
They sell very expensive products and services.
They sell the goods mainly to people who are poor.
They mainly sell their products from shops that they have rented.
They make a lot of profit.
The owners run the business themselves with perhaps one worker or helper.
They sell goods in small quantities.
2.
3.
4.
5.
(8)
(2)
(2)
What product or service does Nomzamo sell?
Who are Nomzamo’s customers?
Explain two ways in which Nomzamo’s business has a positive effect on
(2)
the local community in which she operates.
List two problems that you think Nomzamo could have in trying to
manage and grow her business.
(2)
37
Topic 4 Unit 1
key words
trading licence – a
document bought
from the local
authorities giving
you the right to
trade in the area
wholesaler – a
business that buys
goods in large
quantities from
manufacturers
and then sells the
goods to other
shops or customers
in smaller
quantities
municipal rates
– taxes or levies
charged by towns
or cities to pay
for the provision
of services like
rubbish removal
VAT vendor –
registered to
charge customers
VAT which is
paid over to the
government
VAT – tax paid on the
goods and services
that you buy
38
Formal businesses
A formal business is one that is regulated or controlled by the government
in some way. Formal businesses need to apply for a trading licence from a
local authority and have to be registered to pay tax to the government on any
profit they make. Because of this, they have to keep records of their business
deals. The business usually operates from a fixed address, in a shop or office,
in towns and cities. If they sell food products, they also have to follow certain
health rules such as wearing gloves when handling food so that no germs are
passed on to the customers.
A formal business can be very small, small, medium or large.
Case study: Ram’s formal business
Ram owns a wholesaler in Bela Bela. He sells food and soft drinks, cleaning
materials, household items, furniture, tools and equipment. His business
is a formal business. He has been operating from the same shop for ten
years. As a property owner, he has to pay municipal rates for the supply of
electricity, water, street lights and rubbish removal. The rates also pay for
the wages of the people who manage and run the city.
Ram employs 26 people. He has registered for tax and is also a VAT vendor
which means he has to charge customers VAT which he pays over to the
government.
Some businesses, like
Ram’s, start out as
informal businesses
but as their market and
the size of the business
grow, they have to
start following certain
rules or laws and
then become formal
businesses. Many
informal traders won’t
get the opportunity to
grow their businesses
into a formal business
because of a lack of
skills and money.
Unit1 Topic 4
Micro-enterprises, small, medium and large businesses
key words
Businesses can also be grouped according to their size. A micro-enterprise is a
very small business like Nomzamo’s. It normally employs less than five people
and operates in the local community.
A small business usually employs between 5 and 50 people and is usually
owner-managed. They are mainly formal businesses that trade locally. These
businesses make up most of the established businesses in South Africa and
include enterprises like a hairdressing salon, a small shop or a restaurant.
Medium-sized businesses are formal businesses that employ up to 200 people
and are usually run by a manager. Although most of these businesses trade
locally, they can also have regional or national branches and sell to customers
all over the country.
Small, medium and micro-enterprises are called SMMEs.
Large businesses are usually owned by a large number of people who have
bought shares in the business. These businesses employ hundreds of workers and
they buy and sell products and services on a large scale. They often have offices
and branches in more than one city or country. Examples include banks, large
retailers (shops), clothing and furniture manufacturers and mining companies.
micro-enterprise
– a very small
informal business
employing less
than five people
small business –
employs between
5 and 50 people
enterprise – another
name for a
business
medium-sized
business – employs
up to 200 people
SMME – an
abbreviation for
small, medium and
micro-enterprises
large business – a
business that
employs more
than 200 people
shares – equal parts
of a business that
can be bought by
the public
Activity 4.2 What do you know about formal and informal
businesses?
Match the number with the correct letter by choosing the most suitable match.
1
A medium-sized business
A
A very small informal business
2
An informal business
B
A tax or levy charged by towns or cities to pay for the
provision of services like rubbish removal
3
A small business
C
A record of all the business’ transactions or business
deals
4
A SMME
D
A tax you pay on the goods and services you buy
5
A large business
E
A business that is not taxed or monitored in any way
by any form of government
6
A formal business
F
A business that employs up to 200 people
7
A micro-enterprise
G
A business that employs between 5 and 50 people
8
Accounting records
H
A term given to small, medium and micro-businesses
9
VAT
I
A business that employs hundreds of people and sells
goods and services on a large scale
10
Municipal rates
J
A business that has registered for tax and keeps
accurate accounting records
(10)
39
Topic 4 Unit 2
Unit 2 Types of businesses in the formal and
informal sector
Formal and informal businesses can also be divided into three different types
based on how they earn their money. These types of business can be found in
the informal or formal sectors.
The three types of businesses
key words
manufacturing
business –
involved in making
or producing
goods
trading business
– makes a profit
from buying and
selling goods
service business
– makes a profit
from the provision
of a service
spaza shop – small
informal shop in
a township, often
run from a private
house or from a
wooden container
shebeen –
unlicenced or
unregulated
business, often in
a private home,
that sells alcohol
• Manufacturing businesses are involved in making or producing goods.
They take raw materials and change them into a semi-finished or finished
product that they sell at a profit. Examples include a flour mill, a bakery or
a clothing or toy factory.
A bakery
• Trading businesses make a profit from buying and selling goods. They buy
goods from a producer, manufacturer or wholesaler and resell them at a profit.
They often buy in large quantities and then sell the items in smaller quantities
or individually. Examples include stationery or clothing shops like PNA, CNA
and Edgars; car dealerships, like Kia, Nissan, Toyota or Ford; big retailers like
Woolworths, Spar or Checkers and wholesalers like Cash and Carry and Macro.
• Service businesses make a profit from the provision of a service. Examples
include hairdressers, plumbers, bricklayers, advertising agencies, banks,
insurance companies and hospitals.
There are more informal traders selling finished goods than those who
manufacture or produce the goods they sell. Informal traders are typically street
traders who sell from spaza shops, stalls, shebeens or from the pavement. They
sell fruit, sweets, cosmetics, clothes and accessories, meat or hot meals.
40
Unit 2 Topic 4
Did you know?
75% of informal market consumers use spaza shops every day. The average amount
spent is R175 per month. Items most regularly purchased are milk, bread and paraffin.
The services that informal traders provide include hairdressing, backyard
mechanics, car guarding, shoe shining, as well as phone, fax and cell phone
services. Some informal traders make goods like clothes, beer, baskets, clay toys
and wooden carvings.
A hairdresser is an example of a service business.
Activity 4.3 What type of business is it?
1.
Tick the correct type of business next to each example in the table.
Business
Manufacturing
Trading
Service
Albany Bakery
Makro
FNB Bank
Black River Advertising
Woodcutters Furniture Producers
Edgars
2.
3.
(6)
Explain, in your own words, how a manufacturer makes a profit.
(2)
Explain, giving an example, how a business can be a trader and deliver a
service at the same time.
(3)
41
Topic 4 Unit 3
Unit 3 The advantages and disadvantages of
formal and informal businesses
The types of people who own and manage informal and formal businesses
are very different. This explains why they have different advantages and
disadvantages for the economy.
Did you know?
There are an estimated 750 000 hawkers, spaza shops, shebeens and other informal
traders across South Africa.
Advantages of formal and informal businesses
Advantages of formal businesses
• They operate from a fixed location so customers know where to find them
and are therefore likely to support them on a regular basis. They also
provide a constant and reliable supply of goods and services.
• They employ a lot more people and at higher salaries and wages than
informal businesses which improves the standard of living in the country.
• They normally spend money on training their staff so that staff can learn
more skills and contribute more to the economy.
• The business and its employees are taxed and the government uses this
money to upgrade the country’s infrastructure, for example, building roads
and the provision of electricity. These businesses also provide more goods
and services and so improve people’s standard of living.
• Formal businesses often trade with other countries and this increases the
goods and services available for sale. The exports earn money for the country.
Advantages of informal businesses
• Because they follow no formal rules, they are easy to start and this increases
the number and variety of goods and services on offer in the economy.
• They provide employment and entrepreneurial opportunities in the
economy because anyone can start an informal business as they do not
need any qualification or skills.
• Because they have no formal structure, they can quickly respond to changes
in the economy, either by moving to a new location or changing the
products they offer.
• They offer an opportunity for unskilled, uneducated, disabled and
unemployed people to earn an income, especially in difficult economic
times when there are no job opportunities in the formal sector.
• They do not pay rent or license fees so the cost of creating jobs is
significantly less than in formal businesses.
42
Unit 3 Topic 4
• They provide the local, rural and township
communities with goods and services that are easily
available, cheap and which might not be provided by
formal businesses.
• They are also situated close to their target market (for
example, at taxi ranks) and this increases demand for
goods and services.
• They keep money circulating in the economy and this
increases job opportunities.
A formal business
Disadvantages of formal and informal businesses
Disadvantages of formal businesses
• Entrepreneurs might not start formal businesses because there are too many
rules they need to follow or it might cost too much to register for bar codes
and trading licenses.
• Large businesses often control the market and can charge customers what
they like.
• They are often slow to change the way they do things because there are so
many rules they have to follow.
• They might decide not to employ people because there are too many rules
they have to follow.
• Some large formal retailers make it difficult for informal traders to enter the
formal markets because they control which products they will stock and
producers often have to pay in some way for their goods to be accepted into
the market.
Disadvantages of informal businesses
• Because they do not pay taxes, the government does not get any money from
them to put towards the provision of goods and services in the economy.
• Because informal business operate outside the formal sector and the law,
they do not have any legal right to the land they operate on nor do they
have access to banks or to the opportunity to buy
goods on credit.
• The owners often do not have the education, skills or
money to grow their businesses and so they are likely
to stay small and informal.
• Informal traders are not regulated so some of them
might be involved in illegal activities.
• They are often accused of polluting their business
environment and do not prevent their customers
from littering around their businesses.
An informal business
43
Topic 4 Unit 3
Case study: Formal vs informal business
Nolwazi Cele is the owner of Nolwazi’s Stationery shop. It is her own business and she works very
hard. Her running costs are high, especially the rent she has to pay to have a shop in a smart
shopping centre in the city centre. To make a profit, Nolwazi has to sell a lot of the stock she
keeps. For this reason, she spends many hours trying to make her shop displays look attractive so
that the customers will buy things at her shop.
Rose Mabasso is unemployed. In order to support her family of seven, she decided to start her own
business selling fruit and vegetables. She buys her stock in large quantities from the fresh produce
market and sells it in small packets to her customers. She does good business at lunchtimes when
she sells one or two apples or bananas at a time. Rose cannot afford to rent a shop, so she has to
set up her stall on a pavement in town. She likes to set up her stall outside the Cascades Shopping
Centre because a lot of people shop there and that means more business for her.
Nolwazi has nothing personal against Rose, but she does not want Rose to set up her stall right outside
her stationery shop. The stall hides Nolwazi’s window displays and some customers complain that
they find it difficult to get into her shop when there are crowds of people gathered around Rose’s stall.
Nolwazi is also unhappy about the litter that Rose’s customers leave on the pavement.
Activity 4.4 Have a class debate or write a report
1.
Have a class debate on the following topic: Should Rose be allowed to
trade on the pavement outside the shops in the Cascades Shopping
Centre?
Or
2. Write a report giving your ideas on how this problem can be solved so
that both Nolwazi and Rose will be happy.
44
Unit 4 Topic 4
Unit 4 The role of formal and informal
businesses as producers and consumers
In Topic 3 you looked at the role of producers and consumers, mainly in formal
businesses. How do these roles differ between a formal and informal businesses?
Very few informal businesses buy their stock directly from manufacturers
because manufacturers cannot afford to deliver small amounts to lots of
different informal businesses. However, some big businesses such as Coca-Cola
and SABMiller do deliver directly to some spaza shops.
Formal businesses do not often offer informal businesses special discounts
or services. Informal business owners normally have to take a taxi or bus to
purchase stock and then bring the goods back to their shops by themselves.
Formal and informal traders as producers and
consumers
Formal
Informal
As producers
They provide a large number of goods and
services to people throughout the country.
They provide a limited range of goods and
services, mainly to the local community to
satisfy customers’ basic needs at low prices.
They employ large numbers of workers on a
permanent basis.
They employ very few workers and the
owner is often the entrepreneur and the
only worker.
They often provide opportunities for their
workers to be promoted to better jobs and to
learn new skills.
Owners and workers are usually not well
educated or skilled.
They help other people, businesses and the
government to earn money because they
borrow capital, pay wages, rent and taxes and
buy goods and services from other people,
businesses and the government.
Very little capital is invested in the business
and generally the businesses do not own or
rent the land they trade from.
As consumers
Formal businesses do not often buy goods
and services from informal businesses. They
buy goods and services from other formal
businesses (e.g. stock and advertising) and
from the government (water and electricity).
Informal businesses are consumers of
formal businesses as they buy most of their
products from formal businesses.
45
Topic 4 Unit 4
How formal businesses can help informal businesses
Formal businesses need to play a development role and work in partnerships
with informal traders to reduce the cost of their goods. They can do this by:
• using informal traders to fill a big order that is made up of lots of small orders
• offering sections in their shops where they display products aimed at
informal businesses with goods packaged in sizes suitable for informal
businesses
• giving informal businesses better credit facilities
• offering informal businesses discounts
• offering informal businesses a service where they can phone in their orders.
The formal business can then have the order packed and ready for the
informal business to pick up.
• delivering the stock directly to the informal business.
Activity 4.5 Write a paragraph
Write a paragraph explaining why it is important to have both informal and
formal businesses in the economy.
(10)
Examples of an informal and formal businesses
46
Unit 5 Topic 4
Unit 5 The effect of natural disasters and
health epidemics on formal and informal
businesses
This unit looks briefly at how a natural disaster or health epidemic will affect
businesses. A disaster or epidemic could obviously affect the local economy
negatively because capital goods and infrastructure could be destroyed
and supplies (such as medicine) could be lost or run out. There could be
no production of goods and services until businesses start functioning and
producing again leading to an increase in local prices of goods and services.
key word
epidemic − a large
number of people
falling sick with
the same disease
at the same time
in a particular
community
Destruction to a business after a storm
Activity 4.6 Read a case study about a natural disaster
Read through the following case study and then answer the questions that follow.
Case study: Disaster strikes Emfuleni
Cibongile, wrapped tightly in a blanket, shivered with cold as she listened
to the news on the radio. “The town of Emfuleni was devastated by a
flood last night when the river that runs through the town broke its banks
after three days of heavy rainfall in the area. Local businesses and charity
organisations have rushed in to help, providing tents and blankets to the
local residents who lost their houses and possessions.” How am I going to
survive this flood, Cibongile wondered. Her family home, like many others
in the town, was right next to the river and had been washed away. Her
mother, who supported their extended family of eight, had lost all her stock
of second hand clothes which she sold at the local market.
47
Topic 4 Unit 5
Tobogo Motaung was happy that his house on the hill was not damaged
by the flood, but he was still a worried man. The large furniture shop that
he managed had been flooded and most of the stock had been seriously
damaged and could no longer be sold. The flood had also damaged the
walls, shelving, carpeting and floors of the shop. The windows and doors
would need to be replaced. He was not sure how long it would take before
they could open the store again, but he felt relieved knowing that the
owner had several other branches in the province. He might be able to work
in one of them until this shop was fixed.
1.
2.
3.
4.
key word
compensation –
money that is paid
out after a loss has
been suffered
Explain how you think Cibongile and her family will be able to satisfy
their basic needs for food, clothing and shelter, in the first two weeks after
the flood.
(2)
Explain the effect the flood will have on Cibongile’s mother’s business. (2)
Explain the changes that Tobogo might experience in his everyday
lifestyle in the next two weeks.
(2)
Explain the effect the flood will have on the future of the furniture
business that Tobogo manages.
(2)
The effect of natural disasters
If a natural disaster, like a flood, fire, earthquake or violent storm, were to hit
a business area and destroy all or part of a business’ stock or its buildings, it
would affect informal and formal businesses differently. The table below lists
some of the effects of a natural disaster on formal and informal businesses.
Effects on a formal business
Effects on an informal business
It may be insured against the natural disaster and might
be able to claim back some money to cover what was
lost, but they would still suffer some financial loss. Their
insurance costs might also increase in future.
It would not be insured against the disaster and would not
be able to claim for any losses. If the area was declared
a disaster area, they might be able to get some form of
compensation from government to help them out.
It would probably not be able to trade until the building
had been fixed and the shelves had been restocked. It
would lose sales during this period.
If they have money saved, they could get back to business
by setting up a make-shift stall on the side of the road.
Their employees could temporarily lose their jobs,
especially if they were casual workers.
Because they do not carry a lot of stock, they might be
able to start up again with whatever stock they have left
or be able to buy enough to get them by.
Customers might start buying their goods and services
from other businesses that were not affected by the
disaster and the business would need to win back these
customers.
If they do not have any money saved to buy new stock,
they will no longer be able to trade. This means the
owner, and any workers, will be left without an income.
This will have a huge impact if they are their family’s only
breadwinner.
48
Unit 5 Topic 4
The effect of a health epidemic
If there was a health epidemic, the owner or workers might become too sick
to carry on trading or working, at least for some time. This would also affect
formal and informal businesses differently. The table below shows how this
would affect formal and informal businesses.
Effects on a formal business
Effects on an informal business
If the owner or a worker is unable to work as a result of
Most informal businesses are owner-managed and do
health problems, other employees in the business can take not employ staff. If the owner is sick, the business will
over the jobs and the business can usually continue as
probably have to close down until he or she is better.
normal until they are well enough to return.
The owner and employees often have a medical aid which
will pay towards their medical expenses.
The owner and employees are unlikely to have medical
aid cover which means they will have to bear the
medical costs themselves.
Employees of formal businesses are usually covered by
the Unemployment Insurance Fund (UIF) to which they
contribute every month from their wage or salary. The UIF
will pay them a monthly amount for a period of time if
they become unemployed.
People who work in informal businesses are usually
not registered for UIF.
49
Summary
Unit 1 Formal and informal
businesses
• An informal business is usually a very small
or micro-business that is easily started and
simply run without needing to follow any
rules. It is not taxed or monitored in any
way by any form of government and it does
not keep accurate accounting records.
• A formal business is one that is regulated or
controlled by the government in some way.
It pays tax and has to keep records of its
business deals.
Unit 2 Types of businesses in the
formal and informal sector
• Most economies are divided into two
different sectors, the formal and the
informal sector.
• Businesses can be divided into three different
types: manufacturing, trading or service.
Unit 3 The advantages and
disadvantages of formal
and informal businesses
• Informal businesses are easy to form and
provide employment opportunities for
people who struggle to find employment in
the formal sector.
• Because informal businesses do not pay taxes,
the government does not get any money
from them to put towards the provision of
goods and services in the economy.
• Formal businesses employ more people at
higher wages than informal businesses.
• Formal businesses and their employees are
taxed and the government uses this money
to upgrade the country’s infrastructure,
for example, building roads and providing
electricity.
50
Unit 4 The role of formal and
informal businesses as
producers and consumers
• Informal businesses provide a limited range
of goods and services at low prices, mainly
to their local community, employing very
few workers.
• Informal businesses are consumers of
formal businesses as they buy most of their
products from formal businesses.
• Formal businesses provide a large number
of goods and services to people throughout
the country and they employ large
numbers of workers on a permanent basis.
Unit 5 The effect of natural
disasters and health
epidemics on formal and
informal businesses
• Formal businesses are normally insured
against natural disasters and health
epidemics while informal businesses are
not.
• Informal traders can often quickly get back
to business after disaster strikes by putting
up a make-shift stall on the side of the road
with whatever stock they have left or can
buy.
• If informal businesses lose everything in a
disaster, they will no longer be able to trade
and both the owner and any workers will
be without an income.
• If the owner of a formal business is unable
to work as a result of bad health, other
employees in the business can take over the
job while an informal business will have to
close down if its owner is sick.
Term 1 Revision
Topic 1 History of money
1.
2.
3.
4.
5.
6.
Describe how a barter economy functions.
(8)
Discuss the various items that have been used for money throughout
history.
(8)
Describe the role played by banks in the economy.
(8)
(8)
What characteristics make an item useful as money?
Are credit cards a form of money? Explain your answer.
(8)
Explain why notes and coins might in the future become as out of
date as cowrie shells and whales’ teeth.
(5)
Total [45]
Topic 2 Needs and wants
1.
2.
3.
4.
5.
(8)
Use examples to explain the difference between needs and wants.
Define each of the following terms:
a) Community
b) Renewable resource
(12)
c) Non-renewable resource
Explain, using examples from your own community, what is meant by
public goods and services.
(6)
Draw a picture to illustrate how individual needs and wants can be
classified.
(8)
(6)
Explain in one sentence what is meant by the economic problem.
Total [40]
Topic 3 Goods and services
1.
Choose the most suitable match. Write down only the number and the
letter.
B
A
1.
Goods
A
A commodity given for free
2.
Services
B
A person or organisation that makes products
3.
Consumer
C
A group of people who share a common feature – like the
area where they live
4.
Producer
D
Things that we can touch and consume to satisfy a need or
want
5.
Efficient
E
Choosing the best option to get what you need at the best
price at the right time
6.
Effective
F
Someone who uses goods and services to satisfy their
needs
7.
Government
agency
G
Taking a used product, breaking it down into its basic parts
and then remaking it into a similar product – like old paper
to cardboard
51
2.
3.
4.
8.
Grant
H
Getting the best results from what is available with the
least possible waste of time and materials
9.
Recycle
I
Work done for the benefit of others
10.
Community
J
An organisation controlled by the government to provide
essential goods and services to the people of the country
(10)
(1)
a)
b)
Name one government agency that you know of.
Briefly describe what product or service this agency is responsible
for providing to South African communities.
(2)
a) Describe a product or service that you have consumed today.
(1)
b) Which need or want was satisfied by this product?
(1)
c) Which alternative product could you have chosen compared to
(1)
the one you consumed in (a).
(1)
d) Do you think you made the right choice?
e) Explain your answer in 3d) saying why the choice was more
efficient.
(2)
f) Explain your answer in 3d) saying why the choice was more
(2)
effective.
Recycling can be an efficient and effective way to save money and
satisfy a need or want at the same time. Give one example of how
you can reduce, reuse or recycle waste in your home.
(4)
Total [25]
Topic 4 Businesses
1.
Choose the most suitable match. Write down only the number and the letter.
B
A
52
1.
An advantage of an
informal business
A
A business that makes a profit from buying and
selling goods
2.
An informal business
B
Because they do not pay taxes, the government
does not get any money from them to provide
goods and services in the economy
3.
A micro-enterprise
C
A small informal business
4.
A SMME
D
A business that employs hundreds of people and
sells goods and services on a large scale
5.
A large business
E
A business that is not taxed or monitored in any
way by any form of government
6.
A formal business
F
They offer an opportunity for unskilled,
uneducated, disabled and unemployed people
to earn an income when there are no job
opportunities
2.
7.
A trading business
G
Very little capital is invested in the business and
generally the business does not own the land or
pay rent for it
8.
A manufacturing
business
H
A term given to small, medium and microbusinesses
9.
A disadvantage of an
informal business
I
A business that makes a profit by selling goods
that it has made
10.
A characteristic of an
informal business
J
A business that has registered for tax and keeps
accurate accounting records
(10)
Indicate whether the following statements are True or False by ticking the
correct answer.
True
1.
A medium-sized business employs up to 200 people.
2.
An informal business needs to register with the government for
tax.
3.
A service business buys and sells goods.
4.
An informal business is a micro-enterprise.
5.
Formal businesses are found mainly in townships and rural areas.
6.
Makro is an example of a formal business.
7.
Most informal businesses do not have insurance so they cannot
claim back any money if they lose stock due to a fire or a flood.
8.
An advantage of an informal business is that it is easy to start.
9.
Formal businesses often provide opportunities for their workers
to learn new skills and be promoted to better jobs.
10.
The fact that there are so many costs and rules to follow when
starting a business is a disadvantage of a formal business.
False
(10)
3.
Write a paragraph explaining the effect a natural disaster, like a flood,
will have on a formal business.
(5)
Total [25]
53
Accounting concepts
Financial literacy
Topic 5
Topic overview
• Explain different accounting concepts:
° Capital
° Assets
° Liabilities
° Income
° Expenses
° Profit
° Losses.
54
• Discuss the role of savings, budgets and
banking.
• Explain the importance and role of
keeping financial records.
• Understand different types of
transactions.
Unit 1 Topic 5
Unit 1 Accounting concepts: capital, assets and
liabilities
What is accounting?
Accounting provides information about what a business has done with the
money that it has earned. This helps the owner understand how the business
is doing and enables him to make decisions about the future of the business.
In order to be able to read this information you need to understand the
concepts that accountants use.
What are accounting concepts?
key words
Accounting concepts are the terms used in the language of accounting. It helps
us to understand where or how the money of the business has been spent and
where money has come from. This information needs to be presented in a
particular way that makes it easy for the owner to see what has happened to
the finances of the business.
What is capital?
finances – money or
funds
capital – what the
owner puts into
their business
assets – possessions
that are used to
run a business
A business needs money to start and to keep going. This money comes from
the owner of the business – it can be his own money or money he borrowed.
We call the money put in by the owner capital. Capital does not have to be
just money. If the owner decides that a car is needed in the business, then the
car will also be part of the owner’s capital.
Other items that an owner can use as capital besides
money are:
• Computers
•
Furniture
• Desks
•
Property
• Cars
What are assets?
Assets is the accounting term used for the possessions
of a business. A business would use its assets to provide
customers with a product or service. For example, a
hairdresser needs the following assets: hairdriers, basins,
chairs, mirrors, etc.
Money is also regarded as an asset because the money has
value and belongs to the business. A business can have a
number of different assets and the list that follows gives a few
examples:
A hairdressing business has many assets
including hairdriers, basins, chairs and the
money the business makes.
55
Topic 5 Unit 1
• Land and buildings – this is the property occupied by the business (an office
or a shop)
• Equipment – these are things like computers and furniture
• Vehicles – cars, delivery trucks and motor bikes
• Money in the bank – cash.
key words
liabilities – the debts
of the business
loan – money
borrowed from
a financial
institution such as
a bank
suppliers –
businesses that
a business buys
items from
credit – buy now and
pay later
interest – money
earned on the
money you save
with a bank
What are liabilities?
Liabilities are the debts of a business. Liabilities can be loans, where the
business has borrowed money from a bank or another person. They can also
be amounts of money owed to suppliers, where the business has bought
goods from a shop on account (credit) and still owes the supplier money. The
business will pay its suppliers at a later stage.
Business owners may not have enough of their own money saved to start a
business. Therefore the owner may have to borrow money from a bank. This
means that the owner has to take out a loan. The disadvantage of borrowing
money is that it has to be paid back to the bank with interest.
Activity 5.1 Apply the concepts of capital, assets and
liabilities
Savannah Jackson has decided to start a play school which she will run from
home. She has put R50 000 of her own money into the business and she has
borrowed R20 000 from the bank. She has come to ask you some questions
about how to get her business going.
1. What is the correct accounting term for the R50 000?
(1)
2. What is the correct accounting term for the R20 000?
(1)
3. How much money in total does Savannah have to start her business? (2)
4. Make a list of eight possible assets Savannah would need to buy in order
to run her play school.
(8)
5. Take the list of assets that Savannah may need and investigate how much
these assets would cost her to buy.
(3)
6. In your opinion, do you think she has enough money to start her
business? Give two reasons for your answer.
(2)
7. Do you think it is a good idea to borrow money from the bank to start a
business? Give a reason for your answer.
(2)
56
Unit 2 Topic 5
Unit 2 Income and expenses
What is income?
key words
Income is the money earned from the sale of goods or services. Income can
be earned by:
• selling products to customers, such as a shop selling bread.
• providing a service to clients, such as a hairdresser cutting hair.
• renting property to other people, for example renting a house out to a family.
• putting money into a bank account where it earns interest.
The correct accounting terms for the income earned above, would be:
• Sales – income from selling goods
• Income from providing services, for example, cutting hair
• Rent income – income from renting property
• Interest income – income given by banks or financial institutions.
What are expenses?
Expenses are the costs of running the business. There are many different
expenses that businesses and people have. However, businesses may have
different expenses depending on the type of business they do. For example, a
hairdresser may have different expenses to an accounting business.
Examples of expenses that a hairdresser may have:
• Products
• Water and electricity
• Stationery
• Wages
goods − products
that businesses
sell, for example,
food and clothing
services − services
are provided to
customers for
a fee. They are
the non-tangible
products where
a skill is used to
meet a customer’s
need. Examples of
service businesses
are lawyers,
doctors and
painters
income – money
earned by the
business
expenses – running
costs of the
business
• Advertising
Activity 5.2 Calculate and determine income and expenses
Nick Reed runs a business that coaches cricket and sells cricket kit. He also rents
out part of his building to a doctor. He gives you the following information:
• He coaches 50 boys a week and charges R100 per session per boy.
• He has received R50 000 for selling kit that cost him R20 000 to buy.
• He has to pay three coaches who help him and he pays them each R200
per week.
• Other expenses come to R15 600 for the month.
• The doctor pays rent of R2 500 per month.
Answer the following questions:
1. Name three ways in which Nick earns an income.
2. Calculate his total income for the month.
3. Calculate his total expenses for the month.
4. Make a list of eight items that would be included as other expenses
for the month.
Example of expenses
of a hairdresser
(3)
(2)
(2)
(8)
57
Topic 5 Unit 3
Unit 3 Profits and losses
What is a profit?
key words
profit – the amount
by which income
is greater than
expenditure
loss – the amount by
which expenditure
is greater than
income
Profit is the reason why people start businesses. It is the amount of money
left over after all the expenses have been paid. Profit can be used to measure
whether the business is successful. A profit is made when the income of the
business is more than its expenses. Profit is calculated as follows:
Income – Expenses = Profit
What is a loss?
The opposite of a profit is a loss, in other words, when the expenses of
running the business are more than the income earned by the business.
Worked example
Sam Mfeka started a plumbing business.
He wants to know whether he has made a
profit or a loss for the month of May. He
gives you the following information:
• Money received for plumbing jobs
– R34 500
• Money received for rent – R 3 450
• Money paid for materials needed to
provide the service – R 12 450
• Money paid for wages – R3 200
• Money paid for advertising – R600
• Money paid for equipment* – R5 000
• Money to pay back loan** – R 2 000
• Money paid for motor expenses –
R 2 130
• Money paid for stationery – R 500
• Money paid for interest on loan –
R 270
58
Solution
Income
Plumbing jobs
34 500
Rent income
3 450
TOTAL INCOME
37 950
Expenses
Materials
12 450
Wages
3 200
Advertising
Vehicle expenses
600
2 130
Stationery
500
Interest on loan
270
TOTAL EXPENSES
19 150
PROFIT (Income – expenses)
18 800
*Equipment is an asset not an expense.
**Loans are liabilities not expenses. However,
the interest payable on the loan is an expense
because it is the cost of borrowing money.
Unit 3 Topic 5
Activity 5.3 Practise accounting concepts
Blake’s Builders has the following information in his financial records. Use the
information to answer the questions that follow:
Advertising
1 500 Loan
15 000
Bank
7 000 Material costs
20 500
Capital
70 000 Rent income
3 000
Income from building
services
45 000 Stationery
500
Water and electricity
2 000 Vehicles
55 000
Equipment
30 000 Wages
13 500
1.
2.
3.
4.
5.
6.
7.
Identify the three assets that Blake has in his building business.
Calculate the total value of these assets.
Make a list and calculate the liabilities of Blake’s Builders.
Name two income accounts.
Calculate the total income that the business has earned.
Make a list of the expenses and calculate the total expenses.
Did Blake’s Builders make a profit or a loss? Show the calculation to
support your answer.
(3)
(2)
(2)
(2)
(1)
(6)
(2)
59
Topic 5 Unit 4
Unit 4 Banking, savings and budgets
Banking in businesses
All business owners should start their business by opening a bank account in
the name of the business. Because there are different types of bank accounts
to choose from, it is important to meet with the bank manager to decide what
type of account would best suit the needs of the business.
key words
deposit −put money
into the bank
account
withdraw − take
money out the
bank account
current account
– a bank account
used for daily
transactions, also
called a cheque
account
Businesses need to have a bank account so that they can easily deposit or
withdraw money. In the past, many businesses paid for the items they bought
for their business by cheque. However, cheque fraud has become a big problem
and now many businesses prefer to use the internet to do their payments and
banking.
In school accounting, however, we assume that businesses use a cheque
account and that most of the payments are made by cheque. This kind of
account is called a current account.
Bank statements are documents prepared by the bank showing money that
they have received into and paid out of the account.
Activity 5.4 Interpret banking information
1.
2.
Why do you think it is important for an owner of a business to open up
an account in the name of the business rather than using his personal
(2)
bank account?
Look at the sample bank statement for Olley’s Plumbers below. How much
money did Olley’s Plumbers have in its bank account at the beginning
and at the end of June?
(2)
CHELSEA BANK
BANK STATEMENT FOR OLLEY’S PLUMBERS FOR JUNE 2015
Tran. Date CCYYMM-DD
2015-06-01
2015-06-21
2015-06-25
2015-06-25
2015-06-26
2015-06-27
2015-06-28
2015-06-29
2015-06-30
2015-06-30
60
Transaction Description/Narrative
Statement Opening Balance
Internet payment
Deposit
Bank charges
Deposit
Deposit
Payment
Cheque payment
Bank charges
ATM withdrawal
Closing Balance
Payments
Deposits
R 350.00R 850.00
R 2.00
R 500.00
R 662.00
R 425.00
R 635. 00
R 10.00
R 120.00
Balance
R 15 000.00
R 14 650.00
R 15 500.00
R 15 498.00
R 15 998.00
R 16 620.00
R 17 045.00
R 16 410.00
R 16 400.00
R 16 280.00
R 16 280.00
Unit 4 Topic 5
3.
4.
5.
Explain why the balance of the bank account increases or decreases when
there is a:
a) deposit
b) bank charges
c) cheque payment.
(3)
Name three advantages of using internet payment.
(3)
Calculate the following:
a) the total amount of money deposited into the bank account
during June
(1)
b) the total amount of money paid out of the bank account including
bank charges.
(1)
Saving money in a bank
Savings are money that is put away for something that may be needed in the
future. People are able to save when they do not spend all the money they earn.
Saving is important because it helps us to plan for the future. By saving a little
bit of money each month, people are able to make more money.
A bank pays you interest so that the value of your money increases over time.
Different types of bank accounts offer you different rates of interest. Banks use
the money that people save with them to make loans to other people. When
you borrow money from a bank, you have to pay the bank a certain amount of
interest every month.
Examples of different savings accounts:
• Notice deposit – you earn interest and your money is available after you
have given the required period of notice
• Call deposit – you earn interest and your money is available whenever you
need it
• Fixed deposit – an account where an amount of money is invested for a
fixed period (i.e. you cannot use the money) at a fixed interest rate.
Budgets
To achieve financial success and security it is important for individuals,
families and businesses to prepare a budget so that they can live within their
means and not overspend. A budget is a plan of how much money you expect
to receive and how you expect to spend the money. Budgets will be discussed
in more detail in Topic 7.
61
Topic 5 Unit 5
Unit 5 Financial records and transactions
Why keep financial records?
Business owners must know how their business is doing financially so that
they can plan properly. To make sense of the financial information, the
business needs to keep accurate and up-to-date financial records. This will tell
the owner how much money has come in, how much money has been spent
and what the money was spent on. The information will help the owner to
make sound business decisions.
What are financial records?
Financial records give a formal account of different financial
activities of a business. Examples of financial records are:
• Documents – such as contracts, receipts, cheques
• Bank statements received from the bank
• Income Statements – which calculate the business’ profit
• Balance Sheets – which show how much a business is worth.
There are different people who are interested in reading the financial records
of a business. Some of them are:
• The owners – they need to know whether the business is financially
worthwhile
• The bank manager – as each business needs to have a bank account
• The employees – need to know whether they are earning an acceptable
salary or wage.
Who prepares the financial records?
Business owners are mostly too busy to keep their own financial records.
They employ bookkeepers to record the daily information. Bookkeeping is an
important part of accounting. The information that a bookkeeper enters has to
be done accurately and on time so that the decisions made by the owner are
based on up-to-date information.
62
Unit 5 Topic 5
What is a transaction?
In accounting we refer to any business deal as a transaction. Examples of
transactions are:
• buying stock that the business is going to sell
• paying the wages of someone who works for the business
• receiving money from customers
• buying stationery from a supplier.
A transaction is recorded on a piece of paper known as a source document.
There are different source documents to record the different transactions that
can take place in a business. The bookkeeper records the transactions so that
the owner can use the information to make decisions about how to run the
business.
Money paid for
shampoos – cheques
Interest earned on
money in the bank –
bank statement
Money received from
customers – till slip
Received rent from
the nail lady – receipt
key words
transaction – a
business deal
source document
– a record of a
transaction that
took place in the
business
Paid the water and
electricity bill –
internet transfer
Paid the salary of the
other hairdresser –
cheque
Examples of transactions in a business
Activity 5.5 Explain transactions and the importance of
financial records
1.
2.
3.
Draw a spider diagram to show as many different types of transactions as
you can think of that take place in Durban Dry Cleaners.
(5)
Give two reasons why it is important to make sure that the records of the
business are accurate and up to date.
(2)
Name one piece of financial information that the following people would
want to know about Durban Dry Cleaners:
a) Customers
(1)
b) Owner
(2)
c) Bank manager
(2)
63
Summary
Unit 1 Accounting concepts:
capital, assets and
liabilities
• Capital is money, assets or both put into
the business by the owner.
• Assets are the possessions of the business.
• Liabilities are the debts, for example,
money the business owes to suppliers, the
bank or other people.
Unit 2 Income and expenses
• Income is the money a business earns.
• Income can be earned by:
° selling products
° providing a service
° letting property
° saving money in an account that earns
interest.
• Expenses are the running costs of a
business.
• Examples of expenses are water and
electricity, wages, products and advertising.
Unit 3 Profit and losses
• Profit = Income – Expenses
• If your income is greater than your
expenses, you make a profit.
• If your income is less than your expenses,
you make a loss.
64
Unit 4 Banking, savings and
budgets
• Every business should open a bank account
in the name of the business.
• There are different kinds of bank accounts:
° current account (also called cheque
account)
° savings account (notice deposit, call
deposit, fixed deposit).
• Businesses can save when there is money
left over after all the costs have been paid.
• Budgets are a plan for the future to see how
much money is likely to be received and
paid out.
Unit 5 Financial records and
transactions
• Financial records are used to keep track of
the business transactions so that the owner
can make good financial decisions about
the business.
• A bookkeeper usually records the
transactions.
• Transactions are the business deals that
take place every day.
• There are many different kinds of
transactions, for example, buying stock,
selling stock, and paying accounts or wages.
Income and expenses
Financial literacy
Topic 6
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Topic overview
• Identify different types of personal
income and personal expenses.
• Prepare a Statement of Net Worth.
• Name the types of income received by
businesses.
• Name the types of business expenses.
• Explain the difference between savings
and investments.
65
Topic 6 Unit 1
Unit 1 Personal income and expenses
Types of personal income
Income is the money you have earned. People earn income from their jobs
and from the money they have invested. There are different types of personal
income that people can earn:
• salaries or wages
• interest on bank accounts
• rent from property
• profit from a business.
Salaries and wages
Employees are the people who work for a business. The employer is the
business that pays the salaries or wages to the employees. The differences
between a salary and a wage are explained in the table below.
Employees who receive salaries
Employees who receive wages
Work full time and are usually skilled workers Can work full time or part time and are
usually semi-skilled or unskilled
Are paid at the end of each month – usually
on the 25th
Are paid daily or weekly
Receive the same amount every month
Amount can change depending on how
many hours are worked
Examples: teachers, office clerks and business Examples: domestic workers, labourers,
managers.
casual workers
Semi-skilled workers are paid daily or weekly wages.
66
Unit 1 Topic 6
Interest on bank accounts
When you save money in certain types of bank accounts you earn income called
interest. The interest you earn is a percentage of the amount you invest, for
example, 12% p.a. where p.a. stands for per annum which means per year. So
you will be earning 12% more than you invested in one year. This percentage is
called the interest rate. The interest rate that banks offer depends on:
• the type of savings account, for example, fixed deposit, 32 day notice
account or call account
• the amount of money that you put into the savings account
• the length of time you plan to leave your money in the account.
key words
per annum – per
year
interest rate – the
percentage of
interest you earn
on your savings
Activity 6.1 Investigate the interest rate of three banks
1.
2.
3.
Choose three different banks.
Investigate the interest rate that would be offered by the three different
banks on R20 000 deposited into a fixed deposit for 24 months.
Write the answers down and compare the answers with the other banks
investigated by other members of the class.
(3)
Rent from property
Property is the term for buildings, homes, offices or land. People buy property to:
• live in
• work in
• let (rent out).
People who rent property are called tenants. The tenants pay rent to the
owner of the property. To earn an income from letting out property, the rent
has to be more than the cost of owning the property.
key words
property − buildings,
homes, offices or
land
tenant – someone
who rents a
building, house
or flat
A family renting a home
67
Topic 6 Unit 1
Profit from a business
People who work for themselves are
called entrepreneurs. Entrepreneurs
do not work for other people, but start
their own business to make money
from their business idea. In this way
entrepreneurs can earn a personal
income.
Entrepreneurs own their own businesses.
Activity 6.2 Investigate different ways of earning a
personal income
1.
2.
3.
In your own words, briefly describe four different ways in which personal
(4)
income can be earned.
What is the difference between a salary and a wage?
(4)
Look at the advert for a house below and then answer the questions.
HOUSE TO RENT IN PINETOWN (KZN)
PRICE: R5 000 per month
3 bed, 2 bath house to let.
Very large kitchen, separate
dining and lounge. Close to
Sarnia Primary School and
Paradise Junction. Pet friendly.
Immediate occupation.
a)
b)
c)
d)
68
(1)
How much rent does the owner want?
(1)
Who would you suggest this home is most suitable for?
Why would people choose to rent rather than buy a house?
(2)
Give two reasons why people who own a house would prefer to rent
it out rather than living there themselves.
(2)
Unit 1 Topic 6
What are personal expenses?
Personal expenses are everything that people have to pay for in order to
live. Personal expenses can also be called living expenses. Different people
have different living expenses, but most people would have to pay for the
following:
• Rent or accommodation costs
• Water and electricity
• Cell phone or telephone costs
• Petrol or transport costs
• Food
• Clothing
• School fees (if you have children) • Medical expenses
It is important that people manage their money so that their personal
expenses are not more than their personal income. It is also important to try
and have some money left over each month that can be saved for emergencies
and that can earn some interest. It may be useful to draw up a personal budget
to make sure that you are not spending more than you earn.
Activity 6.3 Calculate personal expenses
1.
In this activity you are going to find out the costs of the items in the
table below. You can find this information on the internet, in adverts in
newspapers or magazines or go to a few shops. Copy the table below and
fill in the information you find.
Item
Cost
Cost of a cell phone contract per month
key words
budget – a money
plan to make sure
you do not spend
more than you
earn
insurance – an
agreement
whereby a
company agrees
to pay for loss of
or damage to your
property in return
for a monthly fee
(there are terms
and conditions
that apply to the
agreement)
Cost of 50 litres of petrol/diesel
Cost of the following grocery items
• Bread
• Milk
• 12 eggs
• Corn flakes
• 5 kg packet of sugar
• A whole chicken
• 2 ℓ cool drink
Pair of jeans
Movie ticket
Insurance on a small car
School fees for a year
Soccer ball
(14)
69
Topic 6 Unit 1
2. Read the case study below and answer the questions that follow:
Case study: The Kara family’s income and expenses
Mayur Kara and his
wife, Ashleigh, have two
children: a boy called
Oscar in Grade 6 and a
daughter called Sarah
in Grade 7. Mayur runs
his own computer repair
business and Ashleigh is a
teacher. Mayur has been
wise with his money and has managed to save some of his money in a bank
account where he earns interest. Mayur’s wife has inherited her granny’s
flat which she rents out. The family have living expenses that they need to
pay for each month. Below is a list of all the income and expenses that the
Kara family had in March:
Ashleigh’s salary
R12 000 Cell phone bills
Entertainment
R1 230 Clothing
Extramural expenses
R780 General expenses
Interest on savings account
R560 Groceries
R400
R500
R7 500
Money from computer business
R23 000 Telephone costs
Rent from flat
R2 500 Transport and petrol costs
Rent paid
R6 700 Insurance
School fees
R3 500 Medical costs
R1 600
Water and electricity
R1 450 Bank charges
R150
a)
b)
c)
d)
e)
f)
70
R1 340
R770
R2 500
R600
Calculate the Kara family’s total income for March.
(5)
Calculate the Kara family’s total expenses for March.
(14)
Have the Kara family got enough income to cover their expenses?
Show a calculation to support your answer.
(2)
Name three other possible expenses of the family that are not listed
in the table.
(3)
In your opinion, explain whether there are any expenses that could be
• increased
• decreased
• removed.
(3)
How can the Kara family increase their monthly income?
(1)
Unit 2 Topic 6
Unit 2 Personal Statements of Net Worth
What are Statements of Net Worth?
When we think of the worth of people around us, we normally think of how
kind, honest or responsible they may or may not be. This is known as their
personal worth.
To calculate how wealthy you are, you can draw up a statement of your net
worth. A Statement of Net Worth is simply a list of all your assets (your
possessions) and liabilities (your debts).
Net worth is calculated using the following formula:
Possessions (assets) – Debts (liabilities) = Net Worth
key word
Statement of Net
Worth – a list
of assets and
liabilities
People have to draw up a Statement of Net Worth when they want to borrow
money from the bank or to see how much they are worth.
Activity 6.4 Draw up a Statement of Net Worth
Worked example
Rachel Gilks has given you the following
information for June and wants you to prepare
her Statement of Net Worth.
Cell phone – R1 500, Loan from the bank –
R20 000, Money in the bank – R4 700, Credit
card – R1 350, Account at clothing shop –
R 650, Car – R130 000, Furniture – R46 500.
Rachel Gilks Statement of Net Worth for June
ASSETS
Cell phone
1 500
4 700
Money in the bank
Car
130 000
Furniture
46 500
182 700
TOTAL POSSESIONS
DEBTS
Loan from bank
20 000
Credit card
1 350
650
Clothing account
TOTAL DEBT
(22 000)
160 700
NET WORTH (ASSETS – DEBTS)
Xolile Gwagwa gave you the following information and has asked you to
prepare his Statement of Net Worth. Look at the Worked example and use a
similar table to draw up the Statement of Net Worth.
Property – R1 500 000, Loan from bank – R980 000, Clothing accounts –
R4 500, Car – R75 000, Furniture – R12 300, Credit cards – R30 500, Savings
account – R 4 000, Money in the bank – R1 670, Cell phone – R 2 100,
(17)
Computer – R12 400, Loan to uncle – R2 000
71
Topic 6 Unit 3
Unit 3 Business income and expenses
key words
income – money
earned by a
business or person
expenses – costs
that a person or
a business has to
pay either in order
to satisfy their
needs or to run
their business
Types of income that businesses receive
Some of the types of income that individuals receive can also be received by
a business, for example, rent and interest. Income is the money a business
earns through selling goods, by offering a service or by investing money. The
following list gives examples of ways in which a business earns income:
• selling goods/products
• renting out extra office space
• earning interest on money invested in a bank account or other form of
investment
• providing a service, like cutting hair or fixing motorcars
• earning commission for selling something, for example, houses or products
for other people.
When doing the books of a business the different income transactions listed
above have specific names:
Rent income
• renting out extra office space
Interest income
• earning interest on money
Sales income
• selling goods/products
Current income
• providing a service
Commission income
• earning commission
Types of expenses that businesses have to pay
The expenses that individuals have to pay are similar to those that have to be
paid by a business.
The accounting names of the different expense transactions are as follows:
Cost of sales
• the cost of the goods sold
Advertising
• the cost of promoting
Salaries and wages
• the cost of employing people
Stationery and printing
• the cost of administration
Service material
• the cost of the material
Delivery expenses
• the cost of delivering
Interest on loan
• the cost of borrowing money
Telephone
• the cost of telephone calls
Rent expense
• the cost of business premises
Profit or loss
Businesses aim to make sure that the income that they earn is more than
the expenses. If the business can manage to do this, it makes a profit. If the
expenses are more than the income, then the business makes a loss.
72
Unit 3 Topic 6
key word
In the business world, profit is normally calculated on an annual basis. Then
the owner of the business is able to make a comparison between the years to
see if the business is improving or getting worse.
annual – yearly
Activity 6.5 Calculate business income and expenses
1.
2.
3.
Define what income and expenses are. Use examples to explain your
answer.
(4)
Identify the correct accounting name for the following transactions:
• Money received from services
• Bought envelopes
• Paid for an advert in the paper
(4)
• Received interest from the bank.
Streaks-Ahead is a hairdressing business owned by Alex Tutton. Calculate
whether her business has made a profit or a loss for October. Below is a list
of all her income and expenses:
Current income
R24 500
Advertising
R600
Commission income
R590
Rent paid
R2 500
Materials to provide this service
R6 790
Salaries and wages
R4 500
Sale of shampoos
R3 500
Cost of shampoos sold
R2 000
Telephone
R860
Bank charges
R100
Stationery
R200
(4)
4.
Look at your answer in question 3.
a) Do you think Alex will be happy with the profit or loss made by
her business?
b) How much income did she make from selling shampoo?
c) Give Alex four suggestions on how she can increase her profit.
(2)
(2)
(4)
73
Topic 6 Unit 4
Unit 4 Savings and investments in business
The difference between saving and investing
In Topic 5 we looked at savings. Saving is when you keep some of your money,
instead of spending it all. Investing is using the money you saved to earn more
money.
Savings in business
If a business has made lots of cash and they do not need to spend it, it would
be a good idea to save the money for the future. It is important for people
and businesses to save. Individuals and businesses both need money for
emergencies. Business emergencies can include:
• The business vehicle is in an accident and needs to be repaired.
• The business needs a new piece of equipment (a machine or computer).
• A flood or a fire in the warehouse damages the stock and the business needs
to buy new products.
In the case of fire damage to a warehouse a business will need to use some of its
savings to replace equipment and stock.
key word
spare – extra
Just like individuals, businesses can save their spare money in different kinds
of bank accounts., for example:
• Savings accounts
• 32 day notice accounts
• Fixed deposits.
A business owner must choose the account that is best suited to the needs of
the business.
74
Unit 4 Topic 6
Activity 6.6 Investigate different savings account
Use the internet or visit the bank in order to complete the following table:
Savings
account
32 Day notice
account
Fixed deposit
account
Requirement for this type of
account
Special features for this account
Advantages of this account
Disadvantages of this account
Long, medium or short term
savings
Possible interest rates
(18)
Different types of investments
Saving money in a bank and earning interest on this money is a form of
investment. However, there are also other ways in which to invest money to
make it grow. You can:
• buy shares – own part of a company
• invest in an endowment policy – put money away and receive it all back
with interest later on
• buy property – land or offices or homes
• buy a business – that already exists
• start a business – become an entrepreneur.
key word
investing – taking
money that you
have saved and
doing something
with it to make
more money
You can only make an investment once you have saved some money. People
invest their savings because they can make more money by investing than
simply putting the money in a bank.
Investments are more risky than savings. This means that there is a chance
that something could go wrong and that you could lose the money that you
have invested. However, if the investment is successful then it can make your
money grow faster than it would have if you had simply put it in a savings
account.
Investments in business
Starting a business is one of the ways in which money can be invested. By
starting their own business, entrepreneurs create their own jobs and they can
even create job opportunities for other people.
75
Summary
Unit 1 Personal income and expenses
• Personal income is the money people earn, for example, salaries and wages.
• Personal expenses are the costs of everyday living, for example, food, water
and electricity.
• Personal income should be more than personal expenses so that people
have money to save.
Unit 2 Personal Statements of Net Worth
• A Statement of Net Worth is a list of things you own (your assets) and a list
of your debts (liabilities).
• Net worth is calculated by subtracting what you owe (debts) from what you
own (assets).
Unit 3 Business income and expenses
• Business income is the money the business earns from selling goods and
services.
• Business expenses are the daily costs of running the business, for example,
rent, stationery, wages and electricity.
• The business makes a profit when the income is more than the expenses.
• The business makes a loss when the expenses are more than the income.
Unit 4 Savings and investments in business
• Savings are made when the money left over after all expenses have been
paid is put aside and saved for the future.
• Investing is when people use their savings to make more money.
• Return is the money earned on an investment.
76
Budgets
Financial literacy
Topic 7
Topic overview
• Understand what a budget is and how
it is used to plan and control income
and expenditure.
• Learn what information is shown in a
budget.
• Understand what income and receipts
are.
• Understand what expenses and
payments are.
• Analyse a personal and a business
budget.
• Understand how a budget can be used
to plan for future buying, saving and
investing.
77
Topic 7 Unit 1
Unit 1 Definition of a budget, income and
expenditure
key words
budget – a table
or spreadsheet
that shows the
amounts of
expected income
and expenditure
for a month for
a business or
individual
In Topics 5 and 6 you learned about personal and business income and
expenses. In this topic you will learn how people and businesses can use a
budget to plan and control their income and expenses. A budget will help you
to avoid wasting money and help you save and invest money for the future.
What is a budget?
The word ‘budget’ comes from an old French word bougette, which was a small
leather bag in which people kept their money. In those days, a housewife first
had to look in the bag to see how much money she had before she
could go shopping. The same applies to you when you buy things
with your pocket money – you first need to know how much
money you have available before you can start spending.
Budgeting involves understanding how much money you earn
and spend over a period of time. A budget today refers to a
document, table or spreadsheet that you draw up where you show
the amounts that the person or business expects its income and
expenses to be every month, for a certain period of time, such as
three months or a year.
Why are budgets important?
A French lady carrying a small
leather bag, called a bougette.
Drawing up a budget is a useful way to keep control of your money
and to make sure that it is being used in the way you want it to be.
It also:
• forces you to plan your spending
• can help you to avoid wasting your money
• can be used to help you control your expenses when you
compare what you actually spent to what you planned to spend.
How to prepare a budget
To prepare a budget the following information is needed:
• How much money is to be received for that month, for example, pocket
money
• How much money is to be paid for that month, for example, birthday
presents, tuck-shop
• How much money is in the bank account at the beginning of the month.
78
Unit 1 Topic 7
Activity 7.1 Look at a budget
Below is a budget drawn up by Tosin Songomuge, a Grade 7 learner, to plan
his monthly spending for the month of January.
Worked example
JANUARY
1.
2.
3.
4.
Income/Receipts of cash
350
Pocket money
50
Birthday present
-
A list of the expected
money to be received
and a total is calculated
Money for working in the garden
300
Expenses/Cash payments
335
Books and magazines
40
Clothes
200
Entertainment
60
Food and cool drinks
35
Total amount received minus total
amount paid
Surplus for the month
15
Money in the bank account at beginning of
the month
Money at the beginning of month
220
Money at the end of month
235
A list of all the expected money that
needs to be paid during the month
and a total is calculated
Money expected to be in the bank account
at the end of January
How much money did Tosin have at the beginning of January?
How much money did he have at the end of January?
Explain why his money went up by R15 during January.
Draw up your own budget and show your:
a) income
b) expenses
c) surplus for the month
d) money at the beginning of the month
e) money at the end of the month.
(1)
(1)
(1)
key word
surplus – when you
have money left
over after you
have paid all your
expenses
(5)
Income and expenditure
The first step in drawing up a budget is to decide what the income and
expenses are, and what amounts are likely to be received and paid in each of
the months for which the budget is being prepared.
Income is any money earned, for example, Tosin earned R300 a month for
working in the garden. As you learned in Topic 6, individuals can earn money
79
Topic 7 Unit 1
from their job in the form of a salary or wage, from renting out property
or from investing money. A business can also make money from making or
buying and selling goods or services.
When drawing up a budget, any money received, but not actually earned, is
also recorded in the budget. For example, Tosin is expecting to receive R150
as a birthday present and R50 pocket money from his parents. He has not
actually done anything to earn this money but he is hoping to receive it.
Expenses are costs that a person or business has to pay either in order to satisfy
their needs or wants or to run their business. Tosin, for example, spent money
on food and
Payments
entertainment.
Money received
Other examples
of the running
costs of families
and businesses
are electricity,
wages
water, fuel and
R300
rent.
When drawing
up a budget any
R50
money paid is
pocket
also recorded,
money
even if it is not
an expense.
Money that
people spend on
R150
equipment like
gift
television sets
and computers is
not an expense
because these goods can be resold for cash, and so have value. In accounting,
these goods are known as assets and not expenses, even though payment is
made when they are bought. Money can also be spent on paying back a loan
or investing in a bank. These are also payments but not expenses.
key word
deficit – the extra
amount of money
you need when
your expenses are
more than your
income
80
The budget should show whether there is a difference between your expected
expenses and income. If you will get more money than you spend, it is called
a surplus; if you get less money it is called a deficit. Tosin had a surplus in
January so fortunately he had money left over from January that he could use
in February.
Unit 2 Topic 7
Unit 2 Personal budgets
Why we should have a personal budget
Money plays an important part in our lives and most of us find that we never
have enough money for all our needs and wants. Many people spend more
money than they earn, so they borrow money from other people or banks. If
they keep doing this, they might end up in situations where they eventually
cannot repay their debts.
Reasons why people spend more than they earn:
• They cannot control their spending and they buy more than they can
afford.
• They want to impress other people by buying things like branded clothing,
iPads and cars when they do not have the money for basic living expenses.
• They have not planned for emergencies so they do not have surplus money
(savings) available for these expenses.
• They have no plan or budget, so they spend their money until it runs out
and then have no money left to last them to the end of the month.
Learn how to draw up a budget and make it a part of your life. This will not
only help you manage your money better, it will also help you to plan ways in
which you can save and invest money for the future.
Did you know?
When people use
a budget to plan
how to spend and
save their money,
they have fewer
problems paying
their debts, bills
and credit cards on
time.
What is a personal budget?
A personal budget is a budget drawn up to plan the income and expenses of
an individual or a family. Tosin’s budget is a personal budget. In a personal or
family budget, all sources of income are identified and expenses are planned
with the aim of matching the expenses to the income so that you don’t spend
more than you have.
Making decisions on how to spend money is difficult because our needs
and wants are unlimited but the money we have to spend to satisfy them is
limited. Not all people will have the same needs and wants, nor will they all
have the same priorities when it comes to deciding on how to spend their
money.
Preparing a budget forces you to carefully plan your spending and to be
realistic about what you can afford. We cannot spend what we do not have.
Follow the steps on the next page to draw up your budget.
81
Topic 7 Unit 2
• Make a list of all the income you earn every month, as well as other income
you think you might be able to earn or receive.
• Make a list of all your needs and a list of your wants.
• You must try and satisfy your needs first.
• Arrange the items on your two lists in order of importance. Which needs
and wants do you want to satisfy first?
• Rather wait to purchase expensive items until you have saved enough
money to pay cash for them. If you buy on credit, make sure you can afford
the repayments.
Activity 7.2 Decide how to spend your money
Imagine that a rich uncle gives you R1 000 to spend on yourself. Make a list
of all the things you would buy, starting with the one that you want the
most and ending with the last one you can still afford to buy. Below are some
examples of items that you might like to put on your list:
• bicycle R300
• jacket R250
• shirt R100
• pants/jeans R100
• jersey R50
• books/stationery R200
• sports equipment R300 • toy R200
• food and drinks R100
• iPod R400
• camera R200
• food and drinks R200
• save R ?
• radio/cd player R200
• tent R300
• food and drinks R50
(10)
82
Unit 2 Topic 7
Activity 7.3 Analyse a family’s budget
Look at the Keakitse family budget February and answer the questions below.
FEBRUARY
Income/Receipts of cash
8 300
Salaries
6 100
Rent received from outside room
1 000
Interest income earned on savings
750
Money earned from sewing business
450
Expenses/Payments of cash
(7 530)
Food
2 650
Transport
560
Clothes
150
School fees
-
Entertainment
150
House rental
3 500
Household goods
200
Services (hairdressers, doctors, etc.)
120
Payment of shop accounts
100
Savings
100
Surplus for the month
770
Money at the beginning of month
1 650
Money at the end of month
2 420
1.
2.
3.
4.
5.
6.
How much money did they have at the beginning of February?
(1)
Explain why there is a rent expense and a rent income amount.
(2)
Why did the family have a surplus of R770 for February?
(2)
Mrs Keakitse makes extra money sewing and mending clothes. She does this
in the evenings and on weekends. What expenses/payments do you think
they would have to cut down on if she no longer offered this service?
(2)
How do you know that they buy some goods on credit/account every
(1)
month?
Why is it so important for the family to budget for savings?
(2)
83
Topic 7 Unit 3
Unit 3 Business budgets
A budget is also an essential planning tool used by
businesses. Before starting a new business, action plans
and budgets should be drawn up to see if the business
is likely to make enough money to cover its costs. From
then on, the existing business needs to plan and budget
what they want to achieve in the next year in order to
grow the business.
No business can plan to run with a deficit because, at
some point in the year, they will run out of money.
Then they will not be able to pay their staff and other
expenses. By drawing up a business budget, they can see
if there are likely to be cash problems and they can plan
to cut some of their costs.
A good budget can also help businesses to avoid
wastage. When every amount is carefully calculated,
it is easy to see how your money is being spent and to
decide whether you have any unnecessary expenditures.
A business budget
A budget can be drawn up by anyone in the
organisation who knows what the plans for the business are and what the
possible income and expenses will be. The person who prepares the budget
must make sure that they work closely with the owner and managers so that
they know what the plans for the business are.
A business budget is usually drawn up for one year but it can be drawn up for a
few years at a time.
Activity 7.4 Complete a business budget
Sugar and Salt is a small business that sells sweets, savoury snacks and chips.
They have drawn up the budget on the next page, for December, based on
their sales from last year. Use the information given, complete the budget and
answer the questions that follow.
84
Unit 3 Topic 7
DECEMBER
Receipts of cash
Sales
Money earned from delivering stock to customers
Payments of cash
Stock bought
?
400 000
8 000
?
170 000
Transport cost of getting stock to shop
2 500
Staff wages
34 000
Shop rental
8 000
Advertising costs
2 000
Other running costs
6 800
Surplus for the month
Money at the beginning of month
Money at the end of month
101 050
?
Information:
• They are expecting sales to double from November to December.
1.
2.
3.
(2)
Give two reasons why you think their sales will go up in December.
Why do you think they are planning to increase their wages in
December?
(2)
a) Calculate whether the business expects to have a surplus or a deficit
(2)
for the month.
b) Calculate the money at the end of the month.
(3)
85
Topic 7 Unit 4
Unit 4 Savings, buying and planning
A plan for spending and saving money
When you create a budget, you are creating a plan for spending and saving
money. We know it is important to save money for the future, emergencies
and unforseen events. Savings are also important to increase your chances of
improving your standard of living. Many people, however, find it difficult to
save. Many people hardly earn enough money to buy the things they need
to survive and so struggle to save any money at all. Other people have many
things they want to buy and they like to spend their money as they earn it.
key word
expenditure – the
money you spend
If, however, people planned their expenditure better by drawing up budgets,
they might find that they could afford to save more. In fact, the first thing you
should put in your budget is an amount you want to save. Then you complete
the budget, planning only to spend the remaining amount available. The
money you save and invest will earn you more money in the form of interest.
Activity 7.5 Do you save?
1.
2.
(2)
Explain whether you save any of your money, and if not, why not.
Explain why you think it is important to try and save some of your money. (2)
Summary
Unit 1 Definition of a budget,
income and expenditure
• A budget is drawn up to show the
amounts that a person or business
expects its income and expenses to be
every month for a certain period of time.
• Income is any money earned.
• Expenses are costs that a person or
business has to pay to either satisfy their
needs or to run their business.
Unit 2 Personal budgets
86
• A personal budget is a budget drawn up
to plan the income and expenses of an
individual or a family.
Unit 3 Business budgets
• A business budget is a budget drawn up
to plan the income and expenses of a
business.
Unit 4 Savings, buying and
planning
• If people planned their expenditure by
drawing up budgets, they might find
that they could afford to save more.
• The first thing you should put in your
budget is an amount you want to save.
Then you complete the budget, planning
only to spend the remaining amount.
Term 2 Revision
Topic 5 Accounting concepts
1.
Copy the table below and classify whether the following accounts are
assets, liabilities or expenses: stationery, bank, stock, equipment, rent
paid, loan from Absa Bank, advertising, telephone, vehicles, water and
electricity, land and buildings, interest on loan.
Assets
Liabilities
Expenses
(14)
2.
3.
Explain the meaning of the following:
a) Transaction
b) Savings
c) Loss.
(6)
Choose the most suitable match. Write down only the number and the letter.
Accounting term
Definition
1.
Assets
A
When money is put aside for the future
2.
Capital
B
The total debts that the business has to pay back
3.
Fixed deposit
C
Planning how much money you will have in the future
4.
Bank account
D
The money or assets invested in the business by the owner
5.
Budgets
E
Money that is earned by the business for providing a service
6.
Savings
F
A savings account where you can withdraw money whenever you need to
7.
Liability
G
The possessions that are valuable to the business
8.
Call account
H
Money earned and paid to the employees of the business
9.
Loan: FNB Bank
I
The cost of borrowing money
10.
Current income
J
An investment made in order to earn a fixed interest rate
11.
Salaries and wages
K
An account opened by the business to deposit and withdraw money
12.
Interest on loan
L
Money that the business has borrowed from a financial institution
(12)
Total [32]
Topic 6 Income and expenses
1.
From the list below, identify which of the following would be a business
income, personal income or both:
a) Salaries and wages
d) Sales
b) Rent from a second home
e) Current income
c) Interest on a fixed deposit
f) Rent of office
(6)
87
2.
3.
4.
From the list below, identify which of the following would be a business
expense, personal expense or both:
a) Salaries and wages
d) Water and electricity
e) Petrol
b) Advertising
c) Interest on loan
f) Service material
(6)
Define the following words:
a) Commission income
c) Investments
b) Savings
d) Interest rate
(8)
Below is the Statement of Net Worth for Jordi Murray for September.
Study the information and answer the questions that follow.
Jordi Murray
Statement of Net Worth for September
POSSESSIONS
House
800 000
Cars
120 000
Furniture
10 000
Computer
5 500
Money
1 500
Fixed deposit
52 200
TOTAL POSSESSIONS
?
DEBTS
Loan at the bank
5.
6.
7.
8.
9.
88
550 500
Credit cards
9 500
Accounts
12 300
TOTAL DEBTS
?
NET WORTH
?
a) Calculate the missing figures in the table.
(3)
b) What is Jordi’s net worth for September?
(3)
c) Why do think that the loan at the bank is so high?
(2)
(4)
d) Discuss two ways in which Jordi can improve her net worth.
What does the term ‘savings’ mean?
(2)
What are the advantages of saving some of your income each month? (2)
Explain what interest is.
(2)
Explain why a fixed deposit account is a better form of investment than
a savings account.
(4)
Explain how savings and investments make money available to start new
businesses.
(3)
Total [45]
Topic 7 Budgets
1.
Complete the following budget and answer the questions that follow.
Information
When Thabiso started Grade 7 his mother decided it was important for him to learn
how to manage money. She decided to give him an allowance of R200 a month. He
would also be given R50 a month if he helped to clean up around the house and wash
the dishes. His mother also agreed to pay him or his sister R60 a month (R15 a week) if
they mowed the lawn once a week.
Thabiso decided that he wanted to spend R30 a month on snacks and R20 a month on
magazines. He also wanted to buy a T-shirt that cost R125 as soon as he got his January
allowance. He also wanted to buy stationery for school for R80.
Income/Receipts of cash
Allowance
Money for cleaning the house
Money for working in the garden
Expenses/Payments of cash
Snack foods
Magazines
Clothes
Stationery
Savings
Surplus for the month
Money at the beginning of month
Money at the end of month
1.
2.
3.
4.
5.
6.
7.
JANUARY
(310)
200
50
45
(305)
30
20
125
80
50
5
5
What is a budget and why is it important to have one?
(5)
What type of information is shown in a budget?
(3)
What kind of budget has Thabiso drawn up?
(2)
Why did Thabiso have no money at the beginning of the month?
(5)
How does Thabiso earn income to pay for his expenses?
(3)
(2)
How many times did Thabiso mow the lawn in January?
How much could Thabiso earn if he mowed the lawn every week?
(2)
Total [22]
89
The entrepreneur
Entrepreneurship
Topic 8
Topic overview
• Understand what an entrepreneur is.
• List the characteristics of an
entrepreneur.
• Discuss entrepreneurial skills.
90
• Investigate the entrepreneurial actions
of buying, selling, producing and
making a profit.
Unit 1 Topic 8
Unit 1
Definition of an entrepreneur
An entrepreneur is a person who owns and runs their own business
and assumes all the risks and rewards for the business venture. An
entrepreneur is the person with the skills and knowledge to use the
other factors of production to produce a useful good or service which
can be sold at a profit to consumers. They can either start a business
or buy an existing business. Entrepreneurs work for themselves and
create their own jobs. An entrepreneur takes a calculated risk by
investing money in a business opportunity in order to make a profit.
They are people who can identify opportunities and have the skills to
turn an opportunity into a successful venture.
What does it take to be an entrepreneur?
It takes certain skills and personal characteristics to be a successful
entrepreneur. Not everyone is cut out to be an entrepreneur. For
example, an entrepreneur has to be able to live with uncertainty
and be comfortable taking risks. Some people are more comfortable
working for other people. They enjoy the security of earning a regular
income at the end of every month.
Activity 8.1 What is an entrepreneur?
1.
2.
3.
Explain in your own words what an entrepreneur is.
(1)
Look at the picture of the entrepreneur on the opener page of
this topic. Identify whether this entrepreneur is selling a service
or selling goods.
(1)
Do you think you would enjoy being an entrepreneur? Give
reasons for your answer.
(2)
Entrepreneurs invest money to
start their own businesses.
key words
entrepreneur − a person who
owns and runs their own
business, assumes all the risks
and rewards for the business
venture, and has the skills and
knowledge to combine the
other factors of production
to produce a useful good or
service which can be sold at a
profit to consumers
calculated risk – making a
decision even though you
know there is a risk involved
Entrepreneurs create jobs
Some entrepreneurs operate on their own, with no partners and
no one working for them. Other entrepreneurs create employment
opportunities by providing jobs. These jobs help the economy to grow
and reduce unemployment and poverty. Long-term unemployment
is a problem for many people in South Africa. Unemployment
rates are high because our economy is not large enough to provide
employment opportunities for everyone. One solution to this problem
is to stimulate the economy by encouraging entrepreneurs to start
Entrepreneurs help to reduce
new businesses. Another strategy is to stimulate the economy by
unemployment by creating jobs
encouraging existing businesses to expand.
for other people.
91
Topic 8 Unit 1
Why do people become entrepreneurs?
We had 273 applicants for
the last job we advertised in
the newspaper!
I work so hard but the
company gets all the
money!
I would like to become an
entrepreneur because I’m very
frustrated. My job’s so boring
and the pay is low.
I did matric three years ago.
I’ve been looking for work
since then. I’ve had no luck
finding anything to do.
I didn’t have the chance to go
to university. It’s hard to get a
job without any qualifications.
I don’t like other people
telling me what to do. I
want to be my own boss.
Many people become entrepreneurs because they want to work for themselves
and make their own decisions. Sometimes people become entrepreneurs because
they are unemployed and they need to find ways to make money in order to buy
enough food and provide housing for their families. Starting your own business
is one way of earning money. Thousands of people in South Africa have created
small businesses that are very successful. Read what some of them had to say:
I didn’t know I could
do it! I’m much more
confident now!
Starting my own business
was really hard but I
learnt so much.
I work hard but at least
I – not my boss – gets the
financial rewards.
92
After years of unemployment it feels
good to be busy and to be able to plan
for the future.
I’m in control of
my own life – it’s
great!
Unit 2 Topic 8
Unit 2 Characteristics and skills
To be a successful entrepreneur one needs certain personal characteristics and
skills. It is not enough just to have a good business idea. Entrepreneurs need to
have business knowledge, perseverance and determination.
Activity 8.2 Interview an entrepreneur
Think of someone you know who is an entrepreneur. Interview this person
and prepare a five-minute oral report back on what you find. The content of
your presentation could include information on:
• what made the person start the business
• what skills they lacked when starting out and how they overcame this
obstacle
• any qualifications they have to run the business
• the characteristics the person says are important to become successful
• any advice the person has for young entrepreneurs.
key words
listed – the company
started selling
shares on the
Johannesburg
Stock Exchange
(JSE)
retailer – a shop
where goods are
sold to the public
The characteristics of successful entrepreneurs
No two successful entrepreneurs are exactly the same. It is, however, possible
to identify common characteristics and skills which help entrepreneurs to
make a success of their business venture. Typically, successful entrepreneurs:
• have a vision of what they want to achieve in the future
• have confidence in their ability to succeed
• like to have control and be in charge
• have will power and perseverance which enables them to overcome obstacles
• are very good at planning and organising
• have exceptional leadership and management skills
• are flexible and able to adapt quickly to change
• have high levels of energy and commitment
• are risk takers
• have the ability to identify a business opportunity and see the potential in
new business ideas.
Read the case study below to learn more about what it takes to make a success
of a business venture.
Case study: Starting small, growing big
Anthony Delport likes to try out new ideas and opportunities, especially those
that involve new technology. In 1990, Anthony and some friends started a
company that is today known as Incredible Connection. The company was listed
in 1997 and is probably one of the biggest computer retailers in South Africa.
93
Topic 8 Unit 2
Anthony says that he has become successful because
he always learns from his mistakes. He believes that
every entrepreneur is unique, but that there are certain
characteristics that are common to all successful
entrepreneurs. According to Anthony, entrepreneurs should
be enthusiastic and love what they do. However, they
also need to be committed to achieving the goals of the
business. To do this, they need to be determined, energetic
and have an ability to complete tasks.
Incredible Connection is one of the
largest computer retail outlets in
South Africa.
One of an entrepreneur’s most difficult problems is that you
usually have to try new ideas more than once and experience failure before you reach success.
This takes up a lot of time.
Entrepreneurs need to develop ideas that excite them. One of the hardest things an entrepreneur
has to do is to never give up. Once the entrepreneur has developed the idea, the next problem is
finding the money to get the business going and keep the business going. Anthony believes that
you shouldn’t think that a big business is better than a small business. It is very important to keep
doing research.
According to Anthony, you should concentrate on cash, not profits, when you start your business.
You should focus on achieving your goals, but always be looking out for new business ideas and
opportunities. Finally, when you are successful, don’t forget the team who helped to create your
business.
Activity 8.3 Identify the characteristics of a successful
entrepreneur
Read the case study again and then answer the following questions.
1. In the case study Anthony Delport mentions many different
characteristics that entrepreneurs need. Working with a partner, make a
list of the characteristics of successful entrepreneurs.
(7)
2. Working on your own, go back through the list of characteristics you
identified and indicate with a star which of these characteristics you have.
3. Explain what is meant by each of the following statements in the case study:
a) Learn from your mistakes.
b) Experience failure before you reach success.
c) Find the money to get the business going and keep the business going.
d) Keep doing research.
e) Concentrate on cash, not profits.
(5 × 2 = 10)
Read another case study to learn more about the skills required to be a
successful entrepreneur.
94
Unit 2 Topic 8
Case study: Following the family example
Sheila Radebe knew that she wanted to own her own business since her days as a jewelry design
student at Wits Technikon. Sheila is the owner of African Jewels in Pretoria, a business that
manufactures and exports jewelry. The business makes ethnically decorated jewelry that includes
necklaces, rings, earrings and beaded costume jewelry.
Sheila’s manufacturing business has expanded from employing three people to ten people and gone
from a small room to a big workshop. She has employed six people from the local community and
started a mentorship programme for youth who want to learn more about jewelry design.
With a father who owned his own grocery store in Mamelodi and an older brother who is an
entrepreneur, business was where Sheila always wanted to work. The banks did not want to
give Sheila a loan so her father and brother became partners in her business by giving her the
necessary finance. Her own shop combines her passion for design and creativity with her dreams
of being an entrepreneur.
Sheila believes other women should start their own
businesses, no matter how small. They should combine
their skills just as Sheila did.
Sheila’s business combines her passion for design and
creativity with her dreams of being an entrepreneur.
While the business is successful, Sheila is looking at
other business opportunities. Her advice to potential
entrepreneurs is not to make excuses about not having skills
An example of ethnic Zulu beadwork
or resources.
Activity 8.4 Identify the skills needed to be an entrepreneur
Read the case study about Sheila again and then answer the questions.
1. What skills does Sheila have for running her business? Where do you
think she learnt these skills?
(4)
2. Anthony is in the retail industry, whereas Sheila is in the manufacturing
industry. Explain the difference between these two types of businesses. (2)
(2)
3. Who are Anthony’s customers and who are Sheila’s customers?
4. Anthony mentioned the importance of having goals. What do you think
Sheila’s goal is?
(1)
5. How did Sheila finance her business?
(1)
6. What does Sheila give back to her community?
(2)
key words
ethnically decorated
− an African
design with ethnic
patterns and
animal themes
95
Topic 8 Unit 3
Unit 3 Entrepreneurial actions
Entrepreneurs have to perform specific functions in order to make their
business successful. Therefore an entrepreneur has to carry out specific actions
to make sure that the business runs smoothly. In this unit you will learn about
the four important actions that entrepreneurs have to perform.
What actions does an entrepreneur perform?
Entrepreneurs have to do four things:
• Produce
• Buy
• Make a profit
• Sell
Buying
The first basic function that an entrepreneur has to perform is buying or
purchasing equipment, raw materials and stock.
key words
equipment – assets
like machines that
are used in the
operation of a
business
raw materials –
things that are
used to make
other goods
inputs – the
specifications and
materials in the
production process
Different businesses need different kinds of equipment to run the business.
For example, a business might need furniture, computer equipment,
machinery or vehicles. This equipment is also known as capital items. The
entrepreneur needs to decide what equipment is needed and where it will be
purchased. When buying the equipment the entrepreneur negotiates the price
with the supplier.
Raw materials are things that are used to make other goods. They are the
inputs in the production process. Examples of raw materials used by a business
that makes furniture include wood, nails, glue, fabric and leather. All these
raw materials need to be purchased. The entrepreneur will decide what raw
materials will be needed and how much of the raw materials will be purchased.
Finding a reliable supplier who can provide good quality raw materials is a
very important part of running a successful business.
Equipment
Raw materials
Product
The equipment and raw materials that an entrepreneur who owned a small cupcake business would need to
purchase.
96
Unit 3 Topic 8
In a small business, the entrepreneur does all the buying of equipment,
raw materials and stock. In a large business, a manager is appointed to take
responsibility for this important business function.
Producing
Producing is the action of making a product. Producing involves taking
raw materials and turning them into something useful that can be sold
to customers. Producing is also sometimes known as manufacturing or
production.
Not all businesses produce goods. Some businesses sell a service without
making any physical product. Businesses that do produce products are known
as manufacturing businesses. In a manufacturing business the entrepreneur
needs to decide what will be produced and how it will be produced. In other
words, the entrepreneur decides what the production process will be to make
the products.
key words
producing − the
act of making
a product by
transforming raw
materials into
goods
selling − the act
of convincing
customers to buy
the goods and
services
Manufacturing businesses are involved in producing products.
Selling
Selling is the action of persuading customers to buy a product or service.
Selling involves activities such as advertising and marketing the product. It
also involves talking to customers and explaining to them how a product
works or telling a customer about the benefits of a product or service. An
important part of selling a product or service is making sure that customers are
satisfied with what they buy so that they come back again.
97
Topic 8 Unit 3
Selling is the action of persuading a customer to purchase a good or service.
Making a profit
key words
make a profit − the
act of ensuring
that income
(revenue) is
greater than
expenses
financial records − a
list of the income
and expenses of a
business
maximise − get
as much out of
something as you
can
minimise − keep low
as possible
98
The goal of owning a business is to make a profit. A business that does
not make a profit would have to close down. To calculate the profit of the
business, the entrepreneur needs to keep good records of how much money is
made and how much money is spent. These are known as financial records.
The financial records help the entrepreneur to keep track of how much money
is coming into the business (income) and how much is flowing out (expenses).
Entrepreneurs try to make as much profit as they can. To do this, they try to
maximise the income of the business and minimise the costs (expenses) of
the business.
Activity 8.5 Describe what an entrepreneur does
Imagine that a friend of yours, Gavin, has decided to open a business that
makes and sells pies. Explain what Gavin would need to do in order to make
a success of this business. Write your answer under the headings: Buying,
Producing, Selling and Making a profit.
(12)
Summary
Unit 1 Definition of an entrepreneur
• An entrepreneur is a person who owns their own business.
• Not everyone can be an entrepreneur − it takes certain skills and personal
characteristics to run a successful business.
• Entrepreneurs create job opportunities for others and stimulate the
economy.
• Becoming an entrepreneur is one way to avoid unemployment.
Unit 2 Characteristics and skills
• Successful entrepreneurs usually have the following characteristics:
° Enjoy what they do
° Hard-working, committed and determined
° Enthusiastic
° Optimistic (see the positive and find opportunities)
° Good with people
° Self-confident and believe in their own ability
° Not afraid to take risks.
• Successful entrepreneurs often have the following skills:
° Good at planning and organising
° Know how to manage money
° Good at problem-solving and generating ideas
° Good at conflict resolution and have team-building skills
° Good leadership skills
° Are creative.
Unit 3 Entrepreneurial actions
• Entrepreneurs carry out the following actions:
° Buying
° Producing
° Selling
° Making a profit.
99
Starting a business
Entrepreneurship
Topic 9
Topic overview
• Identify consumer needs and wants.
• Analyse strengths, weaknesses,
opportunities and threats.
• Look at setting and achieving goals.
• Explain the concept of advertising.
• Analyse different media in advertising.
100
• Understand the principles of
advertising.
• Prepare a budget for an Entrepreneurs’
Day.
• Do various cost calculations.
Unit 1 Topic 9
Unit 1 Needs and wants of consumers
Discovering the needs and wants of consumers
A business is successful if it satisfies the needs and wants of people and
communities. To find out what customers (in other words, the market) want
and need, you need to do research. This kind of research is called a needs
analysis and it can also help entrepreneurs to think of new business ideas.
The needs of people and communities can
include the need for fun and relaxation or a need
for transport from their homes to work.
Businesses in a community will show you what
kinds of needs and wants are being satisfied. It
is also important to look at the community’s
special resources to see if they could lead to a
new business opportunity. Many businesses
Relaxation is a need, for
use the resources of the community to develop
example, a holiday.
business ideas. For example, the Durban
beachfront where the businesses sell food, curios, surf gear, etc. because the
beach attracts a lot of people.
key words
needs analysis
– research to
find out what
the needs of
the people or
community are
resources – the
things we use to
produce goods
and services
A day at the beach satisfies many people’s needs and wants.
The community’s resources can bring money into the area. If the businesses in
the area do well, then this will improve the standard of living of the people in
the community.
101
Topic 9 Unit 1
The first step in starting a business is to find an idea for a product or service
that consumers want. It is also important that the price consumers are
prepared to pay for the product or service is enough to cover the costs of
producing the product or service, and to make a satisfactory profit.
Activity 9.1 Identify the needs and wants of consumers
1.
2.
3.
4.
5.
6.
Draw a simple map to represent your local community. For example, this
could include the local café, a shopping mall or stalls at a taxi rank. Take
note of what each business offers.
(5)
Make a list of the needs and wants that these businesses satisfy. Write
down as many ideas as possible.
(5)
Do the local businesses satisfy your community’s needs? Can you think of
new businesses to fill any gaps?
(5)
Make a list of the needs and wants of the following people in your school:
• Pupils
• Teachers
• Headmaster/headmistress
• Parents
(5)
• Cleaning staff
Think of at least three business opportunities that you could investigate
(3)
starting at your school.
Write a letter to the parents and tell them about your three business ideas.
Include the following details:
• the business idea and how you thought of it
• why you chose this idea
• which needs or wants your product or service will be satisfying.
(10)
Entrepreneurs’ Day
After this topic has been covered you will be expected to run your own
business for a day. Use the skills taught in this topic to help you plan for the
week. More details on Entrepreneurs’ Day will follow in the next topic.
102
Unit 2 Topic 9
Unit 2 Use of recycled materials
What is recycling?
Recycling means breaking something down and reusing waste material.
Examples of items that can be recycled are glass, paper, metal and plastic. As
a consumer you have a role to play in protecting the environment by buying
recycled products. Look for products that have the recycled sign.
key word
recycle − reusing
waste products
Activity 9.2 Campaign for recycling
1.
2.
3.
4.
Form groups of between two and four people.
As a group, identify places where recycling bins can be placed in your school.
Decide on a particular resource that you want to recycle, for example, paper.
Once you have chosen your resource, design a poster to collect your
resource from the learners in your school on a particular day. Take the
resources to the recycling bins.
The recycle sign
Use of recycled materials
Many of the materials we use can be reused more than once before they
become useless. The following materials are often recycled:
• Metals Aluminum cans (such as cool drink cans) can be reused in cars and
for building purposes.
• Plastic Plastic can be melted down and made into new products, such as
milk bottles and even dirt bins and rulers.
• Glass Glass is long lasting and can be recycled over and over again. For
example, a glass bottle can be smashed and remade.
• Paper Paper can be recycled a number of times before it becomes useless.
Metals
Glass
Paper
Plastic
Activity 9.3 Ideas for recycled materials
1.
2.
Choose any three of the materials above and write down three products
you could make using this material.
(6)
Identify three ways in which you could use recycled products in your
business.
(3)
Did you know?
For every ton of
paper 17 trees can
be put to other
uses.
103
Topic 9 Unit 3
Unit 3 SWOT analysis
What is a SWOT analysis?
SWOT stands for strengths, weaknesses, opportunities and threats. A SWOT analysis
would be done to decide whether the business idea has the ability to be successful.
Strengths: Strengths in a SWOT analysis mean that you find all the positive
characteristics you have. For example, your business strength is that you are able
to talk to people easily so you will have a good relationship with your customers.
Weaknesses: Weaknesses in a SWOT analysis mean that you identify all the things
that you are not so good at. Weaknesses are things that we can control and try to
overcome. For example, you do not have the skills or knowledge to run a business.
Opportunities: Opportunities are chances that you can use in order to
improve the position you are in. For example, you think of a new product that
is not being sold in your area.
Threats: Threats are things that can have a negative effect on you, your idea or your
business. These are things that you or your business cannot control. For example, a
petrol price increase means the costs of your product is going to increase.
Activity 9.4 Do a SWOT analysis
Read the case study and then answer the questions.
Case study: Setting up a music business
Kevin is about to set up a business manufacturing and selling traditional musical
instruments. He is a musician himself and has a great deal of experience in
playing and making instruments, including drums and xylophones. He has
consulted you and asked you to help him do a SWOT analysis of his
business idea. He intends to employ two other people to help him make
these instruments and plans to sell them at a busy craft market in the
Kimberley city centre. This craft market is a popular tourist attraction.
1.
2.
3.
4.
104
Do a SWOT analysis where you make a list of the potential strengths,
(8)
weaknesses, opportunities and threats of this idea.
Discuss ways in which Kevin could utilise the strengths and opportunities
in order to make a success of his business.
(2)
Discuss things that Kevin could do to avoid the weaknesses and threats
you have identified.
(3)
Think of a business idea and draw up a SWOT analysis of your own idea. (8)
Unit 4 Topic 9
Unit 4 Setting and achieving goals
Setting goals
Goals are targets that you set and hope to achieve by a certain time. Setting
goals helps people build their self-confidence and gives them a sense of purpose.
You should always set a date by when you want to have achieved your goal.
For example, Mary Jones is in Grade 7. At the beginning of the year she set the
following goals for herself:
• She wants to make the swimming team in the first term.
• Her academic goal is to get over 80% for Maths each term.
• She wants to learn how to ride a horse by the end of the year.
key words
goals – something
you want to
achieve in the
future
Goals can be:
• Long term – longer than a year
• Medium term – within a number of months
• Short term – within a number of weeks.
Goals need to be set by the owners of businesses so that they can achieve the
targets that they have set.
Activity 9.5 Setting goals
1.
2.
Make a list of your goals for your business.
Classify your goals into short, medium and long term goals.
(6)
(6)
Achieving goals
Once goals have been set, it is important to refer back to them to make sure
that you are going in the right direction to achieve them. Once the goals have
been achieved it is important to ask yourself:
• Was the goal reached in time?
• Was the target realistic?
• Do I need to change any of my goals?
Activity 9.6 Achieving goals
By the end of Term 1 Mary had made the swimming team; she had not learnt
how to ride a horse and she had achieved 78% for Maths. Mary needs to check
whether her first goals were realistic.
1. Give two reasons why Mary has not achieved all her goals.
(2)
2. Give Mary two suggestions on how to change her goals for the next term. (2)
105
Topic 9 Unit 5
Unit 5 Advertising
key words
marketing – ways to
increase the sale
of something
promotion – event
or campaign to
encourage people
to buy something
product
Concept of advertising
Marketing means developing ways to increase the number of sales for a
product. Marketing looks at the four Ps which are:
• Product – what are you going to do that makes your product unique? What can
you do to make people want to buy your product (packaging, ingredients)?
• Price – how does the price compare to that of the competitors?
• Place – where is the best place to sell the product?
• Promotion – where is the best place to inform people about the product or
service. For example, running a competition or advertising on the television.
price
place
promotion
Activity 9.7 Explore the four Ps
Take a look at the four Ps of marketing and see if you can write a few sentences
about your business idea using the following as a guide:
• The product I am going to sell
• The price I am going to charge
• The places I am going to sell my product
• Ways in which I am going to promote my business.
(8)
key words
advertising – a tool
used to promote
your business
target market
– potential
customers who
would buy your
product/service
media – places
to advertise or
spread news
106
One of the main tools used in marketing is advertising. Businesses need to
promote their products and services by using advertising. It does not matter how
brilliant the business idea is: if nobody knows about your business, it will fail.
Advertisements need to reach the target market, so they need to be:
• placed in the correct place, for example, it would not be a good idea to
advertise farming products in a ladies fashion magazine.
• at the correct time, for example, it would not be a good idea to advertise
shorts in winter.
The places where adverts appear are called the media, for example, magazines,
newspapers, radio, television, banners, posters, etc.
Unit 5 Topic 9
Media used for advertising
Entrepreneurs can use different media to get the message about their product
or service to the customers. Media refers to places where businesses can
advertise. There are three main categories:
• Print media – newspapers, pamphlets
° Advantages – cheap, a large number of people can be reached
° Disadvantages – newspapers are in black and white, still pictures, limited space
• Broadcasting media – radio and television
° Advantages – a large number of people can be reached
° Disadvantages – very expensive
• Internet – web pages, social networking
° Advantages – new place that people are exploring
° Disadvantage – limited market because not everyone has access.
Principles of advertising
Advertising is used to give people information and to get people to buy a product so
that sales will increase. The following are criteria for a good advertisement:
• Attention – the advertising medium needs to attract the target market’s attention.
• Interest – once the attention has been caught, the advertisement needs to
keep the target market interested.
• Desire – the advertisement needs to create a desire for the product; it must
make the target market want the product.
• Action – the advertisement must lead the customer to
take action and buy the product.
In the mood for a phone?
We call these principles of advertising AIDA principles.
Activity 9.8 Analyse an advert
AMAZING!
New phone that changes colour
depending on your mood.
Read the advert on the right and answer the questions that
follow:
1. Name three ways in which the advert tries to catch
(3)
people’s attention.
2. Does the advert keep you interested? Give a reason for
your answer.
(2)
Available at all leading cell phone shops
3. Are you keen to buy the advertised product? Explain why. (2)
or phone 0800 445 5511
4. How does the advert try to get people to buy the product? (2)
Other incredible features
5. This is a print media advert. Redesign the advert and its
internet connection / WiFi
information to make a user-friendly web page.
(4)
6. Would you advertise this product on the television? Give
reasons for your answer.
(3) An example of an advert
107
Topic 9 Unit 6
Unit 6 Budgeting for Entrepreneurs’ Day
What is a budget?
A budget is a plan of how much money you expect to receive and how you
expect to spend the money. It is important to budget so you know when you
have money available and when you do not.
Worked example
Below is the budget for Freshly Squeezed for three months. Look at the way
the budget is set out.
Budget for Freshly Squeezed
MARCH
MONEY RECEIVED
Money from selling juice
Loan from Mom
Capital from owner
TOTAL MONEY RECEIVED
MONEY PAID
Table hire
Cleaning materials
Oranges
Advertising
Telephone costs
Bottles for juice
TOTAL MONEY PAID
SURPLUS/(DEFICIT)
CASH AT BEGINNING
CASH AT END
A business not going according to plan.
108
726
500
1 500
2 726
300
12
850
50
60
160
1 432
1 294
(306)
988
Note:
• The budget is divided into
three sections:
1. Money received
2. Money paid
3. Calculating the amount
of money left over
• How to calculate the deficit
or surplus
Unit 6 Topic 9
Activty 9.9
Draw up a budget
Use your business idea to complete the following tasks:
1. Draw up a budget for the business you will be running on Entrepreneurs’ Day.
2. Calculate the amount that you are hoping to receive on the day by using
the following calculation: Number of items sold x selling price.
3. Enter this under the money received section.
4. Include, in the money received section, any of your own money you may
be using and any money you may be borrowing from your parents.
5. Calculate the total money received.
6. Calculate how much money you will be spending on different items to
make your product in order to calculate how much money is being paid.
7. Calculate the total amount of money paid.
8. Calculate your surplus or deficit.
9. Calculate the amount of money you hope to make.
10. Analyse whether there are areas that need to be adjusted to make even
(20)
more money. Write this information in a report.
109
Topic 9 Unit 7
Unit 7 Costing
Cost calculations
key words
fixed cost – a cost
that does not
change no matter
how many items
are made
variable cost – a
costs that increases
or decreases
depending on
how many items
are made
Below is a simple way of calculating the costs of making the product you want
to sell. You need to do the following calculations:
Fixed costs + variable costs = total cost of production
Fixed cost + variable costs = unit cost (i.e. cost to make one item)
No of units made
Fixed costs
Fixed costs are those costs that a business pays no matter how many goods it
produces (makes). For example, a business pays the same amount of rent every
month whether they make one or a hundred products. The rent is a fixed cost. Can
you think of other examples of fixed costs that different types of businesses have?
Variable costs
Variable costs are the costs that are different every month and depend on how
many products you make. For example, the more sandwiches a tuck shop
makes, the more money they will spend on buying bread, margarine, cheese,
tomatoes, chicken, mayonnaise and sandwich bags. What variable costs would
a clothing manufacturer have?
Worked example
Frozen Dreams is a business that sells ice creams and customers can add
their own toppings. The ice cream is served in cups with a plastic spoon.
The business is run by two Grade 7 pupils at school and they hope to sell
20 ice creams per day. Below is a list of the costs for Frozen Dreams:
2 litre ice cream
R35.00 for 7 cups
Rent paid to school each month
R10.00
Plastic spoons
20 cents each
Cups
R1 each
Chocolate topping
75 cents per cup
Caramel topping
75 cents per cup
Advertising
R5.00 per week
Calculation of costs
Fixed costs = R10.00 (rent) + (advertising) (R5.00)
= R15.00 per week
Fixed cost per unit = R15.00 4 20
= 75 cents per unit
110
Unit 7 Topic 9
Variable costs per unit
Ice cream
= (35.00 4 7)
= R5.00 per cup
R5.00 (ice cream) + 20 cents (spoon) + R1.00 (cup) + 75 cents (topping) = R6.95
TOTAL COST PER UNIT
= R6.95 + 75 cents
= R7.70
There are various ways to calculate the costs per unit. It is important to
take all costs into account. In the example above the fixed cost per unit
was calculated separately from the variable cost per unit and then the two
were added together. Once the total cost per unit is calculated it gives the
entrepreneur an idea as to how much to sell the product for.
Activity 9.10 Analyse costs
1.
John Ford recycles CDs and makes clocks in a factory. He is unsure which
costs are variable and which costs are fixed. Place a tick in the correct
column to help him decide.
Cost
Fixed cost
Variable cost
Compact discs
Rent expense
Glue
Insurance
Wages of clock makers
Packaging costs
Cleaner of factory
Clock mechanism
Telephone calls
Salary of secretary
2.
(10)
Beaded Bracelets is a business that is owned by a Grade 7 pupil, Courtney
Barnes who makes and sells beaded friendship bracelets to the pupils at
school. Below is a list of all the costs:
String
R15.00 makes 25 bracelets
Renting of table
R5.00 per week
License costs
R2.00 per week
Beads
R60 makes 50 bracelets
Stationery for advertising
R30
Clasps for bracelets
15 cents each
111
Topic 9 Unit 7
Calculate the following:
a) Total fixed costs
b) Fixed costs per unit if Courtney makes 100 bracelets per week
c) Total variable costs
d) Variable cost per unit if 100 bracelets are made
e) Total cost per unit.
(2)
(2)
(2)
(2)
(2)
Calculating the selling price
After the cost per unit has been calculated, the owner can decide how to work
out how much to charge the customers for the product. This is called the
selling price. When calculating the selling price, there are other costs that need
to be included, for example, administrative costs (stationery ) and the cost of
selling (petrol for the delivery truck).
Factors to consider when deciding on the selling price of a product:
• competitors’ pricing
• costs of making the product
• other costs that are not related to making the product
• what the target market is prepared to pay.
Worked example
Deciding on the selling price
Frozen Dreams have calculated that the cost price of their ice creams with
one topping is R7.70 per cup (see the Worked example on page 111). The
owner has various options to choose from when deciding on a price to sell
their ice creams:
• Looking at what the business competition is selling their ice creams or
food for, e.g. other pupils are selling ice creams or sweets for R10.00.
• Investigating the price that customers are prepared to pay for the ice creams,
e.g. they are prepared to pay R12.00 for a cup of ice cream with a topping.
• The owner of Frozen Dreams would need to then decide on the best price,
e.g. perhaps to sell the ice cream for R9.00. This means that they would add
an extra R2.30 onto the cost of the product to calculate the selling price.
• The selling price must be more than all the costs of making and selling
the product so that the owner can make a profit. Some owners choose
to add an amount or a certain percentage onto the cost price of the
products. This will be taught in Grade 9.
112
Unit 7 Topic 9
Activity 9.11 Decide on a selling price
Look at the costs that you calculated for Beaded Bracelets. Courtney Barnes
found out that there were other pupils selling beaded bracelets for R9.00.
Answer the following questions:
1. What price would you suggest that Courtney sells her bracelets for?
(1)
2. How much extra would this be above the cost price calculated in the
previous activity?
(2)
3. Give two reasons for the selling price that you have suggested.
(2)
Activity 9.12 Calculate costs and selling price
You should now make a final decision about the product that you want to
sell at your Entrepreneurs’ Day. Answer the following questions based on the
business idea that you have chosen.
1. Make a list of all the items that you will need to spend money on in order
to make your product.
(3)
2. Make a list of all your expenses or costs such as advertising, rent,
packaging, etc.
(3)
3. Calculate the costs of all these items. Present this in a table like the
example below.
Item
Price
Packets
R10.99 for 50
(3)
4.
5.
6.
7.
Work out how many items you think you can make with the items
(3)
purchased above.
Calculate how much it will cost to make one unit.
(3)
After calculating the cost of one unit, decide how much you would sell
(3)
the product for. Use the information above to assist you.
Write a short paragraph explaining how you determined your selling
price.
(5)
113
Summary
Unit 1 Needs and wants of consumers
• Needs and wants of the community need to be researched.
• Investigate whether the needs and wants are satisfied.
• Turn needs and wants into business opportunities.
Unit 2 Use of reycled materials
• Investigate whether there are business opportunities in helping to save the
environment.
Unit 3 SWOT analysis
• S: stands for strengths – positive things found within the business
• W: stands for weaknesses – negative things also found within the business
• O: stands for opportunities – external things that can have a positive effect
on the business
• T: stands for threats – external things that can have a negative effect on the
business
Unit 4 Setting and achieving goals
• Identify the goals and by when they need to be achieved.
Unit 5 Advertising
• Advertising is communicating with potential customers to get them to buy
your product.
• Media is where the advert appears to reach the target market.
Unit 6 Budgeting for Entrepreneurs’ Day
• Draw up a plan of how much money you expect to receive and how much
money you will have to spend to make your products.
• Calculate how much profit (money) you hope to make running the
business.
Unit 7 Costing
• Fixed costs remain the same and are not affected by how many items are
made.
• Variable costs can increase or decrease depending on how many items are
made.
• Selling price is how much the product needs to be sold for so that all costs
are covered and a profit can be made.
114
Entrepreneurs’ Day
Entrepreneurship
Topic 10
Topic overview
• Research effective planning.
• Discuss the advertising of products.
• Discuss the selling of products.
• Draw up an income and expenditure
statement.
115
Topic 10 Unit 1
Unit 1 Hosting an Entrepreneurs’ Day
Planning for the day
Your task in this topic is to produce and sell the product that you investigated
in Topic 9. You will be selling your product to your peers at school. You are
entrepreneurs who want to make as much profit as you can as a reward for
your hard work and risk-taking. If possible, do this in a group, so that you can
share responsibilities.
Your teacher/school will help you by:
• organising an appropriate day or week where you will be required to make
and sell your product
• organising tables for your product on the day or during the week
• going through the steps to help you make your day a success.
You will need to ask your parents to help by:
• allowing you to use some of their equipment to make your product
• helping you to use some of the equipment, for example, stoves
• lending you money to buy the things that you will need to make your product.
You must each keep a journal, which will be handed in for assessment. You
must write in your journal during the preparation stage, as well as after the
actual selling day. Include details on:
• the task that you are doing
• how you planned the task and divided the work
• how well the group works together
• what went well and what you could have done better.
Final product decision
At this stage, you should already have decided on your product. But, before
making a final decision, it is a good idea to research your target market and
to find out whether or not you have the skills and resources to make your
product. Without this information your business will not be a success.
Market research
key word
market research –
finding out details
about possible
customers
116
The people you are planning to sell your product to are called your target market.
Before you can make detailed plans, you need to do market research to find out:
• Who your target market is.
• What they enjoy or need.
• How they like their products to be packaged.
• How much they are prepared to pay for the product.
• At what time they are likely to buy the product.
• Where they are most likely to buy the product.
Unit 1 Topic 10
Activity 10.1 Design a questionnaire and interview your
market
To find out about your target market, you and your group must design a
questionnaire and use it to interview as many people as possible. You can
adapt and use the example of a questionnaire below:
key word
questionnaire – list
of questions that
people answer on
a form
Entrepreneurs’ Day Questionnaire
I am planning on selling ____________________________ for our Entrepreneurs’ Day.
Please assist me by answering the following questions:
1. Name (optional) ________________________________________________________
2. What grade are you in? __________________________________________________
3. Would you be interested in buying my product? ____________________________
4. What should I change in order to make the product more to your liking? _______
_______________________________________________________________________
5. How much would you be prepared to pay for the product? ___________________
6. How would you like the product packaged? ________________________________
7. Any other questions that specifically relate to your product such as flavours, size,
colours, etc. ____________________________________________________________
_______________________________________________________________________
When designing your questionnaire try to make it quick and easy for people
to fill in. You should interview as many people as you can so that you can
get a good range of results. Once the questionnaires are in you must analyse
the results so that you can see whether you need to make any changes to the
product, the price, the place and the packaging.
Write a report explaining:
• the results of your market research
• the decisions you will make based on the market research.
Now you can start planning your advertising programme, a business name and
logo based on the market research results and your plan from Topic 9.
117
Topic 10 Unit 1
Who will be doing what?
As entrepreneurs, you need to be able to:
• plan
• manage money (buy wisely and calculate prices)
• advertise, make, package and sell your product
• keep accurate records of your business activities
• make products people will want to buy.
Once you have decided on a business idea and found out about your target
market, you need to decide what role each person will play in the business.
Will the people in your group be able to do these things? If not, who can you
ask for help or advice?
Activity 10.2 Decide each person’s role on Entrepreneurs’ Day
1.
a)
From the photos below, try to identify which person is going to be playing
each of the roles in the sandwich-making business.
b)
e)
c)
d)
(5)
2.
3.
4.
118
Write a sentence or two describing each person’s responsibilities in the
(5)
business.
Discuss the most important characteristics a person needs to do each job
successfully. Think about which member of your group is most suited to
doing each job. Then decide who in your group will take on which role
and briefly explain why you have chosen them for the job. Write the
reasons in your journal.
(5)
Use the checklist on the next page to decide who will be doing what before,
during and after the Entrepreneurs’ Day. Keep notes of this in your journal.
Unit 1 Topic 10
Financial
Production
Purchasing
Marketing
TASK
General
Checklist for Entrepreneurs’ Day
Have you bought all the items needed to make and package
your product?
Have you given till slips from all purchases to the financial
manager?
Have you made a cash float to give customers change?
Have you organised a cash box or safe container and a place to
put money received from customers?
Have you recorded all the money received from group members
or other sources (paid into the business)?
Have you recorded all the money that has been paid out by the
business?
Have you stored the till slips?
Have you reminded everyone about equipment they need to
bring?
Have you collected any equipment you need to hire?
Have you organised a safe, clean storage space for your
products?
Has your business been well advertised so that customers know
when and where to bring their money?
Have you planned an attractive display of your product?
Have you made sure each person knows what to do?
Have you helped solve any problems in the team to ensure that
people work well together?
Have you offered to help anyone who has too much to do?
Getting the resources/equipment to produce and sell the
product
Resources are all the things you need to produce and sell your product, such as
tables and chairs, cash box, etc.
Activity 10.3 Decide on resources
1.
2.
Each of you must draw a table like the one on the next page in your
journal. Use it to list all the resources you will need.
Tick the appropriate column for each one, and keep this list in a safe place.
119
Topic 10 Unit 1
Resource
needed
Already
have
Must
borrow
Need
permission
Need to Who is responsible for
buy
bringing this resource
(6)
This is where your parents can help you. It is important to ask them for
permission to use the equipment and whether they can help you in any way.
How much should you sell your product for?
In Topic 9 you calculated a price that you would be prepared to sell your
product for. Compare this price to the price your target market is prepared
to pay for your product. Make a final decision about how much you will be
selling your product for.
You need to set a selling price that is higher than your cost per product, but not
higher than what customers are prepared to pay. If the unit cost you calculated
is more than your target market is prepared to pay, your business will not make
a profit. You will then need to start again with a new product. If people are
prepared to buy your product for more than the cost you have calculated, then
you are in business!
Keeping financial records is very important in any business. You need financial
records in order to calculate your profit or loss accurately.
Decide on a selling
price for the beaded
necklaces
key word
starting capital –
money needed to
start the business
Make sure your group’s financial manager keeps a record of all the money:
• borrowed from group members
• borrowed from other sources
• received from sales
• spent on advertising
• spent on ingredients
• spent on equipment.
You must also keep till slips for everything you buy or spend in your business.
Capital
People often think you need a lot of money to start a business, but this is not
always true. Most businesses need some starting capital, but many businesses
can be started with a small amount.
If you plan to borrow money for your business, you need to draw up a loan
agreement. This agreement is to protect you, as well as the person you borrow
money from.
120
Unit 1 Topic 10
Activity 10.4 Draw up a loan agreement
1.
2.
Discuss the amount that you are going to need to borrow from your
parents or caregivers as an investment in your business.
Draw up a simple loan agreement which is signed by you and the person
you borrowed the money from.
(5)
On the day
Each person in the
group needs to
know what they are
responsible for on the
day or days that you
make and sell your
product. This will save
time and help things
go more smoothly.
Entrepreneur’s Day
Activity 10.5 Do final preparations for Entrepreneurs’ Day
1.
Make a list so that everyone in your group
knows what he or she is responsible for
when you make and sell your product. The
production manager and general manager
should keep a copy of this list.
When you begin a new business activity, it
is unlikely that everything will go well right
from the start! It is very important to evaluate
your business because this allows you to learn from mistakes.
key word
(10)
evaluate – to
study something
carefully to see
whether it was
successful or not
121
Topic 10 Unit 2
Unit 2 Calculating your profit or loss
Calculations
To calculate your profit or loss, answer all the questions below to complete
your calculation. Each of you must do the calculations on your own.
These learners made a profit on Entrepreneurs’ Day.
Activity 10.6 Calculate your profit or loss
1.
2.
3.
4.
5.
6.
7.
122
How many products did you make?
(1)
What was the total unit cost of each product?
(1)
Multiply the number of products you made by the cost of each one to
give you the total of your costs.
(1)
Did you spend money on anything else, such as marketing, equipment
(5)
hire, or rent to the school? List these expenses and add them up.
Add the answers for 3 and 4 together to get your total costs.
(2)
What is your business’ total income (the amount of money you received
from selling the products)? Unless money has gone missing, this should
be equal to the number of products sold multiplied by the selling price. (2)
Subtract the answer in 5 from the answer in 6 to calculate your profit.
If your costs are greater than your income, you have made a loss. Total
income – total costs = profit.
(2)
Unit 2 Topic 10
Income and Expenditure Statement
An Income and Expenditure Statement is a financial report which is used
to calculate the profit/loss made by the business. Below is an example of an
Income and Expenditure Statement.
key word
Worked example
Freddy’s Fries
Income and Expenditure Statement for December 20.1
TOTAL INCOME
870
Money received from sales
850
Donations received
20
TOTAL EXPENSES
550
Cost of making chips sold
425
Stationery
60
Rent of table
20
Rent of equipment
25
Petrol and transport costs
20
PROFIT ON CHIPS
320
Income and
Expenditure
Statement − a
financial report
that is used to
calculate the
profit or loss made
by the business
Activity 10.7 Prepare an Income and Expenditure Statement
Use the calculations from Activity 10.6 to prepare an Income and Expenditure
Statement for your business to add to your journal.
(10)
123
Summary
Unit 1 Hosting an Entrepreneurs’ Day
• Planning for the day
° Your teacher needs to decide on the week when the Entrepreneurs’ Day
takes place.
° By this stage you need to have an idea of the product you plan to
research for your Entrepreneurs’ Day.
° Design and complete a questionnaire to find out what your target market
wants.
• Who will do what
° Each person in the group needs to be assigned certain tasks so that the
main objective can be reached.
° The whole group still needs to function together as the success of the
business relies on the participation of every group member.
• Getting the right equipment and resources
° The business will not be running forever, so the necessary resources need
to be borrowed from parents in the group or from the school.
• How much to sell the products for
° A suitable selling price needs to be decided on.
° The price depends on the cost and the amount of profit the owner needs
to make.
• Capital
° A business needs money to start up.
° It also needs equipment, resources and raw material.
° There will also be other costs such as rentals, salaries, etc.
• On the day
° Make sure you are organised and have run through how the business
should function in your heads.
° Don’t forget a cash float.
Unit 2 Calculating your profit or loss
• The reason why entrepreneurs start businesses is to make a profit.
• Business owners need to know how much profit they have made.
• To find out how much profit they have made, they need to draw up an
Income and Expenditure Statement.
• They use this information to make decisions about the future of the
business.
124
Inequality and poverty
The economy
Topic 11
Topic overview
• Investigate the causes of socioeconomic imbalances.
• Research the inequality in South Africa.
• Discuss the education and skills needed
to fight inequality and injustice.
• List the urban and rural challenges.
• Discuss the creation of sustainable job
opportunities.
125
Topic 11 Unit 1
Unit 1 Causes of socio-economic imbalance
key words
socio-economic
imbalance – a
situation where
people do not
have equal access
to resources
inequality –
imbalance
Socio-economic imbalance is a term used to describe a situation where
people do not have equal access to resources. Inequality is another word used
for imbalances. We say that there is social and economic inequality when
one group of people have significantly more money, power or resources than
another. This is another way of saying that there is a gap between the rich and
the poor.
There are some very wealthy people in South Africa. These people earn a great
deal of money, have access to resources and enjoy a high standard of living.
There are also many people in our country who live in poverty. Those who live
in poverty earn a low level of income. They also have limited access to basic
resources, such as water and electricity.
Did you know?
South Africa is a country with very high levels of social and economic inequality. You
will learn more about social and economic inequality in South Africa in Unit 2.
These high levels of inequality are mostly due to the country’s political history and
Apartheid. Apartheid was a system of discrimination in which black people in the
country were unfairly treated and prevented from taking part in the economic life
of the country. You will learn more about Apartheid and how it has influenced the
economic development of the country in Unit 2.
Activity 11.1 Identify causes of socio-economic imbalance
Look at the artwork and then answer the questions that follow:
1. Discuss how you can tell that the people in this picture are poor.
2. Write a list of all the possible reasons why these people ended up being poor.
3. Discuss what resources these people have.
4. Discuss which basic needs these people are able to satisfy.
5. Write a list of ideas that these people could use to escape poverty.
Some people live in poverty with limited access to resources.
126
(2)
(3)
(3)
(3)
(4)
Unit 1 Topic 11
Economic inequality and its causes
Economic inequality refers to the gap in levels of wealth and
income between the rich and the poor. The term is usually used to
refer to inequality among individuals and groups within a country,
but it can also refer to inequality between countries.
One cause of economic inequality is the difference in wealth. Wealth
refers to the value of all the goods a person owns together with the
money they have saved. Wealth is also sometimes called personal
assets. Different people have different amounts of wealth. Some
people, for example, own large areas of land and shares in companies.
Economic inequality refers to the
fact that some people have more
In most countries, the law says that when a person dies their wealth income and wealth than others.
can be passed on to others as set out in their will. So a person might
inherit wealth (money, jewelry or property) from a family member, even
though they have done nothing to earn it. This means wealth can be passed
down from one generation to another. Inheriting wealth is one of the factors
that contributes to economic inequality.
The main reason for economic inequality is the big differences in the wages and
salaries that people earn. In other words, differences in the levels of income cause
economic inequality. There are many reasons why people earn different incomes.
Reasons for differences in income
Here are a few examples of factors that can result in a difference in income:
Inheriting wealth
• Education and training. People with skills and education are able to earn contributes to
more money than those without education. This means a person’s level
economic inequality.
of education and the amount of training and experience they have will
influence how much income they earn.
key words
• Sexism. Sexism refers to a situation where someone is discriminated against
economic inequality
because of their gender. In some societies men are paid more than women
– the gap between
for the same work. Sometimes women are discriminated against and not
the rich and the
poor
allowed to do certain types of work or to get promotions.
wealth – the value
• Racism. Racism refers to a situation where someone is discriminated against
of all goods
because of the colour of their skin or the ethnic group they belong to.
owned by a person
will
– a legal
In South Africa, for example, there were certain kinds of work that black
document
people were not allowed to do before 1994. Black people were prevented
that provides
information on
from earning high levels of income because they were not allowed to work
what to do with
in jobs that were reserved for white people.
your assets should
you pass away
• Personal preferences. Some people choose to do work that is poorly paid
because they enjoy the work. For example, a person might choose to work
for a charity organisation, even though the salary is low, because they gain
satisfaction from helping people. So the choices a person makes about what
127
Topic 11 Unit 1
key words
prejudice – a
negative opinion
or judgement
of something
or someone
made without
knowledge or
considering the
facts
social attitude – a
way of feeling
or thinking
which exists in a
particular culture
at a particular
time. It is a form
of prejudice which
is widely held
within a certain
society
work to do and where to do it can also influence their level of income.
• Innate ability. Some people have special talents and abilities that enable
them to earn more money than others. For example, some sports people,
actors and singers, have an ability to earn large sums of money because of
the talent they were born with.
• Nepotism. Sometimes people are able to get jobs because of the people they
know. For example, some individuals are lucky that their parents own large
businesses and they are able to get employment in their parents’ business.
So the level of a person’s income is sometimes determined by who they
know or who they are related to.
Causes of social inequality
Social inequality refers to a situation in which certain groups of people do not
have equal social status, social class, and access to resources. Social inequality
is the result of discrimination and restricting people’s opportunities and
rights. It is also the result of prejudice and social attitudes and sometimes, of
religious and spiritual beliefs.
Examples of social inequality include:
• gender inequality
• racial inequality
• age inequality
• inequality on the basis of a physical impairment (disability).
There are many forms of social inequality, including:
• Limiting the individual’s rights to vote and participate in decision-making.
• Restricting the individual’s freedom of speech and preventing groups of
people from getting together (freedom of assembly).
• Preventing people from owning certain forms of property (property rights).
• Restricting an individual’s access to education, healthcare, quality housing
and transport.
It is important to
ensure the inclusion
of disabled people in
society.
Certain groups of people have a lower standard of living than others because
of social inequality. This can stop individuals from enjoying their jobs and can
limit their opportunities to take part in the everyday social and economic life
of the country.
Activity 11.2 Explain the causes of social and economic
inequality
1.
2.
3.
128
In your own words, explain the difference between economic inequality
and social inequality.
(4)
Discuss two causes of economic inequality.
(2)
Discuss the cause of social inequality.
(3)
Unit 2 Topic 11
Unit 2 Inequality in South Africa
South Africa is a country where there are high levels of social and economic
inequality. Although there are many wealthy people in South Africa, there
are also many poor people. Although some people have access to social and
economic life, others are denied access because of discriminating policies and
prejudice.
Socio-economic inequality in South Africa
South Africa has one of the highest levels of inequality in the world and a
long history of socio-economic inequality. At the time of our first democratic
elections in 1994:
• The poorest 40% of the population earned less than 6% of the country’s total
income, while the richest 10% earned more than half the country’s income.
• 17 million people were living in poverty.
• 40% of black children born in rural areas and 20% in cities died before the
age of one, while only 2.7% of white children died before the age of one.
• Electricity was provided to nearly all white households but only to about
20% of African households.
• 12 million people did not have reasonable access to water.
Since 1994, the South African government has attempted to reduce the level
of socio-economic inequality in the country. Nonetheless, there is still an
inequitable distribution of income and wealth in the country and social
inequality still continues.
key word
inequitable – unfair
One example of socio-economic inequality in South Africa is the level of
poverty among the different racial groups. For example, in 2010, 49.5% of
black people in South Africa were living in poverty (they were earning less
than R1 259 per month). By comparison 29.4% of coloured people and less
than 1% of white people were living in poverty. These statistics show that
poverty is more common among black families in South Africa. A similar
pattern can be seen in unemployment numbers. Women and children in
South Africa are particularly vulnerable to poverty.
Did you know?
Since 1994, the government has put in place policies such as the Reconstruction
and Development Programme (RDP) and a policy called Growth, Employment,
and Redistribution (GEAR). These policies are aimed at creating more equal income
distribution and improving access to economic resources and social justice for all
people in the country.
129
Topic 11 Unit 2
Did you know?
It is estimated that there
are 147 million orphans
in the world. Of these,
approximately
88 million live in Asia
and approximately
45 million orphans live
in Africa. There are an
estimated 1.5 million
orphans in South Africa.
Furthermore, every
14 seconds an Aids
death leaves another
There are approximately 147 million orphans in the world,
child orphaned.
of which 1.5 million live in South Africa.
key word
infrastructure – the
basic physical
systems that
support economic
and social activity,
for example,
roads, electricity
and water
Poverty is not only unequally distributed across racial groups in South Africa.
Poverty is also unequally distributed across different geographic regions in the
country. There are some areas of the country that are well resourced with good
infrastructure and services such as running water and electricity. In other
areas, people live without access to running water, no electricity and with a
non-existent infrastructure. The pictures below show the differences between
the levels of economic development in different areas of the country.
The Waterfront, Cape Town
A township just outside of Cape Town
Even within the same city there can be huge socio-economic gaps in the
standard of living.
Inside the Cape Town city centre people live and shop in luxury. There is a good
infrastructure and many economic and social resources. Just outside the Cape
Town city centre, people live in poverty. There is an inadeqate infrastructure and
people do not have easy access to economic and social resources.
Why are some areas of South Africa highly developed, while others have
remained underdeveloped? The main reason for this was a policy called
‘Apartheid’ which was introduced as a law in South Africa in 1948.
130
Unit 2 Topic 11
What was Apartheid?
key word
You will learn more about the history of South Africa and Apartheid in the
Social Sciences course. In this book we will look at the influence of Apartheid’s
economic policies on ownership and how this has affected poverty and wealth
in South Africa.
The word ‘Apartheid’ comes from the Afrikaans word for ‘apartness’. Apartheid
was a system that discriminated between different people on the basis of their
skin colour. All South Africans were divided into one of four race groups: Black
African, White, Coloured (of mixed race) or Asian (mostly from India). Apartheid
was introduced by the National Party when they came to power in 1948.
Apartheid – a system
of discrimination
in which black
people in South
Africa were
unfairly treated
and prevented
from taking part
in the economic
life of the country
The idea behind the Apartheid policy was to try and make sure that white
people had control over the economic and social systems of the country. The
Apartheid policy was also called ‘separate development’ as it tried to make sure
that there were different rules for different race groups and that land and the
resources of the country were divided unequally and unfairly.
Apartheid laws
There were many Apartheid laws in South Africa before our first democratic
election in 1994. Not only were these laws discriminatory, they also prevented
black individuals from participating fully in the economy of the country.
Examples of these laws include:
• The Land Act of 1913 divided South Africa into ‘African areas’ and ‘White areas’.
• The Group Areas Act of 1966 said that different races had to live in different
areas. People living in the ‘wrong’ area had to
move out or they would be forced to move.
• The Bantu Authorities Act of 1951 changed
parts of South Africa into African areas called
‘homelands’. Many black individuals were
forced to live in the homelands and become
citizens of these homelands.
• The Bantu Education Act of 1953 created a
separate Black Education Department, which
designed a curriculum for black children
that only taught them the skills necessary to
become workers and labourers.
A signpost from the Apartheid era in South Africa
prior to 1994
131
Topic 11 Unit 2
Did you know?
Under the Apartheid system, black schools had very little educational material and
few resources. As recently as 1993, the government spent R4 372 on the education of a
white student compared to R1 461 on a black student.
Other Apartheid laws prevented social contact between the races; there were separate
schools, buses, beaches, park benches and entrances to certain buildings for white
people and black people. Other laws controlled who was allowed to do certain jobs
and prevented black individuals from choosing how they wanted to earn a living while
protecting the best well-paid jobs for whites.
Activity 11.3 Explore the relationship between ownership,
poverty, wealth and inequality
You are going to play a game. The game has three rounds and after each round
you will have a class discussion.
1. Divide into five groups with the same number of learners in each group.
2. Each group chooses one large picture from a magazine and cuts it into six pieces.
You must be able to fit the pieces back together again like a jigsaw puzzle.
Round 1
1. Give the pieces of your picture to your teacher, who will mix them all up.
2. Your teacher will hand out six jumbled-up pieces to each group.
3. Groups have ten minutes to swap pieces with other groups in order for
each group to be able to make up one whole picture. You can only take a
picture from another group by swapping it with one of yours.
4. The winning group is the one that manages to put together all of the
pieces of one picture (or the most pieces of one picture) in ten minutes.
Class discussion
What would your group do differently if you played the game again?
Round 2
Play the game again. This time the teacher gives each group a different number
of pieces. Some groups start off with more pieces than others. Remember you
can only take a picture from another group by swapping it with one of yours.
Class discussion
1. Was this round fair? Why or why not?
2. Which group had an advantage from the start? Why?
3. How did the group with the fewest pieces feel?
132
Unit 2 Topic 11
Round 3
Divide the pictures equally between the groups and play the game again. But
this time one of the groups, Group 1, is not allowed to ask other groups to swap
pictures with them. They can only swap pieces if another group asks them to!
Class discussion
1. Was this game fair?
2. How did Group 1 do in the game?
3. How did Group 1 feel about the game?
4. Think about how black South Africans felt during the years of Apartheid.
What connection can you see between Rounds 2 and 3 of the game and
those years?
Under Apartheid many people had no access to the economic resources in the country.
This contributed to the current socio-economic inequality in South Africa. A lot of
South Africans, like this street vendor, are still struggling to make a living.
Activity 11.4 Explain how Apartheid contributed to the
current socio-economic inequality
1.
2.
3.
List three laws that were passed during the Apartheid era in South Africa. (3)
Describe one of the Apartheid laws.
(2)
How do you think these Apartheid laws contributed to the current level
of socio-economic inequality in South Africa? Draw a diagram or write a
paragraph to explain your ideas.
(5)
133
Topic 11 Unit 3
Unit 3 Education and skills to fight inequality
and injustice
key word
poverty − to be
extremely poor
People create their lives and their futures from the resources that are available
to them. Millions of South Africans do not have enough resources because of
the past imbalances of Apartheid. They have no land, no wealth and very poor
education and training.
The poverty trap
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.
No Money
No Education
No Work
No Skills
The poverty cycle
Education and skills training
key word
exploitation – abuse
134
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 It could be hard for these children
to escape the cycle of poverty if they
injustice.
don’t get the necessary education.
Unit 1 Topic 11
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.
When people have skills and education they are able to find
employment or create their own jobs.
Activity 11.5 Discuss the poverty cycle
Discuss the following with a partner.
1. Define the term ‘poverty’.
(2)
2. Explain what is meant by the ‘poverty cycle’.
(3)
3. The poverty cycle is often called the poverty trap. Can you explain why? (2)
4. Explain how learning new skills could help people to escape the
poverty trap.
(3)
5. Suggest how the government could help people to get out of the
poverty trap.
(3)
135
Topic 11 Unit 4
Unit 4
Did you know?
The word ‘urban’
comes from the
Latin word urbs
which means city.
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).
key words
urban area − an
area where
many people live
which also has
infrastructure
rural area − an area
where not very
many people live
(low population
density) and
a lack of
infrastructure
Urban areas are densely populated with well-developed infrastructure.
Did you know?
The word ‘rural’
comes from the
Latin word rus
which means
countryside.
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).
Rural areas are underdeveloped with plenty of wide open natural spaces.
The socio-economic challenges faced by rural areas are different from those in
urban areas.
136
Unit 4 Topic 11
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).
Did you know?
In 2009, the top five most polluted cities
in the world were: Mexico City, Mexico;
Norilsk, Russia; Pernik, Bulgaria; Linfen,
China; and Chernobyl, Ukraine.
The high level of economic activity in urban areas creates
challenges with pollution.
Did you know?
• 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.
The dense population of people in urban areas creates challenges like traffic
congestion.
In 2012
Johannesburg was
the largest inland
city in the world.
key words
pollution − adding
harmful waste
materials to the
water, air or soil
noise pollution −
noise from traffic,
air planes and
factories that is
annoying and
distracting
traffic congestion
− when the roads
leading in and
out of cities are
crowded with lots
of vehicles
137
Topic 11 Unit 4
Did you know?
Socio-economic challenges in rural areas
Before Africa was
colonised by people
from the West, African
people had traditional
methods of planting
and harvesting crops,
making and enforcing
laws, producing music,
recording history,
and using plants to
cure illness. They had
techniques for building
huts and hunting
animals. They had their
own ways of dealing with
marriage and education.
These indigenous
knowledge systems were
suppressed and replaced
by the foreigners who
settled in Africa in favour
of Western ideas and
ways of doing things.
Today in an effort to
reduce poverty, some
rural communities
are moving back to
embrace indigenous
knowledge and are
starting to use traditional
farming methods again
and traditional ways
of managing scarce
resources (like water).
These indigenous
knowledge systems are
more suitable for local
conditions are helping
to achieve sustainable
development and grown
in some communities.
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 such as
electricity and water are also
not easy to access. One of the
consequences of this is that
some people in rural areas
One of the challenges faced by those living in
have to spend quite a big
rural areas is the lack of infrastructure and public
part of their day collecting
services.
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.
key words
Indigenous
knowledge − the
local knowledge
which is unique to
a given culture or
society
138
Activity 11.6 Identify the socio-economic challenges in rural
and urban areas
1.
2.
3.
4.
5.
6.
Explain, in your own words, what the difference between a rural and
urban area is.
Find a picture from a newspaper or magazine that clearly illustrates a
typical rural area.
Find a picture from a newspaper or magazine that clearly illustrates a
typical urban area.
Do you live in a rural or urban area? Give reasons for your answer.
What are the socio-economic challenges that exist in urban areas?
What are the socio-economic challenges that exist in rural areas?
(4)
(2)
(2)
(2)
(4)
(3)
Unit 5 Topic 11
Unit 5 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
Men hold placards offering temporary employment
services outside Builders Warehouse in Johannesburg.
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.
An African woman cooks chicken feet to sell
in the township for income.
139
Topic 11 Unit 5
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.
key words
infrastructure − the
basic physical
structures,
facilities and
services (such as
roads, electricity,
water and sewage
systems) that
improve people’s
quality of life and
make it easier to
conduct 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.
There are many forms of infrastructure that make it easier for a business to expand.
Activity 11.7 Explain how sustainable jobs can be created
1.
2.
3.
140
Explain how promoting entrepreneurship and new businesses creates job
opportunities.
(5)
What is meant by the term ‘infrastructure’?
(3)
What can the government do to encourage manufacturing?
(2)
Summary
Unit 1 Causes of socio-economic
imbalance
Unit 3 Education and skills to fight
inequality and injustice
• 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.
• 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 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 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.
141
Term 3 Revision
Topic 8 The entrepreneur
1.
2.
3.
4.
Describe in your own words what it means to be an entrepreneur.
(6)
List four characteristics of successful entrepreneurs.
(8)
Think carefully about what skills are required to be a successful
entrepreneur. Critically evaluate yourself and discuss which of those
(8)
skills you have and which of them you need to develop.
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.
2.
3.
4.
5.
6.
Explain the difference between a need and a want. Give two examples
of each.
(4)
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
(12)
f) Sparkly Jewellers
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)
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)
Design a flyer for your business using the AIDA principles of
advertising.
(15)
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]
Topic 10 Entrepreneurs’ Day
Entrepreneurship project: Now that the Entrepreneurs’ Day is over, you will be
expected to complete and hand in the following to your teacher. Most of these
items should appear in your journal.
142
1.
Hand in your group’s completed questionnaire and report from
(10)
Activity 10.1 in your journal.
2. Define the following terms:
a) market research
(2)
b) target market.
(2)
3. Describe or show the advert that you used to advertise your product.
(2)
4. Describe the different roles that people play in a business.
(5)
5. Describe your role in the group in a few sentences.
(2)
6. Draw up a list of what you were required to organise in terms of:
a) resources
b) capital
c) skills.
(3)
7. Hand in a copy of all the documents that your group issued and
(5)
received, as well as your financial records.
8. Complete your Income and Expenditure Statement in your journal.
(5)
9. a) Write a concluding paragraph about your experience as an
(5)
entrepreneur.
(4)
b) Include a SWOT analysis (in your journal).
Total [45]
Remember to complete the group’s performance rubric below.
1. Use this rubric to evaluate your group’s performance:
Assessment
criteria
Level 4
Excellent
Level 3
Good
Level 2
Satisfactory
Level 1
Unsatisfactory
What worked
well
The selling day was an
outstanding success;
the group was well
prepared and the
business ran without
any problems.
The group
was organised and
well prepared
for the selling day.
The group attempted
to sell but forgot to
bring all the necessary
things.
The group did not have
anything to sell on the
day.
Working in a
group
An active member
of a working group,
successful
in a variety of roles.
An active group
member but still
requiring some
direction and
supervision from
others.
A passive group
member requiring
direction and
supervision from
others.
Unable to work with
others in a group – little
participation, even
rejection of the group’s
activities.
Suggestions for
improvements
Insightful and realistic
suggestions for
improvements.
Some constructive
thought given
to possible
improvements.
Some inappropriate
suggestions for
improvements.
Made no attempt.
Learning that took
place during the
entrepreneurial
activity
Learnt many new
skills such as working
with people and other
important business skills.
Learning was clearly
evident as many
problem-solving skills
were learnt.
Some learning took
place but needed
more of an effort to
participate and try the
activity.
Made no attempt to
participate in the group;
did not make an effort
to sell.
Learner’s
level
143
2. Your teacher and classmates will assess your group using the following rubric:
Assessment
criteria
Level 4
Excellent
Level 3
Good
Level 2
Satisfactory
Level 1
Unsatisfactory
Calculating
profit
A detailed explanation
of the costing and
selling price calculations which accurately
determined the profit
or loss of the selling
day activities.
Simple and accurate
calculations done but
details not included.
Attempted to calculate
profit but the selling
price and cost price
calculations were
inaccurate.
No financial
information given.
Market
research
Thorough and
comprehensive
research is done
that shows a lot of
important information.
An excellent
questionnaire which
allowed the group to
meet the needs of their
target market.
Meets the basic
research requirements
and shows some
valuable information.
A good questionnaire
which helped with
identifying some of the
target market’s needs.
Attempted to do
market research,
but limited and does
not show enough
information. A simple
questionnaire.
Irrelevant market
research shows no
valuable information.
No questionnaire was
designed to establish
the needs of the target
market.
Producing an
advert
Advert attracts
attention, is appealing,
gives the necessary
information and lots of
people were attracted
to the table.
Advert attracts
attention, is generally
appealing with some
information.
Advert attracts
attention but does
not give enough
information to let
people know where or
when product will be
sold.
Poor advert that does
not attract attention.
No or few posters
displayed around the
school.
Learner’s
level
Topic 11 Inequality and poverty
1.
2.
3.
4.
5.
6.
7.
8.
144
(8)
Explain the difference between economic and social inequality.
Discuss two causes of economic inequality.
(4)
List two examples of social inequality.
(4)
South Africa has one of the highest levels of socio-economic inequality
in the world. Discuss how Apartheid contributed to this problem.
(5)
Explain, in your own words, what is meant by the poverty trap.
(6)
Explain the difference between a rural and urban area.
(4)
Discuss two socio-economic challenges in urban areas.
(8)
Discuss three strategies that could be used to create sustainable jobs in
South Africa.
(6)
Total [45]
The production process
The economy
Topic 12
Topic overview
•
•
•
•
•
•
Define production.
List inputs and outputs.
Discuss sustainable use of resources.
Define the meaning of economic growth.
Define the meaning of productivity.
Research the effect of productivity on
economic growth.
• Discuss technology in the production
process.
• Describe the contribution of
technology to improving productivity
and economic growth.
145
Topic 12 Unit 1
Unit 1
key words
production − the
process of taking
raw materials and
transforming them
into useful goods
and services
template – pattern
What is production?
You have already learned how entrepreneurs make profits by creating goods and
services that they can sell to customers. The process of making a good or service
is known as production. Production is the process of taking raw materials and
transforming them into useful goods and services. The raw materials used in the
production process are also known as resources or factors of production. You will
learn more about these inputs in the production process in Unit 2. In this unit
you will learn about the production process by playing the Production game.
The Production game
You are going to learn more about the production process by playing the
Production game. In this game, groups compete with one another to see who
can make the most vests in 15 minutes.
The groups all have the same number of learners and the same materials and
equipment. Before Round 1, each group makes two cardboard templates of
the vests (one for the front and one for the back).
You have to follow the instructions below to make the vests. Your teacher
will be the quality controller and will decide whether the groups’ vests are
acceptable or not.
There are two 15-minute rounds
in this game. In both rounds, each
group must try to make as many
acceptable vests as possible. Your
teacher will record each group’s
results after each round.
Before Round 1, make
templates for the front and
back out of cardboard
Step 1: Use the templates to
trace the vests onto newspaper.
Cut them out.
Step 2: Staple the front and the Step 3: Decorate the front with
back together using six staples. your team’s badge.
How to make a vest for the Production game
146
How to make a vest
Each group needs an old newspaper,
one pair of scissors, one stapler,
one ruler, two pencils, one Koki or
coloured crayon, and two large pieces
of cardboard. Before Round 1, make
templates for the front and back out
of cardboard.
Unit 1 Topic 12
Activity 12.1 Learn about the production process
1.
2.
After you have played both rounds of the game, discuss the
following questions in your groups:
a) Did everybody in your group contribute and share ideas?
b) Did anyone become the group leader? If so, how did this
happen?
c) How were your resources (scissors, pencils, and so on) used
in Round 1? Did you have problems sharing the resources?
d) Did your group use its resources differently in Round 2?
e) In which round did your group make the most vests? Why
do you think this happened?
f) In which round were the vests of better quality? Why?
g) How did your group make decisions in Round 1? Were they
made the same way in Round 2? If not, how was it different
and did this affect the production process?
Write a report on how your group worked together as a team.
Explain the problems that you had and how you solved them.
List any important lessons you learned while playing the game
that would help if you were to start a real business.
The three stages in the production process
The production process consists of three stages: the primary stage, the
secondary stage and the tertiary stage.
The primary stage of production
During the first or primary stage of production natural resources are
taken from the earth. The primary sector is made up of businesses
that are involved in the first stage of production. These businesses
are sometimes called extractive industries because they often extract
things, such as crops or metals, from the ground. The primary sector
includes mining, fishing, forestry and farming.
Did you know?
Sometimes people think that
because an idea or product
comes from overseas that it
must be good. It is strange
how sometimes people
over-value anything that is
foreign while under-valuing
things that come from their
own country. This is true
particularly in Africa, where
sometimes indigenous
knowledge systems and local
ways of doing things are
not respected. Indigenous
knowledge is the term used to
describe the local knowledge
which is unique to a given
culture or society. Within any
culture or society there are
certain age-old practices and
ways of farming, dealing with
health problems, preparing
food, and managing resources.
These traditional practices
embody the indigenous
knowledge system for that
society. When we design new
products and production
processes we should be careful
not to make the mistake of
over valuing foreign ways
of doing things. Instead we
should make room for the
possibility that there may be
local indigenous knowledge
that could be used to produce
a better product that is more
suitable for local conditions.
key words
primary sector – in
this sector natural
resources are
extracted from
the earth
extract – to take out
Examples of the primary stage of the production process
147
Topic 12 Unit 1
The secondary stage of production
key words
secondary sector
– in this sector
products are being
manufactured
from raw materials
manufacture – to
make goods,
usually using
machines
tertiary sector –
in this sector
businessess
provide services
rather than make
goods
In the secondary stage of production, products are manufactured from the
natural resources extracted in the primary stage. Businesses in the secondary
sector of the economy process the primary sector products and turn the
natural resources into finished goods. Examples are flour mills, factories,
sawmills and car manufacturing plants.
Examples of the secondary stage of the production process
The tertiary stage of production
The third or tertiary stage of production is done by businesses that provide
services rather than make goods. Some tertiary sector businesses buy goods
from manufacturers and transport or resell the goods to customers. In other
words, they offer services to manufacturers and customers. Other businesses
in this sector offer services to individual people, such as healthcare, banking
or transport. Examples of businesses in the tertiary sector include shops,
transport companies, doctors and banks.
Examples of the tertiary stage of the production process
148
Unit 1 Topic 12
Activity 12.2 Identify the stages in the production process
1.
Each set of pictures below shows the primary, secondary and tertiary
stages of production for different products. The pictures are in the wrong
order. With the help of a partner, rearrange the pictures to show the
correct order in the production process. Write down the letters belonging
to each picture in the correct order.
(4)
Row A
a)
b)
c)
Row B
f)
d)
e)
Row C
g)
h)
i)
k)
l)
Row D
j)
2.
Choose any three products that you use at home every day. For each
product, draw a flow diagram to show the primary, secondary and tertiary
stages of production. Here is an example of a flow chart for the production
of maize meal.
Primary sector
Secondary sector
Tertiary sector
Maize grown on farms
is harvested.
It is ground into meal
and packed.
Maize meal sold in shops
and cooked at home.
(6)
149
Topic 12 Unit 2
Unit 2
Inputs and outputs
In the previous unit you learned that raw materials (inputs) are transformed into
goods and services (outputs) during the production process. In this unit you will
learn more about the inputs and outputs used in the process of making products.
Inputs (the factors of production)
Natural resources (Land)
Entrepreneur
Labour
Production
Capital
key word
natural resources
(land) – the
resources provided
by nature that
are used in the
production process
labour – the
physical and
mental effort that
people provide
to produce goods
and services
capital – the manmade objects that
are used in the
production process
entrepreneur – an
individual who
starts, owns
and manages
businesses
150
The four factors of production
Inputs, also known as the factors of
production, are the resources used
in the production process to make
goods and services. There are four
groups of factors of production:
• natural resources (land)
• labour
• capital
• entrepreneurs.
Natural resources (land) are the
things provided by nature that
people use to produce goods and
services. Examples of natural
resources are land, air, water,
minerals, animals, plants and wind.
Labour describes the people involved
in the production process. Labour
refers to the physical and mental
effort that people provide to produce
goods and services. The human
part of any production process is
classified as labour.
Capital is the term used to describe all the man-made objects that are used in
the production process. Examples include buildings, machinery, equipment,
furniture, vehicles and computers. Money is also considered to be a capital item.
Any natural resources that have been processed are also considered to be capital.
Entrepreneurs are the people who start businesses. They are individuals who
identify business opportunities, plan the production process and then produce
the goods or services needed. Entrepreneurs combine the other three factors
of production to provide useful goods and services. Entrepreneurs identify
business opportunities and make them work.
Unit 2 Topic 12
Activity 12.3 Identify the inputs in the production process
1
2
3
An example of a production process
Work with a partner and look at the pictures that show the production process
in Kim’s Furniture Factory. Answer the following questions:
1. The picture shows many people involved in the production process.
a) Identify each person and explain what they are doing.
(3)
b) Follow the production process from beginning to end. Explain each
(3)
step of the process.
2. The picture shows many resources that are used to produce the furniture.
a) Identify as many resources as you can.
(3)
b) List the resources under the headings: natural resources (land), labour,
(4)
capital, entrepreneur.
c) Could any of these inputs be replaced by another input? Give two
(2)
examples.
3. Kim is considering buying some equipment to use in the production process.
This equipment would replace the work done by some of the labour.
a) How would this decision affect production?
(2)
b) How would this decision affect the people whose jobs will be replaced
by the new capital items?
(3)
Outputs (goods and services)
The outputs of the production process refer to the products that the business
produces. There are two kinds of outputs:
• Goods: Goods are all the physical products that are made and sold by a
business. We say that goods are tangible because they can be touched and
owned. For example, a can of cooldrink is a good.
• Services: Services are all the non-tangible products that are produced and
sold by businesses. For example, a haircut is a service.
151
Topic 12 Unit 3
Unit 3
Sustainable use of resources
In the previous unit you learned that resources are all those things that are
used to produce goods and services. Resources are combined in the production
process to make goods or services. Resources are also known as the inputs in
the production process or as factors of production. Resources are scarce. There
are a finite number of them so we need to use them wisely. In this unit you
will learn more about the sustainable use of resources.
Renewable and non-renewable resources
key words
renewable resource
− a natural
resource with the
ability to replace
itself through
some biological or
natural process
non-renewable
resource − a
natural resource
that cannot be
replaced
sustainability − the
process of using
resources in such
a way that we do
not deplete them
deplete – keep using
something until
there is nothing
left
A renewable resource is a natural resource with the ability to replace itself
through some biological or natural process. Renewable resources can be
replenished in time. Examples of renewable resources are:
• water
• oxygen
• timber
• fruit and vegetables
• meat from animals.
There is an endless supply of some renewable resources such as solar energy,
wind energy and geothermal pressure. Other renewable resources such
as wood, oxygen, leather and fish need some time or effort to regenerate
themselves. Most precious metals are also considered renewable even though
they are not naturally replaced. They can, however, be recycled because they
are not destroyed during their extraction and use.
A non-renewable resource is a natural resource that cannot be replaced.
Examples of non-renewable resources include:
• fossil fuels like coal, oil and gas
• minerals like copper.
Once a non-renewable natural resource has been depleted it means that there
is no more available for future needs.
Sustainability
Sustainability refers to the process of using resources in such a way that we do
not deplete them. Sustainable use of resources means that our rate of using the
resource can continue forever without damaging the environment. To use resources
sustainably, we need to rethink the resources we use and how we use them.
Strategies for the sustainable use of resources
A recycle bin
152
There are a number of strategies we can implement to ensure that we make
sustainable use of resources. These include:
Unit 3 Topic 12
• Reuse resources: The simplest
way to make resources last
longer is to reuse them
whenever possible. Instead
of throwing something
away as waste you can try
to find another way to use
it. For example, reuse plastic
containers instead of throwing
them away.
Solar ovens use solar power instead of
• Reduce use of resources: One
electricity to cook food.
way to make resources last
is to use them less often. We
can limit our consumption
of a number of resources.
For example, it is sometimes
possible to use less water when
we are cleaning something.
By saving water we reduce our
usage and make the supply of
water last longer. Sometimes,
it is possible to reduce our use
Unemployed people sell items like cardboard
A wind turbine near
of a scarce or non-renewable
to recycling depots to earn an income.
Malmesbury
resource by replacing it with a
resource that is more abundant
or renewable. An example is when we use wind power or solar power
instead of electricity generated by coal.
• Recycle: Another way to make sustainable use of resources is by recycling
them. Recycling refers to the process of putting some waste product (like
waste paper and plastic) through a process that transforms it into another
kind of reusable form. Water is an example of a resource that can be recycled.
Activity 12.4 Identify strategies to make sustainable use of
resources
1.
2.
3.
Explain the difference between renewable and non-renewable resources. (4)
List three strategies that can be implemented to use natural resources
sustainably.
(3)
Make a poster to encourage other learners in your school to make
sustainable use of resources.
(10)
153
Topic 12 Unit 4
Unit 4 Meaning of economic growth
When a country’s economy grows and becomes bigger, we
call this economic growth. We call this economic growth.
If we say a country shows economic growth, we mean that
the country’s economy has become bigger. In other words,
the country has produced more goods and services than
it did in the previous year. Economic growth is a process
that occurs when there is an increase in the quantity of
goods and services produced in the country. A country’s
economic growth and development is very important.
A graph showing economic growth
key words
economic growth –
an increase in the
level of economic
output over time
Activity 12.5 Identify factors that contribute to economic
growth
Work with a partner and answer the following questions:
(4)
1. What would happen if the economy of a country did not grow?
2. What effect or impact do you think economic growth has on the people
living in the country?
(3)
3. What factors do you think will stimulate economic growth in a country? (4)
4. What factors do you think prevent or slow down economic growth?
(4)
Economic growth in South Africa
Currently, South Africa’s economy grows at an average rate of approximately 3%
per year. This means that the value of goods and services produced increases by
3% from one year to the next. This growth rate has remained fairly consistent
since 1993. Although it is good that our economy is growing at a steady and
consistent rate, the rate of growth is not enough to combat the effects of poverty
and unemployment in the country. We need a greater level of economic growth.
Strategies to stimulate economic growth
There are many strategies that can be used to stimulate economic growth in
South Africa. These include:
• Promoting entrepreneurship and encouraging new small businesses.
• Encouraging existing businesses to expand and increase their production.
• Improving the level of productivity to produce more goods and services.
• Modifying production techniques to make them more effective so that
output increases.
154
Unit 4 Topic 12
• Ensuring better management of resources so that we gain maximum use
from them.
• Improving business management practices so that companies become more
efficient and productive.
• Encouraging investors from other countries to invest money in local
businesses or to start businesses in South Africa.
Results of economic growth
When the level of production in a country
increases there are social and economic
consequences. These include:
• There are more goods and services for
consumers to choose from which means
there is more variety and more items for
them to purchase.
• Employment levels rise and
unemployment levels drop. This reduces
poverty.
• The level of income increases because
people profit from the sale of more goods.
• The average standard of living improves
Carnarvon in the Northern Cape will soon be host to the new
because more people have jobs and
Square Kilometre Array radio telescope. This development
more money is being circulated in the
has helped the town’s economy grow by creating jobs for the
economy.
local population such as tarring this road.
The benefits of economic growth do
not always flow to the poor people in the country. Sometimes economic
growth simply results in rich people getting richer while the lives of the poor
remain unchanged. However, this is not always the case. Often, the benefits
of economic growth are felt by many people in the country. So achieving
economic growth is an important goal of the government of any country.
Activity 12.6 Illustrate the results of economic growth
Make a poster to show what is meant by economic growth and illustrate the
(10)
consequences of economic growth.
155
Topic 12 Unit 5
Unit 5
key words
productivity −
how efficiently
resources are
being used to
generate products
and services
morale − confidence
and enthusiasm
Productivity
You have learned that production is the process of combining resources in
order to produce goods and services. You have also discovered that resources
are scarce and that they need to be used wisely to ensure sustainability.
Productivity is a word that is used to refer to how efficiently resources are
being used to generate products and services. Increasing productivity refers to
the process of improving the use of resources to get more out of them so that
more goods and services can be produced.
Activity 12.7 Think about your own productivity
1.
2.
Think about your own productivity at school and how well you use the
resources you have (time, your brain, your textbooks and the lessons) to
make the most of learning.
a) How would you rate your productivity on a scale of 0 to 10 (where
0 = not at all productive and 10 = extremely productive)? Explain
your answer.
(2)
b) What are the factors that prevent you from being more productive? (2)
c) What strategies could you use to improve your productivity?
(2)
Now think about the Production game you played in Unit 1.
a) How would you rate your team’s productivity on a scale of 0 to 10
(where 0 = not at all productive and 10 = extremely productive)?
Explain your answer.
(2)
(2)
b) What factors prevented your team from being more productive?
c) What strategies could you have used to improve your productivity? (2)
Improving productivity
It is the goal of most entrepreneurs to increase productivity in their businesses.
If productivity increases, the business will produce more products which in
turn will mean that the entrepreneur makes more profits.
Strategies to improve productivity
There are several strategies that can be used to improve productivity. These
include:
• Improving the motivation and morale of workers.
• Involving employees in decision-making about the production process.
• Making more economical use of all resources (recycling, reusing and
reducing).
• Improving the level of skill and expertise of all workers so that they can do
their jobs more efficiently.
156
Unit 5 Topic 12
• Improving the method of production (by using newer technology or
rearranging the production process to make it more efficient).
• Using incentives to reward employees who make significant contributions
to the business.
• Making use of leadership and management skills to monitor and control
the actions of employees.
Productivity can be improved by increasing the level of motivation of employees and
making effective use of leadership skills to monitor the actions of employees.
Results of improving productivity
When productivity improves, more goods and services are produced and
entrepreneurs make more profits. This increase in output contributes to
the level of economic growth in the country. So, if the productivity of all
businesses increased, there would be a large increase in the level of economic
growth in the country.
Activity 12.8 Describe ways to improve productivity
Steven owns a small manufacturing plant that employs 10 people. His business
makes a range of wooden designer furniture which is sold directly to interior
designers. Steven has asked you for advice about how he can improve the
productivity of his business. Write a short essay in which you describe what
strategies you could recommend to Steven.
(10)
157
Topic 12 Unit 6
Unit 6 The effect of productivity on economic
growth
In Unit 5 you learned that increased productivity leads to an increase in
output which in turn can lead to economic growth. One of the ways the
government of a country tries to stimulate economic growth is by improving
the productivity of the workforce so that the output of all businesses improves.
When the productivity of labour is low, there is a waste of resources and
a decrease in the level of output. This leads to a decrease in economic
growth. There are a number of factors that can have a negative effect on the
productivity of labour. These include:
• ill health
• lack of education and training
• poor motivation
• absenteeism
• strikes and industrial action.
The government takes steps to increase the productive capacity of all
factors of production, since all these factors contribute to economic
growth. In particular, the government tries to encourage the productivity of
labour and land.
The government tries to increase labour productivity by:
• ensuring that workers are well educated and well trained
• taking steps to improve the health status of workers
• taking steps to ensure that workers are well motivated
• making laws which compel employees to go to work except when they are sick.
The government seeks to increase the productivity of natural resources (land) by:
• educating people about the sustainable use of resources
• passing laws which prevent the exploitation of natural resources
• encouraging people to use natural resources responsibly.
Activity 12.9 Describe the relationship between
productivity and economic growth
1.
2.
3.
158
Explain in your own words what is meant by productivity.
(2)
Explain in your own words what is meant by the term economic growth. (3)
Explain how productivity leads to economic growth.
(8)
Unit 7 Topic 12
Unit 7 Technology in the production process
You have already learned about the four factors of production (land, labour,
capital and entrepreneurship) and the role they play in the production
process. In this unit you will learn about the role of technology in the
production process.
key word
technology − any
machinery,
equipment or
tools developed
with scientific
knowledge
What is technology?
The word ‘technology’ is used to describe any machinery,
equipment or tools developed with scientific knowledge.
Examples of technology used in the business environment
include computers, smart phones, electronic gadgets and
machinery.
Technology has a significant effect on the way humans
interact with and control their environment. As scientific
discoveries are made, new technologies develop and people
have more power to change their living conditions.
Technology has a big influence on the way people
communicate and do business. Technology also has an impact
Technology changes the way people
on the production process and changes the way goods and
communicate and do business.
services are produced.
Advantages of using technology in the production process
Many forms of technology can be used in the production process. With
technology, machinery can be designed to do the work of people more
efficiently and more effectively. Through the use of technology it is therefore
possible to produce more goods and services. Technology improves the
productivity of the other factors of production.
Disadvantages of using technology in the production process
Although technology has the potential to improve productivity and result
in more goods being produced, it can also have disadvantages. These
disadvantages include:
• Costly to purchase. Technology is very expensive to buy. So it can be very
expensive for businesses to use technology, especially when the technology
is imported from other countries.
key word
purchase − buy
159
Topic 12 Unit 7
• Loss of jobs. Technology can replace the use of labour, since some
machines can do the work of humans faster and more efficiently. Therefore
the use of technology can sometimes lead to unemployment. It is true that
the use of technology can also create jobs, but it usually creates jobs for
highly skilled individuals like engineers and technicians.
• Expensive to maintain. Most technology needs to be fixed by a skilled
engineer or technician when it breaks down. These are highly skilled
individuals who have to be well paid for their skills. This makes it expensive
to own and maintain technology.
Some forms of technology can replace the work of humans in the production process.
Activity 12.10 Investigate the use of technology in
production
Use the internet, newspapers, magazines and books to investigate a new form
of technology that is being used by business to improve productivity.
1. Describe the new technology and how it was developed.
(4)
2. Explain how the technology has affected or changed the production
process.
(4)
3. Think about how new technology has had an effect on the economy in
terms of standard of living and unemployment.
(6)
160
Unit 8 Topic 12
Unit 8 Contribution of technology to improving
productivity and economic growth
You have already learned how productivity can be improved by making better
use of labour and natural resources. In this unit you will learn about the role of
technology in improving productivity and stimulating economic growth.
Technology and productivity
Generally speaking, technology has the potential to improve productivity.
Technology enables humans to do things faster and better. Technology also
improves efficiency and effectiveness. This is often true in the production
process as well. Using technology can enable businesses to produce more
goods and to get more out of the other factors of production. The use of
technology can increase productivity and result in an increase in the levels of
production.
key words
efficiency – the
speed with which
a task is done
effectiveness – how
well the task is
done
Although technology has the potential to increase productivity, it can
also have a negative impact on productivity. For example, in many office
environments workers sit at desks with computers and have access to the
internet. They are able to check their personal e-mails and use social media
(such as Facebook) whenever they want to. This can stop them from doing
their work and make them less productive. Introducing new technology can
also have a negative impact on production when it causes a change to the
production process or requires workers to learn a new system. Learning to use
new technology can be time consuming and stressful for workers and this can
cause a decline in productivity.
Technology and economic growth
Technology has a direct impact on economic growth when it leads to a greater
number and range of goods and services being produced. You will remember
from Unit 4 that economic growth is the result of an increase in the level
of production. When the level of production increases through the use of
technology, this will lead directly to economic growth.
Economic growth usually leads to a decrease in unemployment, a reduction
in poverty and an increase in the average standard of living. Therefore
technology can lead to an increase in the standard of living in a country and
can reduce unemployment. However, this is not always true. Sometimes when
a new technology is introduced, it replaces labour in the production process
and people lose their jobs. This can lead to an increase in unemployment and
poverty. Also, technology sometimes results in increased pollution which also
161
Topic 12 Unit 8
Did you know?
In some countries
of the world
cashiers in shops
have been replaced
with self-checkout
points. Technology
has thus replaced
cashiers.
has a negative effect on the environment and on people’s standard of living.
It is also true that technology often creates jobs for people with a high level of
skill (engineers and technicians) but makes it harder for those with low levels
of education to gain employment.
Technology has replaced cashiers in shops in some parts of the world.
Activity 12.11 Describe the role of technology in improving
productivity and economic growth
1.
2.
162
Explain in your own words what is meant by each of the following terms:
a) Technology
b) Productivity
c) Economic growth.
(6)
Describe the relationship between technology, productivity and economic
growth.
(10)
Summary
Unit 1 What is production?
• Production is the process of taking raw
materials and transforming them into
useful goods and services.
• The raw materials used in the production
process are also known as resources or
factors of production.
• The first or primary stage of production is
when natural resources are taken from the
earth.
• The primary sector is made up of businesses
that are involved in the first stage of
production.
• In the secondary stage of production,
products are manufactured from the natural
resources extracted in the primary stage.
• Businesses in the secondary sector turn the
natural resources into finished goods.
• The third or tertiary stage of production
consists of businesses that provide services.
Unit 2 Inputs and outputs
• Inputs, also known as the factors of
production, are the resources used in the
production process to make goods and
services.
• There are four groups of factors of
production: natural resources (land),
labour, capital and entrepreneurs.
• The outputs of the production process refer
to the products that the business produces.
• There are two kinds of outputs: goods and
services.
Unit 3 Sustainable use of resources
• Resources are scarce − there are a finite
number of them and so we need to use
them economically.
• A renewable resource is a natural resource
with the ability to be replaced through
some biological or natural process.
• A non-renewable resource is a natural
resource that cannot be replaced.
• Sustainability refers to the process of using
resources in such a way that we do not run
out.
• Strategies to make sustainable use of
resources include: reusing resources,
reducing use of resources and recycling.
Unit 4 Meaning of economic growth
• Economic growth is a process that occurs
when there is an increase in the quantity of
goods and services produced in the country.
• Currently South Africa’s economy grows at
a rate of about 3% per year.
• Economic growth can be achieved by
making better use of the four factors of
production.
• Economic growth leads to a reduction in
unemployment and poverty and results in an
increase in the standard of living.
Unit 5 Productivity
• Productivity is a word that is used to refer
to how efficiently resources are being used
to generate products and services.
• Increasing productivity refers to the process
of improving the use of resources to get
more out of them so that more goods and
services can be produced.
• Productivity can be improved by increasing
the motivation of workers, improving their
level of skills and making better use of
technology.
• Improvements in productivity lead to
economic growth in the country, which
in turns leads to an improvement in the
standard of living.
163
Unit 6 The effect of productivity
on economic growth
• When the productivity of labour is low
there is a waste of resources and a decrease
in the level of output.
• Improvements in productivity lead to
economic growth in the country which
in turns leads to an improvement in the
standard of living.
• The government thus tries to encourage
productivity in order to promote economic
growth and reduce poverty in the country.
Unit 7 Technology in the
production process
• Technology can be used in the production
process to improve the use of the other four
factors of production.
• Technology leads to new developments
which lead to new production processes.
164
Unit 8 Contribution of
technology to improving
productivity and economic
growth
• Technology can lead to an increase in
productivity, which leads to more goods
and services being produced.
• Technology can lead to an increase in
output which gives rise to economic
growth.
• Although technology can lead to economic
growth, it can also lead to increased
levels of unemployment when people are
replaced by machines.
• Technology can also have a negative impact
on productivity when it causes people
to be distracted from their work or when
they have to learn new systems and new
production processes.
Savings
Financial literacy
Topic 13
Topic overview
• Understand the difference between
saving and investing.
• Understand what is meant by return
and the rate of return.
• Understand why people save and the
purpose of saving.
• Discuss the history of banks.
• Explain the role of banks and the
services they offer.
• Research how to open a savings
account.
• Discuss what community saving
schemes are.
• Understand the services provided by
financial institutions and organisations
promoting entrepreneurship.
165
Topic 13 Unit 1
Unit 1 Personal savings
key words
personal savings
– the money
you keep for
emergencies or
the future
investment −
purchase of
property or shares
or money saved in
the bank in order to
earn more money
Personal savings and investing
People can either spend all the money they earn or receive, or they can keep
some of it to spend at a later stage. Personal savings refer to the money a
person keeps instead of spending it all. Investing is using the money you save
to earn more money.
Saving and investing are important to help people, families and businesses
have a better life in the future. Many people spend all the money they earn on
everyday living expenses. If they lose their jobs or form of income, they have
to rely on other people to support them.
Some people find it difficult to save, especially unemployed people, families
with children and people who have just started working, as their living
expenses are often more than their income. A lot of young people don’t save
because they are ‘living for the moment’ rather than saving for the future. If,
however, people save and invest some of their earnings, then there will still be
income coming in every month from their investments.
There are many things you can invest in when you start earning:
• You could buy a house that you could rent out.
• You could invest in a small business and make a profit.
• You could buy shares in a big company and earn part of the profits it makes.
• You could invest in a bank and earn interest.
In South Africa individuals generally do not save. Although it might seem hard
to save, the earlier you start saving and investing, including the interest you earn,
the quicker you will be able to build up your investments for the future.
Activity 13.1 List the reasons why people don’t save enough
1.
2.
Interview five people from different age groups. Ask them the following
questions:
a) How much money do you save every month?
b) How much money would you like to save each month?
c) Why are you not able to save as much as you would like to?
d) Make a list of the people you asked and what their answers were.
Now make a short list of the most common reasons why people don’t save.
The purpose of savings
Maria is 12 years old and is saving money to buy some new clothes. Sibusiso is
a 28 year old taxi driver. He is saving money to put down a deposit on his own
166
Unit 1 Topic 13
taxi. Zinzi is 35 and has two children in primary school. She is saving money
to be able to afford to send her children to a good college one day. The Hugo
family saves money every month so that they can pay for emergencies, such as
the car breaking down. Fahana has a very good job and earns a lot of money.
She saves and invests some of her money so that she can make more money in
the form of interest. Michael is only 25 but he is already putting money into a
pension fund so that he will have income coming in when he is 65 years old
and he retires from his job.
People save money for a variety of reasons:
• to buy expensive items in the future
• for a holiday or outing
• for children’s education
• for unforeseen expenses
• to make more money
• to put money into a pension or retirement scheme.
The economic purpose of saving
Unemployment is one of the greatest problems facing the world today. One way
of creating jobs is to encourage businesses to expand their production. They
need money to do this. Entrepreneurs wanting to start their own businesses also
need money. They either have to save their own money or they have to borrow
money from banks or from those people who have saved some of their money.
It is a good idea
to save money for
emergencies.
Remember, it is impossible for anyone to borrow money unless someone else
has saved some money. Therefore savings are the most important source for
making money in the future, for creating wealth and jobs and to build new
factories and other businesses.
increase in
saving
investment
more businesses
and equipment
more jobs
available
more goods
produced
increase in
standard of living
Activity 13.2 Think about the purpose of saving money
1.
2.
List five reasons why people save money.
(5)
Is it a good idea to save money by spending less on cheaper products,
like clothes and electronic equipment, or should you buy better quality
products because they will last longer? What do you think?
(3)
167
Topic 13 Unit 2
Unit 2 Banks
Banks are businesses that act as the middlemen between people who want to
save or keep their money safe, and people who want to borrow money. Banks
that do this are actually known as commercial banks. In South Africa the top
four banks are:
• Absa Bank
• Standard Bank
• First National Bank
• Nedbank.
An investment bank is a bank that, instead of lending money directly to a
person or business, helps businesses get other businesses to invest in them or
lend them money. Top investment banks in South Africa are Standard Bank,
Rand Merchant Bank and Citi Bank.
The history of banks
Banks came into existence before notes and coins were used as a
form of money. Banking originated in Ancient Mesopotamia in
2000 BC when the royal palaces and temples were used for the
safekeeping of grain. These ‘safe houses’ developed because people
felt that they were the safest places to store their grain and other
valuables. The palaces and temples were well built and also sacred
places, so thieves were too scared to go there. People could withdraw
their grain by writing out an order instructing the temple or palace
keeper to give them back the grain. These written orders were then
used as a medium of exchange just as people use cheques today.
As gold became a popular form of money, people would ask the
goldsmith, who made coins, if he would store their gold money for
Storing valuables in a ‘safe house’
them. Because gold was heavy and difficult to carry around, and
because the goldsmith had big secure rooms in which they could safely store
the coins, they left their gold with him. The amount of gold coins that the
goldsmith received from a person was recorded on a paper document that had
to be produced if the owner wanted some of his money.
key words
depositor – person
who leaves money
for safekeeping
168
Because the goldsmiths stored so many gold coins, and knew that most of the
depositors would not be collecting their money for a while, they decided to
lend out money to people who needed it as long as the lenders paid it back
later. To borrow money in this way, the borrower had to pay the goldsmith
extra money, known as interest. For example, if someone borrowed 100 coins
for a month, they had to pay back the 100 coins plus another two coins.
Unit 2 Topic 13
The two extra coins were the cost of borrowing the money. In this way the
goldsmith made money by lending out other people’s money. This is exactly
what banks do today.
The first modern banks were established in the 17th century. In South Africa First
National Bank started as the Eastern Province Bank in Grahamstown in 1838.
The role of banks
Because money is used in the exchange of
goods and services, it needs to continually
pass between consumers and producers. The
more the money flows, the more successful
the economy will be. The role of banks is
to help keep money flowing. The flow is
between people and businesses who save and
invest money; people and businesses who
need money; and between those earning
the money and those producing goods and
services.
For example:
A woman invests R200 000 in the bank for
two years. In return, the bank promises to
pay her money back with interest of 10% per
year (R200 000 x 10% = R20 000 a year).
The bank now has R200 000 that it can lend
out for two years to an entrepreneur who
wants to start a business. The entrepreneur
has to pay the money back in two years and
is charged 12% interest per year to borrow
the money (12% x R200 000 = R24 000 per
year).
Did you know?
The first bank to
be established
in South Africa
was called the
Lombaard Bank. It
was owned by the
government and it
opened in 1793.
R200 000
Bank
Entrepreneur
R200 000 loan +
R48 000 interest
Bank
After two years the entrepreneur pays the
bank the R200 000 plus R48 000 interest.
The bank pays the woman back her R200 000
plus R40 000 interest, and keeps R8 000 interest
as profit for the bank.
R200 000 investment +
R40 000 interest
169
Topic 13 Unit 2
Banks also play a role in helping consumers and producers transfer money between
them almost immediately with very little chance of the money being lost or stolen.
For example, Thandi has bought clothing for R3 500 from Edgars on account. She
needs to pay back R1 200 of what she owes. Because she works full-day she transfers
the money from her bank account to Edgars using internet banking.
Services offered by banks
key word
ATM − a machine
at a bank or near
shops that you can
use to withdraw
cash at any time of
the day or night
Today, banks not only look after your money and provide loans; they also
provide other products and services. Some of these services include:
• ATMs: The bank has special machines at the branch, or in or near shops,
where you can withdraw cash, make cash deposits, transfer money or pay
accounts. These machines operate 24 hours a day, 7 days a week. This
means people have access to their money all day and all night.
• Internet banking: You can now check your bank balance, transfer money or
pay accounts using the internet. This allows you to bank from home or from
wherever you can get internet access. You can also do your banking at any time.
• Financial advice: Banks will advise you on how best to invest your money.
• Small business support and advice: Banks have people who specialise in
helping small businesses.
• Foreign exchange: Customers can buy foreign bank notes and transfer
money to other countries.
• Credit and debit card facilities: Customers can apply for credit cards,
which allow you to buy now and pay later.
Activity 13.3 Draw a poster illustrating bank services
1.
a)
b)
Draw a poster which shows all the services that a bank offers. You may use
pictures that you have cut out of magazines to add to your poster.
(10)
You need to label all the activities in some way so that people looking at
your poster will know what is happening in each area of the bank.
(4)
Opening a savings account at a bank
The best way for a young person to start saving is to open a savings account
at a bank. Many banks have special savings accounts specially designed for
young people. If you are over 16 you can open an account on your own. If you
are under 16, you need to go to the bank with a parent or guardian.
You will need to bring the following items with you:
• your birth certificate or ID book
• a bank statement or municipal bill or account that is addressed to the
address where you live. If you are over 16 you need to bring this with you,
as well as a letter written by your parent/s and stamped by a police station or
170
Unit 2 Topic 13
commissioner of oaths, saying that you live at this address.
A law passed in South Africa says that the bank needs you to
prove where you live. (FICA)
When opening a savings account, some banks require that you
deposit a minimum amount, for example, R50 in the account,
while other banks do not require an opening deposit.
Banks have accounts that are specific to the needs of children.
Opening a savings account
Once you have opened the account you will be given a bank card
so that you can deposit or withdraw money whenever you want to from a bank or
ATM. Before deciding what bank to choose you need to make sure that you:
• choose a bank that is near where you live or that you have easy access to
• ask them how much money the bank will charge you every month for
having the savings account; and whether they will charge you every time
you withdraw money
• ask them how much interest they will give you for investing in their bank.
Below is information about savings accounts from different banks:
Standard Bank
Did you know?
• An account designed for children and teenagers under the age of 16, packed with
benefits that place you in control of how you enjoy your money
• A debit card you can use to withdraw cash at any ATM and buy stuff at any store
displaying the Maestro or VISA sign, if you have money in your account.
• No monthly management fee
• 4 Free electronic debit transactions (which include cash withdrawal at Standard Bank
ATM and card swipes)
• 4 Free ATM cash deposits
• 1 Free branch cash deposit
• Free bank card
• Free balance enquiries when using your cellphone banking
• Free MyUpdates (SMS notifications to keep track of money moving in and out of your
account)
• Free Cellphone banking (by dialing *120*2345#) and Internet banking subscription
• Free prepaid airtime recharges
You can get more
information from
the following
websites: www.
standardbank.
co.za; www.
absabank.co.za;
www.fnb.co.za;
www.nedbank.
co.za
Source: http://www.standardbank.co.za
ABSA Bank
•
•
•
•
•
•
•
Mega U – savings account
Anyone under the age of 18
Minimum of R10 in the account
Used for spending and savings
Debit card
Can be used at the ATM to deposit and withdraw money
Top up airtime
Source: http://www.absa.co.za
171
Topic 13 Unit 2
First National Bank
• FNB Fluid Account – a savings and transactional account for youth aged 18 and younger
• Two free debit transactions each month – incl. FNB ATM withdrawals, payments,
transfers, debit orders, card purchases and prepaid services
• No minimum balance required
• Interest is earned on credit balances
• FNB Fluid MasterCard Debit Card
• No monthly management fee if you have at least R500 in your account at all times
Source: https://www.fnb.co.za
Nedbank
• The youth account is a convenient way to transact and save that enables children
and scholars to take control of their financial future. It offers airtime top-ups as well
as banking through all self-service channels (Internet, cell phone banking and SMS
banking).
• There is no monthly maintenance fee. The first R100 deposit per billing cycle is free and
clients receive the first statement per billing cycle free if they request it over the counter
or at a self-service terminal.
• Clients receive a debit card to use when making purchases at selected stores displaying
the Maestro/Visa Electron sign.
Mala Somers/Nedbank
Activity 13.4 Match the terminology
172
1.
Match the number with the correct letter by choosing the most suitable match.
1
Saving
A Checking your bank account balance or transferring
money using a computer
2
A reason for saving
B
3
The cost of borrowing
money
C New factories and other businesses can be built and
new jobs created
4
Why saving is important
for an individual person
D Taking the money you save and putting it into
something that will help you make more money
5
An ATM
E
Income that has not been spent
6
Investing
F
They act as the middlemen between people who want to
save and invest and those who want to borrow money
7
Why saving is important
for the country
G The changing of South African rands into American
dollars
8
Foreign exchange
H A machine that you can use to draw cash from your
bank account any time during the day or night
Interest
9
The main role of banks
I
It helps you improve your standard of living in the future
10
Internet banking
J
Putting money away for something that may be
needed in the future
2.
(10)
Explain in your own words what you need to do if you want to open your
own savings account.
(5)
Unit 3 Topic 13
Unit 3 Community savings schemes
In South Africa many people do not earn large wages or salaries and many
earn a living in the informal sector. They save very little and do not often use
banks. Instead, they invest in informal community-based saving schemes,
known as social, burial and saving clubs. These clubs are known as ‘stokvels’.
Today stokvels are not only formed by low income people but they also exist
amongst high income earners who have started investment stokvels, birthday
stokvels and even tourism stokvels, where the money goes to pay for holidays
locally and overseas.
Stokvels have been around in South Africa for over 150 years and are like
a savings club. They are formed by a group of people who agree to support
each other to achieve some sort of goal. The members are often neighbours,
members of the same community or a church. They agree to put a set amount
of money into the fund
every week or month. One
of them is appointed to
look after the fund, which
is often put into a savings
account at a bank.
In some stokvels the money
is taken out once a year
and shared amongst the
members or is used to buy
food which is shared by
all. In other stokvels, the
members each get a turn to
take the pool of money. In
some stokvels, a member
can withdraw money in
times of need or in order to
buy household goods, like
furniture or pay for a burial
or a wedding.
Did you know?
In 2003 a study
was done by the
University of Cape
Town which found
that black adults
in South Africa
invested about
R12 billion a year
in stokvels.
• 47% of those
surveyed belong
to savings
stokvels
• 41% belong to
burial societies
• 20% belong to
grocery stokvels
• 5% belong to
investment
stokvels.
The province
with the highest
penetration
of stokvels is
Gauteng at 24%,
closely followed
by Limpopo at
20%, then North
West at 12% and
KwaZulu-Natal at
14%. These four
provinces make up
70% of the stokvels
market.
Community-based saving schemes help people who
do not earn a lot of money.
Activity 13.5 Write a report about stokvels
1.
2.
In pairs, discuss why some people prefer to invest in stokvels rather than
banks and the advantages and disadvantages of them doing so.
Write a short report on what you discussed.
(10)
173
Topic 13 Unit 4
Unit 4 Financial institutions and organisations
promoting entrepreneurship
Financial institutions
Financial institutions are businesses that provide some kind of financial service,
where people can invest or borrow money. Examples are banks, insurance
companies, pension funds and investment companies. Besides banks, Old Mutual
and Sanlam are two of South Africa’s largest financial institutions, offering mainly
insurance. Most financial institutions are regulated by the government.
Insurance and pension companies
key words
retirement annuity
− saving plan that
pays out money
when you retire
People can pay insurance companies money to insure or protect them or
their property against loss due to fire, accidents or theft. If one of these things
happen to you, they will pay you a certain amount of money. You can also buy
health or life insurance which pays you or your family if you get sick or die.
Insurance is a form of saving and the insurance companies not only pay their
customers if there is disaster of some sort, but companies who offer retirement
annuities also invest their clients’ money in banks and other businesses.
By putting money into a pension fund, a person is saving money that earns
interest that will be paid out when they retire at the age of 55 or older. Pension
funds invest the money in other businesses or banks to earn interest.
Organisations promoting entrepreneurship
In order to try and solve the large unemployment problem in South
Africa, there are many organisations that have been started to promote
entrepreneurship and small businesses. They offer help in getting a business
up and running, as well as helping the entrepreneur to get money to start the
business. A few of these organisations will be discussed below.
• SBDA: The Small Business Development Agency is a government agency
run by the Department of Trade and Industry. They give advice and
support to small businesses and have regular market days and courses for
entrepreneurs. http://www.seda.org.za
• The Khulu Enterprise helps small business owners get bank loans of
R1 million or less to start their business. http://www.khula.org.za
• The National Youth Development Agency promotes entrepreneurship, job
creation and skills development for South Africans between the ages of 14
and 35. http://www.nyd.gove.za
174
Unit 4 Topic 13
Other web pages where you can find more information are:
• http://www.businesspartners.co.za
• http://www.capegateway.gov.za/eng/your_gov/13464
• http:www.dti.gov.za ; http://www.upstarts.co.za
Activity 13.6 Think about financial institutions
Show which of the following statements are true or false, by ticking the
correct answer.
Statement
True
False
A bank is a financial institute.
SBDA is a bank.
A pension fund will protect you against damages in a fire and
will pay out money if your house burns down.
Old Mutual and Sanlam are financial institutions that offer
mainly insurance.
The NYDA helps young people develop skills which will help
them find a job or start their own business.
The members of a stokvel normally do not know each other well
but all invest in the same fund.
Khulu Enterprise is an insurance company.
You invest in a pension fund so that you will be able to earn
money, in the form of a pension, when you retire.
(8)
175
Summary
Unit 1 Personal savings
• Personal savings refers to the money a
person keeps instead of spending it all.
• Investing means using the money you save
to earn more money.
• Saving and investing are important to help
people, families and businesses have a
better life in the future.
• Savings are the most important source for
making money in the future and creating
wealth in the country.
Unit 2 Banks
• Banks are businesses that act as the
middlemen between people who want to
save or keep their money safe, and people
who want to borrow money.
• Temples and palaces around 2000 BC could
probably be regarded as the first types of
banks.
• Then goldsmiths became banks where
people could deposit and borrow gold.
• The role of banks is to help keep money
flowing between people and businesses that
save and invest money, and people and
businesses that need money.
• Banks also provide many other products
and services such as internet banking and
financial advice.
Unit 3 Community savings
schemes
• In South Africa, many people save very
little and do not often use banks. Instead,
they invest in informal community-based
saving schemes known as stokvels.
176
• Stokvels are formed by groups of people
who agree to put a set amount of money
into the fund on a regular basis.
• This money can be taken out and shared
amongst them, used to buy food, or the
members may each have a turn to take the
pool of money.
Unit 4 Financial institutions and
organisations promoting
entrepreneurship
• Financial institutions are businesses that
provide some kind of financial service,
where people can invest or borrow money.
• Financial institutions include banks and
businesses that provide insurance and
pension funds.
• There are many organisations in South
Africa that have been started to promote
entrepreneurship and small businesses.
• They offer help in getting a business
up and running, as well as helping the
entrepreneur to get money to start the
business.
Term 4 Revision
Topic 12 The production process
1.
2.
3.
Look at the pictures below and identify whether they are examples of
primary, secondary or tertiary production.
(12)
a)
b)
c)
d)
e)
f)
(4)
List the four factors of production.
Look at the pictures below of goods and services. Identify which of these
are goods and which are services.
(15)
a)
c)
d)
e)
b)
4.
5.
6.
7.
Explain the difference between renewable and non-renewable
resources.
(4)
Explain in your own words the meaning of economic growth.
(4)
Discuss two strategies that can be used to improve productivity.
(4)
Discuss the effect that technology has on productivity and economic
growth.
(7)
Total [50]
177
Topic 13 Savings
Read through the following case study and answer the questions that follow.
Case study: Stokvels help many people to save
Today, stokvels meet a range of lifestyle needs.
People set them up to pay for groceries,
holidays abroad, birthday parties, businesses,
a deposit on a car, or schooling and university
fees for their children.
The youth have realised that they can do things
differently from their parents. While parents
belong to a burial society, younger members may
instead join birthday or investment stokvels and
see it as ‘I can put down a deposit for a car’.
A recent study conducted by market research
company African Response revealed that
47% of the South African population belongs
to a stokvel. Managing Director Mamapudi
Nkgadima says their study shows that ‘there are
811 830 stokvels, with 11.4 million members,
and a total estimated fund value of R44 billion’.
As stokvels have evolved, so too has the safekeeping of money, with members now using
bank accounts and electronic transfers, says
Sibiya. It is a nest egg that is not sitting at
home, where it can be stolen or destroyed in a
fire. It is somewhere safe. And if there is a crisis,
the money is easily accessible.
Eunice Sibiya, FNB’s Consumer Education
Programme Manager says: “There will always be
a need for stokvels, especially in our culture. I
know of people who’ve achieved their degrees
from stokvel money. Their mothers would have
been domestic workers and saved like nobody’s
business, with dreams of their children going
to university. People have also managed to start
businesses from stokvel money.”
The nature and beauty of stokvels is that it
encourages savings, something former finance
minister Trevor Manuel always emphasised South
Africans needed to do to boost the country’s
economic growth, says Sibiya. “We’re really
lacking badly in savings in South Africa. I think
stokvel accounts make up for it. It encourages a
saving culture and instills discipline.”
Increasingly, stokvels have found their place
among the youth, says Motshegoa. “Some may
no longer have their parents around. Perhaps
some have had to become parents overnight
to take care of their siblings. So they need that
stability,” says Lebo Motshegoa, director of
Foshizi, a black consumer insights agency. “It
is also a disciplined way of saving because they
are accountable to other people.”
Nkgadima says parents are also making a point
of inviting their children to join in stokvels.
But there are some things that work against
mainstream banks, argues Motshegoa. When
someone dies, stokvels are more approachable
and the turn-around time is quicker. Banks need
a death certificate as proof. Stokvels don’t need
the paperwork – they know the person who has
died and understand that families are grieving.
“Banks also don’t offer friendship, brotherhood
and community. With stokvels, people chat
and know about each other’s lives,” explains
Motshegoa. “Stokvels are about more than just
money. They are about coming together.”
Source: http://www.iol.co.za/the-star/not-your-gogo-s-stokvels-1.1243875#.T9H3pSVVTrk.email
178
1.
2.
3.
4.
5.
6.
7.
8.
Why is it important for people to try and save money?
(2)
Why are stokvels good for the South African economy?
(3)
Give two examples from the case study that show how stokvels have
helped improve the lives of people.
(4)
Name two kinds of stokvels whose members are usually older people and
explain what these stokvels do.
(4)
Name one kind of stokvel that is mainly made up of young people
and explain why a young person may want to join such a stokvel.
(3)
Why do some people enjoy saving their money in a stokvel rather
than a bank?
(2)
Why do you think that more and more stokvels are using the services
offered by banks?
(3)
Explain whether you think stokvels can help encourage entrepreneurship
in South Africa.
(4)
Total [25]
179
Glossary
A
accounting records books or records that are
drawn up by a business or person to keep track
of all their transactions and business deals
advertising a tool used to promote your business
annual yearly
Apartheid a system of discrimination in which
black people in South Africa were unfairly
treated and prevented from taking part in
the economic life of the country
assets possessions that are used to run a business
ATM a machine at a bank or near shops that
you can use to withdraw cash at any time of
the day or night
B
bank card a piece of plastic with particular
characteristics issued by a bank which allows
the holder to make payments and conduct
electronic banking
barter trade that takes place without money; goods
and services are exchanged for one another
budget a money plan to make sure you do
not spend more than you earn; a table or
spreadsheet that shows the amounts of
expected income and expenditure for a
month for a business or individual
buying also called purchasing the raw materials
and equipment needed to run a business
C
calculated risk making a decision even though
you know there is a risk involved
capital what the owner puts into their business;
the man-made objects that are used in the
production process
cheque a written instruction to a bank
ordering them to pay a certain sum of
money to the person named on the cheque
collective belonging to everyone
community a large group of people who live or
work together
compensation money that is paid out after a
loss has been suffered
constitution all the laws governing a country
consume to use up or finish
consumer a person or business that consumes
credit buy now and pay later
180
credit card a type of bank card which allows
the holder to borrow money in order to
make payments
current account a bank account used for daily
transactions, also called a cheque account
D
debit card a type of bank card which allows the
holder to use money that they have already
deposited in the bank to make payments
deficit the extra amount of money you need when
your expenses are more than your income
deplete keep using something until there is
nothing left
deposit put money into the bank account
depositor person who leaves money for
safekeeping
durable lasts for a long time and is not easily
broken or used up
E
economic growth an increase in the level of
economic output over time
economic inequality the gap between the rich
and the poor
economic problem having unlimited needs and
wants but limited resources to satisfy them
economics the study of needs and how to
satisfy them
effectively choosing the best option to get what
you need at the best price at the right time
effectiveness how well the task is done
efficiency the speed with which a task is done
efficiently getting the best results from what
is available with the least possible waste in
time and materials
enterprise another name for a business
entrepreneur an individual with skills who
starts, owns and manages businesses
epidemic a large number of people falling sick
with the same disease at the same time in a
particular community
equipment assets like machines that are used in
the operation of a business
ethnically decorated an African design with
ethnic patterns and animal themes
evaluate to study something carefully to see
whether it was successful or not
expenditure the money you spend
expenses costs that a person or business has to
pay either in order to satisfy their needs or
to run their business
expenses running costs of the business
exploitation abuse
extract to take out
f
finances money or funds
financial records a list of the income and
expenses of a business
fixed cost a cost that does not change no
matter how many items are made
formal business regulated or controlled by the
government in some way
G
goals something you want to achieve in the future
goods products that businesses sell, for
example, food and clothing
government agency an organisation like Umgeni
Water, that supplies water to the people
who live and work in Durban; or Eskom, that
generates electricity and delivers it to the
homes and factories of Southern Africa
grant an allowance which means that no
payment is required
H
households groups of individuals (such as
family members) who live together
I
inclusion the need to make sure that everyone
has access to all necessary services
income money earned by the business or a
person
Income and Expenditure Statement a financial
report that is used to calculate the profit or
loss made by the business
indigenous knowledge the local knowledge
which is unique to a given culture or society
indirect trade trade that occurs when money is
used to pay for goods or services
inequality imbalance
inequitable unfair
informal business any business that is not
regulated or controlled by the government
infrastructure the basic physical structures,
facilities and services (such as roads,
electricity, water and sewage systems) that
improve people’s quality of life and make it
easier to conduct business
inputs the specifications and materials in the
production process
insurance an agreement whereby a company
agrees to pay for loss of or damage to your
property in return for a monthly fee (there
are terms and conditions that apply to the
agreement)
interest money earned on the money that you
save with a bank
interest rate the percentage of interest you
earn on your savings
investing taking money that you have saved and
doing something with it to make more money
investment purchase of property or shares or
money saved in the bank in order to earn
more money
L
labour the physical and mental effort that
people provide to produce goods and
services
large business a business that employs more
than 200 people
listed the company started selling shares on the
Johannesburg Stock Exchange (JSE)
liabilities the debts of the business
loan money borrowed from a financial
institution such as a bank
M
make a profit the act of ensuring that income
(revenue) is greater than expenses
manufacture to make goods, usually using machines
manufacturing business involved in making or
producing goods
market a place where people come together to
buy and sell goods
market research finding out details about
possible customers
market share the part of the market in which
you sell your goods and services
marketing ways to increase the sale of something
maximise get as much out of something as you can
media places to advertise or spread news
medium of exchange an item that is used to
make trade easier, for example, notes and
coins; money is a medium of exchange
181
medium-sized business employs up to 200 people
micro-enterprise a very small informal business
employing less than five people
minimise keep as low as possible
money any object (such as notes or coins) that
can be exchanged for goods or services
morale confidence and enthusiasm
municipal rates taxes or levies charged by
towns or cities to pay for the provision of
services like rubbish removal
N
natural resources (land) the resources provided
by nature that are used in the production
process
need something you have to have in order to
stay alive
needs analysis research to find out what the
needs of the people or community are
noise pollution noise from traffic, air planes and
factories that is annoying and distracting
non-renewable resources resources that can
run out and can’t be replaced
O
operating costs costs of running a business
P
per annum per year
personal savings the money you keep for
emergencies or the future
pollution adding harmful waste materials to
the water, air or soil
poverty to be extremely poor
prejudice a negative opinion or judgement
of something or someone made without
knowledge or considering the facts
primary needs our most basic survival needs,
which include our need for food and water
(physical needs) and our need for safety
(security needs)
primary sector in this sector natural resources
are extracted from the earth
producers people or organisations who make
or develop goods and/or services
producing the act of making a product by
transforming raw materials into goods
production the process of taking raw materials
and transforming them into useful goods
and services
productivity how efficiently resources are
being used to generate products and services
182
promissory note a piece of paper on which one
person writes a promise to pay the other
person a certain sum of money at some time
in the future
promotion event or campaign to encourage
people to buy something
property buildings, homes, offices or land
public goods things that the government
provides which everyone in the community
uses, for example a park
public services services that the government
provides which everyone in the community
needs, for example water and electricity
purchase buy
Q
questionnaire list of questions that people
answer on a form
R
raw materials things that are used to make
other goods
recycle reusing waste products
renewable resource a natural resource with
the ability to replace itself through some
biological or natural process; resources that
can be replaced and will never run out
resource something that can be used to make
something with or do something with; the
things we use to produce goods and services
retailer a shop where goods are sold to the public
retirement annuity saving plan that pays out
money when you retire
rural area an area where not very many people
live (low population density) and a lack of
infrastructure
S
scarce only a small or limited quantity available
scarcity not enough of something
secondary needs needs that develop once our
basic primary needs have been satisfied (for
example, our social needs and self-esteem
needs)
secondary sector in this sector products are
being manufactured from raw materials
sectors sections or parts
selling the act of convincing customers to buy
the goods and services
service business makes a profit from the
provision of a service
services services are provided to customers for
a fee. They are the non-tangible products
where a skill is used to meet a customer’s
need. Examples of service businesses are
lawyers, doctors and painters
shares equal parts of a business that can be
bought by the public
shebeen unlicenced or unregulated business,
often in a private home, that sells alcohol
small business employs between 5 and 50 people
SMME an abbreviation for small, medium and
micro-enterprises
social attitude a way of feeling or thinking
which exists in a particular culture at a
particular time. It is a form of prejudice
which is widely held within a certain society
socio-economic imbalance a situation where
people do not have equal access to resources
source document a record of a transaction that
took place in the business
spare extra
spaza shop small informal shop in a township,
often run from a private house or from a
wooden container
specialise to focus on one thing and become
really good at it
standard of living the level of income, wealth,
comfort, material goods and necessities
available to a person
starting capital money needed to start the business
Statement of Nett Worth a list of assets and
liabilities
subsistence economy a way of living where
people produce everything they need
themselves
suppliers businesses that a business buys items from
surplus more of something than is needed;
when you have money left over after you
have paid all your expenses
sustainability the process of using resources in
such a way that we do not deplete them
technology any machinery, equipment or tools
developed with scientific knowledge
tenant someone who rents a building, house or
flat
template pattern
tertiary sector in this sector businessess provide
services rather than make goods
trading business makes a profit from buying
and selling goods
trading licence a document bought from the
local authorities giving you the right to trade
in the area
traffic congestion when the roads leading in
and out of cities are crowded with lots of
vehicles
transaction a business deal
U
urban area an area where many people live
which also has infrastructure
V
variable cost a cost that increases or decreases
depending on how many items are made
VAT tax paid on goods and services that you buy
VAT vendor registered to charge customers VAT
which is paid over to the government
W
want something you would like to have but do
not need
wealth the value of all goods owned by a person
wholesaler a business that buys goods in large
quantities from manufacturers and then sells
the goods to other shops or customers in
smaller quantities
will a legal document that provides information
on what to do with your assets should you
pass away
withdraw take money out the bank account
T
target market potential customers who would
buy your product/service
tax a payment charged by the government to
pay for the provision of goods and services
that are needed to run the country; money
paid to the government on the money your
business makes
183
Index
A
accounting 55–56, 64, 72
advertising 106–107, 114
Apartheid 126, 131–33, 141
Apartheid laws 131, 141
assets 55–56, 64, 71
ATMs 11, 170, 171
B
bank accounts 60, 61, 66, 67,
74–75, 170–71
bank card 11, 12
banking
electronic 7–8, 12
internet 170
banks 168–72, 174
bartering 2–4, 12
budgets 61, 64, 69, 78–80,
81–83, 84–85, 86
business(es) 36–39, 40–41,
42–44, 45–46, 47–49, 50
business budgets 84–85, 86
business development 139, 141
business expenses 72, 76
business income 72, 76
buying 96–97, 99
C
call deposits 61, 64, 67
capital 55, 64, 120, 124, 150
cheque account 60, 64
coins 6, 12
community needs 15–16, 23
community savings
schemes 173, 176
compensation 48
consumer(s) 25, 27, 28, 30–31,
34, 101–102, 114
consumer choices 30–31
consumer needs/wants 101–
102, 114
cost calculations 110–11, 114
costing 110–13, 114
credit 56
credit card facilities 170
currency 7, 8, 11
current account 60, 64
D
debit card facilities 170
184
debt, see liabilities
deficit 80
deposit 60
digital currency/money 8, 11
E
economic growth
in South Africa 154–55, 163
productivity and 158,
161–62, 164
role of technology 159–60,
164
stimulating 154–55, 163
economic inequality 126,
127–28, 141
economic problem 22, 23
economics 22
education 127, 134, 141
electronic banking 7–8, 12
employment 138, 141
enterprise 39
entrepreneur(s) 68, 150
characteristics 93–95, 99
definition 26, 91–94, 99
functions 96–98, 99
promoting 139, 141, 174, 176
skills 93–95, 99
Entrepreneurs’ Day 102, 108,
116–23, 124
epidemics, see health
epidemics
expenditure 79–80, 86
expenses 57, 69, 72, 76
f
factors of production 150, 163
fICA 171
finances 55
financial advice 170
financial institutions 174, 176
financial records 62, 64, 98
fixed costs 12, 110, 111, 114
fixed deposits 61, 64, 67, 75
foreign exchange 170
formal businesses 36, 38–39, 50
advantages/
disadvantages 42–43, 50
as consumers/producers 45,
50
effect of epidemics/natural
disasters 47–49, 50
types of 38–39, 40, 50
G
goals 105, 114
goods 16, 23, 25, 26, 30–31, 34,
57, 151
government agency 25
grant 29
H
health epidemics 47, 49, 50
households 15
as consumers 28–29, 34
as producers 28, 34
I
income 57, 64, 72–73, 76,
79–80, 86
Income and Expenditure
Statement 123, 124
indirect trade 12
inequality 126
economic 127–28, 141
social 128, 141
in South Africa 129–30, 141
influx of people 137, 141
informal businesses 36–37, 50
advantages/
disadvantages 37, 42–43, 50
as consumers/producers 45,
50
effect of epidemics/natural
disasters 47–49, 50
types of 38–39, 40, 50
infrastructure 130, 138, 140,
141
inputs 96, 150, 163
interest 56, 57, 61, 67
interest rate 67
internet advertising 107, 114
internet banking 170
insurance companies 174, 176
investment 74–75, 76, 78, 166,
176
J
job creation 139–40, 141
L
labour 150, 163
laws, Apartheid 131, 141
liabilities 56, 64, 71
loss 58, 64, 72, 76
M
manufacturing 40, 140, 141
market research 116–17
market share 31
marketing 106
media 106, 107
media advertising 107, 114
medium of exchange 9, 12
micro-enterprises 39
money 5–11, 12
N
natural disasters 47–49, 50
natural resources 150, 163
needs 14–22, 23, 32–33, 34,
101–102, 114
needs analysis 101
nepotism 128
net worth, statement of 71, 76
non-renewable resources 21,
152, 164
notice deposits 61, 64, 67, 75
O
operating costs 26
outputs 150, 151, 163
P
paper money 7, 12
pension companies 174, 176
personal expenses 69, 76
personal income 66–70, 76
personal savings 166–67
poverty cycle 134
poverty trap 134, 141
pricing 120, 124
producers 27, 30–31, 34, 45,
50
producing 97, 99
production 146–49, 150
production process 147–49,
150–51, 159–60, 163
productivity 156–57, 158,
161–62, 163, 164
profit 58, 68, 72–73, 76
profit/loss calculations 122, 124
profit-making 98, 99
promissory notes 6, 12
promotion 106
property 67
public goods 16, 23 (see also
goods)
public services 16, 23, 138, 141
(see also services)
R
racism 127
rand (SA currency) 7
raw materials 96
recycling 32–33, 34, 103, 114,
153
reduce (recycling) 32, 34, 153
re-engineer 33
renewable resources 21, 152,
163
rent, property 67
resources 21–22, 23, 101, 150,
152–53, 163
return (recycling) 33
reuse (recycling) 32, 34, 153
rural areas, challenges 36, 138,
141
S
salaries 66
saving schemes 173, 176
savings 74, 76, 86, 166–67, 179
savings account 61, 64, 67,
74–75, 77, 170–71
scarcity problem 21–22, 23
sectors (in business) 36
security, banking 8, 11, 12
selling 97, 99
selling price 112–13, 114, 120,
124
service business 40
services 16, 23, 25, 26, 30–31,
34, 57, 151, 170
sexism 127
shares 39
shebeens 40
skills training 134–35, 141
small business 10, 39
SMME 39
social inequality 126, 128, 141
socio-economic challenges
137–38, 141
socio-economic imbalance 126
socio-economic inequality 129–
30, 141 (see also inequality)
source document 63
spaza shops 40
standard of living 16, 128
starting capital 120, 124
statement of net worth 71, 76
stokvels 173, 176
subsistence economy 2
suppliers 56
surplus 2, 12, 79, 80, 108
sustainability
of jobs 139–40, 141
of resources 152–53, 163
SWOT analysis 104, 114
T
target market 106
tax 34, 36, 38
technology 159–60, 161–62,
164
tenant 67
trading business 40
trading licence 38
traditional societies 2–4, 12
transactions 63, 64
U
unemployment 138, 139, 141
urban areas 136–37, 141
V
variable costs 12, 110, 114
VAT 38
VAT vendor 38
W
wages 66
wants 14, 20, 21–22, 23, 30–31,
34, 101–102, 114
wholesaler 38
will 127
withdrawal 60
185