Approaches Used in South Africa and the North/South Divide (Grade 12 NSC Matric Economics): Revision Notes
Approaches Used in South Africa and the North/South Divide
Understanding South Africa's economic policy approaches
South Africa has implemented various economic policies since democracy began in 1994. These policies can be categorised into two main approaches: growth-focused policies and development-focused policies.
The transition to democracy in 1994 marked a fundamental shift in South Africa's economic approach, requiring new strategies to address the inequalities and structural problems inherited from apartheid.
Growth versus development policies
Economic policymakers must choose between different approaches when trying to improve their country's economy. Let's explore the key differences:
Growth policies use macroeconomic tools to achieve:
- Higher economic growth rates
- Increased employment levels
- Price stability (controlling inflation)
- Exchange rate stability
- Economic equity
The theory behind growth policies is that when the economy grows, the government collects more tax revenue. This additional revenue can then fund social services and infrastructure that benefit everyone - a concept known as "trickle-down economics."
Development policies take a different approach by focusing on:
- Industrial development and modernisation
- Agricultural improvements
- Human development (education, healthcare, skills)
- Microeconomic initiatives to improve competition
- Social welfare programmes
- Poverty alleviation measures
- Affirmative action policies like Black Economic Empowerment (BEE/BBBEE)
- Land redistribution programmes
- Skills development through programmes like JIPSA
Timeline of South African economic policies
South Africa's economic policy has evolved significantly over the past three decades:
This timeline shows how South African economic policy has shifted focus over time, moving between growth and development approaches depending on the country's needs and political priorities. The evolution reflects lessons learned from previous policies and changing economic conditions.
Key South African economic policies
1. Reconstruction and Development Programme (RDP) - 1994
The RDP was South Africa's first major post-apartheid economic strategy. Its main goal was to address the inequalities created by apartheid.
Policy Analysis: RDP Implementation
Key objectives:
- Alleviate poverty
- Address social service shortfalls
- Focus on job creation, welfare, housing, transport, land reform, healthcare, education, and water provision
Evaluation:
- Successes: The programme helped meet basic needs by creating increased demand for goods and services. Public works programmes provided employment and reduced poverty slightly. Some social achievements included building houses, providing clean water, electrification, land reform, and healthcare improvements.
- Challenges: Real GDP growth was inconsistent after 1994, and formal sector unemployment actually increased. The key objectives of poverty reduction and improved service delivery were only partially successful.
2. Growth, Employment and Redistribution (GEAR) - 1996
GEAR aimed to strengthen economic development whilst redistributing income and creating opportunities for the poor.
Policy Analysis: GEAR Results
Evaluation:
- Mixed results: The policy brought greater financial discipline and macroeconomic stability, with inflation dropping to within target ranges and foreign exchange reserves increasing.
- Challenges: Failed to create sustainable job opportunities and did not redistribute wealth more evenly. The fiscal deficit was reduced to less than 3% of GDP, meeting international benchmarks.
3. Accelerated and Shared Growth Initiative for South Africa (ASGISA) - 2005
ASGISA was designed to coordinate government initiatives for economic development.
Policy Analysis: ASGISA Targets and Outcomes
Key targets:
- Halve unemployment and poverty by 2014
- Achieve economic growth averaging 6% between 2010 and 2014
Evaluation:
- Partial success: Led to growth in infrastructure investment, particularly in the public sector. The Expanded Public Works Programme helped reduce unemployment slightly.
- Ongoing challenges: Employment growth lagged behind economic growth due to wage increases exceeding productivity improvements. Poor economic growth and high youth unemployment remained problems.
4. Joint Initiative on Priority Skills Acquisitions (JIPSA) - 2007
JIPSA served as the skills development component of ASGISA, focusing on developing critical skills through institutions like SETAS (Sector Education and Training Authorities).
5. New Growth Path (NGP) - 2012
The NGP aimed to enhance growth, create employment, and promote greater equity.
Strategy: Identify key sectors as "job drivers" and promote industries that can create substantial employment.
Target: Create 5 million jobs by 2020, reducing unemployment from 25% to 15%.
Other important programmes
National Development Plan (NDP): Focuses on expanding economic opportunities through infrastructure investment, innovation, private investment, and entrepreneurship.
Small Business Development Promotion Programme (SBDPP): Supports small, medium, and micro enterprises through various government departments and revised legislation.
Black Economic Empowerment Programmes (BEE): Designed to transform the economy and address historical disadvantages through workplace and business environment reforms.
The North/South divide
The global economy shows a clear division between developed countries (often called "the North") and developing countries ("the South"). This divide illustrates significant inequalities in economic development worldwide.
Understanding the differences
The North/South divide represents one of the most significant challenges in global economics, with stark differences in living standards, economic opportunities, and environmental impact between developed and developing regions.
Standard of living:
- North (Developed countries): High GDP per capita, life expectancy around 75 years, high literacy rates
- South (Developing countries): Low GDP per capita, life expectancy around 48 years, low literacy rates
Economic structure:
- North: Low poverty levels, high economic growth, manufacturing-based economies that receive subsidies
- South: High poverty levels, low economic growth, economies based on raw materials and agriculture without subsidies
Environmental impact:
- North: Primarily responsible for ozone layer damage through mass production and consumption, but increasingly adopts environmentally conscious practices
- South: Suffers more negative environmental effects despite contributing less to global environmental problems, often uses unsustainable production practices
Global trade patterns show that the North typically exports manufactured goods and receives subsidies, while the South exports raw materials and agricultural products without receiving similar support. This creates an unequal trading relationship that can perpetuate development gaps.
Implications for South Africa
As a developing country, South Africa faces many of the challenges typical of "Southern" countries, including high unemployment, poverty, and dependence on raw material exports. The country's various economic policies have attempted to address these challenges whilst moving towards more sustainable development patterns.
Key Points to Remember:
-
Economic growth policies focus on macroeconomic objectives like GDP growth and employment, whilst development policies emphasise human development, social welfare, and structural transformation.
-
South Africa has implemented numerous policies since 1994, including RDP, GEAR, ASGISA, and NGP, each with mixed success in addressing unemployment and poverty.
-
The North/South divide represents the gap between developed and developing countries in terms of living standards, economic structure, and environmental impact.
-
South Africa's economic challenges reflect broader patterns seen in developing countries, including high unemployment, poverty, and dependence on raw material exports.
-
Successful economic policy requires balancing growth objectives with development needs, particularly in addressing historical inequalities and creating sustainable employment opportunities.